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Unknown Executive: [Interpreted] Dear ladies and gentlemen, investors, and analysts, good afternoon. Thank you all for joining the 2025 Third Quarter Earnings Call of China Oilfield Services Limited today. COSL, guided by the goal of building a world-class energy service company with Chinese characteristics continuously optimizes resource allocation and enhances the efficiency of capital operation. It focuses on 5 major development strategies: technology-driven, cost-oriented, integration, internationalization and regional development. The company is committed to optimizing the structure of large-scale equipment, continuously improving profitability, constantly breaking through and perfecting key core technologies and enhancing the core competitiveness of oilfield services. In the face of a complex and volatile external environment, the company adheres to the goal of world-class standards, deepens and broadened strategic planning and intensifies and refines the implementation of strategies. It promotes the coordinated development of production and operation as well as reform and development in an all-rounded way. Overall, the company presents a high-quality and sustainable development trend. Please allow me to introduce Mr. Qie Ji, the Chief Financial Officer of the company. Today's press conference is divided into 2 parts. First, Mr. Ji will lead us to understand the company's performance in the third quarter of 2025. Afterwards, we will open a question-and-answer session. Now, allow me to give the floor to Mr. Ji.
Ji Qie: [Foreign Language]
Unknown Executive: [Interpreted] Thank you for the management's introduction. Now we will proceed to the Q&A session to give more investors the opportunity to ask questions. [Operator Instructions] We'll now invite the first person to raise questions who is Wang Yiming from [ Merrill Lynch ].
Yiming Wang: [Interpreted] First of all, I would like to congratulate the company for achieving very good results for the third quarter of the year. I have 2 questions. First of all, I have heard some news about certain drilling rigs, which will restart their operations. And I have heard that would involve 6 projects in total. Has the company heard such news? And if that is the case, if certain projects are about to be recommissioned, is it going to have a positive impact on your daily rate and also utilization rate overall? My second question is about the effective tax rate being reduced in the third quarter. I would like to understand the reasons behind that. And do you have any forward-looking projections into the fourth quarter? Or what is your projection for the next year concerning effective tax rate?
Ji Qie: [Interpreted] Allow me to first address the first question, which is relevant to the development in Middle East. Actually, beginning from the month of August, we have started receiving some news about certain activities, but to date, we do not have any well-established demand coming from that region. What we need to focus on at the moment is to ensure the high level of efficiency of our operations and at the same time, make effective dynamic adjustments to the use of our equipment in the global front so as to optimize the utilization of our equipment instead of just focusing on one single region. Now allow me to switch over to your second question and share some figures with you. This year, overall speaking, the effective tax rate has returned to a normal level. Previously, it was between 19% and just below 20%. And now if we look at the level for the third quarter, it is slightly over 20%. So by comparing the figures from the third quarter to the previous time period, I would not say there are any major fluctuations. So if you look at the figures for Q1 to Q3, which was around 28% in the year 2024 and compare that level with the level we see this year, yes, you may say there is a rather substantial change. So what are the main reasons behind such a reduction in the effective tax rate? Well, I can offer some of my own thinking and analysis. I believe the major reason is in relation to what happened to the operations in Norway. We have enjoyed very good performance there with very high level of daily rate and also the level of losses have been substantially reduced. At the same time, there was no increase in the profit tax, which is a very good news. So if you look at such situation, I can say that towards the -- if you compare the first 3 quarters of last year and that is caused by the operations or special situation in Saudi Arabia. So I would not say that these are generalized trends, but rather, I think such change or movements have been caused by certain special events or special activities instead. So combining the 2 examples I have just given you, the impact would be a drive down of about 5 points. So if you look at the actual level, 28% to 29%, dropping to around 20%, that is a drop of 8 to 9 points. So looking ahead into the fourth quarter and also the full year, I would say that such elements would continue to play a role. And since our effective tax rate has already returned to the normal level, I can tell you I do not expect any substantial changes.
Unknown Executive: [Interpreted] Let's introduce the next questioner, which is [Technical Difficulty]
Unknown Analyst: [Interpreted] I actually want to ask about your well services segment. In the first half, I have examined the figures for the profit situation. So I would like to ask, can you explain why in the third quarter the profit trend has shown such a direction? What do you expect the future profit margin to be looking ahead into the final quarter of the year? And also, what is the projection for the full year?
Ji Qie: [Interpreted] Allow me to first answer your first question. Well, I should say in relation to our well services segment, if you look at what has happened in the past 3 years, I should say that we have seen very good improvement in terms of our scale of operations and also the quality of our operations. And actually, I should say that we have already entered a phase of rapid development. So focusing on this year, we have seen the drop in oil prices and that has caused a lowering of investment sentiment in the upstream. Overall investment reduction is about 6%. So to us and particularly to the well services segment, I think this trend will continue. So when we talk about the technical segment, we need to understand that it is still well supported by the huge amount of workload available on the domestic front. So while we see a slight decrease of 3% comparing the first quarter to the third quarter, we can say such a mild drop is still outperforming the global trend or the global situation. So when we talk about the drop in the domestic front, it is still well under control. And for the overseas performance, we do see a mild decline in our profit level. But still, our margin is standing at a relatively high level, which is more than 16%. So basically, we are doing quite well compared to our peers. And we see that from Q1 to Q3, there was a drop of 3% to 4%, but it is, comparatively speaking, better than the global situation and also some of the other major players in the market. For example, we can see that [ Halliburton ] has also suffered a decline of their performance by 53 point odd percent and Baker Hughes dropped by 5% and other peers are also suffering. So you can draw a comparison here and see we are actually doing quite well. So looking ahead into the future, when it comes to the well services segment, our future expectation is that we will expand our overseas operations. In particular, we will focus our efforts on the technical front. We will enhance our collaboration with the IOC and AOC. And with our sophisticated technologies and very outstanding equipment offering, we believe we can expand our market share and improve our profitability. Yes, we will continue to see fluctuations in the market. And yes, competition will continue to be fierce. And at the same time, we see a reduction in the sentiment of investment, but we will strive to improve ourselves and maintain all the operational indexes at a high level.
Unknown Executive: [Interpreted] Let's invite the next questioner from [ BAC ].
Unknown Analyst: [Foreign Language]
Ji Qie: [Foreign Language]
Unknown Analyst: [Interpreted] I have 2 questions. First of all, I can see the revenue coming down in Q3, but the gross margin has gone up. Can you please explain why? Second question, if you look at the fourth quarter last year, the trend was a rising revenue, but a substantially dropping profit margin. So is that going to be the trend this year? What are your expectations?
Ji Qie: [Interpreted] At the moment, if you look at the progress we are making with our revenue, yes, we do see a mild decline, but that is well within our expectation. And when it comes to the gross margin level, certain activities or elements have created impact on us, especially in the third quarter, but the impact is not going to be as substantial as last year. So I would say, together with some savings we have made on the portion of our financial expenses, I think things are well under control. [Interpreted] So if we are to look ahead into the fourth quarter, that means we are examining the situation for the full year. I would say this is a usual trend that happens in the well services industry. In the second half of the year, the revenue level would normally be affected by poor weather. But because of the speeding up of account settling in the final quarter, we expect a slight increase for our revenue level. In relation to our cost factor, because of certain salary and wages limitations stipulated by the state, the cost going into salaries would take up a rather big portion of our overall cost. And all along, our company has been doing well this balancing act involving our different cost elements. So at the moment, I can tell you we are still confident that the company will maintain a very good growth momentum.
Unknown Executive: [Interpreted] Let's invite the next questioner, which is Yan Bei Na.
Beina Yan: [Interpreted] I have 2 questions in total. The first one is concerning the fees you have collected and any changes in such trend for the first half comparing it with the second half. Do you have any major fluctuations that you can share with us on this front? And secondly, it is about [ South Sea #8 ]. Concerning this vessel, I think it is supposed to be heading directly to Brazil in the first half of this year. So what is happening to the latest operations of this vessel? What is happening, especially considering the political upheaval in Brazil? Is it affecting our operations and services?
Ji Qie: [Interpreted] So allow me to answer your first question, which is the systemic charges and fees. I would say this is a new development trend in Mainland China. And if you look at the performance on this front, comparing what happened last year, which was only a single digit, it has already increased to about 50% or so this year. So in relation to what will happen in the future, we will maintain such a big portion. It really depends on the actual situation on the site of our operations. Well, I would like to share a few points. First of all, concerning such fees or rates, they do not create any big impact on our technical segment. The extent is only about a few hundreds of millions. Secondly, the impact on the shorter term on our profit level is also quite small. So what we'll be doing is to optimize our raw materials combination to reduce our cost. And actually we have achieved very good results on this front for the first 3 quarters of this year. So when it comes to the actual extent of such endeavors, it really depends on what is happening to our raw materials. We will need to continuously do our homework and do further development and make necessary timely adjustments. And sometimes when there are changes to the raw material side, we may need to make adjustments for about a year or so. So let me move on to your second question, which is about South Sea #8. The vessel is now currently in the stage of being inspected by the Brazilian party. So at this moment, there is no operation for this vessel. And the overall adjustment project will be completed once the inspection team is ready to collaborate with us on the adjustment front.
Unknown Executive: [Interpreted] Let's invite the next questioner from Macquarie.
Huaxin Miao: [Interpreted] I have 2 questions. The first question is about the drilling services segment. I have heard that in the second quarter, there are actually no real operations in the Northern Sea. So can you please update us on what is happening? Is there some sort of saturation happening there? And my second question is about your finance cost. I can see some obvious improvement this year. So what is your plan for your USD debt? And also considering the recent depreciation of renminbi, what is the outlook for next year?
Ji Qie: [Interpreted] Concerning the drilling services segment, what happened in Norway in the second and third quarter, I think various vessels have gone under certain repair work. And overall speaking, such repair work is normal repair. We are well within our plan. So whether the repair activities have gone up or come down, everything is well inside our plan. I can give you some examples. For example, our Innovator in the second quarter is going through some repair work. And also the other vessel [ Protector ], there's a short period of repair in September. So for the fourth quarter, I would say all 4 vessels will go into normal operations. So you can see, if compare the second quarter and the third quarter in relation to the fees, you may say that the performance in Q3 is much better compared to Q2. In relation to the second question, from the first quarter all the way into the third quarter, we have made substantial saving in terms of our finance cost because we have been actively managing our debt and optimizing our debt. For example, between June and July, we have repaid USD 1 billion debt and we have also repaid other high interest-bearing debt. So in relation to our overseas market changes, we will continue to keep a close eye on that. And at the moment, we are making arrangements to swap out high-cost debt. Whether renminbi is appreciating or depreciating, its impact on our profit, well, I should say that there are real fluctuations involved. But based on the control mechanism of the state, a certain level or range of fluctuation is permitted. So we will make our best effort in managing exchange rate risk so that they will not create any major impact on our operations. So in relation to the well services segment, we are going to repay this mature debt of up to CNY 3 billion next year. By that time, we will decide with more details in relation to repayment of all the debt. And we will have the purpose or ultimate objective of optimizing our financial scale and also reducing our finance cost. We are swapping out the high interest debt for lower interest debt. So the benefit in the longer term from that front should be sufficient to offset anything on the depreciation side for the short-term currency changes.
Unknown Executive: [Interpreted] Thank you very much for the previous questions and our management's answers. Due to time constraints, we are now going to bring in the final question from Changjiang Securities.
Unknown Analyst: [Interpreted] I only have 1 question, which is in relation to the well services segment. I can see that our peers have higher level of revenue. So I would like to ask for a breakdown in relation to our revenue comparing domestic operations with overseas operations. And can you tell me something about the future trends concerning such split? And what will be the regions or areas of your focus looking ahead?
Ji Qie: [Interpreted] Thank you very much for that one question, but it's actually a very rich question. So I will do my best to answer that. In relation to the well services segment, first of all, I would like to share a number of characteristics about this segment with you. It is focused on the domestic front. I think the portion here is over 80%, while the overseas operations, the scale, it is about 5 billion. Concerning profitability, it is around 16% to 17%. And overall speaking, profitability is stronger on the domestic front compared to the international operations. Secondly, I would like to talk about our current arrangement and development. In relation to our well services segment, I think our future growth will be focused on the overseas operations and also on the technical front. I believe we will expand further and solidify our market share in Southeast Asia and also increase our level of competitiveness in the Middle East market. We have already seen some real results inside Middle East. I also want to add some personal sharing. If you look at the first 9 months, our locked overseas contract in relation to technical contracts, there's a growth of 47% and our bundled services have improved by 255% and we have also 36% of new contracts signed. So if you look at the total sum or overall quality and also our ability of risk aversion, I can tell you we are making improvements on all fronts. Thank you. That's the end of my answer.
Unknown Executive: [Interpreted] Thank you all for your questions and the detailed answers from our management. We appreciate your attention and support for the company. Due to time constraints, this call is coming to an end. If you have any further questions, please contact us at any time. This concludes our meeting. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]