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1
ANNUAL REPORT 2004
Abbr.：CNOOC Engineering
Code：600583
March 14, 2005
2
Section I Important Notice
3
Section II The Company Information
5
Section III Summary of Financial Highlight and Business
Highlight
7
Section IV Changes in Capital Shares and Particulars about
Shareholders
10
Section V Particulars about Directors, Supervisors, Senior
Executives and Employees
15
Section VI Corporate Governance Structure
21
Section VII Introduction of the General Meeting of Shareholders
26
Section VIII Report of the Board of Directors
30
Section IX Report of the Board of Supervisors
59
Section X Important Matters
61
Section XI Financial Report
66
Section XII Documents for Reference
110
3
Section I Important Notices and Contents Important Notices
To the best knowledge of the Board of Directors of the Company, there is no untrue
presentation, seriously misleading statements, nor omission of material facts contained in
the information herein. The Board of Directors severally and jointly bears responsibility for
the correctness, accuracy and completeness of the information contained in this Annual
Report.
All directors attended the board meeting.
Chairman of the Board Mr. Zhou Shouwei, General Manager Mr. Yang Shubo, Financial
Controller Mr. Lin Rongqing and Manager of Financial Department Mr. Xie Hongjun state
that they ensure the correctness and completeness of the financial statements contained in
this Annual Report.
The annual financial statements have been audited by Zhongxingyu CPA Ltd. and an audit
report with an unqualified audit opinion was issued.
Terminologies and Abbreviations
1. QK18-2: Qikou 18-2 oil field, located in Bohai Bay, where Tanggu is in its northwest
43km away, water depth: 8-11 meters
2. CFD11-1/2: Chaofeidian 11-1/2 oil field, located in the west part of Bohai Bay, Tanggu is
in its west 90 km away, water depth: 21-26 meters
3. LD10-1: Livda 10-1 oil field, Bohai Bay
4. BZ25-1: Bozhong 25-1 oil field, including BZ25-1and BZ25-1 south oil fields, located
southeast Tanggu 150 km away, average water depth: 19 meters.
5. HZ21-1B: Project of Huizhou 21-1 North Gas Field Development, South China Sea, 160
km southeast to Hong Kong, water depth: 115 meters.
6. LF13-2: Project of Lufeng 13-2 oil field development, east part of the South China Sea.
7. NB35-2: Nanbao 35-2 oil field, Center of Bohai Sea, Tanggu is in its southwest 110 km
away, water depth: 12.2 meters.
8. PY30-1: Panyu 30-1 gas field, South China Sea, water depth: 200 meters, currently the
project with largest depth of water that the company has contracted.
9. PL19-3 Second Phase: Penglai 19-3 oil field second phase.
10. JZ20-2: Jinzhou 20-2 condensate field, located in Liaodong Bay north to Bohai Bay, 50
km to the shore of Hludao, Liaoning Province, water depth: 15.19 meters.
4
11. WHP: Wellhead platform
12. STT: The Surface Tension Transfer.
13. AUT: Automatic Ultrasonic Technique.
14. CEP: Central platform.
15. CFRE: Contractor Furnished Reimbursable Equipment.
16. CCS: China Classification Society.
17. DNV: Det Norske Veritas.
18. HSE: Healthy Safety Environment.
19. SPM: Single Point Mooring.
20. FPSO: Float Production Storage and Offloading.
21. TLP: Tension Leg Platform.
22. SPAR: A Spar Platform.
23. 3D: 3 dimensional design.
24. Intools: instrumentation engineering and design software
25. EPCI: Engineering design, Purchase, Construct, and Installation.
5
Section II The Company Information
1. Statutory name of the Company:
In Chinese: 海洋石油工程股份有限公司
In abbreviated Chinese: 海油工程
In English: OFFSHORE OIL ENGINEERING CO., LTD.
In abbreviated English: CNOOC Engineering
2. Legal representative: Zhou Shouwei
3. Secretary of Board of Directors: Liu Lianju
Contact address: 4 - 396 Hebei Road, Tanggu District, Tianjin
Tel: 022-25215878
Fax: 022-25215565
Email: [email protected]
4. Registered address: 4 - 396 Hebei Road, Tanggu District, Tianjin
Office address: 4 - 396 Hebei Road, Tanggu District, Tianjin
Post code: 300451
Website: http://www.cnoocengineering.com
Email: [email protected]
5. Newspapers for disclosure of Interim Reports are as follows: China Securities Journal,
Shanghai Securities News
Website for publishing the Annual Report of the Company: http://www.sse.com.cn
Place of the Annual Report Filed: Office of Secretary of Board of Directors of the
Company
6. Place where the company shares are listed: Shanghai Stock Exchange
Short form of Stock Name: CNOOC Engineering
Stock code: 600583
7. Other Related Information:
Initial Registration Date of the Company: April 20, 2000
6
Registered address of the Company: 248 Block A, Zhongji Keyuan, Huayuan Industrial
Zone,
Tianjin Hi-Tech Industrial Park
Alteration Registration Data of the Company: October 27, 2004
Alteration Registration Address of the Company: 4-396 Hebei Road, Tanggu District,
Tianjin
Registration Number of Business License: 1200001000326
Tax Registration Number of the Company: 120118722950227
Name of the Accountants Office Designated by the Company: Zhongxingyu CPA Ltd
7
Section III Summary of Financial Highlight and Business Highlight
Ⅰ. Main financial data and business data of this year (consolidated statement) Unit: yuan
Item Amount Total profit Net profit *Net profit after deducting non-recurring gains and losses* Profit from main operations Other operating profit Operating profit Investment income Subsidy income Net non-operating income/expenses Net cash flows arising from operating activities Net increase/decrease in cash and cash equivalents
561,147,494.56365,596,840.19365,784,367.83630,663,270.47
16,148.85559,808,844.76
1,618,541.8048,485.00
-279,892.00512,294,017.86199,495,899.40
*Note: After deducting non-recurring gains and losses
Unit: yuan
Item Amount Non-operating income Subsidy income Non-operating expenses Net non-operating expenses and receipts Income tax
129,638.0048,485.00
458,015.00-279,892.00
-92,364.36 Non-recurring profit and loss after income tax -187,527.64
II. Major accounting data and indices over the recent past three years (consolidated
statement) Item Unit 2004 2003 2002
Income from main operationNet profit Total assets Shareholder’s equity (after minority shareholder’s equity) Earnings per share (diluted) Net assets per share Net assets per share after adjustment Net cash flow from operating activities per share Return on net assets (diluted) Weighted average return on net assets calculated after deduction of non-routine profit and loss
Yuan Yuan Yuan
Yuan
Yuan/share Yuan/share
Yuan/share
Yuan/share
%
%
3,487,502,020.87365,596,840.19
2,659,217,983.47
1,794,333,097.70
1.11 5.44
5.44
1.5520.38
22.54
2,053,897,722.08 196,453,348.88
2,093,752,972.73
1,456,236,257.51
0.71 5.30
5.28
1.71
13.49
13.49
1,733,885,317.15132,668,684.32
1,961,445,271.08
1,284,450,408.63
0.535.14
5.14
0.7910.33
11.33
8
III. Return on net assets and earnings per share of the profit of this year calculated
according to the Reporting Rules for the Information Disclosure of Listed Companies
(No. 9) issued by China Securities Regulatory Commission Earnings against net assets(%) Earnings per share (yuan) Profit in this
report period Fully diluted Weighted average Fully diluted
Weighted average
Income from main operations Operating profit Net profit Net profit after deduction of non-recurring profit and loss
35.15 31.20 20.38
20.39
38.86 34.49 22.53
22.54
1.91 1.70 1.11
1.11
1.91 1.70 1.11
1.11
IV. Particulars about changes in share equity during the report period Unit: yuan
Item Share Capital reserve
Surplus reserve
Statutory Welfare
fund
Retained Total equity
Amount in the period beginning
275,000,000 746,588,376.12 95,228,708.06 42,676,056.54 339,419,173.33 1,456,236,257.51
Increase in this report year
55,000,000 - 54,840,594.51 18,280,198.17 365,596,840.19 475,437,434.70
Decrease in this report year
- 27,500,000.00 - - 109,840,594.51 137,340,594.51
Amount at the period end 330,000,000
719,088,376.12 150,069,302.57 60,956,254.71 595,175,419.01 1,794,333,097.70
Note: Reason for changes
1. In the report period, the company implemented the 2003 annual profit distribution and
Capital reserve Capitalizing program, that is.”1 yuan(including tax)of dividend is distributed
for each 10 shares and one share from capitalized capital reserve is issued and distributed
to every ten shares”, so that the total share capital is increased from 275.000,000 shares to
330,000,000 shares.
2. In the report period, the company implemented the 2003 annual Capital reserve
Capitalizing Program, that is, one share from capitalized capital reserve is issued and
distributed to every ten shares, so that the capital public reserve at the period end is
reduced by 27,500, 000, 00 accordingly.
3. In the report period, the increase of the company’s surplus public reserve(including
statutory public welfare fund)is resulted from the withdrawal of legal reserve and statutory
public welfare fund according the Company’s bylaw.
9
4.Increase of retained profit is due to ①In the report period, the Company realized a net
profit of 365,596,840.19 yuan, the Company’s 2003 annual profit distribution scheme,
which is 1 yuan (including tax) of dividend is distributed for each 10 shares and one share
from capitalized capital reserve is issued and distributed to every ten shares,
ove factors caused the Company’s final retained profit an increase of 255,756,245.68 yuan
in total.
5. In the report period, the increased realization of net profit this year results in an increase
in share equity.
10
Section IV Changes in Capital Shares and Particulars about Shareholders
I. Statement of change in share capital
(I). Change in shares
Unit: share Before the Increase/decrease of this thime(+/-)
Change Allotment of shares
Bonus shares
Shares capital
transferred from public
reserve
Additiona issuance
Others Subtotal After the changer
I. Unlisted shares
Including:
State-owned shares* 187,000,000 18,700,000 18,700,000 37,400,000 24,400,000
Others
4. Preference shares or others
Total unlisted shares 187,000,000 18,700,000 18,700,000 37,400,000 24,400,000
II. Listed shares
1. RMB ordinary shares 88,000,000 8,800,000 8,800,000 17,600,000 05,600,000
2. Domestically listed foreign shares
3. Overseas listed foreign shares
4. Others
Total listed shares 88,000,000 8,800,000 8,800,000 17,600,000 105,600,000
II. Total shares 275,000,000 27,500,000 27,500,000 55,000,000 330,000,000
* Notice: CNOOC, the actual controller of this Company, as a transferee, received a total of 15,923.38 shares (accounting for 57.9% of the total outstanding shares) by agreement from the following sponsor shareholders: CNOOC Platform Fabrication, China Offshore Oil Marine Engineering and China Offshore Oil Development & Engineering, Share transfer agreement was signed and entered into force on September 28, 2003, relevant share transfer proceedings were fulfilled on February 13, 2004.
(II) Issuance and listing of shares
1. Up to the end of the report period, the Company had issued its shares once, as detailed
below: Type of share: RMB ordinary share (A share) Issuance date: January 21, 2002 Issuance price: RMB9.6 Yuan/share Quantity of issuance: 80,000,000 shares Price/earnings ratio:19.6 times Listing date: February 5, 2002 Shares approved for trading: 80,000,000 shares Total share capital after issuance: 250,000,000 shares
2. Total share capital of the company and alterations of its structure
11
The 2002 annual scheme on conversion of public reserve into share capital was passed on
the First Provisional Shareholders’ Meeting held on September 23,2003. Based on the
total share capital of 250,000,000 shares, one share from capitalized capital reserve is
issued and distributed to every ten shares, as detailed below:
Registration date of stock rights: October 14, 2003 Listing date of newly added circulation shares: October 16, 2003
Date when cash dividends reach account: October 21st, 2003 Total share capital after distribution: 275,000,000 shares
Non-circulation share capital after distribution: 187,000,000 shares Circulation share capital after distribution: 88,000,000 shares
3. The 2003 annual scheme on conversion of public reserve into share capital was passed
on the 2003 Provisional Shareholders’ Meeting held on April 19, 2004. Based on the total
share capital of 275,000,000 shares, one share from Capitalized capital reserve is issued
and distributed to every ten shares, as detailed below: Registration date of stock rights: May 14, 2004 Listing date of newly added circulation shares: May 18, 2004
Date when cash dividends reach account: May 21st, 2004 Total share capital after distribution: 330,000,000 shares
Non-circulation share capital after distribution: 224,400,000 shares Circulation share capital after distribution: 105,600,000 shares
II. About shareholders
(I) The number of total shareholders at the end of the report period is 10,863.
(II) About shares held by the top ten shareholders (up to December 31, 2004) Unit: share
Serial number
Shareholder’s name Increase/decrease in this period
Amount at the period-end
Proportion (%)
Type
1 China National Offshore Oil Corp.
191,080,560 191,080,560 57.9S State owned legal person
2 CNOOC South China Sea West Co.
5,331,722 31,990,332 9.69 State owned legal person
3 Fortis Haitong Income Securities Investment Fund
6,361,398 6,361,398 1.93 circulating
4 Yuyang Securities Investment Fund
3,510,926 6,242,315 1.89 circulating
5 Western Securities Co., Ltd 2,504,270 6,033,170 1.83 circulating
6 Fortis Haitong Best Selection Securities Investment Fund
3,895,019 5,900,112 1.79 circulating
7 Penghua Sector Growth Securities Investment Fund
4,904,213 4,904,213 1.49 circulating
8 China Dragon Securities Investment Fund
3,501,483 3,501,483 1.06 circulating
9 Changsheng Sector Growth Securities Investment Fund
3,435,300 3,435,300 1.04 circulating
10 CITIC classic Allocation Securities Investment Fund
3,397,613 3,397,613 1.03 circulating
Note:
12
1. That shareholders holding 5% shares or above are not subject to pledge or freezing
during this report period.
2. Among the top ten shareholders, CNOOC South China Sea West Co. is subsidiary fully
owned by CNOOC and is state-owned legal person shareholders. Fortis Haitong Best
Selection Securities Investment Fund and Fortis Haitong Income Securities Investment
Fund are all securities investment funds managed by Fortis Haitong Fund Management Co.,
Ltd.; it is unknown if there exists associated relationship or consistent action among other
shareholders.
3. Among the top ten circulate shareholders and shareholders with 5% holding, there is no
strategic investor or a common legal person involved in rights issue or foreign-fund
shareholder.
4. CNOOC, the actual controller of this Company, as a transferee, received a total of
15,923.38 shares gratis by agreement from CNOOC Platform Fabrication Co., Ltd., the
sponsor shareholder, China Offshore Oil Marine Engineering Company, China Offshore Oil
Development & Engineering Corp., accounting for 57.9% of the total outstanding shares.
CNOOC becomes the biggest shareholder of the Company. Share Transfer Agreement
was signed and entered into force on September 28, 2003, relevant share transfer
proceedings were fulfilled on February 13, 2004.
(III) Particulars about the largest shareholder
1. Company name: China National Offshore Oil Corp.(hereafter referred to as “CNOOC”)
2. Legal representative: Fu Chengyu
3. Date of foundation: February 15, 1982
4. Registered capital: 50 billion yuan
5. Scope of business: Fully authorized by the “Regulations of the Peoples Republic
China on the Exploitation of Offshore Petroleum Resources in Cooperation with Foreign
Enterprises”. CNOOC has the overall responsibility for the exploitation of offshore oil and
natural gas. CNOOC is principally engaged in the exploration, development, production and
development as well as the processing and utilization of oil refining, petrochemical and
natural gas; sales of oil, natural gas, oil and gas processed products; provision of oil and
natural gas exploration, development, production and sales services to users; import and
13
export of commodities of the third category; entrusted import and export for associated
working units; joint ventures and cooperative businesses, incoming material and sample
machining, incoming parts assembly, compensation trade and entrepot trade; contracting of
overseas projects and domestic foreign-fund projects of the industry as well as the import
and export of required equipment and material, parts and accessories; dispatching of
engineering, production and service labors to overseas countries and regions.
6. Property rights and control relationship between the company and the actual
controller.
(IV) Particulars about the top ten shareholders of circulating shares
(up to December 31, 2004) Unit: share Serial number Shareholder’s name Amount at the period-end Type of shares
1 Fortis Haitong Income Investment Fund
6,361,398 A-share
2 Yuyang Securities Investment Fund 6,242,315 A-share 3 Western Securities Co. Ltd. 6,033,170 A-share 4 Fortis Haitong Best Selection
Securities Investment Fund 5,900,112 A-share
5 Penghua Sector Growth Securities Investment Fund
4,904,213 A-share
6 China Dragon Securities Investment Fund
3,501,483 A-share
7 Changsheng Sector Growth Securities Investment Fund
3,435,300 A-share
8 CITIC Classic Allocation Securities 3,397,613 A-share
CNOOC
Offshore Oil Engineering Co.,Ltd.
100% 100%
57.99.69 0.41
CNOOC South China Sea West Co. CNOOC Bohai Co.
State-owned Assets Supervision and Administration Commission of State Council
14
Investment Fund 9 Penghua Securities Investment Fund 2,552,938 A-share 10 Changsheng Tongsheng Securities
Investment Fund 2,304,000 A-share
Note:
Among the top ten shareholders of circulating shares, Fortis Haitong Income Securities
Investment Fund and Fortis Haitong Best Selection Securities Investment Fund are all
securities investment funds managed by Fortis Haitong Fund Management Co., Ltd.;
Penghua Sector Growth Securities Investment Fund and Penghua Securities Investment
Fund are all securities investment funds managed by Penghua Fund Management Co., Ltd;
Changsheng Sector Growth Securities Investment Fund and Changsheng Tongsheng
Securities Investment Fund are all securities investment funds managed by Changsheng
Fund Management Co., Ltd; it is unknown if there exists associated relationship or
consistent action among other shareholders of circulating shares.
15
Section V Particulars about Directors, Supervisors, Senior Executives and Employees
I. Particulars about Directors, Supervisors and Senior Executives Name Sex Age Title Tenure Shares held
in the Period-
beginning
Shares held at the
period-end
Reason of change
Zhou Shouwei Male 54 Chairman of
the Board of
Directors
2004-2007 0 0 NO
Yang Shubo Male 48 Director,
General
Manager
2001-2007 0 0 NO
Hu Chang’an Male 57 Director 2004-2007 0 0 NO
Wang zhong’an Male 41 Director 2004-2007 0 0 NO
Xu Yongchang Male 36 Director 2004-2007 0 0 NO
Huang Daya Male 44 Director 2004-2007 0 0 NO
Li Weian Male 47 Independent
Director
2004-2007 0 0 NO
Yang Jun Male 46 Independent
Director
2004-2007 0 0 NO
Han Chuanmo Male 54 Independent
Director
2004-2007 0 0 NO
Yin Jihong Male 55 Chairman of
the Board of
Supervisors
2003-2006 0 0 NO
Xiao Jianwen Male 55 Supervisor 2003-2006 0 0 NO
Liu Liming Male 55 Deputy General
Manager
2003-2007 0 0 NO
Zhang Songfu Male 51 Deputy General
Manager
200-2007 0 0 NO
Chen Wenjin Male 40 Deputy General
Manager
2000-2007 0 0 NO
Wang Tao Male 38 Deputy General
Manager
2002-2007 0 0 NO
Lin Rongqing Male 41 Financial
Controller
2001-2007 0 0 NO
Liu Lianju Male 39 Secretary of
Board of
Directors
2001-2007 0 0 NO
Particulars on shareholders’working units：
Name Shareholder’s
Company Position
Beginning
date of
Position
End date
of Position
Payment and
Allowance on
Shareholders’
16
Company
Zhou Shouwei CNOOC Vice General Manager 2002.8 - Yes
Wang Zhongan CNOOC Planning Department,
General Manager
2003.4 - Yes
Xu Yongchang CNOOC Asset Management
Department, General
Manager
2003.4 - Yes
Yin Jihong CNOOC 2003.4 - Yes
Xiao Jianwen CNOOC 2003.4 - Yes Particulars on Position Outside of the Company：
Name Shareholder’s
Company Position
Beginning
date of
Position
End date
of Position
Payment and
Allowance on
Shareholders’
Company
Huang Daya CNOOC Oil
Base Group
Co.,Ltd
HR. General Manager 2004.12 - Yes
Li Weian Nankai
University,
Tianjin
Master of Business
School, Director of
MBA Centre. Director
of Company
Management Research
Center, Professor,
Supervisor of
Doctoral Student,
Special Professor of
“Changjiang
Scholar” under the
Education Ministry
1997 - Yes
Yang Jun Ping An
Insurance
Company of
China, Ltd
Consultant 2001 - Yes
Han Chuanmo Tianjin
University of
Finance &
Economic
Vice Director of
Business College,
Director of
Accounting Dept,
Professor,
Supervisor of
doctoral Student
1997 - Yes
II. Work experience of current working directors, supervisors and senor management
personnel.
Name Position Main Work Experiences Zhou Board From September,1999 to October, 2000: China National Offshore Oil
17
Shouwei chairman Co.,Ltd. executive director, executive vice president, general manager and secretary of the party committee of CNOOC (China) Ltd. Tianjin Bratch. From October,2000 to August, 2002: China National Offshore Oil Corp., vice general manager, party member, excutive director, executive vice president of CNOOC (China) Ltd. From August, 2002 to present: China National Offshore Oil Corp., vice general manager, party member, executive director, executive vice president of CNOOC (China) Ltd. Board chairman concurrently since Jan. 2004.
Yang Shubo
Director, General Manager
2001.9-2002.2 Offshore Oil Engineering Co.,Ltd. Vice General Manage. 2002.2-Present Offshore Oil Engineering Co.,Ltd. General Manage. 2001.5-Present Director of the company.
Hu ChangA
n Director
From August, 1999 to April,2001: Offshore Oil Extraction Co., CNOOC Bohai Co., Manager and Secretary of the party committee. From April 2001 to December 2001: Offshore Oil Extraction Co., CNOOC Bohai Co., manager and secretary of the party committee, manager of Offshore Oil Extraction Engineering Co., and Technical Services Co. From December,2001 to December,2003: CNOOC Bohai Co., vice secretary of the party committee. From December,2003 to present: Offshore Oil Engineering Co.,Ltd. Secretary of the party committee. As a director since January, 2004.
Wang Zhongan Director
From January,2000 to February, 2001: National Development and Reform Commission, industrial department, vice section chief. From February,2001 to August,2001: CNOOC (China) Ltd, strategy department, vice general manager. From August,2001 to July,2005:CNOOC, Planning department, general manager. From August,2005 to present, CNOOC, planning department, general manager. Company direction since April, 2002.
Xu Yongcha
ng Director
From August, 2000 to July,2002:the Central Committee of the Communist Party of China, working committee, full time supervisor; From August, 2002 to April, 2003:CNOOC, Ministry of Supervision, board of supervisors, manager; From April, 2003 to present: CNOOC, Asset management department, general manager; Company director since January, 2004
Huang Daya Director
From September,2000 to June, 2001: CNOOC South China Sea West Co., Tepu company, manager; From June, 2001 to September,2001: CNOOC South China Sea West Co., Business management department, manager; From September,2001 to December, 2004:CNOOC South China Sea West Co., vice manager; From December, 2004 to precent:China Offshore Oil Base Group Limited, HR department, general manager; Company director since May,2003.
Li Weian Independent director
From October,1997 to present: Master of Internation Business College under Nankai University, director of MBA center, Director of Company Management Research Center; In 2005,to award “Changjiang Scholar” by Ministry of Education, professor, supervisor of doctoral student; As an independent director since April,2002.
Yang Jun
Independent director
From 1997 to 2001, BOC Internaitonal Co., Ltd. Director manager; From 2001 to present, Ping An Insurance Co., Ltd. Counselor; As an independent director since April,2002.
18
Han Chuanm
o
Independent Director
From September, 1977 to 2004:Tianjin Finance & Economic University, professor, supervisor of doctoral student; From 2004 to present, Tianjin Finance & Economic University, vice rector;As an independent director since April, 2002.
Yin Jihong
Board of Supervisor, Chairman
From September, 2001 to April,2003, CNOOC, HR Department, Manager of salary & insurance; From April,2003 to present:CNOOC, Asset management department, senior commissioner; As a chairman of Board of supervisor since September,2003.
Xiao Jianwen Supervisor
From March,2001 to December, 2002, State-owned Assets Supervision and Administration Commission of the State Council, commissioner; From January, 2003 to present, CNOOC, Asset management department, commissioner; As a supervisor since September,2003.
Liu Liming
Deputy General manager
1999.9-2003.8 CNOOC Research Centre, Vice Director 203.8-Present CNOOC Engineering Co., Ltd, Vice General Manager.
Zhang Songfu
Deputy General manager
From April,2000 to present, CNOOC Engineering Co., Ltd. Vice general manager.
Chen Wenjin
Deputy general
manager
From April,2000 to present, CNOOC Engineering Co., Ltd. Vice general manager.
Wang Tao
Deputy general
manager
From April,2000 to March, 2002, CNOOC Engineering Co., Ltd. Production management department, vice manager; From January, 2005 to December, 2005, studied at the University of Texas at Arlington, and get EMBA ; From March, 2002 to present, CNOON Engineering Co.,Ltd. Vice general manager.
Lin Rongqin
g
Financial supervisor
From April,2000 to February,2001, CNOOC Engineering Co., Ltd. Finance department, manager; From February, 2001 to present, CNOOC Engineering Co., Ltd, Finacial supervisor.
Liu Lianju
Secretary of board of directors
From April,2000 to February, 2001, CNOOC Engineering Co., Ltd. Supervisor; From February, 2001 to present, CNOOC Engineering Co., Ltd.Secretary of board of directors.
III. Particulars about annual payment drew by directors, supervisors and senior executives in the report period
(I) Decision-making procedure and decision basis of payment drew by directors,
supervisors and senior executives:
1. Referring to the payment for senior executives of the industry
Senior middle school graduate and below 30%University graduate and above
27%Technical school graduate 6%Technical secondary school graduate 21%Collage
graduate 16%EducationProfessionProduction personnel 64%Salespersons
2%Administrative personnel 11%Technicians 22%Financial personnel 1%2. According to
roles and complexity as well as working performance.
19
(II) During the report period, 8 out of the abovementioned directors, supervisors and senior
executives employed by the Company received their payments from the Company, with a
total annual payment of 1,410,700 yuan.
Totally 2 directors received their payments from the Company, with a total annual payment
of 418,300 RMB Yuan.
The total payment for first three high-paid senior executives amounts to 596,600 RMB
Yuan.
Payment classification of directors, supervisors and senior executives receiving their
payments from the Company:
Payment range (RMB) Number of persons 200,000 yuan~220,000 yuan
160,000 yuan~180,000 yuan
120,000 yuan~160,000 yuan
3
3
2
The allowance for each of the three independent directors is 42,000 RMB yuan (including
tax)for each person each year. The travel expense for attending directors’ meetings and
shareholders’ meetings and other expenses for the fulfillment of authorities according to
Corporate Bylaws will be reimbursed accordingly.
(III)Directors and supervisors who do not draw their payments and allowances from the
Company include Zhou Shouwei, Yin Jihong, Wang Zhongan, Xu Yongchang, Huang Daya
and Xiao Jianwen draw their payments and allowances from China National Offshore Oil
Corp. (CNOOC), the largest shareholder, and Huang Daya draw his payment and
allowance from CNOOC Oil Base Group Co., Ltd.
IV. Particulars about changing of directors, supervisors and senior executives in the
report period
In accordance with regulations of the Company Law and the Company Bylaws, the first
Board of Directors has met its due date. It was agreed on the 19th session of the first board
of directors, which was held on December 13, 2003, that Mr. He Deixiang, Wu Zhiyun and
Xie Weizhi resigned from their positions as director and Mr. Zhou Shouwei, Yang Shubo,
Hu Changan, Wan Zhongan, Xu Yongchang and Huang Daya were nominated by CNOOC
shareholders and Board of Directors as NON-independent director candidate; Li Weiand
from their positions as director and Mr. Zhou Shouwei, Yang Shubo, Hu Changan, Wan
Zhongan, Xu Yongchang and Huang Daya were nominated by CNOOC shareholders and
20
Board of Directors as NON-independent director candidate; Li Weian, Yang Jun and Han
Chuanmo are elected as independent director candidates of the Second Board of Directors.
On the First Meeting of the Second Board of Directors held on January14, 2004, Zhou
Shouwei was elected as chairman of the board.
On the Third Meeting of the Second Board of Supervisors held on December 29, 2004,
approved that Workers’ Congress should proceed the election of Employee Supervisor as
soon as possible due to the death of former Employee Supervisor, Xun He.
V. About employees
Up to December 31, 2004, the Company has a total staff of 2550, as classified below:
1. Classification according to educational background Education Number of persons
University graduate and above
College graduate
Technical secondary school graduate
Technical school graduate
Senior middle school graduate and below
683
415
535
162
755
2. Classification according to profession: Profession Number of persons
Administrative personne
Technicians
Financial personnel
Production personnel
Salespersons
277
572
34
1606
61
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Section VI Corporate Governance Structure
I. Corporate governance
The Company continually constructs and improves its Corporate Governance structure in
compliance with Company Law, Securities Law as well as the relevant laws and regulations
of China Securities Regulatory Commission (CSRC). According to Guidelines for Corporate
Governance of Listed Companies in China issued by CSRC and State Economic and Trade
Commission, a series of regulations including Rules of Procedures for Shareholders’
General Meeting, Rules of Procedures for Board of Directors, Rules of Procedures for
Board of Supervisors and Working Instruction for General Manager, were prepared.
Currently the corporate governance structure is as follows
(I)About shareholders and Shareholders’ General Meeting
According to Suggestions on the Standardization of Shareholder’s General Meetings of
Listed Companies and other laws and regulations, Rules of Procedures for Shareholders’
General Meeting was strictly prepared to ensure that all shareholders including medium
and small shareholders can enjoy fully the equality and rights. In the report period, the
company has amended the Negotiation Rules of Shareholders Meeting, some new terms
are added such as the namely “Accumulating Voting Mechanism”, improving procedures
of director election, shareholder meeting and decision making.
(II) About the relation between the largest shareholder and the listed company
The largest shareholder of the Company has not directly or indirectly interfered with the
decision-making and operation of the Company beyond the Shareholders’ General Meeting
and is separated from the Company in five aspects which are of personnel, assets,
financing, institution and business. The Company’s board of directors, board of supervisors
and internal institutions can be operated independently. By preparing Regulations on
Financial Management, the Company has established a complete financial and accounting
management system for separate accounts, and the largest shareholder will not interfere
with the financial and accounting activities of the Company.
(III) About directors and the Board of Directors
The Directors of the Company are elected in accordance with the procedures for appointing
directors as stipulated in the Corporate Bylaws. The Company has complied with the
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provisions of laws and regulations regarding the size and composition of the Board of
Directors, and independent directors account for one third of the Board of Directors in terms
of number of persons, meeting the requirement in Guidelines for the Establishment of
Independent Director System in Listed Companies issued by CSRC. By establish and
implementing a Negotiation Rules of Director Board Meeting, directors can attend sessions,
fulfill their duties and make decisions with a responsible attitude to ensure efficient and
scientific decision-making.
In the report period, the Company amended the Negotiation Rules of Director Board
Meeting and terms of Audition on External Guarantees and intension to establish Strategic
Committee were added, which further improves and regulates the company’s operation.
(IV) About supervisors and the Board of Supervisors
The Company has prepared and implemented Rules of Procedures for Board of
Supervisors and complied with the requirements of laws and regulations regarding of the
size and composition of its Board of Supervisors. Each Supervisor has diligently carried out
their duties and have, with a view to accountability to shareholders, exercised supervision
over the Company’s financial activities and the performance of the Company’s Directors,
General Manager and other senior management to ensure their conduct was in compliance
with the law and regulations.
(V) About stakeholders
The Company has respected and protected the lawful interests of its bankers, creditors,
employees, employers, suppliers and other stakeholders for sustainable and healthy
development of the Company.
(VI) About information disclosure and operational transparency
The Company has formulated and implemented Management Measures for Information
Disclosure. Secretary of the Board of Directors is responsible for information disclosure.
The Company has disclosed relevant information in a truthful, complete and timely manner
in accordance with the relevant regulations and endeavored to ensure equal access to
information for all shareholders and other authorized personnel and departments, so as to
protect the lawful rights and interests of shareholders, especially medium and small
shareholders. The Company is enabled to timely disclosure the detailed information and
23
changes in share equity of large shareholders or actual controller. During the report period,
the company adopted Management Methods of Investor Relationship, which further
standardizes the management of investor relationship.
II. Performance of Independent Directors
There independent directors of the Company bear responsibly and effectively fulfilled their
duties since they came into office. They have leveraged on their professional experience
and expertise to furnish opinions on the Company’s operation, compensation appraisement
and other matters. During the report period, these three independent directors attended
those sessions of the Board of Directors, deliberated upon proposals and studied relevant
references for decision-making. The furnished expertise on the Company’s relevant
transactions and periodical reports. As far as the perfection the corporate governance
structure is concerned, the independent directors boosted the establishment of the
Strategic Committee of the Board of Directors and the Compensation and Appraisement
Committee opinions and assumed the offices of relevant positions, playing active roles in
the improvement of the Company’s decision-making level and the optimization of
performance appraisal and incentive mechanism. Furthermore, they proposed well-judged
suggestions on the Company’s development in a perspective of China’s economic situation,
which is very meaningful to the scientific decision-making of the Board of Directors and the
robust growth of the Company.
They also give us pertinent suggestions about company development with their profound
professional knowledge, which plays an active role in director’s scientific decision and
company’s active development.
1. The presence at meetings of the individual director: Names of
Independent Directors
The times that director should be present this year
The presence times in body
Consigner times
The absence times
Li Weian 8 8 0 0
Yang Jun 8 8 0 0
Han Chuanmo 8 8 0 0
2. The record of different opinions on relative items to company from independent
directors.
In this year, there are no different opinions on relative items to company from
independent directors.
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III. The Company’s Separation from the holding shareholder in five aspects of
business, personnel, assets, institution and financing
(I) Business: Independently engaged in the design, construction, installation and
maintenance of marine and land oil and gas development projects and supporting projects,
the Company is not dependent on the largest shareholder. Owning an independent supply
and sales system and the capacity for independent business operation, the Company is not
dependent on the largest shareholder in terms of the purchase of main raw materials and
the production and sales of products.
(II) Personnel: The appointment of the Company’s directors and senior executive is legally
exercised. The general manager, deputy general manager, financial controller, secretary of
Board of Directors and other senior executives are all fulltime employees and salary
payees of the Company. They do not have part-time jobs at shareholders’ working units.
The Company is fully independent in terms of labor, salary and personnel management.
(III)Assets: The Company’s assets are independent and complete, having an independent
production system, supporting facilities and non-patent tangible and intangible assets,
differing from the ownership of shareholders. The Company has its own construction site
and ten engineering ships including Lanjiang ship as well as other production equipment
and facilities, fully meeting the requirement for the Company’s production and operation.
(IV) Institution: The production, operation and office institution of the Company is fully
independent from the largest shareholder without mixed operation or joint office. The
Company’s Shareholders’ General Meeting, Board of Directors and Board of Supervisors
as well as management are performing their respective duties and assuming their
respective responsibilities in a legal manner.
(V) Financing: The Company has an independent finance department and financial
personnel, and independent accounting system and financial management system have
been developed. The Company is independent in terms of financial decision-making, bank
accounts, taxation and external contracting. No external guarantees are provided for
associated parties and the largest shareholder has never interfered with the use of funds by
the Company.
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In a word, the Company has been fully independent from the largest shareholder in five
aspects of business, personnel, assets, institution and financing, with an independent and
complete business and the capacity for independent operation and development.
IV. Performance appraisement and incentive mechanisms for senior management
According to the resolution of the Shareholders’ General Meeting. The Board of Directors
established the Compensation and Appraisement Committee and developed the
Implementation Rules for the Compensation and Appraisement Committee of the Board of
Directors in 2002. Currently, the Compensation and Appraisement Committee is working
out an incentive mechanism and compensation system better adapting to a listed company
to boost the sustainable and robust growth of the Company and meet the demand for
international and domestic market competition.
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Section VII Introduction of the General Meeting of Shareholders
1. During the report period, the company held shareholders’ General Meeting 2003 and 1 st,
2nd, 3rd Provisional Shareholders’ Meeting 2004
(I) First Provisional Shareholders’ Meeting 2004
1. About the Shareholders’ General Meeting
The Company’s Board of Directors published Public Notice on Resolutions of the 19th
Session of First Board of Direct tors of CNOOC Engineering and Circular on the Convening
of Shareholders’ General Meeting 2002 in Chinese Securities Journal and Shanghai
Securities Journal on December 13, 2003. On January 14, 2004 Shareholders’ General
Meeting 2004 was held at CNOOC Building, Beijing Totally 6 shareholders and shareholder
representatives attended the meeting, representing 189,702,062 shares, taking up 68.98 %
of the total share capital of the Company.
2. Resolutions approved and published
By registered ballots, the Resolution on the Election at Expiration of office Terms of Board
of Supervision was deliber ated and adopted, Zhou Shouwei, Yang Shubo, Hu Chang’an,
Wang Zhong’an, Xu Yongchang, Hung Daya were non-independent director candidates of
the Second Board of Directors, and Li Weian, Yang Jun and Han Chuanmo as independent
directors of the Second Board of Directors. The above 9 directors constitute the Second
Board of Directors.
Lawyer Zhang Zongzhen from Junhe Law Firm witnessed this meeting and presented legal
letter. The public notice on resolutions of this meeting was published in Chinese Securities
Journal and Shanghai Securities Journal dated January 15, 2004..
(II) Shareholders’ Meeting 2003
1. About the Shareholders’ General Meeting
The Company’s Board of Directors published Public Notice on Resolutions of the 2nd
Session of Second Board of Directors of CNOOC Engineering and Circulator on the
Convening of Shareholders’ General Meeting 2003 in Chinese Securities Journal and
Shanghai Securities Journal on March 9, 2004. On April 19, 2004, Shareholders’ General
Meeting 2003 was held at Conference Room of Beijing CNOOC Building. Totally 9
shareholders and shareholder representatives attended the meeting, representing
192,386,489 shares a 69.96% of the total share capital of the company.
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2. Resolutions approved and published
By registered ballots, the following reports and proposals have been deliberated and
adopted:
(1) Deliberated and adopted the Work Report for the First Half Year of 2003 of Board of
Directors;
(2) Deliberated and adopted the Work Report for the First Half Year of 2003 of Board of
Supervisors;
(3) Deliberated and adopted Resolutions on Submission Public Funds in terms of 5% to
General Meeting of Shareholders.
(4) Deliberated and adopted the Final Settlement of Accounts for the year 2003.
(5) Deliberated and adopted the Report and Abstract of Company for the year of 2003.
(8) Deliberated and adopted Resolution on the Continual Employment of Beijing
Zhongxingyu CPA Ltd as the Auditor for year 2004.
(9) Deliberated and adopted Profit Distribution Draft plan for the year of 2003 by a special
resolution
(10) Deliberated and adopted Scheme on Conversion of Public Reserve into share capital
for the year of 2003 by a special resolution
(11) Deliberated and adopted Resolution on the Amendment of the Cooperate Bylaws of
CNOOC Engineering and Authorized Board of Directors Handling industry and commerce
Registration and Records.
Lawyer Gong Rui from Junhe Law Firm witnessed this meeting and presented legal letter.
The public notice on resolutions of the meeting was published in Chinese Securities
Journal and Shanghai Securities Journal dated April 20, 2004.
(III) The Second Provisional Shareholders’ General Meeting 2004
1. About the General Meeting
The company’s Board of Directors Published Public Notice on resolutions of the 3rd
session Board of Directors of CNOOC Engineering and Circular on the Convening of
Second Provisional Shareholders’ General Meeting 2004 in Chinese Securities Journal and
Shanghai Securities Journal on April 28, 2004. On May 31, 2004, the Second Provisional
Shareholders’ General Meeting 2004 was held at the Conference of the Office Building of
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our Company. Totally 3 shareholders and shareholder representatives attended the
meeting, representing 232,811,843 shares, a 70.55% of the total of the Company.
2. Resolutions approved and published
By registered ballots, the resolutions on the sign of contract among Chunxiao Group,
Tianwai Group and Tianshang Group in purchasing, building, connecting and debugging
between UOCC and our company are deliberated and adopted.
Lawyer Zhang Zongzhen from Junhe Law Firm witnessed this meeting and presented legal
letter. The public notice on resolutions of this meeting was published in Chinese Securities
Journal and Shanghai Securities Journal dated June 1, 2004.
(IV) The Third Provisional Shareholders’ General Meeting
1. About the Shareholders’ General Meeting
The company’s Board of Directors Published Public Notice on resolutions of the 6the
session of Second Board of Directors Chines Securities Journal and Shanghai Securities
Journal on September 1, 2004. On October 11, 2004, the Third Provisional Shareholders’
General Meeting 2004 was held at the Conference of the Office Building of our company
Totally 5 shareholders and shareholder representatives attended the meeting, representing
225,129,094 shares, a 68.22% of the total share capital of the Company.
2. The adopted and published Resolutions at Shareholders’ General Meeting
By registered ballots, Resolutions on the Change of the Registered Address and the
Amendment of the Corporate Bylaws of our Company are deliberated and adopted. The
new registered address is changed into Tanggu Ocean Hi-tech Development District of
Tianjin from Jikeyuan of Huayuan Industrial Area of New Technology District of Tianjin. The
new registered address is No.4-396, Hebei Rd.,Tanggu District, Tianjin.
Lawyer Zhong Zongzhen from Junhe Law Firm witnessed this meeting and presented legal
letter. The public notice on resolutions of this meeting was published in Chinese Securities
Journal and Shanghai Securities Journal dated October 12, 2004.
II. Election and changes of directors and supervisors
As stipulated in Company Law and the Articles of Corporation, that the tenure of the First
Board of Directors of the Company had expired. It was agreed on the First Provisional
Shareholders’ Meeting 2003 held on January 14, 2004 that Mr. He Dexiang, Mr. Wu Zhiyun
29
and Mr. Xie Weizhi resigned from their positions as directors, and Mr. Zhou Shouwei, Mr.
Yang Shubo, Mr. Hu Chang’an, Mr. Wang Zhong’an, Mr. Xu Yongchang, and Mr. Huang
Daya were elected as non-independent directors of the Second Board of Directors, and Mr.
Li Weian, Mr. Yang Jun and Mr. Han Chuanmo as independent directors of the Second
Board of Directors.
30
Section VIII Report of the Board of Directors
I. Management Discussion and Analysis during Report Period
With the rapid development national economy and the increasing demand for energy, the
shortage of energy has become the choke point against economy development. In 2004,
our demand for petroleum increases rapidly with the imported amounts as much as 120
million tons. The degree of foreign-dependence is 40%. Moreover, the international
petroleum price is higher-oriented. The economy development and petroleum shortage
bring development opportunity for CNOOC. As a result, CNOOC maintains development
momentum in2004. Ocean Petroleum Engineering works as the key step of Ocean
Petroleum exploitation. And the development of CNOOC supplies new opportunities and
challenges for our company.
Our company faces opportunities and challenges in the report period; Carrying on the “full
harmonious, sustainable” development view, insisting on “honest and creditable, creating
value” principle, carrying forward the scientific , practice-oriented, creative, struggling, and
devoted sprit, devoted into the promotion of comprehensive competitive ability; giving
prominence to main industry with scientific integrated planning, proper arrangement, and
safety construction, our company has received obvious effects in production and
management with the staff effort. Carrying forward the increase momentum of 2003, our
company keeps stable and active development in achievements. We will get the highest
point of history and stride forward “ Modern Important Ocean Engineering” with a steady
step.
With the economy benefit increasing year by rear, the company wined affirmation in capital
market with normative fathering and scientific management. In may of 2004, the company
was honored as one of the ten “CCTV 2003 China Most Valuable Market Companies” and
accepted the return interview from CCTV in September.
In November, it was listed (No.37) in the “100 top competition companies in China market
of 2004” recommended by Economy magazine.
1. Having seizing development opportunities, the company first obtains RMB 3
31
billion Yuan from sales, which brings higher profits in economic effect.
In the report period, facing the rapid increase of ocean petroleum engineering business, the
company grasps the chance, optimizes the resource distribution, and overall plans the
arrangement. The company runs the being built project and to be build project in an
effective and quality way. There is great promotion in asset scale, productive ability and
economic effect. The income of main business is RMB 3488 million Yuan, of which the
main business profit is RMB 631 million Yuan and net profit is RMB366 million, RMB1.11
Yuan for one share, increasing by 69.8%, 127.9%, 86.1%, and 55.08% respectively than
that of last year. That is the most rapid development in history.
The compound increasing rate of main business is 42.42% from 2002 to 2004, and the
compound profit increasing rate is 49.63%. Both of them keep rapid increasing rate.
2. The construction task is well finished, and the achievements keep stable increase
rate.
In the report period, the new constructions are two periods of CFD11-1, two periods of
BZ25-1, LF13-2, HZ19-3/2/1, Cezi island under sea pipe, Donglian Dock, HZ 21-1B, the
north high point of JZ20-2, PY30-1general constructing, and the being built constructions:
QK18-2, one period of CFD11-1, one period of BZ25-1, Bonan, Chunxiao, NB35-2. The
total 18 projects are implemented. The quantity of construction keeps faster increasing
speed.
①To organize production in a scientific way
For the faster increasing construction quantity, the company intensifies management,
organizes carefully, and exerts the advantage of associate item groups. The units
cooperate closely and are well organized. The human source and facilities are well
32
distributed. As a result, every project is completed on time, and every item is safe, standard
and qualified. In the report period, the company finishes QK18-2 general constructing items
(ahead of 19 day than original plan,) CFD11-1 one period (ahead of 15 days than original
plan), BZ25-1 one period (WHPB/WHPD/WHPE earlier 5 days/15 days /15 days
respectively than original plan), and four general constructing items of Bonan project
(ahead of 31 days). In addition, LD10-1 oil field construction was finished in Janngs
increasing obvious effects.
To design business, the devoted man-hours increase by 77% in 2004 than that of 2003. In
the routine work, the widely application of accelerated 3D, Intools and standardization
liberates the labor force further and increases the efficiency and ensures that every item
works orderly. At the same time, the special topic of deep sea platform technology is
organized to study and to get the full knowledge of floating platform design technology,
which lays a solid base to ensure the national 863 plan completes as required.
In construction business, the company insists on arranging the construction in a reverse
order, defines the target and task, and innovates in practice. The adoption of the innovated
techniques and technology lessens the workload and increases efficiency and shortens the
construction period. The output of processed steel of a whole year increases by 76% than
that in last year.
In installation business, the company takes “Lanjiang” as the main course and adjusts the
plan timely and properly to realize anti-backlash, attempter and increase the installation
efficiency oversea. The average shipping operation rate is 87% and increase 12% than that
in the same period of last year, and the average shipping rate is 94%, an increase of 2.4%
than that in the same period of 2003 which ensure powerfully the construction to be
completed on time.
In inspection business, the company is strict in inspecting method and quality and insists on
operating according to procedures. As a result the company gets the belief from business
owner and the third party.
In purchasing business, the company has fumbled and summarized a suit of effective
operation modes in CFRE equipment for contract. It not only shortens the purchasing
33
period and ensures that the project goes on wheels, but also reduces the construction
waste as possible and save the cost. It has primarily exerts it advantages.
② New Breakthrough in Market Exploitation.
In the report period, based on the increase of comprehensive ability, the company gets
belief from business owners and the third party by improving the construction quality and
service, which explores the new market. The home shoal water market is consolidated
further and the international and deep-sea market is actively explored around “Langjing”
Two periods of PL19-3, PY30-1 and Indonesia SES item show the company’s competitv
ability completely improves a lot. They also indicates that the company’s business ability is
approved by foreign MNC, marking the new breakthrough in market exploitation.
3. Insist on harmonious development management and improve the “multi-aspects
management” ability rapidly.
① During the period, the company consolidates and improves the associated item group
management modes. It also intensifies the supporting item management, optimizes the
management staff distribution and improves the operation efficiency. All the above ensures
that the heavy workload is completed effectively.
② Insist on the management and operation strategy of “technology development and
infrastructure” and “safe production and market operation”, and regulated development to
improve the total design quality and efficiency, At present, the company has taken on
studying the net-oriented design management system to improve the design quality and
efficiency further and step forward the First-class International Engineering Design
Company.
③ Improve the management and regulation ability on long-range items and multi-items
operating together. The manufacture range on land is from Dalian, Shanhaiguan, Longkou,
Shanghai, Huizhou, and Shenzhen to Zhanjiang. The installation range oversea is from
Bohai, East Sea to South China Sea. Every item is well controlled, marking that the
company has better control and management ability on multi-aspect situation.
④ The Company sets public item management rules primarily. And it also makes
centralization of management and records of public items, such as the outside the
company but relative to production items, and resource distribution. The charge of those
public items is well distributed.
34
4. Improve equipment to get diving ability of huge-pattern pipe and lay a solid base
for later development.
① During the report period, according to the company’s development layout and needs,
the company adds imperative facilities in time and improves and optimizes the installation
ability based on improvement of installation operation technology, facing the installation
ability shortage.
The company lays emphasis on improving Langjiang heavy derrick/lay barge operation
ability. The oversea installation of Chunxiao, LD10-1 etc has been completed successfully.
The ship has become the core equipment of the company for construction and the
backbone of the company for future development. The ship is also the solid base for huge
and complicated general constructing items.
On May 25, another important item” 8000 tons submersible barge was completed. The
capital of the item was raised.
On June 22, the Company helped “Lanjiang” finish the CEP deep-sea pipe frame (as heavy
as 6500 tons) installation for moving and diving of Chunxiao Oil Field, marking the success
of the first adoption of slippage diving installation technology. This is the most heavy pipe
frame in history.
The deep-sea pipe frame is carried to a certain maritime space by 8000 tons submersible
barge and dive into the water. Then the frame is made to stand and to be installed by
Langjiang heavy derrick/lay barge. The building of the ship changes the single lift-up-lift-
over mode of pipe frame installation into the lift-up-lift-over mode and slippage diving
together. The ability to install the pope frame is changed from 3,800 tons to 8,000 tons. The
marine installation capacity of the Company has l steps forward greatly.
On September 27, the “Offshore Oil 299” purchased from Norway arrived Tianjin dock. All
repair work had finished by November 19, After passing the CCS first inspection and DNA
ship’ classification recovery strict inspection, it was formally put into performance on
January 26, 2005. The ship is the first class-2 dynamic Positioning ship. Now the total
number of barge is twenty. Its application improves the company’s installation level. It’s
sure that another brand will be built up after “Lanjiang” and adds new dynamism to the
oversea installation efficiency.
② The Company faces huge ocean building engineering business. The shortage of sites
has become the choke point of development. During the report period, to satisfy the home
large scale of oil field exploitation needs, to carve out international market, to reserve
35
resources for development of deep-sea business, to strengthen the stamina for later
development, and to ensure the integrated development strategy, the company decides to
build new site in Qingdao based on the widely study and investigation of home sites.
Having been put into production, the item mainly is applied for floating platform and fixed
drill platform and other relative facilities for oil and gas field exploitation home and abroad.
At the same time, it also provides accessorial service for oversea transportation and
installation engineering. It is used as berth site and replenishment base for huge self-
employed construction. The products market covers the shoal water and deep-sea
construction of China maritime space, and also reaches the offshore construction in
Australia, Southeast Asia, Middle East, West Africa, and South America. As planed, the
item will be put into production partly in 2006 and it will be one of the largest manufacture
bases for offshore engineering in the world.
5. Carry out and perform the low cost strategy completely to ensure the sustainable
improvement of company’s efficiency.
Quality is the base to stand, and cost is road to existence. During the report period, the
company holds the effective “cost year” activities, intensifies the cost management,
enforces the budget and strengthens the staff consciousness of “Reducing cost is equal to
create profits.” It has achieved obvious effects by shortening the time of construction,
oversea installation, and facilities purchasing period; and optimizing the design and
innovating technology.
6. Innovation in development is to build the core competitive ability of the company.
①. Manage well the deep-sea technology reserve and drive the rapid improvement design
ability with technology progress.
To reserve the deep-sea technology, the company assumes the study task of the subject-
“typical deep-sea platform definition design and study”. To well organize the study work, the
company set the group of “typical deep-sea platform definition design and study. The
purpose of the group is to study the definition design of deep-sea platform. This marks the
company has stepped a solid step forward the deep sea area.
Meanwhile, the company invited the deep-sea platform engineering technology expert from
America and Sweden to explain the development trends of international ocean engineering.
They specially introduces the TLP and SPAR patterns of deep-sea platform, explain the
definition inductively, and train the relative staff on the structure design, infrastructure
36
design, movement and moor design, and stand pipe design of the two types of platform,
and relative number analysis and construction practice, which bring the staff with further
knowledge about the ocean structure design. The staff, with the theory of typical deep-sea
platform design, understands well the content and purpose next step. That promotes the
company to grasp the knowledge on the design and the key technology of international
deep-sea oil and gas exploitation engineering, and lays a solid foundation for
accomplishing the national 863 plan successfully.
②. Pay attention to study and basic construction of business and increase the performance
efficiency, making positive contribution to cost cut.
Innovation of 2004
Technical Innovation Main Achievement Application Hight Strength Subsea pipeline STT+INNERSHIELD welding procedure
advance technology in duct coupling, First precedent of its kind
BZ25-1, LD, etc.
3DTechnology Reduced on site tray modification rate
LF13-2 etc.
Landing pipeline design Filled the blank of on land pipeline design
BN Project
new model of SPM (Single Point Moorings)
First precedent Homeland CFD11 Oil field
Independent creation of Oil cleaning device
Saving 100,000 yuan LD 10-1CEP module
7. To complete the establishment as planned, improve the workflow, salary and
employment system, organize and prepare human resources for strategic goal of
building a Chinese modern marine heavy industry.
To ensure the company’s stable and health growth, promote its competitive capacity and
make the company the most influential general contracting company. In the report period,
the company has completed the strategic planning establishment.
To accommodate the intensifying international and domestic petroleum market, fulfill the
strategic goal of becoming a Chinese modern marine heavy industry and to establish high
speed, high efficient awarding system, enhance the company’s core competitive capacity,
the company’s reform on workflow, employment and salary system has been completed in
March, 2005. This reform focuses on the strategic goal of becoming a Chinese modern
marine heavy industry. Organization structure is optimized in accordance with company’s
development scheme; salary system and employee’s career development channel are
37
established according to 3 aspects of the management, sills and operation, hence to set up
an environment where everybody will be well trained and everybody is able to achieve the
potential. The in-take of human resources, training, selection and award system are
established. The above mentioned forms a framework and employment basis that are
needed fulfilling the strategic goal of becoming a Chinese modern marine heavy industry.
8. Stick to Human oriented, strengthen management of QHSE, enhance safety
awareness, prevent from risks and dangers.
In the report period, the human oriented principle is emphasized, the attitude of “safety first,
prevention as a mean to deal with risks, strengthening the basis and keeping up with
project schedule” is formed deep in everybody’s mind. It is also requested to improve safety
management model, promote management execution culture, and carry out award and
punishment accordingly. The attitude of “ the person who is in charge of a job should bear
its responsibilities” is vital to run our management system, release the system’s influences.
Combining with the practice, with enhanced safety awareness of employees and operation
skills, employees are able to avoid danger and risks consciously. When the work amount is
increasing, safety goals are set on each stage of work; therefore employees are getting
more experienced in recognizing and avoiding danger and risks, influencing safety
production in a positive way.
9. Return the society
Since 2003, the company has been developing rapidly. In this period, lots of activities have
been held to help the development of society. Donation had been made to Hope Project
funded primary schools in Longhua, Mancheng and Luanping of Hebei Province; and
activity namely “CNOOC Hope School Summer Camp” was held in Tanggu, Tianjin,
displaying the contribution spirit and healthy corporate culture.
II. Operations Overview during the report period
(I) Major Business Range and Operation
The company is a big-scale engineering general contract company integrating offshore oil
engineering design, construction, installation, debugging and maintenance. Major business
includes design, construction, installation, connection and debugging of offshore and
38
onshore oil and gas development engineering and related engineering; marine pipeline
construction, testing and maintenance of offshore oil and gas field facilities; production and
installation of various steelworks, net-structure frame engineering; construction of pressure
containers, etc.
During the report period, the company concentrated on development of offshore oil
engineering, consolidating domestic market and shallow-water market. At the same time,
significant achievement has been made in opening up international market.
During the report period, revenue from major business increase 69.8% compared to the
previous year. At present, there is about 85% of domestic market share in assembled
blocks, pipe frame construction and installation engineering, over 90% of marine installation
market share, about 90%.of domestic market share in subsea pipeline construction
engineering business.
1. Major Business according to Business Category
According
to Area or
Product
Major business
Revenue (RMB)
Major
Business
Cost
(RMB)
Gross
Profit
Rate
(%)
Increase/
Decrease
of Major
Business
Revenue
(%)
Increase/
Decrease
of Major
Business
Revenue
(%)
Increase/
Decrease
of Gross
Profit Rate
(%)
Offshore
Engineering 3,487,502,020.87 2,807,984,422.52 19.48 69.8 62.63 3.55
Connected
Transaction
Included
3,041,330,290.03 2,564,689,469.05 - - - -
2. Major Business according to Area Area Major Business
Revenue (RMB)
Major Business Cost
(RMB)
Major Business Profit (RMB)
Increase/Decrease of Major Business
Revenue(%)
Tanggu Area 3,471,998,767.19 2,804,695,422.97 621,160,477.6 70.82
Shenzhen Area 72,124,151.57 60,246,732.88 9,320,398.21 235.69
Nanhai Area 4,680,027.00 4,343,191.56 182,394.66 -41.30
(II) Business and achievement of major holding companies and share companies of
the Company
39
1. Particulars of holding subsidiaries of the Company brought into the combined
statement scope during the report period
Company Name Registered capital
(RMB 10 thousand)
The main business
and products
Assets
(RMB 10
thousand)
Net profit
(RMB 10
thousand)
Percentage of
Equity
Shenzhen CNOOC
Platform Repair &
Installation Co., Ltd
1,365 The construction,
installation and repair
of Ocean oil platform
3,720.69 931.28 95%
Hainan CNOOC
Platform Repair &
Installation Co., Ltd
2,000 The construction,
installation and repair
of platform oversea
and on land
2,485.63 0.71 Direct
Shareholding 70%
indirect
shareholding 30%
2. Particulars of share companies during the report period Company
Name Registered
Capital （RMB10
thousand）
Date of Registration
Principal Activities Actual Contributed
Capital (RMB 10 thousand)
Percentage of Equity
CNOOC Finance Co., Ltd.
141,500 June, 2002 Handling deposit, bank loans, finance,
lease for member companies
2,500 1.77%
(III) Principal Suppliers and Clients
Total payment for purchase by the company to top 5 suppliers is RMB330, 587, 800,
accounting for 34.23% of total purchase amount, and the sales revenue from top 5 clients
is RMB3, 364,730,000, accounting for 96.48% of total sales revenue.
(IV) Problems, Difficulties and Solutions in Operation
1. Integral deep-sea technology of the company can not meet the development demand
towards deep-sea area.
The deep-sea operation technology shall be improved to meet the demand of deep-sea
exploration already conducted by the company. The company has set up “Typical Deep-
sea Platform Concept Design & Research Subject Group” to engage in the platform
concept design & research in the report period, and invited some experts of deep-sea
platform engineering and technology from U.S and Sweden to expatiate the development
trend of international ocean engineering, especially the concepts of TLP and SPAR. The
40
experts also carried out detailed technology trailing for our staff about the structure design,
foundation design, movement and mooring design, standpipe design, installation design,
and relevant numerical analysis and engineering practice of TLP and SPAR. As a result,
we have gained some new recognition about the design concept of ocean structure, and
mastered some theoretical basis of typical deep-sea platform design.
2. Comparatively lack of construction foundations and equipments and production capacity
with the rapid development of business.
The company has started the project of new construction foundation in Qingdao in the
report period, which will be used to construct relevant facilities, such as fixed pile supported
platform and floating platform needed when exploiting oil and gas fields at sea at home and
abroad. The project will also be used to offer adequate and systematic services of marine
transportation and installation engineering, and used for the mooring and replenishment
base of large in-use engineering vessels. The product markets cover the shallow and deep
sea engineering of Chinese sea area, and radiate the marine engineering markets, such as
Australia, Southeast Asia, Middle East, West Africa, and South America etc. This project
will bring into production partially in 2006. And it will become the largest construction
foundation of marine engineering in the world after completion with a manufacturing
capability of 200-250 thousand tons of steel products annually.
Another important fund-collection project “8,000 tons submersible barge “ has been
completed. The company purchased a secondary dynamic positioning vessel from Norway.
The operating vessels increased to 12. As a result, the operating ability of the company at
sea is improved greatly and the lack of equipments is made up in time.
3. The human resources, especially management and technical personnel of large
international projects can not meet the development demand of the company.
The company has enlarged the force to train the staff in different ways, including retaining
foreign technical experts to engage in operation nudge. As a result, the technical and
operation level of the staff in the company have been improved greatly and a lot of
management and technical personnel emerged. The company will continue to construct the
technical staff and focus on cultivating senior project mangers and technical personnel of
international engineering so as to meet the demand of international general contracting and
store enough personnel for the realization of development strategy objective. III. Investment during Report Period
(I) Investment of Raised Capital
41
1. Expenditure of Raised Capital
In January 2002, the company issued RMB 80 million ordinary shares, raising net capital
amount of RMB750.38 million yuan. By the end of 2004, the company spent
RMB719.68million yuan of the raised capital, depositing the remaining RMB30.70million
yuan in the bank with adequate guarantee for security. Unit: RMB 10 thousand
Total Amount of Raised
Capital
75,038 Total Expenditure of Raised Capital in
2004
2,555
Accumulated Total Expenditure of
Raised Capital
71,968
Promised projects Planned
Investment
Amount
Project changed
or Not
Actual Investment
Amount
Consistency with
schedule and
predicted income
“Lanjiang”heavy derrick/lay
barge
62,738 No 62,738 Yes
800KNM hydraulic hammer 2,700 No 2,667 Yes
350Oton caterpillar crane 2,000 No 1,963 Yes
10,000 tons submersible
barge
4,600 No 9,010 Yes
Deep-water ditch digger 3,000 No 0 No
Total 75,038 - 76,378 -
Notes: 10,000 tons submersible barge has been put into use during report period and gained estimated profit, however,
the actual time for putting into use was behind schedule.
2. Project Schedule
(1)”Lanjiang” heavy-weight heavy derrick/lay barge
Completed debugging and put into work in February 2002 and performed normal
operation during the report period. Its pipe-laying depth is 6~150 meters with full-round
hoisting power of 2500 tons, maximum hoisting power of 3800 tons and with two
certificates issued by Chinese classification society and American classification society.
Launch of “Lanjiang” greatly strengthened the company, increased deep sea operation and
general contract ability of the company and provided hardware support international
competition of the company.
(2) 800KNM hydraulic hammer
Completed debugging and put into use in 2002 and performed normal operation during
the report period. It is specially used for offshore deepwater pile hammering with maximum
water depth of 1000 meters. It is main-force hammer generally owned and used by offshore
42
engineering companies of the world. It has greatly improved offshore operation and work
efficiency of the company.
(3) 350ton caterpillar crane
Completed debugging and put into use in 2002 and performed normal operation during
the report period. Purchase of it maximized technique of hoisting operation in offshore oil
engineering, turning the original combined hoisting operation of two cranes into single unit
operation, multi-machine operation into fewer machine hoisting operation which greatly
increased efficiency and improved comprehensive operation.
(4) 10,000 tons submersible barge
The building of 10,000 tons submersible barge has been completed successfully during
report period, with actual investment of RMB 90.10 million yuan, RMB 46 million yuan
raised capital and RMB 44.10 million yuan self-owned capital has been spent. On Jun the
22nd of 2004, the barge successfully assisted “Lanjiang” in finishing skid submersion
installation of CEP deep water conduit derrick that weighs 6,500 tons. The completion and
putting into use of this barge enable the company to conduit installation of conduit derrick in
the form of combining hoisting with skid submersion instead of single hoisting, and enhance
the installation capability of the conduit derrick from 3,800 tons to 80,000 tons, which is of
great significance to enhance the marine operation capability and comprehensive
competitiveness of our company.
(5) Deepwater ditch digger
The scheme working out is under way during the report period.
(II) Significant Investment Projects with Non-raised Capital during Report Period
1. Universal Dynamic Positioning Barge
During report period, the company purchased second class dynamic positioning barge
“Marine Petroleum 299” from Norway for the first time, with total investment of RMB73.24
million yuan. The barge was officially put into marine operation on January, 26, 2005. It has
escalated company’s equipping level noticeably, created a new brand in the wake of
“Lanjiang” for the company, and played an important role in fulfilling company’s strategic
goal of “developing towards deep water”
2. Building New Manufacturing Site in Qingdao
43
During report period, the study of building a new manufacturing site started, after extensive
survey, it was decided that a new manufacturing site would be built in Qingdao City. On
January 27th, 2005, the company held a meeting of directors to come to the consent that
company would invest RMB 95 million yuan in building a new manufacturing site in
Qingdao. On February 25th, 2005, the company held a meeting of directors to make a
resolution of RMB 200 million investment in setting up branch company in Qingdao. The
project was initiated with a view to meet to demand for construction site of large scale
domestic oil field exploration so as to maintain company’s leading position in domestic
market, make necessary sources reservation for developing international market and deep
water business, enhance modem Chinese offshore oil engineering company.
IV. Analysis of Financial Status and Operation Result Unit: RMB
Item 31 December 2004 31 December 2003 Increase/Decrease(%)
Monetary Capital 596,112,51,8.35 396,616,618..95 50.30
Account Receivable 87,921,458..62 99,047,383..57 -11.23
Stock 396,085,153.36 154,820,698.12 155.83
Current Assets 1,133,607,638.58 684,441,303.33 65.63
Total Assets 2,659,217,983.47 2,093,752,972.73 27.01
Equity of share holders 1,794,333,097.70 1,456,236,257.51 23.22
Item 2004 2003 Increase/Decrease(%)
Major Business Revenue 3,487,502,020.87 2,053,897,722.08 69.80
Major Business Cost 2,807,984,422.52 1,726,646,822.69 62.63
Major Business Profit 630,663,270.47 276,658,620.72 127.96
Net Profit 365,596,840.19 196,453,348.88 86.10
Net Cash Flow from
Operating Activity
512,294,017.86 471,402,343.93 8.67
Net Increase of Cash and
Cash Equivalent
199,495,899.40 86,512,663.79 130.60
Reasons for changes:
1. The main reason for monetary capital increment is caused by rise of received
money for project progress.
2. Main reasons for stock increment:
According to “Financial accounting method for construction corporation” the unsettled
projects under construction is listed in stock, adjustment has been made on corresponding
data of last year on comparable basis. The project under construction of this stage
increased considerably, the receivable collection of some contracts of the project under
44
construction have not reached milestone. In this case, the substantial increment in
unsettled money for on-going project construction brought about increased stock of the
company.
By December 31st, 2004, the unsettled money for on-going project construction reached
RMB 304 million yuan, increased 467.13% over that of comparable period.
3.Main reasons for Increment of Major Business Revenue: Due to soaring and effective
development of Chinese offshore oil industry, the company has completed the projects in
time or ahead of time resulting from enhancement in equipping capability and productivity
and execution of innovation, which benefit from management strengthening, unified
resource arrangement and withdrawal as well as scientific production organization. Rapid
growth of major business revenue has been achieved because of beforehand completion of
four large scale oil field projects such as QK18-2 general contracting, first phase of CFD11-
1, first phase of BZ25-1 and Bonan Project, plus sound progress of other underway
projects.
4. Major Reasons for Significant Growth of Net Profit ①Major business revenue increased
69.8% during the report period, with corresponding increase of profit from major business.
② During report period, the company effectively campaigned activities of innovation and
“cost year” to bring the advantages of combined project team into full play. Shorten
construction time, enhance construction efficiency and lower project cost effectively, with
3.55% increment in gross margin rate. As a result, all these have had direct and positive
impact on net profit increment.
5.Major Reasons for Increment of Net Increment Amount of Cash and Cash Equivalent:
During report period, company has paid off all the debts and received all the account
receivables in time.
V. Impact on Company Exerted by Changes in Production and Operation
Environment, Macroscopic Policies and Laws
45
(Source of data:National Bureau of Statistics)
In 2004, the soaring of international petroleum price and the shortage of domestic energy
make petroleum price become important issue in economic life in China, the second largest
petroleum consumption country in the world. According to statistics, since 1990, China’s
petroleum consumption has been on the rise at the rate of 6.94% per annum, but the
annual petroleum output increases only at the rate of 1.6%, causing substantial rise in
import. According to statistics from the custom, in 2004, the crude oil China imported
totaled 120 million tons, increased 34.8%, the growth in import volume is the fastest during
past four years, with annual crude oil import exceeding 100 million ton for the first time.
According to analysis from Energy Economy and Development Strategy Research Center
of National Energy Institution of Development and Reform Committee, by 2010, China’s
strategic petroleum reservation has been high on agenda. “10th Five-year Plan” of China
Petroleum Industry has stipulated the development of “Proceeding for domestic market,
developing international market, intensify prospection, rationalizing exploration, practicing
thrift and make reservation.” It is proposed for the first time to set up and perfect national
strategic petroleum reservation system to enhance the ability of handling emergency and
safeguard the safety of national petroleum supply, which has provide the development of
China’s petroleum industry with important opportunity and fierce challenge.
46
2. China’s Unprecedented Historical Opportunity Provided by Effective and Soaring
Development of Offshore oil and Gas In short, medium and long run, offshore oil and gas
become more and more important due to its great potential for exploration. In recent years,
China has intensified prospection of offshore oil and gas even initiating deep water
prospection, and stipulated great strategic development goal to produce 5000 to 5500 stere
petroleum by 2010, the execution of this strategy has provide our company with
unprecedented opportunity for development.
3. Enhanced Development in Offshore oil and Gas Industry Due to Duty-free Preferential
Treatment on Imported Offshore oil Production Equipment
The gradually improvement of offshore oil productivity is in dire need of large number of
advanced offshore oil production equipment. Currently, domestic technological and process
level are far from the requirement of offshore oil production for precession technology and
equipment, as makes it necessary to import some offshore oil production equipment. The
core technology and equipment with high added value such as geophysical prospecting
equipment, system software and positioning & navigational equipment, etc are entirely
dependent on importation. In consideration of current condition that it is imperative for
China to develop offshore oil industry in the context of lacking advanced production
technology, it is a shortcut to import advanced production equipment substantially.
In order to give support to development of energy industry and promote exploration of
offshore oil and gas, State Financial Ministry, State Administration of Taxation and General
Administration of Customs jointly issued a provisional stipulation that imported materials for
offshore oil (natural gas) exploration will be exempted from tax, this stipulation offers duty-
free preferential to dedicated equipment and key components necessary for petroleum
production, it has facilitated importation of offshore oil production equipment vigorously.
VI. Major Work for 2005
2005 will be a key year for China offshore oil industry to guarantee output increment and for
our company to fulfill establishing “China modern marine heavy industry”. Our company
seizes the opportunity and rise to challenge to promote execution of company’s strategic
development plan. Our company will continue to improve equipping facilities, improve
comprehensive competitiveness, make good deep water technology reservation and lay
47
solid foundation for future development on the basis of enhancing management capability
and construction efficiency. The main work of 2005 is as follows:
a) Defining 2005 as “Year of Efficiency and Cost”
To lead all works by means of innovation, to ensure efficiency by virtue of taking
reasonable measures to intensify project budget and cost control.
b) Being Fully Aware of Extreme Importance of Safe Production and Continuing to Do Well
in Safe Environment Protection Work
Safe Production is vital to company’s sound development. Our company will be fully aware
of the importance of safe production to be responsible of staff’s safety and the safety of
company’s property. It will carry out the principle of “Safety comes before production” to
bring safety awareness to all staff, which is also embodiment of of “Human orientation and
concern for staff”
c) Making Sure Timely or Beforehand Completion of Each Project Construction.
The constructing projects of 2005 is more onerous than previous years, which mainly
comprises of BZ25-1 general contracting, maritime installation of upper facilities of spring
dawn oil & gas field, general contracting of LD oil field, general contracting LF13-2 oil field,
general contracting of NB35-2, general contracting of HZ21-1, general contracting of CFD
second phase, JZ20-2, East union and upper facilities, Mabianzhou Dock, PY maritime
installation and Eight-square Kiosk, etc. The projects are planned to put into construction
including DF second-phase maritime installation, second phase of PL19-3, Indonesian SES
natural gas, Weizhou project, QK17-2 east high point, etc. The company will fully bring the
advantages of combined project team into full play to mobilize all relevant units to ensure
timely or beforehand completion of each project construction by means of elaborate
organization and joint efforts. Special attention should be paid to the key projects such as
PL19-3 second phase, spring dawn oil field, PY30-1, NB35-2 platform (7800T) Float over
installation, and Indonesian SES, etc. Our company will win owner’s trust by courteous
service and excavate the brand value of “offshore oil project”
d) Focusing on Improving Technological Level to Do well in Technology Reservation for
Deep Water Project.
Our company will improve technological level of design, construction and installation by all
means and do well in technological reservation of deep water project and perfect
construction capability of deep water business gradually through cooperation so as to be
posed for further exploration of deep water market.
e) Enhancing Tam Building up to Improve Staff’s Qualification
48
To meet the requirement of international general contracting project management, our
company will build up the team of project managers of international sophisticated projects
vation for company’s future development.
f) Deepening Reform and Perfecting Flow
Reform is impetus of development, in 2005; our company will continue to deepen reform.
Based on the salary and employment system set in 2004, our company will straighten out
management flow, perfect corporate system and promote sound and stable development of
the company.
g) Sustainable Improvement in Equipment and Facilities
In 2005, while making sure successful construction of Qingdao Manufacturing Site,
research into improvement and enhancement in maritime installation equipment will be
made to meet the requirement of business development, boost comprehensive
competitiveness, strengthen company’s development potential, ensure sound and
sustainable development, make company’s comprehensive ability rank top position in
international trade and fulfill the overall strategic development goal of building China
“Modern Maritime Heavy Industry”
VII. Company’s Operation Plan in New Year
It is estimated that, in whole year of 2005, the main business revenue will gain 10% growth
over that of 2004; net profit will gain 15% growth over that of 2004.
VIII. Routine Work of Board of Directors
(I) Meetings and Resolutions of Board of Directors during Report Period
During the report period, the board of directors has had eight meetings.
1. The first meeting of second board of directors was held in Beijing on January 14, 2004,
the resolution of electing Zhou Shouwei as Chairman was approved.
The announcement of this meeting’s resolution was published in China Securities Journal
and Shanghai Securities Journal of January 16, 2004.
2. The second meeting of second board of directors was held in Shanghai in March 5th,
2004, with the following resolution approved:
(1) Deliberated and adopted the Work Report for the Year of 2003 of Board of Directors;
(2) Deliberated and adopted Work Report for the year of 2003 of General Manager ;
49
(3) Deliberated and adopted Proposal of Applying with Shareholder’s Meeting for Approval
of Company’s Retaining Statutory Public Reserve of 5%
(4) Deliberated and adopted Company’s Final Accounting Statement for the Year of 2003.
(5) Deliberated and adopted Company’s Profit Distribution Plan for the Year of 2003.
(6) Deliberated and adopted the Company’s Proposal on Capitalizing the Capital Reserve
for the Year of 2003.
(7) Deliberated and adopted Report on Company’s Budgetary Investment on Fixed Assets
for the Year of 2004.
(8) Deliberated and adopted Company’s Annual Report and Summary for the Year of
2003.
(9) Deliberated and adopted Proposal on General Election of Strategy Committee, Salary
and Appraising Committee of Board of Directors.
(10) Deliberated and adopted Proposal on Revising Articles of Association of Offshore Oil
Engineering Company and Authorizing Board of Directors to Handle Industrial and
Commercial Registration.
(11) Deliberated and adopted Proposal on Revising Rules of Procedure of Shareholder’s
Meeting of Offshore Oil Project Engineering Company.
(12) Deliberated and adopted Proposal on Revising Rules of Procedure of Director’s
Meeting of Offshore Oil Project Engineering Company.
(13) Deliberated and adopted Method of Management on Investor Relationship of
Offshore Oil Engineering Company.
(14) Deliberated and adopted Resolution on the Reemployment of Beijing Zhongxingyu
CPA Ltd. as the Auditor for Year 2003;
(15) Deliberated and adopted Resolution on the Convening of Shareholder’s General
Meeting 2003.
Announcement of this meeting was published on China Securities Journal and Shanghai
Securities Journal of March 9, 2004.
3. The third meeting of the second board of directors was held on April 23, 2004 in the
form of fax meeting and passed the following resolutions:
(1) It was approved that the procurement, construction, connection and commissioning of
upper block of Chunxiao and Tianwaitian will be subcontracted to UOCC (United Offshore
50
Construction Co. CONHW) ,relevant contract was planned to be signed, with contract
amount of RMB 132.98 million yuan.
Announcement of this meeting was published on China Securities Journal and Shanghai
Securities Journal of April 28, 2004.
4. The 4th session of the second board of directors was held on July 19 of 2004 in the form
of fax meeting and passed the Proposal on Budget of Purchasing Supporting Barge for
Ditch Digging Operation
5. The 5th session of the second board of directors was held on August the 6th, 20044 in
the form of fax meeting and passed Company’s Annual Report and Summary for the Year
of 2004.
6. The 6th meeting of the second board of directors was held on August 30 ,2004 in the
form of fax meeting and passed the following resolutions:
The announcement of this meeting was published on China Securities Journal and
Shanghai Securities Journal of September 1st, 2004.
(1) Deliberated and adopted Proposal on Changing Company’s Registration Address and
Revising Articles of Association Accordingly.
(2) Deliberated and adopted Proposal on Changing Company’s Third Interim
Shareholders’ Meeting in 2004
The announcement of this meeting was published on China Securities Journal and
Shanghai Securities Journal of September 1st, 2004.
8. The 8th meeting of the second board of directors was held on November 30, 2004 in the
form of fax meeting and passed the following resolutions:
(1) Deliberated and adopted Work Report of General Manager in The First Three Quarters
of 2004.
(2) Deliberated and adopted Proposal on Approval of Constructing New Manufacturing
Site in Qingdao and Project Listing of Setting Branch Company in Qingdao.
The sequent matters:
(1) The 9th meeting of the second board of directors was held on January 27, 2005 in
Beijing and passed the Proposal on Constructing New Manufacturing Site in Qingdao
Economic and Technological Development Zone and Signing Relevant Agreement on Land
Transfer:
51
The announcement of this meeting was published on China Securities Journal and
Shanghai Securities Journal of February 1st of 2005.
(2) The 10th meeting of the second board of directors was held on February the 25 of
2005 in Beijing and passed the Proposal on Registration for Establishing Offshore Oil
Engineering (Qingdao) Co. Ltd
The announcement of this meeting was published on China Securities Journal and
Shanghai Securities Journal of February 28th of 2005.
(II) Execution of Resolutions of General Meetings of Shareholders by the Board
According to the resolution passed by sharholders’ meeting in 2003, the Company duly
executed Plan for Profit Distribution and Preserve Capitalizing Plan for the year of 2003,
namely, based on total capitalization of RMB275 million yuan, to distribute 1 share to every
10 shares, dividens of RMB1.00 yuan (including tax) to every 10 shares to all shareholders
and issued and distributed 1 share to each 10 shares with public reserve, with total
dividends amounting to 27.5 million shares and RMB27.5 million yuan, increased equity of
27.5 million shares and total equity shares of the company after the capitalization of public
reserve reaching 330 million shares. (For detailed information, please refer to the
announcement published on China Securities Journal and Shanghai Securities Journal of
May 10, 2004.)
IX. Proposal on Profit Distribution for This Year or Capital Reserve Capitalizing
Proposal
It was audited by Beijing Zhongxingyu CPA Ltd. that in 2004 the company gained total net
profit of RMB365,596,940.19 yuan, plus the undistributed profit RMB 339,419,173.33 at the
beginning of this year and retained 10% statutory common reserve fund and 5% common
welfare fund totaling RMB 54,840,594.51 yuan. So the distributable profit for shareholders
was RMB650,175,419.01 yuan. The company distributed stock dividends RMB27,500,000
yuan and cash dividends RMB27,500,000 yuan to all the shareholders in May, 2004. By
the end of 2004, the undistributed profit of the company was RMB595,175,419.01 yuan.
The company plans to take the total 330 million capital shares by the end of 2004 as the
base, 1 share and the cash dividend (pre-tax) RMB1.00 yuan will be distributed for every
10 shares, and for every 10 shares 1 share will be added by capitalizing the capital
common reserve fund. After completion of the capitalization, the total capital share of the
52
company will be 396million shares, including 126.72 million float shares. This time, total
cash dividends of RMB33million yuan will be distributed, and the balance of undistributed
profit RMB529,175,419.01 yuan will be distributed in the following years.
The proposal of this time will be submitted to shareholders’ general meeting of the
company in 2004 for approval.
X. Other Matters:
(I) Special notes made by Beijing Zhongxingyu CPA Ltd. on the capital appropriation by
holding shareholder and the related parties
To all the shareholders of CNOOC Engineering:
We have audited the financial statements of 2004 of CNOOC Engineering Co.,Ltd.
(hereafter the “Company”). During the course of audit, we noticed the related transactions
and capital flow between CNOOC Engineering and its holding shareholder and its related
parties. In accordance with the requirements of Zheng Jian Fa No. (2003)56 Circular On
Certain Issues Concerning Standardizing The Capital Flow Between Listing Companies
and Related Parties and Guarantees Provided by Listing Companies, we make the
followings notes on the related transactions and capital flow in 2004 between CNOOC
Engineering and its holding shareholder and its related parties:
I. Basic Information of Related Parties
1. Related Parties in Controlling Relationship
Company’s Registered
Address and Registered
Capital
Operating Business
Relationship with our company
Nature of Ownership
Legal Representative
CNOOC
Registered address: Beijing, China Registered capital: RMB50
billion yuan
Prospecting exploitation,
production and processing of
offshore petroleum and natural gas
Parent Company
State-owned enterprise Fu Chengyu
2.Related Parties without Controlling Relationship Company’s Name Relationship with our company
CNOOC Platform Manufacturing
CNOOC Offshore Engineering
CNOOC Engineering Design
CNOOC Western South China Sea
CNOOC Bohai
CNOOC East China Sea
CNOOC (China) Co., Ltd.
Affiliated to the same parent company *
Affiliated to the same parent company *
Affiliated to the same parent company *
Holding 9.69% shareholding of the company
Holding 0.40% shareholding of the company
Affiliated to the same parent company
Affiliated to the same parent company
53
CNOOC Oil Field Service Co., Ltd.
CNOOC Finance Co., Ltd.
CNOOC Fiduciary Investment Co., Ltd.
Affiliated to the same parent company
Affiliated to the same parent company
Affiliated to the same parent company
The shareholding held by the three companies marked with* are 24.78%, 22.02% and
11.11% respectively, their stock options have been transferred to CNOOC.
Currently, CNOOC Bohai Co is the provider of the comprehensive service business
previously offered by abovementioned three companies.
Capital Flow between the Company and Related Parties and Its Holding Shareholders:
1. Non-operational Capital Flow:
(1) General information about the non-operation capital flow:
The non-operational capital flow between the company and the related parties is the related
savings formed by the company’s depositing the capitals in its related party-CNOOC
Financial Co., Ltd. And CNOOC Trust & Investment Co., Ltd.
(2) Non-Operational Capital Flow of Related Parties:
Name of Related
Party
Year-beginning
Savings
Aggregate
Incurred Amount
of the Debit
Aggregate
Incurred Amount
of the Credit
Year-end Savings
CNOOC-Finance
Co., Ltd. Total
221,883,630.83
221,883,630,83
3,128,085,301.22
3,128,085,301.22
2,991,688,269.51
2,991,688,269.51
358,280,662.54
358,280,662.54
Our company has received stock dividends RMB 1,634,594.60 yuan from CNOOC
Financial Co., Ltd
2. Operational Capital Flow:
(1) General information about the operation business of related parties:
The company entered into many related transactions with the related parties, which is
decided by the franchise system of CNOOC for China-foreign cooperative exploitation of
offshore oil and the development history of CNOOC. The main operating businesses of the
company include general project contracting, and most of the contracted projects are long-
54
term projects such as design, building and installation for offshore oil and natural gas field.
In the project contracts signed by the company, most of the ways of payment are progress
payment, that is, when a progress milestone of a project is reached as provided in the
contract, the company will provide relating documents for payment, upon confirmation of
the proprietor, the company will receive the payment for the progress specified in the
contract. It is decided by the characteristics of the company business that most of the time
the proprietor is CNOOC (China) Co., Ltd. The accounts receivable as of the date of
preparing the accounting reports are the payments receivable for the project calculated
according to deposit clause specified in the contract and the project progress, but such
amounts are not due as provide by the building contract. In the principle of market price,
the company provides professional production services to the related parties, including
design, building and installation.
(2) Operational Capital Flow of Related Parties: Name of Related
Parties Year-beginning
Balance of Accounts
Receivable/prepaid
Revenues in this Year
Amount Received in this
Year
Year-end Balance of Accounts
Receivable/prepaid
CNOOC(China)Ltd -71,911,168.24 2,355,949,226.66 2,235,281,957.35 48,756,101.07
CNOOC Bohai Co. -13,773,574.29 325,035,270.80 267,918,228.74 43,343,467.77
CNOOC Bohai Co. 5,450,000.00 9,080,000.00 9,080,000.00 5,450,000.00
CNOOC and Shell
Petrochemicals 195,199,757.37 103,692,025.95 91,507,731.42
Company Limited
ACT OPERATOR’S
GROUP
159,857,624.68 126,356,903.34 33,500,720.74
Total -80,234,742.53 3,045,121,879.51 2,742,329,115.98 222,558,021.00
Note: The balance of accounts receivable/advances shown in the above table is the balance of the
accounts receivable and unsettled accounts of the completed stock less advances.
II. *Capital Flow between the Company and Other Related Parties and Its holding
Shareholder:
1. Non-operational Capital Flow:
The non-operational capital flow of the company refers to the capital flow between related
parties, with details listed as follows:
(1) Other payables
55
Name of Related Party
Year-beginning Balance
Amount Added in the Year
Amount Lessened in the Year
Year-end Balance
CNOOC 7,769,950.73 7,769,950.73
Total 7,769,950.73 7,769,950.73
2. Operational Capital Flow:
The agreements on related transactions entered into by and between our company and
related company include Agreement on Warehousing, Agreement on Logistics Services
and Agreement on Comprehensive Services, each sponsor company shall render
comprehensive services to the joint stock company. The capital flow incurred during the
normal operation of the company between the company and the related parties are shown
as follows Organization Year-beginning
accounts
payable/advances(-)
Total related
costs for the
year 2003
Amount Paid
in the Year
Year-end accounts
payable/advances(-)
CNOOC 10,938,683.10 229,802,892.53 204,143,462.47 36,598.113.16
China Oilfield
Services Limited.
5,421,944.00 61,818,544.10 54,90,742.10 12,330,746.00
CNOOC Bohai
Co.
4,000.00 67,438,662.58 44,311,144.28 23,131,518.30
CNOOC East
China Sea CO.
- 126,472.80 126,472.80 -
Total 16,364,627.10 359,186,572.01 303,490.821.65 72,060,377.46
III. Net Capital Flow
(1) Non-operational Net Capital Flow S/N Item Year-
beginning
Balance
Aggregate
Incurred
Amount
Aggregate Paid
Amount
Year-end
Balance
①
Total capital flow to
the company from
major shareholders
and the related
parties
221,883,630.83 3,128,085,301.22 2,991,688,269.51 358,280,662.54
②
Total capital flow to
the major
shareholders and the
related parties from
the company
7,769,950.73 7,769.950.73
①-② Net capital flow 214,113,680.10 3,128,085,301.22 2,991,688,269.51 350,510,711.81
56
(2) Operational Net Capital Flow S/N Item Year-
beginning
Balance
Aggregate
Incurred
Amount
Aggregate Paid
Amount
Year-end
Balance
①
Total capital flow to
the company from
major shareholders
and the related
parties
-80,234,742.53 3,045,121,879.51 2,742,329,115.98 222,558,021.00
②
Total capital flow to
the major
shareholders and the
related parties from
the company
16,364,627.10 359,186,577.01 303,490,821.65 72,060,377.46
①-② Net capital flow -96,599,369.63 2,685,935,307.50 2,438.838,294.33 150,497,643.54
(3) Newly Added Non-operational Capital Flow Item Year-beginning Balance Year-end Balance Amount Added
Total capital flow to the
company from major
shareholders and the
related parties
221,883,630.83 358,280,662.54 136,397,031.71
Total capital flow to the
major shareholders and
the related parties form
the company
7,769,950.73 7,769,950.73 -
Net capital flow 214,113,680.10 350,510,711.81 136,397,031.71
(4) Newly Added Operational Capital Flow Item Year-beginning Balance Year-end Balance Amount Added
Total capital flow to the
company from major
shareholders and the
related parties
-80,234,742.53 222,558,021.00 302,792,763.53
Total capital flow to the
major shareholders and
the related parties form
the company
16,364,627.10 72,060,377.46 55,695,750.36
Net capital flow -96,599,369.63 150,497,643.54 247,097,013.17
IV. The capital flow incurred between the company and its subsidiaries
The capital flow incurred between the company and its subsidiaries were mainly current
accounts, see below for the details:
57
1. Other Payables Item Year-beginning
Balance Amount Added
in the Year Amount Lessened
in the Year Year-end Balance
COPMIC Shenzhen Ltd. 152,477.69 523,645.00 676,122.69
COPFC Hainan Ltd. 6,081,689.58 41,901.00 95,273.29 6,028,317.29
Total 6,234,167.27
2. Other Payables Item Year-beginning
Balance Amount Added
in the Year Amount Lessened
in the Year Year-end Balance
COPMIC Shenzhen Ltd. 1,167,021.01 523,532.44 643,488.57
Total
3. Payables Item Year-beginning
Balance Amount Added
in the Year Amount Lessened
in the Year Year-end Balance
COPMIC Shenzhen Ltd. 19,524,412.86 19,524,412.86
Total 19,524,412.86 19,524,412.86
V. Guarantee for Holding Shareholders and Other Related Parties:
During the year, the company didn’t provide any guarantee for the holding shareholder and
other related parties. We haven’t found the company had any circumstance of illegal capital
occupation by the holding shareholder and the related parties as described in the Zhen Jian
Fa No. (2003)56 Circular of the Securities Regulatory Commission of China on Certain
Issues Concerning Standardizing the Capital Flow between the Listing Companies and the
Related Parties and the Guarantees Provided by the Listing Companies.
(II) Special notes and independent opinions of the independent directors on the aggregate
guarantees and guarantees provided in the year by the company
In accordance with the requirements of Zheng Jian Fa No. (2003)56 Circular On Certain
Issues Concerning Standardizing the Capital Flow Between Listing Companies And related
Parties And Guarantees Provided by Listing Companies as well as “Articles of Association
of Company”. We conducted scrupulous check on guarantee matters of the company in
2004. It was reviewed that the aggregate guarantees and guarantees provided in the year
by the company was zero. No guarantees were provided. The capital flow incurred between
the company and its holding shareholder and the capital flow incurred between the
58
company and its controlled related parties were capital flow for normal business, and no
circumstances of illegal capital appropriation occurred.
Independent Directors: LI Weian, Yang Jun, Hen Chuanmo
59
Section IX Report of the Board of Supervisors
I. The Work of the Board of Supervisors
During this report period, the board of supervisors held 2 meetings.
1. The 2nd meeting of the second board of supervisors was held on March 5, 2004, in
Shanghai, and passed Work Report of Board of Supervisors of the Company in 2003:
The announcement of the resolutions adopted in this meeting was published on China
Securities Journal and Shanghai Securities Journal dated March 9, 2004.
(1) All the supervisors discussed on how to unfold the work of board of supervisors in 2004,
Consensus was reached that in 2004 the board of supervisors shall operate in strict
(2) Worked out a scheme for the works to be done in 2005.
II. Independent Opinions of Board of Supervisors on Relevant Matters of the Company in
2004
c of China and the Articles of Association of the company, the production decision-making
proceedings were legitimate, the company fulfilled all the tasks of production and operation
objective for the whole year with a great success.
2. During this report period, the members of the board of directors and the senior
management of the company were highly responsible, to the best interests of the company,
strictly abided by the laws, regulations and the Articles of Association of the com and
interests of the shareholders.
(II) Check on Financial Status of the Company
During this report period, the board of supervisors performed careful checks on the
financial system and the financial status of the company. The board of supervisors held that:
the financial reports of the company for the year 2004 reveals the true and accurate
financial status and operating results of the company, the audit report presented by Beijing
Zhongxingyu Certified Public Accountants is practical, objective and fair.
(III) Use of Raised Capitals
g successfully and were put into use in 2002; The 10,000-ton submersible barge project
has been completed and put into use during report period, with actual investment of
RMB90.10 million yuan including public raised capital of RMB46 million yuan and self-
raised capital of RMB 44.10 million yuan; During this report period, the scheme working out
60
of the deep water submersible barge project was ongoing. The actual projects invested with
the capitals raised by the company are in consistence with the committed projects. During
the process of project construction, no illegal or regulation-violating circumstances occurred
and no circumstances of seizure and misappropriation of project capitals occurred.
(IV) Acquisition and Sales of Asset by the Company
(V) Substantial Related Transactions
The company made many related transactions with the related parties, the nature of these
related transactions was governed by many agreements reached by and between the
company and the related parties, the terms and conditions thereto were defined in the
principle of Being Just, Fair and Open and by means of adopting market prices. When
deciding by vote on the related transactions, the board of directors and the general meeting
of the shareholders of the company withdrawn from voting, and no conduct impairing the
interests of the company was carried out.
61
Section X Important Matters
I. During this report period, no serious matters concerning lawsuits and arbitration occurred
in the company
II. During this report period, no matters concerning acquisition and sales of assets merger
and consolidation occurred in the company
III. Substantial Related Transactions during Report Period
(I) Transactions Related to Purchase and Sales of Goods As Well as Rendering and
Accepting Labor Services
1. The company provided related parties with professional production services including
design, construction and installation, determined contract price through competitive bidding
in accordance with market principle and made settlement according to milestone or project
progress... Related parties to the transactions Transaction Amount
(in RMB yuan)
Percentage in the
Transactions of
the Same Kind (%)
CNOOC(China)Ltd.
CNOOC Western South China Sea
CNOOC Bohai
CNOOC and Shell Petrochemicals Company Limited
CACT
2,355,949,226.66
9,080,000.00
325,035,270.80
195,199,757.37
159,857,624.68
67.55
0.26
9.32
5.60
4.58
2. The related parties provided the company with project subcontracting and shipping
services and determined contract price through competitive bidding in accordance with
market principle. The company signed Agreement on Warehousing, Agreement on
Logistics Services and Agreement on Comprehensive Services with the main sponsor
companies to provide comprehensive services based on market price. For this type of
transactions, the final accounts were settled according to milestone or on a monthly basis.
A. Comprehensive services Related parties to the transactions Transaction Amount(in RMB yuan)
Related parties to the transactions Transaction Amount
(in RMB yuan)
Percentage in the
Transactions of
the Same Kind (%)
CNOOC Bohai Co.
CNOOC Western South China Sea
54,410,015.22
832,030.58
15.61
0.24
B. Project Subcontracting
62
Related parties to the transactions Transaction Amount
(in RMB yuan)
Percentage in the
Transactions of
the Same Kind (%)
CNOOC Bohai Co.
CNOOC Western South China Sea
China Oilfield Services Limited
CNOOC East China Sea Co.
86,328,702.84
66,606,632.00
1,885,700.00
126,472.80
24.76
19.11
0.54
0.04
C. Shipping Service Related parties to the transactions Transaction Amount
(in RMB yuan)
Percentage in the
Transactions of
the Same Kind (%)
China Oilfield Services Limited 59,932,844.10 17.19
D. Transporting Service
Related parties to the transactions Transaction Amount
(in RMB yuan)
Percentage in the
Transactions of
the Same Kind (%)
CNOOC Bohai Co. 6,500,269.30 1.86
E. Fuel Surcharge Related parties to the transactions Transaction Amount
(in RMB yuan)
Percentage in the
Transactions of
the Same Kind (%)
CNOOC Bohai Co. 56,411,229.85 16.18
F. Water and Electricity Charge Related parties to the transactions Transaction Amount
(in RMB yuan)
Percentage in the
Transactions of
the Same Kind (%)
CNOOC Bohai Co. 15,581,342.16 4.47
ign cooperative exploitation of offshore oil and its development history. Please refer to the
prospectus of the company for more details. These related transactions were necessary
(II) Transactions Related to Transfer of Assets and Share Right
During report period, no transaction related to assets and share right transfer occurred in
the company.
(III)Transactions Related to Investment with Related Parties
63
During report period, no transaction related to investment with related parties occurred in
the company.
A. Receivables:
Company Name Increase in theReport Period Balance
CNOOC(China)Ltd.
CNOOC Western South China Sea
CNOOC Bohai Co.
-58,688,563.72
0
43,318,467.77
25,947,453.50
5,450,000.00
43,343,467.77
B. Receivables
Company Name Increase in theReport Period Balance
CNOOC Bohai Co.
China Oilfield Services Limited
CNOOC Western South China Sea
25,659,430.06
6,908,802.00
23,127,518.30
36,598,113.16
12,330,746.00
23,131,518.30
C. Receivables Increase During Report Period Balance
0 7,769,950.73
2. There existed no serious guarantee mater between the company and related parties
during report period.
(V) Other Substantial Related Transactions
1. Related Savings Company’s Name 2004 （RMB yuan）
CNOOC Financial Co., Ltd 358,280,662.54
2. Interest of Related Savings Company’s Name 2004 （RMB yuan）
CNOOC Financial Co., Ltd 2,784,925.93
3. Related Investment Balance end Investment Proceeds Company’s Name Investment Balance at the end of report period
(yuan) 2004 （RMB yuan）
CNOOC Financial Co., Ltd 25,000,000.00 2,784,925.93
64
IV. Substantial Contracts and Execution
(II) During this report period, the company had no major matters concerning guarantee.
(III) During this report period, the company had no major matters concerning entrusting
others to manage the cash assets.
(IV) Other Substantial Contracts
Substantial Contracts and Execution Payer Contract Subject Matter Contract
Value Cumulative
Payment CNOOC (China) Co., Ltd.
CNOOC Bohai
CACT
Kerr-McGee China Petroleum Co.,Ltd.
Contractiong of offshore oil project
BZ25-1
HZ21-1general contracting
CFD11
424,640.68
17,600.00
48,646.86
65,570.00
282,115.24
17,600.00
12,244.66
64,148.24
The above transactions were the routine production and operation businesses. During this
report period, every contract was smoothly performed with good progress.
V. Commitments
During this report period, the company or the shareholders holding 5% or more of the
shares had no major matters concerning commitments to be disclosed.
VI. Appointment of Certified Public Accountants
eijing Zhongxingyu Certified Public Accountants were as follows:
1. The appointment and the remuneration, or the way of determining the remuneration of
the Certified Public Accountants were decided by the general meeting of shareholders, and
the board of directors and the independent directors of the company agreed to this
decision-making proceeding.
VII. Other Substantial Matters
es as the base, distributed cash dividends (pretax) RMB1 yuan and stock dividends 1 share
for every 10 shares to all the shareholders, with every ten shares of capital common
reserve capitalized into 1 share for issuance, after distribution of profit distribution and
capitalization, the total capital stock of the company amounts to 330,000,000 shares,
among which, 224,400,000 shares is non-float stock, 105,600,000 shares is float shares.
The corresponding industrial and commercial changes were finished on July 7, 2004. .
65
ddress was changed from Shangri Technological Garden, Huayuan Industrial Zone, Tianjin
New Technology Industrial Garden into No.4-396, Hebei Road, Tanggu District, Tianjin City,
the relevant industrial and commercial change formalities were gone through on October 27,
2004.
ard of directors of the company.
4. Change of the chairman of the board of directors: The 1st meeting of the second board
of directors was held on January 14, 2004, Mr. Zhou Shouwei was elected the chairman of
the board of directors of the company in this meeting.
During this report period, the company, the board of directors of the company and the
members of the board of directors of the company were not involved with any audit
performed, administrative penalty imposed, circulating a notice of criticism made by the
China Securities Regulatory Commission, or the circumstances denounced by the stock
exchange.
uring this report period,the company had no major matters as specified in Article 62 of the
Securities Law of the People’s Repulic of China and listed in Article 17 of the Rules
Governing Implementation of information Disclosure by pulic offering Companies(trial
implementation)
66
Section XI Financial Report
Audit Report
ZXYSZD (2005) No.2036
All shareholders of CNOOC Engineering:
We have audited the hereafter attached consolidated balances sheet and the consolidaded
balance sheet of CNOOC Engineering (hereafter referred to as “Your Conpany”)as of
December 31,2004,profit,profit appropriation statement and the consolidated profit
appropriation statements as well as the consolidated statement of cash flow in 2004.The
development of these accounting statements is the responsibility of your company”s
administering authority,ours is to declare ourselves to these accounting statements basing
on the execution of auditing work.
We plan and carry out our auditing work according to the independent auditing principle of
certified public accountant of China, to reasonably ensure whether major mistakes exist in
the accounting statement. This auditing work includes checking and supporting the sum of
accounting statements and the evidence revealed, evaluating the accounting policy
adopted and the major accounting estimates made by the administering authority in
working out the accounting statements, as well as evaluating the whole reflection of
accounting statements. We believe that our auditing work provides a reasonable basis for
concluding the opinions.
We tske the view that the abovementioned statements comply with the enterprise
accounting principle and the regulations of “Enterprise Accounting System”,which in all the
significant aspects, fairly teflects the financial status of your company as of December 31,
2004 and the business achievements and cash flow in 2004.
Zhongxingyu CPA Ltd. China Certified Accountants
Certified Public Accountant of China, Liang Xiaoyan and Moulifeng
Beijing/China
Date:March 11,2005
67
Consolidated Balance Sheet (Creditors)
Prepared by: CNOOC Engineering Unit: RMB (yuan)
Asset Note Amount at the end of period
Amount at the beginning of period
Current Assets Currency Capital
1 596,112,518.35 396,616,618.95
Short-term Investment Notes Receivable Dividends Receivable Interests Receivable Accounts Receivable 2 87,921,458.62 99,047,383.57Other Receivables 3 6,545,625.15 2,020,941.33Accounts Advanced 4 42,086,154.93 31,872,382.82Allowance Due 5 4,821,281.21Stock 6 396,120,600.32 154,883,976.66Expenses to be amotized within one year Other Current Capital
Total of Current Capital 1,133,607,638.58 684,441,303.33Long-term Investment Long-term Stock Right Investment 7 25,085,614.92 25,101,667.72Total of long-term investment 25,085,614.92 25,101,667.72Among: Difference in the consolidated prices Fixed Assets
85,614.92 101,667.72
Original price for fixed assets 8 2,254,404,492.55 2,003,921,080.95Less: Accumulated depreciation 8 801,666,055.49 665,604,125.20Net value of fixed assets 1,452,738,437.06 1,338,316,955.75Less: provision of devaluation for fixed assets Net volume of fixed assets 1,452,738,437.06 1,338,316,955.75Engineering materials Projects under construction 9 35,376,629.23 28,913,366.91Liquidation of fixed assets Total of fixed assets 1,488,115,066.29 1,367,230,322.66Intangitable assets and other assets Intangible assets 10 12,409,663.68 11,559,789.68Long-term expenses to be apportioned 11 5,419,889.34Other long-term assets Total of intagible assets and other assets 12,409,663.68 16,979,679.02Deferral taxes Debit items of deferral taxes Total of assets 2,659,217,983.47 2,093,752,972.73
Company statutory representative: Zhou Shouwei
Principal of senior accountants: Lin Rongqing
Principal of accounting organization: Xie Hongju
68
Consolidated Balance Sheet (Liabilities)
Prepared by: CNOOC Engineering Unit: RMB (yuan)
Debt and shareholders’ equity Note Amount at the end of period
Amount at the beginning of period
Current liabilities Short-term loan Notes payable 12 9,153,967.05 19,639,300.83Accounts payable 13 454,296,443.99 173,672,804.43Accounts receivable in advance 14 194,696,225.12 355,068,896.82Wages payable 32,393,068.63 27,434,071.46Welfare expenses payable 3,842,831.57 179,887.56Dividends payable Taxes payable 15 139,401,591.55 28,637,658.17Other funds payable 16 1,369,061.72 398,131.22Other funds payable 17 24,665,068.74 26,767,959.54Expenses retained in advance Estimated liability Long-term liability due within one year Other current liability Total of current liability 859,818,258.37 631,798,710.03Long-term liabilities Long-term loan Bonds payable Long-term funds payable Special funds payable Other long-term liabilities Total of long-term liabilities Deferral taxes Debit items of deferral taxes 18 4,303,230.57 5,420,250.85Total of liabilities 864,121,488.94 637,218,960.88Rights and interests of minority shareholders
763,396.83 297,754.34
Shareholders’equity: Capital stock 19 330,000,000.00 275,000,000.00Less: Retured investment Net amount of capital stock 330,000,000.00 275,000,000.00Capital common reserve fund 20 719,088,376.12 746,588,376.12Surplus of common reserve fund 21 150,069,302.57 95,228,708.06Common welfare fund 60,956,254.71 42,676,056.54Undistributed profit 22 595,175,419.01 339,419,173.33Cash dividens to be distributed 33,000,000.00 27,500,000.00Total shareholders’equity 1,794333,097.70 1,456,236,257.51Total liabilities and shareholders’equity 2,659,217,983.47 2,093,752,972.73 Company statutory representative: Zhou Shouwei Principal of senior accountants: Lin Rongqing Principal of accounting organization: Xie Hongjun
69
Consolidated Profit and Profit Distribution Statement Prepared by: CNOOC Engineering Unit: RMB (yuan)
Item note 2004 Year 2003 Year 1.Incomes from main business 1 3,487,502,020.87 2,053,897,722.08Less: cost for main business 2,807,984,422.52 1,726,646,822.69
Tax of main business and additional 2 48,854,327.88 50,592,278.67
2. Profit from main business 630,663,270.47 276,658,620.72Add: other business profit 16,148.85 105,143.97
Business expenses
Overhead expenses 3 73,922,746.24 50,340,691.44
Financial expenses 4 -3,052,171.68 2,003,432.36
3. Business profit 559,808,844.76 224,419,640.89Add: benefit of investmnet 5 1,618,541.80 577,462.35
Incomes from allowance 48,485.00
Nonbusiness income 29,638.00 258,665.46
Less: nonbusiness expenditure 458,015.00 80,876.00
4. Total amount of profit56 1,147,494.56 225,074,892.70Less: tac income 6 195,085,011.88 28,886,451.61
Less: loss and profit of minority shareholders 465,642.49 -264,907.79
5. Net profit 365,596,840.19 196,453,348.88Add: undistributed profit in the beginning of the year 339,419,173.33 97,595,609.39
Other transferred in
6. Profits to be distributed 705,016,013.52 394,048,958.27Less: Retained statutory surplus common reserve fund 36,560,396.34 19,753,189.96
Retained statutory common welfare fund 18,280,198.17 9,876,594.98
Retained staff bonus and welfare fund
Retained provident fund
Retained enterprise development fund
Returning profit to investment
7.Profit to be distributed among shareholders 650,175,419.01 364,419,173.33Less: dividends payable of preferred stock
Retained random surplus
Dividends of common stock payable 27,500,000.00 25,000,000.00
Dividends of common stock capitalized 27,500,000.00
8.Profit undistributed 595,175,419.01 339,419,173.33 Company statutory representative: Zhou Shouwei Principal of senior accountants: Lin Rongqing Principal of accounting organization: Xie Hongjun
70
Consolidated Statement of Cash Flow
(2004)
Prepared by: CNOOC Engineering Unit: RMB (yuan) Item Notes Amount
A. The cash flow that the business activities produce :
1. Cash received from goods sale, labor service offering 3,044,613,243.73
2. Received taxation returned 73,728,534.93
3. Other cashes related to business activities received 1 5,150,738.22
Subtotal of cash inflow 3,123,492,516.88 4. Cash paid to buy goods, and accept labor service 2,317,269,615.56
5. Cash that pay to workers and pay for the worker 140,159,499.65
6. Taxations paid 123,600,952.26
7. Other cashes paid related to business activities 2 30,168,431.55
Subtotal of cash outflow 2,611,198,499.02 Net amount of cash flow from the business activities 512,294,017.86 B .Cash flow from the investment activity
1. Cash received for regaining the investment
2. Cash received from obtaining the investment return 1,634,594.60
3. Net amount of cash from disposing fixed assets, intangible
assets and other long-term assets
79,000.00
4. Other cashes received related to investment activity
Subtotal of cash inflow 1,713,594.60 5.Cash paid from purchasing and building fixed assets,
intangible assets and other long-term assets
287,013,344.30
6. The cash paid for investment
7. Other cashes paid related to investment activity
Subtotal of cash out flow 287,013,344.30 Net amount of cash flow from the investment activity -285,299,749.70 C. Cash flow from the fund-raising activity:
1. The cash received for absorbing investment
2. Cash received for borrowing money
3. Other cashes received related to fund-raising activity
Subtotal of cash inflow
4. The cash paid for debt
5. Cash paid for distributing the dividend, profit 27,500,000.00
6. Other cashes paid related to fund-raising activity
Subtotal of cash outflow 27,500,000.00 Net amount of cash flow from the fund-raising activity - 27,500,000.00 D.Impact on cash by the changes in the exchange rate 1,631.24
E. Net increase of cash and cash equivalent 199,495,899.40 Company statutory representative: Zhou Shouwei Principal of senior accountants: Lin Rongqing Principal of accounting organization: Xie Hongjun
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Notes to the consolidated statement of cash flow
2004
Prepared by: CNOOC Engineering Unit: RMB (yuan)
Item Notes Amount 1. Regulating the net profit as the cash flow for business activities Net profit 365,596,840.19 Add: loss and gains of minority shareholder 465,642.49
Retained provision for asset devaluation 21,168,246.59
Depreciation of fixed assets 140,151,009.72
The amortization of intangible assets 1,702,514.00
Amortization of long-term expenses to be amortized 4,727,969.04
Reduction in the expenses to be amortized (Less: increase)
Increase of expenses retained in advance (Less: decrease)
The losses for disposing fixed assets, intangible assets and long-term
assets (Less: benefits)
306,945.68
Loss from scrapping of fixed assets 81,947.00
Financial expenses
Losses of investment (Less: income) -1,618,541.80
Debit item of deferred tax (Less: debit )
Reduction in stock (Less: increase) -263,316,481.53
Reduction of operative projects receivable (Less: increase) -6,773,028.91
Increase of operative project receivable (Less: decrease) 249,882,902.39
Others
Net amount of cash flow from the business activities 512,294,017.86 2. The investment and fund-raising activities not related to cash
revenue and expenditure:
Liabilities capitalized
Overdue convertible bonds of company in one year
Fixed assets of financing lease
3. The net increase of cash and cash equivalent
Balance of the cash at year end 596,112,518.35
Less: Initial balance of the cash 396,616,618.95
Add: Balance of the cash equivalent at year end
Less: Initial balance of the cash equivalent
The net increase of cash and cash equivalent 199,495,899.40 Company statutory representative: Zhou Shouwei Principal of senior accountants: Lin Rongqing Principal of accounting organization: Xie Hongjun
72
Balance Sheet
(Creditors)
Prepared by: CNOOC Engineering Unit: RMB (yuan)
Asset Note Number at the end of period
Number at the beginning of
period Current assets: Currency capital 584,025,473.23 386,256,601.86 Short-term investment Notes receivable Dividends receivable Interests receivable Accounts receivable 1 86,582,404.30 93,792,832.90 Other funds receivable 6,605,616.81 1,926,134.90 Accounts paid in advance 42,086,154.93 31,872,382.82 Allowance receivable 4,821,281.21 Stock 396,085,153.36 154,820,698.12 Expenses to be amortized Long-term creditors rights investment due within 1 year Other current assets Total of current assets 1,120,206,083.84 668,668,650.60 Long-term investment: Long-term investment of stock right 2 55,767,750.83 46,931,610.04 Total of long-term investment 55,767,750.83 46,931,610.04 Price differential for consolidation Fixed assets: Original price of fixed assets 3 2,241,942,336.13 1,990,740,789.72 Less: accumulated depreciation 3 792,010,459.60 655,106,422.56 Net value of fixed assets 1,449,931,876.53 1,335,634,367.16 Less: provision of devalueing fixed assets Net value of fixed assets 1,449,931,876.53 1,335,634,367.16 Engineering materials Projects under construction 35,376,629.23 28,913,366.91 Liquidation of fixed assets Total of fixed assets 1,485,308,505.76 1,364,547,734.07 Intangible assets and other assets: Intangible assets 12,409,663.68 11,559,789.68 Ong-term expenses to be amortized 4,305,390.00 Other long-term assets Total of intangible assets and other assets 12,409,663.68 15,865,179.68 Deferred taxes: Debit item of deferred taxes Total of assets 2,673,692,004.11 2,096,013,174.39 Company statutory representative: Zhou Shouwei Principal of senior accountants: Lin Rongqing Principal of accounting organization: Xie Hongjun
73
Balance Sheet
(Liabilities) Prepared by: CNOOC Engineering Unit: RMB (yuan)
Debt and shareholder’s equity Note Amount at the end of period
Amount at the beginning of period
Current liability: Short-term loan Notes payable 9,153,967.05 19,639,300.83 Accounts payable 466,599,625.93 172,696,389.39 Accounts collected in advance 194,696,225.12 355,068,896.82 Wages payable 32,393,068.63 27,350,071.46 Welfare funds payable 3,589,342.24 Dividends payable Taxes payable 138,463,763.30 28,093,012.49 Other funds payable 1,345,604.38 390,395.50 Other funds payable 28,814,079.19 31,118,599.54 Expenses retained in advance Estimated liability Long-term liability due within one year
Other current liability Total of current liability 875,055,675.84 634,356,666.03 Long-term liability: Long-term loan Bonds payable Long-term funds payable Special funds payable Other long-term liabilities Total of long-term liability Deferred taxes: Debit items of deferred taxes 4,303,230.57 5,420,250.85 Total of liabilities 879,358,906.41 639,776,916.88 Capital stock 330,000,000.00 275,000,000.00 Less: returned investment Net amount of capital stock 330,000,000.00 275,000,000.00 Capital reserve fund 719,088,376.12 746,588,376.12 Suplus of reserve fund 148,266,434.84 93,426,908.81 Common welfare fund 60,081,962.69 41,802,120.68 Undistributed profit 596,978,286.74 341,220,972.58 Cash dividends to be distributed 33,000,000.00 27,500,000.00 Total Shareholders’ equity 1,794333,097.70 1,456,236,257.51Total liabilities and shareholder’s equity
2,659,217,983.47 2,093,752,972.73
Company statutory representative: Zhou Shouwei Principal of senior accountants: Lin Rongqing Principal of accounting organization: Xie Hongjun
74
Profit and Profit Distribution Statement Prepared by: CNOOC Engineering Unit: RMB (yuan)
Item Note 2004 2003 1.Incomes from main business 4 3,471,998,767.19 2,032,528,045.03Less: Cost for main business 2,804,695,422.97 1,701,882,826.16
Tax of main business and additional 46,142,866.62 49,659,947.36
2. Profit from main business 621,160,477.60 280,985,271.51Add: other business profit 16,148.85 105,143.97
Business expenses
Overhead expenses 73,922,746.24 50,340,691.44
Financial expenses -3,009,429.38 2,048,592.96
3.Business profit 550,263,309.59 228,701,131.08Add: benefit of investmnet 5 10,470,735.39 -3,700,800.16
Incomes from allowance 48,485.00
Nonbusiness income 126,500.00 258,665.46
Less: nonbusiness expenditure 365,772.00 174,790.00
4.Total profit 560,543,257.98 225,084,206.38Less: tax income tax 6 194,946,417.79 28,630,857.50
Loss and profit of minority shareholders
5.Net profit
Add: undistributed profit in the beginning of the year 365,596,840.19 196,453,348.88
Other transfers 341,220,972.58 199,235,626.03
6.Profits to be distributed 706,817,812.77 395,688,974.91Less: Retained statutory surplus common reserve fund 36,559,684.02 19,645,334.89
Retained statutory common welfare fund 18,279,842.01 9,822,667.44
Retained staff bonus and welfare fund
Retained provident fund
Retained enterprise development fund
Returning profit to investment
7. Profit to be distributed among shareholders 651,978,286.74 366,220,972.58Less: Dividends payable of preferred stock
Retained random surplus
Dividends of common stock payable 27,500,000.00 25,000,000.00
Dividends of common stock capitalized 27,500,000.00
8. Profit undistributed 596,978,286.74 341,220,972.58 Company statutory representative: Zhou Shouwei Principal of senior accountants: Lin Rongqing Principal of accounting organization: Xie Hongjun
75
Statement of Cash Flow
2004 Prepared by: CNOOC Engineering Unit: RMB (yuan)
Items Note Amount A. The cash flow from the business activities: 1. Cash received from goods sale, labor service offering 3,024,939,821.94 2. Received taxation returned 73,728,534.93 3. Other cashes related to business activities received 5,088,397.70 Subtotal of cash inflow 3,103,756,754.57 4. Cash paid to buy goods, and accept labor service 2,304,667,704.78 5. Cash that pay to workers and pay for the worker 137,702,897.38 6. Taxations paid 121,157,793.40 7. Other cashes paid related to business activities 29,938,480.23 Subtotal of cash outflow 2,593,466,875.79 Net amount of cash flow from the business activities 510,289,878.78 B. Cash flow from the investment activity 1. Cash received for regaining the investment 2. Cash received from obtaining the investment return 1,634,594.60 3. Net amount of cash from disposing fixed assets, intangible assets and other long-term assets
79,000.00
4. Other cashes received related to investment activity Subtotal of cash inflow 1,713,594.60 5. Cash paid from purchasing and building fixed assets, intangible assets and other long-term assets 286,736,274.30 6. Cash paid for investment 7. Other cashes paid related to investment activity Subtotal of cash out flow 286,736,274.30 Net amount of cash flow from the investment activity -285,022,679.70 C. Cash flow from the fund-raising activity : 1. Cash received for absorbing investment 2. Cash received for borrowing money 3. Other cashes received related to fund-raising activity Subtotal of cash inflow 4. The cash paid for debt 5. Cash paid for distributing the dividend , profit 27,500,000.00 6. Other cashes paid related to fund-raising activity Subtotal of cash outflow 27,500,000.00 Net amount of cash flow from the fund-raising activity -27,500,000.00 D. Impact on cash by the changes in the exchange rate 1,672.29 E. Net increase of cash and cash equivalent 197,768,871.37 Company statutory representative: Zhou Shouwei Principal of senior accountants: Lin Rongqing Principal of accounting organization: Xie Hongjun
76
Notes to Cash Flow Statement
2004 Prepared by: CNOOC Engineering Unit: RMB (yuan)
Items Note Amount 1. Regulating the net profit as the cash flow for business activities Net profit 365,596,840.19 Add: the loss and profit of minority shareholders The provision of assets devaluation 21,352,267.96 Depreciation of fixed assets 139,486,794.36 The amortization of intangible assets 1,702,514.00 Amortization of long-term expenses to be amortized 4,305,390.00 Reduction in the expenses to be apportioned (Less: increase) Increase of expenses retained in advance (Less: decrease) The losses for disposing fixed assets, intangible assets and long-term assets (Less: benefits)
215,762.68
Loss from scrapping of fixed assets Financial expenses Losses of investment (Less: income) -10,470,735.39 Debit item of deferred tax (Less: liabilities) Reduction in stock (Less: Increase) -
263,344,313.11 Reduction of operative projects receivable (Less: increase) -11,776,516.72 Increase of operative project receivable (Less: decrease) 263,221,874.81 Others Net amount of cash flow from the business activities 510,289,878.78 2. The investment and fund-raising activities not related to cash revenue and expenditure:
Liabilities capitalized Company bonds due within one year Fixed assets of financing lease 3. The net increase of cash and cash equivalent Balance of the cash at year end 584,025,473.23 Less: Initial balance of the cash 386,256,601.86 Add: Balance of the cash equivalent at year end Less: Initial balance of the cash equivalent The net increase of cash and cash equivalent 197,768,871.37 Company statutory representative: Zhou Shouwei Principal of senior accountants: Lin Rongqing Principal of accounting organization: Xie Hongjun
77
Annotations of the Accounting Statement of CNOOC Engineering
1. Company Profile
1).Establishment:CNOOC Engineering (hereafter referred to as “This company”) is a joint
stock limited company jointly established by CNOOC Design Company (hereafter referred
to as “Design Company”), CNOOC Platform Manufacturing Company(hereafter referred to
as “Platform Company”), CNOOC Maritime Engineering (hereafter referred to as “Maritime
Engineering Company”), CNOOC Bohai Company (hereafter referred to as “Bohai
Company”) as well as CNOOC Nanhai West Company (hereafter referred to as “West
Company”).As the major initiators of this corporation, the design company, the platform
company and the maritime engineering company evaluated the entire operational assets
with regard to the design, building of ocean projects, maritime installation and the seabed
lay of pipelines they pertain to and convert into the state-owned legal representative shares.
Bohai Company and West Company jointly established this corporation with the land-use
right of 3632.26m2 and the 4,000 ton slideways as well as the land-use right of 3864m2
after evaluation separately as investment. This company was formally incorporated in April
20, 2000 and registered at Tianjin Industrial and Commercial Administrative Regulatory
Bureau and obtained a business license of legal representative with a registered capital of
RMB170million.
2). Business scope: general contract of projects, design of oil and gas (offshore oil
engineering, manufacturing and reparation of oil machinery, pipeline transport project, oil-
gas processing projects, oilgas chemistry and comprehensive utilization projects) and
building projects; undertaking construction of various offshore oil projects and other ocean
projects; undertaking production and installation of various types of steel structures, net-
rack projects; production of pressure containers; export businequipment and materials
necessary to the above-said offshore projects; the necessary labor overseas dispatch of
contract workers as well as common cargo ship transport along coastal areas (the items
within the above range handled according to the regulations if special regulations are
imposed).
3). Initial issue of shares: Approved by the No. 2 file of China Security Supervision
Commission ZJFXZD (2002), this company publicly issued 80 million social public shares.
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After obtaining the capital collected, this company started its trade at Shanghai Security
Exchange on Feb. 5, 2002; the code of the stock is 600583. The registration for altering
industrial and commercial registering was completed on July 9, 2002, the number of the
legal business license after alteration is1200001000326 with a registered capital of
RMB250 million.
4. All capital increase after issuing public shares:The program of Company Capital
Accumulation Fund Turned to be Capital Stock Increased on the first temporary
shareholder’s conference in 2003 with 250 million shares as the base, and 10 shares turn
to 1 share increased with capital accumulation funds. After the increase of capital stock
program is done, the overall capital stock is 275 million shares, among which the circulating
shares are 88 million. This company completed its commercial and industrial3 with
275million shares as the base, and 10 shares turn to 1 share increased 27.5million shares
with capital accumulation funds, and 10 shares dividend 1 bonus share increased another
27.5million shares with undistributed profit. After the increase of capital stock program is
done, the capital stock increased 55 million shares. This company completed its
commercial and industrial registration for alteration in Oct. 27, 2004, and the registered
capital after alteration is 330 million.
5). Stock right change: CNOOC has become the biggest shareholder of the company after
assigning 159,233,800 shares of CNOOC Platform Fabrication, CNOOC Marine
Engineering, CNOOC Development & Engineering free of expense through agreement,
representing 57.9% of the total shares of the company. Stock Transfer Agreement was
issued on Sept. 28, 2003 and came into effect immediately. Stock transfer procedure was
completed on Feb.13, 2004. And three initiators (CNOOC Platform Fabrication, CNOOC
Marine Engineering, and CNOOC Development & Engineering) shall not hold the shares of
the company any more.
2. Major Methods for Accounting Policy, Accounting Evaluation and Merge
Statement by the Company
1. System of Accounting
This company carries out the Principle of Enterprise Accounting, the System of Enterprise
Accounting and its supplementary regulations, and the Accounting Regulations for
Construction Enterprises formulated by the Financial Ministry.
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2. Fiscal Year
A fiscal year is calculated from Jan. 1 until Dec. 31 according to the Gregorian calendar.
3. Principle of Charging Account and Basis for Valuation
Use debit-credit bookkeeping method and examine and calculate based on the accrual
system with historical cost as the basis for valuation. At the end of accounting, the provision
of corresponding devaluation may be set up according to the relevant regulations of the
financial ministry if the assets decrease in their value.
4. Business Accounting of Currency
With RMB as the standard currency, keep books using the market exchange rate converted
to RMB promulgated by Bank of China on the last workday of last month when business is
done. By the end of fiscal year, it is adjusted according to the term-end market exchange
rate, the difference between the RMB balances of the foreign currency accounts after
adjustment and the balance of the original accounts is listed as profit and loss in exchange
of current period. The profit and loss directly related to the construction of fixed assets, etc
are to be recorded into the cost for constructing assets before the assets reach the
scheduled usage status.
5. The Standard to Determine Cash Equivalent
The cash that has a short term, high liquidity and is easy to be converted to known amount,
and the investment with little variation in its value are confirmed to be the equivalent to
cash.
6. The Valuating Method for Short-term Investment and the Business Accounting Method
for Short-term Investment Depreciation Provision
The short-term investment is calculated according to investment cost when achieved.
The short-term investment at the end of term is calculated depending upon the lower one in
the comparison between cost and market price, and for the balance of market price lower
than cost should be calculated short-term investment depreciation.
7. Accounting Methods of Bad Debts
80
(1) Confirmation Method of Bad Debts: The receivables that can not be collected indeed
due to the decease or bankruptcy of debtor after the liquidation of his or her legacy or
bankrupted assets; The receivables that the debtor fails to fulfill the obligation of debt
repayment and that has obvious features showing that it can not be withdrawn.
(2) The accounting of loss by bad debts uses the allowance method. The provision of bad
debts may be set up on accounts receivable and other receivables, among which the funds
receivable not exceeding the time limit (the unsettled accounts after completion calculated
based upon the completion plan in respect of the items on construction), the funds
receivable, all kinds of guaranty funds, cash deposits and reserve funds of the relevant
units are not calculated on the provision of bad debts. The provision of bad debts may be
set up according to the analysis of account year combining with reality. The accounts receivable overdue may be set up on the following proportion:
Accounts Year Calculation Proportion (%)
Within 1 year
1-2 years
2-3 years
3-5 yesrs
More than 5 years
5
10
30
50
100
8. Accounting Method of Stock
The stock includes engineering stock and engineering construction.
The stock shall be kept accounts based upon actual cost when achieved, the stock
received or delivered is generally calculated based on the first-in-first-out method to confirm
the cost, the raw and processed materials having special requirements purchased for
engineering projects are calculated based on individual valuation to confirm cost when they
are sent out of warehouse. When receiving consumable materials, turnover materials and
low-valued consumables, the one-time amortization should be adopted. By the end of the
year, the provision of stock depreciation may be calculated on the balance of the realizable
net value of stock lower than cost.
The engineering construction shall reflect that the cost accumulation and gross profit of the
engineering in the contract has been done, and the engineering has transacted the debt
balance.（The credit balance shall be shown in the deposit received if formed so as to
reflect that the clause of the engineering under construction has been settled）.
9. Accounting Method of Estimating the Provision for Contract Loss
81
According to the regulations of the building contract guideline, when the estimated total
cost of the contract will exceed the estimated total revenue of the contract during the
execution of this contract, the provision of contract loss estimated can be set up and be
calculated into the overhead expenses of current period based upon the accounts of the
estimated total cost exceeding the estimated total cost. The estimated provision of contract
loss is shown in the balance sheet.
10. Accounting Method of Long-term Investment
The confirmation method of calculating prices and benefits for long-term bond investment: it
should keep business records based on the balance of all the purchase prices actually paid
when achieved (including taxes, commission and relevant expenses) deducting the bond
interests unreceived in maturity as the cost accounting of initial investment, the interests
can be set up and calculated into investment benefits according to the principle of accrual
system on schedule.
The confirmation method of calculating prices and benefits for long-term stock right
investment: the achieved actual cost is calculated as initial investment cost in terms of the
long-term investment of stock right based on. Generally, the cost method is used to check
and calculate the investment to other units which accounts for 20% less of the total amount
of capital that has the right to vote in this unit; the equity method is used to check and
calculate the investment to other units which accounts for 20% or less of the total amount
of capital that has the right to vote in this unit, a merge statement is to be compiled in the
case of the subsidiaries whose investment proportion exceeds 50%.
When using the equity method to check and calculate long-term overseas investment of
stock right, the balance between its achieved cost and the shares accounted for in the
proprietorship of the units under investment will be calculated into the balance of the
between its achieved cost and the shares accounted for in the proprietorship of the units
under investment, the balance should be accounted into the capital surplus. And the
accounting treatment of overseas investments, which were handled before relevant
provisions have been issued by the Financial Ministry, shall not be adjusted again.
The abstraction method of devaluating provision for long-term investment: use the item-by-
item calculation, according to the variation in the business conditions of the units under
investment which results in its withdrawal of the values lower than the account values of its
long-term investment, and if this decreased value can not be renewed during the near
future, based on the withdrawable amounts lower than account value of long-term
82
investment, the devaluation provision of long-term investment can be calculated. The
devalued loss of the estimated long-term investment is calculated into the account of profit
and loss that year.
11. The Valuation and Depreciation of Fixed Assets
Fixed assets referred to the houses, buildings, machines, machinery, transport vehicles
and other equipments, appliances and tools, etc. related to production and operation with
the life time exceeding one year. The articles not belonging to the main equipment for
production with a unit value of over RMB2000, and a life time over two years can be called
fixed assets. The fixed assets are calculated based on the actual cost in terms of price, and
calculate the depreciation rate using composite life method, the range of calculation
includes all the fixed assets that have not been well set up. The rate of value is 5-10%; its
depreciation rate is shown below according to the class and life term of fixed assets. Class Life Term (Year) Rate of Depreciation per Year (%)
Houses & Buildings 20 4.5
General-purpose Equipments 5-10 9-18
Dedicated Equipments 5-15 6.33-18
When the value of fixed assets is decreased due to aged technology, being damaged and
longtime idleness, etc., the provision of devaluation may be set up on the division of capital
items according to the relevant regulations of Ministry of Finance.
12. Business Accounting Method for Project under Construction
This company is calculated based upon actual cost for the project under construction,
which is turned to fixed assets after acceptance and delivery. The loan interests generated
by the project carried out with loan are generated before the delivery and usage of project
under construction, the interest capitalization is calculated into the cost of the project under
construction, and the loan interests generated after delivery and usage of the project under
construction should be calculated into loss and benefit of current period.
The construction in progress is expected to be devalued, for example, the construction in
progress that stops building for long time and is expected not to start working within 3 years,
the provision of devaluation is set up based on the project.
13. Valuation and Amortization of Intangible Assets
The intangible assets can be calculated based on actual cost when achieved, which are to
be averagely amortized by stages within the expected life term from the month that it is
83
achieved.
When the intangible assets have been replaced by other new technology, the market value
goes down sharply or exceeds the term of protection; the provision of devaluation may be
set up on the assets.
14. Amortization Policy of Long-term Expenses to be apportioned
The expenses already paid with the amortization term of over one year are listed as long
term expenses to be apportioned, which is to be averagely amortized within the benefit
term of the expenses.
15. Business Accounting Method of Borrowing Cost
In addition to the borrowing cost generated by the dedicated loan for the purchase of fixed
assets, other borrowing cost is confirmed to be expenses in the current period ad directly
calculated into the finance charge of current period.
16. Business Accounting Method of Bonds Payable
The issued bonds are processed as liabilities based on the actual total of issue value; the
difference between the total of issue value and the total of bonds par value is to be
amortized as the premium or discount of bonds when calculating interests using straight-
line method within the duration of bonds, and is handled according to the principle of
borrowing cost.
17. Confirmation for Revenue Realized
Based on the features of the major business, this company imposes the Guideline of
Building Contract for business accounting, and confirm the income and cost of contract
using completion percentage method, the terms to confirm the contract revenue are as
follows: 1) The gross income can be measured reliably; 2) the economic interest can flow
into this company with regard to the contract; 3) on the balance sheet date, the completion
schedule of contract and the cost to be generated due to uncompleted contract can be
reliably determined; 4) the contract cost already generated by the uncompleted contract
can be clearly divided and reliably measured. The realization of operating income is
confirmed after satisfying these four conditions. This company uses the proportion of the
accumulated contract cost actually generated accounting for the estimated gross cost of
the contract to determine the pace of completion. This company adjusts the estimated
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gross cost of contract according to the actual conditions for budget execution in the
alteration of contract or bigger difference existing between actual payout and budget.
18. Accounting Method for Income Tax
The income tax of this company uses the tax payable to check and calculate.
19. The Compiling Methods for Consolidated Accounting Statement
According to the related regulations provided for in the Provisional Rule of Consolidated
Accounting Statement promulgated by Financial Ministry, this company brings the holding
companies whose investment proportion exceeds 50% of the net assets of the enterprises
under investment into the range of the statement.
20. Comparison Data
In order to comply with the principle of consistency, appropriately categorize and adjust the
individual comparison data of last year in the accounting statement in accordance with the
Accounting Regulations for Construction Enterprises issued by the Ministry of Finance
2003 No.27.
3. Taxes
1. Value-added Tax：According to the Written Reply Issued by state Administration of
Taxation Concerning CNOOC Changing Value-added Tax Applicable to the Tax Manage-
meng Method of “Exemption,Offsetting and Refund”(Guo Shui Han[2004]No.1043),the co-
mpany shall pay value-added tax for the sales of marine engineering construction from
Jan.1,2004,and company shall carry out the drawback policy of “exemption,offsetting and
refund”according to the Notice Issued by Finance Ministry and State Administration of Tax-
ation Concerning the Value-added Tax Drawback Execution Marine Engineering Construct-
ion(Cai Shui [2003]No.46)and its complementary notice issued by State Administration of
Taxation(Cai Shui [2003]No249).
2. Sales Tax: the execution of offshore oil constructions and other ocean constructions
should be collected sales tax in proportion of 3% of sales income; the ocean project
designs should be collected sales tax based on 5% of sales income.
85
3. Additional City-Construction Tax and Educational Fee: pay the additional city-
construction tax and educational fee based on 7% and 3% of sales tax and value-added tax
due separately (Shenzhen China Ocean Petroleum Platform Maintenance & Installation,
the subsidiary, pays the additional city-construction tax and educational fee based on 1%
and 3% of sales tax and value-added tax due separately.
3. Income tax: According to the GSWZD（2000）No.43 “On the written Reply of CNOOC
Engineering Co., Ltd. Applying to the Preferential Policy of Taxation for High and New
Technology Enterprises and the Relevant Problems” by the state tax bureau of Tianjin and
Certificate of Registration for High and New Technology Enterprise promulgated by the
Science & Technology Committee of Tianjin New Technology Industrial Zone, this company
enjoys the preferential policy to pay income tax at the tax rate of 15%; acc survey, it shall
actually pay income tax at the tax rate of 15%; the income tax rate of the holding
subsidiaries: Shenzhen China Ocean Petroleum Platform Maintenance & Installation and
Hainan China Ocean Petroleum Platform Manufacturing is 15%.
5. Other taxes are calculated and collected based on the state tax laws in this regard.
4. Holding Subsidiary and Share-holding Enterprises
1. The basic situation of the holding subsidiaries brought into the range of merger
statement by this company during the report period:
Name of Units under
investment
Registered
capital
Registration
date Business scope
Proportion of
Shareholding
Actual paid-up capital
Shenzhen China Ocean Petroleum Platform Maintenance & Installation
13,650,000
yuan July 1993
Building, installation and maintenance of ocean oil platform
95% 12,967,500 yuan
Hainan China Ocean Petroleum Platform Manufacturing
20,000,000
yuan Oct. 1995
Construction, installation and maintenance of platforms at sea and land
Direct shareholding 70% Indirect shareholding 30%
14,000,000
yuan
No variation in range of the merger statements of this company happened during the
report period.
2. The basic situation of the share-holding enterprises of this company during the report
period:
Company name under investment
Registered capital
Registration date Business scope Proportion of
shareholding
Actual paid-up capita
86
CNOOC Finance Co., Ltd. 1,415,000,000
yuan June, 2002 Handling of deposits,
loans, financing and leasing for member
1.77% 25,000,000
yuan
5. Notes on the major items of the merger balance sheet on Dec. 31, 2004 (Unit: RMB)
Note 1: Currency Capital Item Ending Beginning
Cash 51,998.36 24,103.05
Bank Deposit 596,025,260.56 396,569,178.85
Other Currency Capital 35,259.43 23,337.05
Total 596,112,518.35 396,616,618.95
Foreign Currency:
Ending Beginning
Currency Value of foreign
currency Exchange
rate Converted
to RMB
Value of foreign
currency
Exchange rate
Converted to RMB
US Dollar 5,085,917.89 8.2765 42,093,599.42 4,154,753.50 8.2767 34,387,648.29
HK Dollar 9,329.70 1.0622 9,910.01 9,330.53 1.0657 9,943.55 The main reason for the increase of currency capital is the increase in the schedule funds of projects. Deposit of the Relevant Units:
Company name Ending Beginning
CNOOC Finance Co., Ltd. 358,280,662.54 221,883,630.83
Note 2: Receivables
Ending Beginning Years of accounts
Proportion of bad debts
calculated Amount Proportion Provision of bad debts Amount Proportion Provision of
bad debt
Within 1 year 5% 82,271,101.86 93.21% 70,476.54 88,262,025.64 87.96% 486,311.93
1-2 years 10% 5,450,000.00 6.17% 11,550,230.27 11.51% 637,023.03
2-3 years 30% 4,800.00 0.01% 1,440.00 454,946.60 0.45% 136,483.98
3-5 years 50% 534,946.60 0.61% 267,473.30 80,000.00 0.08% 40,000.00
Total 88,260,848.46 100.00% 339,389.84 100,347,202.51 100.00% 1,299,818.94
According to the Accounting Regulations for Construction Enterprises,the receivables mean quality bail of the pro-jects,The accounting of the projects under construction was shown in the stock and corresponding comparison data had been adjusted at the same time; (2)The receivables of the company within due date shall not be calculated into bad debts; (3)The total top 5 receivables are RMB85,711,571.00, accounting for 97.11% of the balance at the end of the issue; (4)The arrearage by the shareholder units holding above 5% shares of this company (including 5%):
87
Company name Ending Beginning Property of Funds
CNOOC South China Sea West 5,450,000.00 5,450,000.00 Project Fund
Note 3: Other Funds Receivable
Ending Beginning Years of account
Proportion of bad debts
setup Amount Proportion Provision of bad debts Amount Proportion Provision of
bad debts
Within 1 year 5% 6,324,306.09 95.56% 23,320.99 1,639,136.44 80.16% 20,689.93
1-2 years 10% 110,792.00 1.67% 10,611.80 403,034.82 19.71% 1,890.00
2-3 years 30% 183,274.81 2.77% 38,814.96
3-5 years 50% 2,700.00 0.13% 1,350.00
More than 5 years
Total 100% 6,618,372.90 100.00% 72,747.75 2,044,871.26 100.00% 23,929.93
(1)The main reason why the reduction of other accounts receivable increased was caused by the increment of project fund and imprested fund. (2)The top five debts of other accounts receivable total up to RMB2,239,078.81 , accounting for 33.83% of the balance at the end of the issue; (3)The provision for bad debts is not set up on the tariff earnest money, reserve funds and all kinds of deposits. (4)The arrearage by the shareholder units not holding 5% (including 5%) shares of this company in other accounts receivable. Note 4: Account Payable
Ending Beginning ages of account
Amount Proportion Amount Proportion
Within 1 year 41,950,241.93 99.68% 31,867,869.82 99.99%
1-2 years 135,913.00 0.32%
2-3 years
More than 3 years 4,513.00 0.01%
Total 42,086,154.93 100.00% 31,872,382.82 100.00%
(1)The main reason why the advance accounts increased was caused by the increment of the advance accounts of imported material. (2)The top five debts of advanced payment total up to RMB24,932,088.27，accounting for 59.24% of the balance at the end of the issue; (3)The funds not being advanced by the shareholder units holding over 5% (including 5%) of the advanced payment; Note 5: Stock
Item Ending Beginning
Drawback of marine engineering construction 4,821,281.21
88
As of Jan. 1, 2004, the company shall carry out the value-added drawback policy of ”exemption, offsetting and refund” for the marine engineering construction（see Annex 3-1）. Note 6: Stock
Ending Beginning Project
Amount Provision for deduction
Provision for contract loss
Amount Provision for deduction
Provision for contract loss
Engineering
stock 71,550,250.85 2,612,307.46 103,081,477.99 3,239,773.10
Engineering
construction 349,889,980.44 22,707,323.51 55,042,271.77
Total 421,440,231.29 2,612,307.46 22,707,323.51 158,123,749.76 3,239,773.10
(1)The reason why the stock balance increased was caused by the increment of the projects under construction in this period. It is not the time to receive payments for some projects so the project funds increased largely. (2)The annual comparison data of the stock is included in the engineering construction not accounted (see Annex 5/Note2). (3)As of Dec. 31, 2004, the details of the major contracts under construction are shown as follow:
Project name Amount
General contracting of submarine line of South China Sea Petroleum 92,113,544.69
General contracting of LD block 71,269,667.19
General contracting of Chunxiao Gasfield upper block 65,797,981.86
General contracting of HZ 21---1B 33,500,720.74
General contracting of BZ 25-1jacket 21,466,731.44
General contracting of LD C/D jacket 20,128,366.86
Total 304,277,012.78
(4)Increment and Decrement of Stock Deduction Provision:
Project Beginning Increment Decrement Ending
Engineering stock 3,239,773.10 627,465.64 2,612,307.46
Total 3,239,773.10 627,465.64 2,612,307.46
The deduction of stock is set up according to the concept of lower of cost or net realizable value. The net realizable value of the stock is decided by the ruling price of the materials minus estimated treatment expenses. (5)Increment and Decrement of Presumed Contract Loss:
Project Beginning Draw Transfer Balance at the end of the year
NB 35-2EPIC project 22,707,323.51 22,707,323.51
Total 22,707,323.51 22,707,323.51
89
The presumed contract loss is set up according to the implementation of building contract.As of the day of this report.the presumed contract cost of Nanbao 35-2EPIC has exceeded the presumed contract income.The company has set up relevant loss provision for the loss probably to place in the future. Note 7:Long-term investment （1） Other investment of stock rights
Name of Units under Investment
Proportion of
investment Initial investment Ending Balance
CNOOC Finance Co., Ltd. 1.77% 25,000,000.00 25,000,000.00
Total 25,000,000.00 25,000,000.00
（2） The balance of stock-right investment
Name of Units under
Investment Initial amount
Term of
amortization
Method of
amortization
Amortization
rate of current
year
Value of
Amortization Causes
Hainan China Oean Petroleum Platform Manufacturing
-39,413.97 10 Integrated
adjustment -3,941.40 -21,020.75
Devaluation
Appraised
Shenzhen China Ocean Petroleum Platform Maintenance & Installation
199,941.90 10 Integrated
adjustment
19,994.20 106,635.67 Valuation
Appraised
Total 160,527.93 16,052.80 85,614.92
Note 8: Fixed Assets and Accumulated Depreciation
Item Ending Balance Beginning Balance
Original value of fixed assets 2,254,404,492.55 2,003,921,080.95
Accumulated depreciation 801,666,055.49 665,604,125.20
Net value of fixed assets 1,452,738,437.06 1,338,316,955.75
A.Original Price of Fixed Assets
Category Beginning Balance Increase of
current period Reduction of
current period Ending Balance
Houses & buildings 195,802,720.00 7,113,118.19 202,915,838.19
Dedicated Equipments 1,359,088,755.76 179,360,851.41 530,000.00 1,537,919,607.17
General equipment 449,029,605.19 68,847,637.00 4,308,195.00 513,569,047.19
Total 2,003,921,080.95 255,321,606.60 4,838,195.00 2,254,404,492.55
B.Accumulated Depreciation
Category Beginning Balance
Increase of current period
Reduction of current period
Ending Balance
90
Houses & buildings 44,430,340.76 19,844,504.85 64,274,845.61
Dedicated Equipment 403,329,418.84 74,986,655.81 498,000.00 477,818,074.65
General Equipment 217,844,365.60 45,593,398.95 3,864,629.32 259,573,135.23
Total 665,604,125.20 140,424,559.61 4,362,629.32 801,666,055.49
C．Net value of fixed assets 1,338,316,955.75 114,897,046.99 475,565.68 1,452,738,437
.06 (1)The increase in the fixed assets of current period mainly results from such projects under construction dynamic positioning barge, bracket submersible barge being transferred to fixed assets. (2)The company has set enough original value of RMB405,675,743.15 of the fixed assets being used, among which, most are dedicated equipments. (3)The dedicated devices of our company are mainly the work boats for construction at sea. (4)There are no cases of replacement, mortgage and guarantee in the fixed assets of our company. (5)There is no depreciation found in the fixed assets in this period. Note 9: Projects under Construction
Item
Budget Number (RMB10 thousand)
Beginning Balance
Increase of Current Period
Transferred Fixed Assets of Current
Period Ending Balance Source
of capital Completion
progress
BH105 reconstruction (the first phase) 444 2,311,495.63 2,311,495.63 Self
raised 75%
Reconstruction of Transformer Station in Building Ground 430 4,036,000.00 4,036,000.00 0.00 Self
raised
Reconstruction of Ejecting Ditch Digger 255 380,000.00 380,000.00 Self
raised 15%
30m3 Grouting Machine 179 1,497,795.00 1,497,795.00 0.00 Self raised
3M Steel Preprocessing Production Line 350 1,858,800.00 1,858,800.00 Self
raised 50%
7000T Barge 4300 10,809,079.00 10,809,079.00 Self raised 26%
Dynamic Positioning Barge 9696 73,241,000.00 73,241,000.00 0.00 Self raised
Dry Loading Device 660 1,980,000.00 4,620,000.00 6,600,000.00 0.00 Self raised
Cable Burying Machine 263 1,410,000.00 1,410,000.00 0.00 Self
raised Auto Ultrasonic Defect
Detector 135 1,350,000.00 1,350,000.00 0.00 Self raised
Jacket Submersible Barge 8900 20,449,783.91 69,650,216.09 90,100,000.00 0.00 *
Hydraulic Hammer Line Winch 423 407,676.00 951,244.00 1,358,920.00 0.00 Self
raised Lanjiang Bracket
2304 15,631,560.31 15,631,560.31 Self raised 95%
30000T Barge 1,654,611.32 1,654,611.32 Self
raised Roller Trio Hydraulic Lapping Machine 1906 1,226,411.77 1,226,411.77 Self
raised 10%
Ocean Oil Engineering Technology Research
Center 7711 6,075,907.00 1,576,412.20 6,147,648.00 1,504,671.20 Self raised 2%
91
Total 28,913,366.91192,204,625.32 185,741,363.00 35,376,629.23
*The project of jacket submersible barge came into effect in 2003 with RMB 46,000,000 of collected fund and RMB44, 100,000 of self-raised fund, which had been transferred to fixed assets after completion in this period. Note 10: Intangible assets
Item Mode of Achievemen
t Original value Beginning
Balance
Addition of Current Period
Amortization Rate of Current
Period
Accumulated Amortization
Rate
Ending Balance
Month of surplus
amortization
Software Purchase 9,715,960.68 4,709,569.68 2,552,388.00 1,554,674.00 4,008,677.00 5,707,283.68 9-59
Land-use
right Input 7,392,300.00 6,850,220.00 147,840.00 689,920.00 6,702,380.00 544
Total 17,108,260.68 11,559,789.68 2,552,388.00 1,702,514.00 4,698,597.00 12,409,663.68 (1) The software is purchased by outsourcing, its credit value is the actual cost of purchase. (2) The land-use right is put in by promoters,its credit value is the land value that is assessed and confirmed by
Center for China’s Real Consultation and Evalution. Note 11: Long-term Expenses to be apportioned
Category Original
Happening Rate
Beginning Increase of
Current Period
Amortizing Rate of Current Period
Rollout of Current Period
Accumulated Amortization
Ending Balance
Right to Use
Housing 165,540.00 39,030.00 39,030.00 165,540.00
Right to Use Housing*
2,462,787.00 190,455.00 190,455.00 2,462,787.00
Payment of Renting Betterment
6,403,858.19 5,190,404.34 4,498,484.04 691,920.30 5,711,937.89
Total 9,032,185.19 5,419,889.34 4,727,969.04 691,920.30 8,340,264.89 *Since the land of this house is the leased land with a limited use right, the use right of this house is to be amortized according to the service life of land lease; the payment of renting betterment shall be accounted after being transferring into fixed assets. Note 12: Invoices Payable
Note Category Ending Beginning
Acceptance draft of bank 5,504,716,52 10,144,469.04
Acceptance draft of commerce 3,649,250.53 9,494,831.79
Total 9,153,967.05 19,639,300.83
As of the report date, in the acceptance bill which our company draws, except that the bank acceptance bill of RMB 2,150,472.05 and the commerce acceptance bill of RMB 571,186.01 will expire on March 15, 2005, others have already been paid at the specified date. Note 13: Accounts Payable
92
Ending Beginning Age of Account
Amount Proportion Amount Proportion
Within 1 year 441,812,992.01 97.25% 164,572,487.99 94.76%
1-2 years 9,875,704.18 2.17% 7,553,927.51 4.35%
2-3 years 2,081,807.68 0.46% 1,343,865.78 0.77%
More than 3 years 525,940.12 0.12% 202,523.15 0.12%
Total 454,296,443.99 100.00% 173,672,804.43 100.00%
(1) The reason for the increment in the accounts payable is resulted from the increase of the quality bail of subcontract works in the quality guarantee period. (2)The main debts are as follows in the accounts payable:
Units in Debt Amount of Debt Proportion Causes of Debt Time of Debt
Dalian New Ship Heavy Industry 70,479,958.00 15.51% Project fund 2004
CFD 11 General Contracting 42,103,894.29 9.27% Project fund 2004
CNOOC South China Sea West 23,131,518.30 5.09% Project fund 2004
HYUNDAI HEAVY INDUSTRIES CO., LTD 16,729,119.78 3.68% Project fund 2004
Guangzhou Salvage 16,660,029.36 3.67% Tonnage Dues 2004
Total 169,104,519.73 37.22%
(3)The funds of the shareholder units holding over 5% (including 5%) shares of our company without any debt in the accounts payable:
Company name Ending Beginning Property of fund
CNOOC South China Sea West 23,131,518.30 Project fund
Note 14: Accounts Payable in Advance
Ending Beginning Age of Account
Amount Proportion Amount Proportion
Within 1 year 194,696,225.12 100.00% 355,068,896.82 100.00%
Total 194,696,225.12 100.00% 355,068,896.82 100.00%
(1) Because the construction contract of this company requires the owner of our company to pay the project fund strictly based on the project progress according to the milestone payment point or the image progress point that owner confirms, the balance sheet date company carries forward the project incomes according to the actual completion progress, difference is formed and the uncompleted funds are to be settled. (2)The main reason for the decrease of advanced account is that part of the general contracted projects is paid with the project funds according to the image progress point that owner confirms, and is the result of timely gathering. These projects have been completely basically. (3) The funds of the shareholder units holding over 5% (including 5%) shares of our company without any debt in the accounts received in advance.
(4) The main details of the uncompleted funds already settled by December 31,2004.
93
Project name Amount
General contracting of PY 30-1 93,524,974.56
General Contracting of LF13---2 32,097,735.35
General Contracting of NB 35---2EPIC 22,138,170.57
General Contracting of Mabianzhou Wharf 19,034,968.88
Installation of East 1---1 (second phase) at sea 14,794,217.22
Total 181,590,066.58
Note 15: Taxes Payable
Amount Category
Ending Beginning Legal tax rate executed
Sales tax 3,351,920.04 9,989,665.81 3%,5%
City Construction Tax 368,607.31 687,049.78 1%,7%
Enterprise Income Tax 149,999,372.85 17,904,692.02 33%
Individual Income Tax 23,958.77 27,336.23
Value-Added Tax -14,342,267.42 28,914.33 17%
Total 139,401,591.55 28,637,658.17
(1)This project does not include the business tax and city planning tax of the subcontract works that is undertaken by the subcontractor. (2)The reason why this period of balance increases is the increase of business tax and corporate income tax that should be paid. Note 16: Other Funds Payable
Item Ending Payment Standard
Educational fee additional 169,935.61 3% of circulating tax
Flood control expenses 47,029.60 1% of circulating tax
Others* 1,152,096.51
Total 1,369,061.72
*Others refer to the funds the company has not paid such as public accumulation fund for housing construction, etc. Note 17: Other Funds Payable
Amount Age of Account
Ending Beginning
Within 1 year 1,924,845.96 21,535,165.12
1—2 years 19,650,686.87 1,940,610.62
94
2—3 years 741,165.00 715,656.64
More than 3 years 2,348,370.91 2,576,527.16
Total 24,665,068.74 26,767,959.54
(1)The top five units of debt total is up to RMB8,641,931.58, accounting for 35.04% of the balance at the end. (2)The funds of the shareholder units holding over 5% (including 5%) shares of our company.
Company name Ending Beginning Property of funds
CNOOC Corporation 7,769,950.73 7,769,950.73 Current funds
Note 18: Deferred Taxation Loan
Item Original amount Beginning Increase of
current period
Amortization of
current period Ending
Income tax
payable 8,688,886.43 5,420,250.85 1,117,020.28 4,303,230.57
(1).The income tax payable is calculated based on the appraised value-added rate and 15% of income tax; the funds are to be amortized in 10 years on average since May 1, 2000 by the integrated adjustment method. (2)The income tax payable is calculated based on 15% of income tax in terms of the application for purchase new stock and the frozen capital interests in 2002; this fund is divided to be amortized equally in 5 years since January 1, 2002. (3).The increment of the income tax resulted from the increase of income tax rate has been adjusted in the income tax payable in this period. Note 19: Stock Capital
Unit of quantity: 10,000 shares
Item Beginning Variation of this period(+、-) Ending
1. Shares not circulating
1). Shares of initiators
Among these
Shares owned by state* 18,700.00 3,740.00 22,440.00
Shares held by legal
representative at home
Shares held by the legal
representatives foreign-funded
Other
2). Corporate stocks collected
3). Internal staff stocks
4). Preferred stock or others
Total of stocks uncirculated 18,700.00 3,740.00 22,440.00
2. Stock circulated
95
1). RMB common stocks listed at
home
2). Freign capital stock listed
domestically
3). Foreign capital stock listed
abroad
4). Others
Total of circulated shares 8,800.00 1,760.00 10,560.00
Total 27,500.00 5,500.00 33,000.00
The reason for the increase of capital stock of current period, see Annex 5/Note 22(1). * Notice: CNOOC, the actual controller of this Company, as a transferee, received a total of 15,923.38 shares (accounting for 57.9% of the total outstanding shares) by agreement from the following sponsor shareholders: CNOOC Platform Fabrication, China Offshore Oil Marine Engineering and China Offshore Oil Development & Engineering, Share transfer agreement was signed and entered into force on September 28, 2003, relevant share transfer proceedings were fulfilled on February 13, 2004. Note 20: Capital Surplus
Item Dec. 31,2004 Dec. 31, 2003
Balance of beginning 746,588,376.12 771,255,876.12
Increase of current period
Among these: stock capital at a premium
Provision of stock right investment by company under investment 332,500.00
Other capital surplus
Reduction of current period 27,500,000.00 25,000,000.00
Among these: Stock capital at a premium 27,500,000.00 25,000,000.00
Other capital surplus
Balance of ending 719,088,376.12 746,588,376.12
Among these: Stock capital at a premium 702,212,590.36 729,712,590.36
Provision of stock right investment by units under investment 332,500.00 332,500.00
Other capital surplus 16,543,285.76 16,543,785.76
The reason for the premium of capital stock of current period, see Annex 5/Note 22(1). Note 21: Surplus
Item Dec.31, 2004 Dec.31, 2003
Balane of beginning 95,228,708.06 65,598,923.12
Additional of current period 54,840,594.51 29,629,784.94
96
Among these:Legal surplus 36,560,396.34 19,753,189.96
Legal public welfare funds 18,280,198.17 9,876,594.98
Public welfare funds of arbitral surplus
Income tax credited and shifted
Reduction of current Period
Ending Balance 150,069,302.57 95,228,708.06
Among these:Legal surplus 89,113,047.86 52,552,651.52
Legal public w elfare fund 60,956,254.71 42,676,056.54
Income tax credited and shifted
Reduction of current Period
The reason why the surplus of current period increases: according to the Profit Distribution Program passed on the eleventh session of the second board of directors of this company, the legal accumulation funds of surplus can be set up based on 10% of the net profit of current period, and the legal public welfare fund at a rate of 5%. Note 22: Profits Undistributed
Item Dec.31,2004 Dec.31, 2003
Undistributed profits in the beginning of year 339,419,173.33 197,595,609.39
Plus: Net profit of current period 365,596,840.19 196,453,348.88
Minus:Withdrawal of legal surplus 36,560,396.34 19,753,189.96
Minus:Withdrawal of legal public welfare funds 18,280,198.17 9,876,594.98
Minus: Distribution of cash dividends 27,500,000.00 25,000,000.00
Minus: Distribution of dividends of common stock 27,500,000.00
Undistributed Profit at the end 595,175,419.01 339,419,173.33
Among these: Cash dividends planned to distribute 33,000,000.00 27,500,000.00
1)According to “The Scheme of the Undistributed profit andCapital Surplus of Company Transferred for Adding Capital stock” passed on the shareholder’s meeting in 2003,with the 275 million shares of the shareholding equity as the basis,I share of dividend and RMB1.00 of cash bonus (including the tax) are distributed every 10 shares, and 1 share is transferred and increased per 10 shares with capital surplus. After it is done, the shareholding equity of this company is 330 million shares, among which there are 105.6 million shares of circulating stocks. And RMB27, 500,000 of dividends were distributed this time. (2)According to the pre-scheme of profit distribution and capital surplus transferred for adding capital stock passed on the eleventh session of the second board of directors, with the shareholding equity of 330 million as the basis, 1 share of dividend and RMB1.00 of cash bonus (including the tax) are distributed every 10 shares, and 1 share is
97
transferred and increased for every 10 shares with capital surplus. After the scheme is done, it is 396 million shares
98
99
6. Notes on the Main Projects in the Consolidated Profit Statement (Unit: RMB) Note 1: Income from Main Business
Item 2004 2003 Income from the general contracting items of ocean project
2,987,394,397.57 1,423,543,572.76
Income from the non-general contracting items of ocean project
500,107,623.30 630,354,149.32
Among these: Income form the land formation of ocean project
11,453,670.70 79,324,432.70
Income from the installation at sea and pipe outlay for the ocean project
436,647,220.36 453,646,899.19
Income from the design of ocean project 2,421,339.00 20,908,078.36
Income from the ocean project maintenance 49,585,393.24 76,474,739.07
Total 3,487,502,020.87 2,053,897,722.08
The income increase of current period， was resulted from the income increment of general contracting items of ocean project. Note 2: Taxes and Increase of Main Business
Item 2004 2003
Business Tax 44,570,713.58 46,019,593.35
City Construction Tax 2,923,862.83 3,189,295.54
Educational Increase 1,359,751.47 1,383,389.78
Total 48,854,327.88 50,592,278.67
This item does not include any business tax and additional taxes of the subcontract works undertaken by that subcontractor. Note 3: Overhead Expenses
Item 2004 2003
Amount 73,922,746.24 50,340,691.44
The main reason why the overhead expenses increase in the current period is that there is RMB22, 710,000 of provision of contract loss. See Annex5/Note6. Note 4: Financial Expenses
Item 2004 2003
Interest expenditure 3,408,499.37
Commission Charge 1,229,180.94 433,475.24
Loss & Benefit of Exchange 86,962.18 340,834.89
Minus: Interest Income 4,368,314.80 2,179,377.14
100
Total -3,052,171.68 2,003,432.36
The reduction of financial expenses in this period mainly results from no loan in this period. Note 5: Return on Investment
Item 2004 2003
Return on investment of stock equity 1,618,541.80 577,462.35
Among these: Dividends return 1,634,594.60 593,515.15
Euity investment balance amortization -16,052.80 -16,052.80
Credit investment income
Total 1,618,541.80 577,462.35 The increase of investment return in current period is resulted from the dividend increment distributed from CNOOC Financial. There is no large limitation to the investment realization and the repatriation of investment return. Note 6: Income Tax
Item Year of 2005 Year of 2004
Income tax 195,085,011.88 28,886,451.61
The main reason why the income tax increases in this period is that the profit increased in 2004, and the company set up income tax at the rate of 33% without obtaining the preferential of income tax of approved tax file. The Company and its holding subsidiary carry out 15% of the income tax rate. 7. Notes on the Statement of Consolidated Cash Flow Note 1: Other cash received related to business activities RMB 5, 150,738.22.
Item Amount
Interest income 4,368,314.80
Note 2: Other Cash paid related to business activities:RMB 30, 168,431.55. Main Items:
Item Amount
Transport expenses 3,870,205.60
Travel expenses 2,482,748.92
Advertising Fee 2,191,367.98
Business reception expenses 1,651,657.44
Convention expenses 1,302,892.18
Communication expenses 1,297,401.77
Come-and-go expenses 1,200,685.00
Water & Electricity Fee 1,059,373.43
101
Consulting Fee 908,160.00
Board of Director Tax 637,350.66
8. Notes on the Main Items of Accounting Report of Company (Unit: RMB) Note 1: Accounts Payable
Ending Beginning Age of
Account
Withdrawal
of bad
debts Amount Proporti
on Provision of
bad debt Amount Proportion
Provision of bad debt
Within 1year 5% 86,311,571.00 99.38% 82,730,919.67 87.26% 209,756.63
1-2 years 10% 11,550,230.27 12.18% 637,023.03
2-3 years 30% 4,800.00 0.01% 1,440.00 454,946.60 0.48% 136,483.98
3-5 years 50% 534,946.60 0.61% 267,473.30 80,000.00 0.08% 40,000.00
Total 86,851,317.60 100.00% 268,913.30 94,816,096.54 100.00% 1,023,263.64
(1)The accounts payable within due date shall not account for the provision of bad debt. (2)The top five accounts payable total up to RMB85,711,571.00,accounting for 98.69% of the total accounts. (3) The debts by the shareholder units holding 5% more (including 5%) shares of this company:
Company name Ending Beginning Fund Property
CNOOC South China Sea West 5,450,000.00 5,450,000.00 Project Fund
Note 2: Long-term Investment
Amount Category
Ending Beginning
Other Investment of Stock Rights 55,767,750.83 46,931,610.04
Total 55,767,750.83 46,931,610.04
(1)List of Other Investment of Stock Right
Name of units under investment investment Term
Proportion of registered capital
accounted for in the company under
investment
Investment amount
Hainan CNOOC Platform Manufacturing 1995.10-2005.10 70.00% 14,000,000.00
Shenzhen CNOOC Platform Maintenance & Installation 1993-2017 95.00% 12,967,500.00
CNOOC Finance Co., Ltd 1.77% 25,000,000.00
Total 51,967,500.00
(2)Other Equity Investment Calculated According to Equity Method:
102
Name of Units under Investment
Initial investment
Added Investment Beginning
Equity fluctuation of the company under
investment
Cash Dividend Distributed
Accumulated Fluctuation Ending
Hainan CNOOC Platform Manufacturing
14,000,000.00 28,299.67 2,205,896.02
Shenzhen CNOOC Platform Maintenance & Installation
12,967,500.00 5,657,332.20 8,847,207.36 1,537,039.56 14,504,539.56
Total 26,967,500.00 21,829942.32 8,852,193.59 3,714,635.91 30,682,135.91
(3)Balance of Equity Investment:
Name of Units
under Investment
Initial
Amount
Term of
amortization
Amortization
Method
Amortization in
Current Period
Accumulated
Amortization
Value of
remained
amortization
Cause
Hainan CNOOC Platform Manufacturing
-39,413.97 10 Integrated adjustment -3,941.40 -18,393.22 -21,020.75 Devaluation
appraise
Shenzhen CNOOC platform Maintenance& Installation
199,941.90 10 Integrated adjustment 19,994.20 93,306.23 106,635.67 Devaluation
appraise
Total 160,527.93 16,052.80 74,913.01 85,614.92
Note 3: Fixed Assets and Accumulated Depreciation
Item Ending Beginning
Original Value of Fixed Assets 2,241,942,336.13 1,990,740,789.72
Accumulated Depreciation 792,010,459.60 655,106,422.56
Net Value 1,449,931,876.53 1,335,634,367.16
A.Original Value of Fixed Assets
Item Begining
Increase of current
period
Reduction of
Current Period Ending
Houses & buildings 195,151,720.00 6,147,648.00 201,299,368.00
Dedicated Equipments 1,357,640,795.76 179,360,851.41 1,537,001,647.17
General-purpose
Equipments 437,948,273.96 68,570,567.00 2,877,520.00 503,641,320.96
Total 1,990,740,789.72 254,079,066.41 2,877,520.00 2,241,942,336.13
B.Accumulated Depreciation
Item Begining Increase of current
period
Reduction of
Current Period Ending
Houses & buildings 44,191,212.76 19,541,682.96 63,732,895.72
Dedicated Equipments 402,040,451.84 74,951,458.81 476,991,910.65
103
General-purpose
Equipments 208,874,757.96 44,993,652.59 2,582,757.32 251,285,653.23
Total 655,106,422.56 139,486,794.36 2,582,757.32 792,010,459.60
C.Net Value of Fixed
Assets 1,335,634,367.16 114,592,272.05 294,762.68 1,449,931,876.53
Note 4: Incomes from Main Business
Item 2004 2003
Income from the general contracting items of ocean projects 2,971,891,143.89 1,423,543,572.76
Income from the non-general contracting items of ocean projects
500,107,623.30 608,984,472.27
Among these: Income from the land formation of ocean project
11,453,670.70 65,927,482.90
Income from the installation at sea and pipe outlay for the ocean project
436,647,220.36 453,646,899.19
Income from the design of ocean project 2,421,339.00 20,908,078.36
Income from the ocean project maintenance 49,585,393.24 68,502,011.82
Total 3,471,998,767.19 2,032,528,045.03
Note 5: Benefits from Investment
Item 2004 2003
Income of Equity Investment 10,470,735.39 -3,700,800.16
Among these:Dividends Distributed 1,634,594.60 593,515.15
Balance Amortization of Equity Investment -16,052.80 -16,052.80
Income of Credit Investment
Total 10,470,735.39 -3,700,800.16Main reasons of the increase of investment income: (1) The increase of dividends distributed by CNOOC Financial; (2)The operation of the subsidiaries took a turn for the better. There is no large limitation to the investment transferred to cash and the repatriation of investment income of the company. Note 6: Income Tax
Item 2004 2003
Income tax 194,946,417.79 28,630,857.50
9. The Relations of Affiliated Parties and Their Transactions 1. Basic Information on the Affiliated Parties A. The affiliated parties existing control relations
Company
name
Registrated address
& capital Main business
Relations with
this company
Economic
property
Legal
representative
104
CNOOC
Registrated address:Beijing
China Registrated:RMB
50 billion
Exploration,development,production and
processing of offshore oil and natural gas
Parent company
State-owned enterprise Fu Chengyu
B.The affiliated parties not existing control relations
Company name Relations with this company
CNOOC Platform Same parent company
CNOOC Marine Engineering Same parent company
CNOOC Development & Engineering Same parent company*
CNOOC South China Sea West Holding 9.69% shares of this company
CNOOC Bohai Holding 0.40% shares of this company
CNOOC East China Sea Same parent company
CNOOC (China) Same parent company
China Ocean Petroleum Oil-field Service Same parent company
CNOOC and Shell Petrochemicals Same parent company
CNOOC Financial Same parent company
CNOOC Trust & Investment Same parent company
* The proportion of the shares of this company held by these three companies is 24.78% , 22.02% and 11.11% respectively, this stock right has already been transferred to China National Offshore Oil Corporation. The services offered by the above three companies will be offered by CNOOC Bohai. 2. Matters on Affiliated Transactions A.This company offers professional services of designing, installing, building etc for the affiliated parties. And the contract price is confirmed according to the market principle, through the public bidding, the amount of professional services offered in the report period is as follows:
Affiliated company 2004 2003
CNOOC (China) Co., Ltd. 2,355,949,226.66 1,401,556,465.78
CNOOC South China Sea West 9,080,000.00 64,507,972.90
CNOOC Bohai 325,035,270.80 144,082,086.95
CNOOC Shell Petrochemicals Co., Ltd. 195,199,757.37
ACT OPERATOR’S GROUP 159,857,624.68
B.The related transaction agreement concluded by and between this company and main promoter companies and other affiliated companies includes “The Storage Ageement”,”Logistic service agreement”,”comprehensive service agreement”,the joint-stock company is provided with comprehensive services by each promoter company and other affiliates, the amount of expenses of the relevant companies happened during the report period is:
Affiliated company 2004 2003
CNOOC Boha 54,410,015.22 21,784,667.02
CNOOC Platform 3,252,479.06
105
CNOOC Maritime Engineering 3,652,909.80
CNOOC Development & Engineering 2,808,064.47
CNOOC South China Sea West 832,030.58 700,734.92
C.Subcontract Works The subcontract works completed in the report period by the subcontractors having affiliated relationship with the company are shown as follow:
Company name 2004 2003
CNOOC Bohai 86,328,702.84 78,373,518.55
CNOOC South China Sea West 66,606,632.00 56,930,000.00
China Ocean Oilfield Services 1,885,700.00 34,126,594.10
CNOOC East China Sea 126,472.80 558,836.80
CNOOC Development & Engineering 202,000.00
D.Vessel Services The under-mentioned affiliated companies provide vessel service for this company, the amount of service fees arising from during the report period is as follows:
Company name 2004 2003
CNOOC Bohai 18,423,011.00
China Ocean Oilfield Services 59,932,844.10 35,535,436.58
E.Transport Services
Company name 2004 2003
CNOOC Bohai 6,500,269.30 5,251,404.51
CNOOC Platform 3,229,614.00
F.Fuel Cost
Company name 2004 2003
CNOOC Bohai 56,411,229.85 28,737,260.40
CNOOC East China Sea 664,500.00
G.Water & Electricity Fees
Company name 2004 2003
CNOOC Bohai 15,581,342.16 17,514,983.16
H.Affiliated Deposits By the end of report period, the balances of deposit by the company at the affiliated companies are as follows:
Company name Ending Beginning
106
CNOOC Financial 358,280,662.54 221,883,630.83
I.Interests of Affiliated Deposits During the report period, the deposit interests achieved by depositing at the affiliated companies are as follow:
Company name 2004 2003
CNOOC Financial 2,784,925.93 1,013,620.60
J.The balance of affiliated investment and the investment benefit achieved:
Company name Investment Balance of Dec. 31, 2004 Investment Balance of 2004
CNOOC Financial 25,000,000.00 1,634,594.60
3.Balance of Exchanged Funds by the Affiliated Party
Accounts Receivable:
Accounts Receivable:
Company name Ending Beginning
CNOOC (China) Co., Ltd. 25,947,453.50 84,636,017.22
CNOOC South China Sea West 5,450,000.00 5,450,000.00
CNOOC Bohai 43,343,467.77 25,000.00
Accounts Receivable:
Company name Ending Beginning
CNOOC Bohai 36,598,113.16 10,938,683.10
China Ocean Oilfield Services 12,330,746.00 5,421,944.00
CNOOC South China Sea West 23,131,518.30 4,000.00
Other Funds Payable:
Company name Ending Beginning
CNOOC 7,769,950.73 7,769,950.73
10. Contingent Matters: Contingent Assets: During the construction of part of the project undertaken by the company, as to the additional work related to project insurance, the company is most likely to receive insurance compensation, which will be determined as company assets after the amount of compensation is confirmed. 11. Matters on Promises: By December 31, 2004, the company had significant commitment matters that should be revealed. 12. Matters on Balance Sheet after Date: As of the date of the report, the company had no significant matters on balance sheet after date. 13. Other Major Matters: Non-Regular Loss & Benefit
107
CNOOC Engineering Co., Ltd. March 11, 2005
Item 2004 2003
Net Profit 365,596,840.19 196,453,348.88
Minus: Non-operating Incomes 129,638.00 258,665.46
Subsidy Income 48,485.00
Plus: Non-business Expenditure 458,015.00 180,876.00
Plus: The Influence Number of Income Tax -92,364.36 11,968.42
Net Profit after Deducting Non-Regular Loss and Benefit 365,784,367.83 196,387,527.84
108
Supplementation of Financial Report The detailed list of devaluation provision
of the amalgamated assets Jan. to Dec. of 2004
Prepared by: CNOOC Engineering Unit:RMB
Assets Initial
Balance
Increase in
the Year
Decrease of
Current
Period
Ending
Balance
1.total of bad debts provision 1,323,748.87 49,724.82 961,336.10 412,137.59
Among Them: Accounts receivable 1,299,818.94 960,429.10 339,389.84
Other Funds Receivable 23,929.93 49,724.82 907.00 72,747.75
2.Total of short-term investment Depreciation
Provision
Among tem:Stock Investment
Bond Investment
Fund Investment
3.Total of Stock Depreciation Provision 3,239,773.10 22,707,323.51 627,465.64 25,319,630.97
Among them: Stocked Commodities
Raw Materials 3,239,773.10 627,465.64 2,612,307.46
Consigned materials for processing
Estimated Contract Loss 22,707,323.51 22,707,323.51
4.Total of Devaluation Provision for Long-term
Investment
Among Them: Long-term Stock Right Investment
5. Total of Devaluation Provision for Fixed Assets
Among Them: Houses and Buildings
Machine and Equipment
6. Provision of Intangible Assets Devaluation
Among them: Patent Right
Trade-Mark Rights
7. Provision of Devaluation for Projects Under
Construction
8. Provision of Devaluation for Loan by Mandate
Among them: Long-term Loans
Short-term Loans
Total Devaluation Provision 4,563,521.97 22,757,048.33 1,588,801.74 25,731,768.56
109
List of Asset Depreciation Provision
Jan. to Dec. of 2004 Prepared by: CNOOC Engineering Unit:RMB
Assets Initial Balance Increase in the
Year
Decrease of
Current Period
Ending
Balance
1. Total of bad debts provision 1,040,480.17 26,760.43 754,350.34 312,890.26
Among Them: Accounts receivable 1,023,263.6
4
754,350.34 268,913.30
Other Funds Receivable 17,216.53 26,760.43 43,976.96
2. Total of Depreciation Provision of Short-term
Investment
Among them: Stock Investment
Bond Investment
Fund Investment
3. Total of Stock Depreciation Provision
Among them: Stocked Commodities
Raw Materials
Consigned materials for processing
3,239,773.10
3,239,773.10
22,707,323.51 627,465.64
627,465.64
25,319,630.97
2,612,307.46
Estimated Contract Loss 22,707,323.5 22,707,323.51
4.Total of Devaluation Provision for Long-term
Investment
Among Them: Long-term Stock Right Investment
5. Total of Devaluation Provision for Fixed Assets
Among Them: Houses and Buildings
Machine and Equipment
6. Provision of Intangible Assets Devaluation
Among them: Patent Right
Trade-Mark Rights
7. Provision of Devaluation for Projects Under
Construction
8. Provision of Devaluation for Loan by Mandate
Among them: Long-term Loans
Short-term Loans
Total Devaluation Provision 4,280,253.27 22,734,083.94 1,381,815.98 25,632,521.23
110
Section XII Documents for Reference
1. The accounting statement with the signatures and stamps of legal representative,
director in charge of accounting and chief of accounting organization;
2. The originals of auditing report with the stamp of certified accountant office, and the
signatures and stamps of certified public accountant;
Zhou Shouwei
Chairman of the Board of Directors of CNOOC Engineering Co., Ltd.
March 14, 2005
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