Operator: Good morning, ladies and gentlemen. Welcome to the conference call. Ruby, please begin your call, and I'll be standing by for the Q&A.

Unknown Executive: Good morning, ladies and gentlemen. On behalf of China Oil and Gas Group, it is a pleasure for me to welcome you all to our 2026 interim results conference call. Today, our Chief Financial Officer, Ms. Jenny Law, will present the group's 2026 interim results, and she will answer any questions you may have after that presentation. Our presentation material for today has been uploaded to our official website at www.hk603.com under Investor Relations and then Roadshow Presentation or you can also access it through the link attached in our announcement e-mail. We will first talk about the financial highlights and performance of the group, followed by the operating performance of our core business, natural gas distribution business and then our upstream oil and gas production business in Canada. The presentation will take around 10 minutes. Then we will have a Q&A session at the end.

Yin Shan Law: Thank you, Ruby. Good morning, everyone. Let's start with the PPT. First, let's look at the group's core financial highlights. In the first half of 2026, the group gross profit reached HKD 1,093 million, up 11% year-on-year. Benefiting from improved purchase sales margins, the overall gross profit margin rose from 12% in the same period last year to 14%. EBITDA stood at HKD 1,160 million, representing a 3% year-on-year increase. As of June 30, 2026, net assets amounted to HKD 8,000 million, a 3% rise compared with HKD 7,755 million at the end of 2025. The shareholders' equity base remains solid. Slide 4. In terms of turnover, revenue totaled HKD 7,854 million in the first half, a slight 1% year-on-year decline. Profit before taxation was HKD 705 million. Profit for the period was HKD 501 million. Profit attributable to owners of the company was HKD 196 million, down 22% year-on-year. Slide 5. This slide shows adjusted profit after stripping out one-off items. Reported profit attributable to shareholders fell 22% year-on-year, largely dragged down by nonoperating factors, including the fair value changes of financial liabilities and foreign exchange losses. After excluding these one-off items, the group's underlying operating profit was HKD 228.5 million, down 10%. These adjusted figures better reflect the true operating performance of the group core businesses. Slide 6 and 7. The group's consolidated gross profit margin rose to 14%. Profitability varies across business segments. Sales and transmission of Natural Gas gross profit margin maintained at 12%. Gas Pipeline Construction and Connection, standout performance, margin increased from 37% to 41%. Canadian Oil and Gas Production segment, gross profit margin remained stable at 35%. Coal Derived Clean Energy segment gross profit margin stood at negative 4%. We will continue to optimize the operating model for this segment going onward. Slide 8. The total sales and distribution costs and administrative expenses reached HKD 304 million in the period, rising 31% year-on-year. The increase was mainly driven by higher R&D spending within the Coal Derived Clean Energy segment. Faced with a rising expense ratio, the group will implement cost reduction initiatives, strictly control various operating expenses and improve profit efficiency. Slide #9. EBITDA amounted to HKD 1,160 million, up 3% year-on-year. As debt scale expands, net interest expenses increased. Going forward, we will keep optimizing the debt structure and managing financing costs. Slide 10. Other financial data statement of financial position and cash flow information. At the end of June, total asset was HKD 22,130 million; net assets, HKD 8,000 million; total debt, HKD 9,791 million; cash and cash equivalents, HKD 5,046 million; net debt, HKD 7,745 million (sic) [ HKD 4,745 million, ] up 12% compared with year-end of 2025. In February 2026, the group issued USD 300 million 7% senior notes maturing in 2029. In first half of 2026, the group fully redeemed the USD 400 million 4.7% senior notes due 2026 via market buybacks, cash tender offers and existing on-hand cash resources. On August 5, 2026, the group secured a new USD 150 million syndicated loan, which was fully applied to repay the existing USD 350 million syndicate loan with a view to reduce future finance costs. The group's weighted average cost of all indebtedness, including bank borrowings, other borrowings and senior notes stood at 4.5% for first half of 2026. First half of 2025 was 4.7%. On cash flow, net cash flow from operating activities totaled HKD 470 million, down 6% year-on-year. Capital expenditure was HKD 222 million, a 20% year-on-year decrease. The group maintained a prudent capital expenditure strategy, prioritizing the safety of operating cash flows. Part 2, natural gas distribution business, Slide 12. We now turn to the domestic city gas segment. Total gas sales and transmission volume reached 3,763 million cubic meters in the first half of 2026, representing a 6% decrease compared to year-on-year. Affected by macroeconomic conditions, gas demand softened and overall volume declined. Nevertheless, through gas resources management and implementation of price pass-through mechanisms, purchase sales margin expanded materially, delivering the operating profile of low volumes but higher profit. Slide 15 (sic) [ Slide 13 ]. This shows the volume breakdown. Total gas sales volume down 9% year-on-year. Residential users down 12% year-on-year. C&I down 8% year-on-year. Gas stations down 5% year-on-year. Transmission volume down 3% year-on-year. On Slide 14, C&I customer accounted for 67% of gas sales volume and remain the core foundation of the group's revenue and profit. Going forward, the group will continue to prioritize the development of our C&I customers in market expansion. Slide 15. By region analysis, Qinghai remains our largest volume province. Shandong, Jiangsu and Jiangxi posted notable gas sales growth, demonstrating solid progress in our key region expansion. [indiscernible] other province record volume decline due to local industrial cycle fluctuations. We will flexibly adjust market tactics according to local reality. Slide 16, the key profitable metrics. The blended average selling price RMB 2.66 per cubic meter. Blended purchase and sales margin, RMB 0.55 per cubic meter, a marked improvement from RMB 0.45 per cubic meter in first half of 2025. Average transmission price remained flat at RMB 0.062 per cubic meter. Slide 17. The end user base expands steadily. As at June 30, 2026, the group had accumulated 221,560 (sic) [ 2,217,560 ] residential users and 21,089 C&I users. During first half 2026, we added 25,014 (sic) [ 23,014 ] new residential households and 394 new C&I customers. Slide 18. Our key business development priorities. Beyond traditional gas sales, the group is actively nurturing second growth curve. First, further deepen value-added service businesses, push channel penetration for priority brands, roll out the 5 unified customer management system and enlarge the project pipeline for gas and integrated energy initiatives. Second, reinforce safe operations, iterate digital information systems and continuously enhance internal institutional frameworks and risk control systems across the group. Slide 19 and 20. Our national operation map. The group holds 64 city-gas concession rights across 13 provinces, cities and autonomous regions in China with more than 27,235 kilometers of natural gas pipeline invested and built. Let's go to Part 3, our oil and gas production business, Slide 21. Our Canadian oil and gas operation. Average production in the first half of 2026, 5,209 BOE per day, down 4% year-on-year. Crude oil output, 1,905 barrels per day, down 17% year-on-year. NGL output plus 4% (sic) [ plus 6% ] year-to-year. Natural gas output plus 5% year-on-year. International crude oil prices rose sharply. WTI averaged USD 82.67 barrel in first half of 2026, up 23% year-on-year. The group's realized crude oil selling price reached CAD 107.79 per barrel, plus 25% year-on-year. However, rising operating costs and royalty fees pulled the operating netback down to CAD 30.31 per BOE, down 6% year-on-year. Resource position at end of 2025. Proved reserves 36.02 million -- MMBOE. Proved plus probable reserves 57 MMBOE. Both reserve categories increased by 13% year-on-year, further solidifying our resource base. Slide 22. The group adopts a prudent development program. We completed 6 net wells in the first half with a 100% drilling success rate. Unit operating costs were controlled at CAD 14.46 per BOE. In future, we will keep balancing production volume, cost and investment returns while studying the feasibility of supplying Canadian oil and gas resources back to the domestic Chinese market. Conclusion. Looking back on first half of 2026. Against a challenging macro backdrop and subdued domestic industrial gas demand, overall sales transmission volume declined. Nevertheless, by optimizing gas source procurement and implementing price pass-through mechanisms, the group delivered higher gross profit margin and higher absolute gross profit. For the second half of the year, the group will continue executing its strategy, consolidate the core foundation, drive with 4 growth engines, empower through digital intelligence, deepen customer-centric operations. We will strengthen and optimize our city gas core business, foster 4 growth engines, advance digital intelligence transformation, strictly control expense, reinforce risk management and strive to deliver full year operating targets. This concludes our presentation for first half 2026 results. This presentation is for reference only and does not constitute investment advice. Please refer to the published interim announcement for full figures. We will now open the floor for questions. Thank you. Thank you, operator.

Operator: [Operator Instructions] Our first question comes from Don with Standard Chartered.

Don Yew: Just 2 parts -- 2 questions basically. One is on the operational side of things. Can you just -- I think you touched briefly on it that you've controlled costs quite well. But can you perhaps expand a little bit on why the input cost has gone down to RMB 2.11 per cubic meter from RMB 2.2. Because obviously, I think natural gas prices domestically has gone up, right? So I guess, can you perhaps share why for you guys, it's come down on the cost side? And then second part to this would be, can you provide guidance on the gas sales volume and dollar margin for the full year? Any guidance would be helpful. I'll stop there for now.

Yin Shan Law: Okay. When you mentioned about the input costs, you mean the dollar margin?

Don Yew: No. The -- I think on your slide, you have it as RMB 2.11 basically the purchasing price, the blended average purchasing price.

Yin Shan Law: The blended average purchase price. Why was that down? Okay. Well, the main reason is because you can look at our slide with all our provinces. The Qinghai province has dropped their sales of natural gas dramatically. The reason is that we have a very warm winter. So in Qinghai, the volume down quite a bit. And this part is the one that is not making much margin. So the margin is very low on the heating natural gas part in Qinghai. So without that part, the other province has grown their sales of natural gas. So the blended purchase price is down. If this makes sense to you?

Don Yew: Okay. So it's basically just a favorable revenue mix.

Yin Shan Law: Yes.

Don Yew: Mix change. Okay. Okay. And then can you provide guidance on the -- for full year, what's the sales -- gas distribution sales volume and blended dollar margin?

Yin Shan Law: Okay. The blended dollar margin, we will expect it will stay stable, plus or minus 0.01 or 0.02 due to the weather that will affect the dollar margin. For the sales volume, we expect we'll do better. Hopefully, we can have a colder winter and our gas sales volume will be up. Since the economy in Mainland China is still quite slow, and we are doing our best to sustain our cash flow and operating profit. Thank you.

Don Yew: Okay. So obviously, for first half, the gas sales volume was down 9% year-on-year, right? So you're expecting full year to be up year-on-year. So you're expecting quite a significant rebound in the second half?

Yin Shan Law: Well, for now, we expect sales volume will be down in single digit. We will not be over to double digit. But it's hard to tell for now. So it's around 6% to 7%.

Don Yew: Okay. Also for full year, the sales volume will be down single digit year-on-year?

Yin Shan Law: Yes.

Don Yew: Okay. Okay. Got it. And then the second question I have is, if I look at for the -- as of June balance sheet, right, the gross amount of bank loans, I think it's gone up about HKD 860 million. Obviously, I know you got the syndicate loan, you drew that in August. So that wouldn't have been reflected on the balance sheet for -- as of June, right? So can you just explain what additional loans you got in the first half that led to the loans going up about HKD 860 million in the first half?

Yin Shan Law: Yes, mainly due to increase of bank loans on our Mainland China operating business.

Don Yew: And these are short-term loans or long-term kind of loans?

Yin Shan Law: Both of them are short-term loans because we try to let our PRC subsidiaries to get their loans onshore, where the loan is more cheaper in Mainland China. The average borrowing cost in Mainland China for bank loans is around 2% to 3% per annum. So we were just trying to maintain our -- most of our debt in the Hong Kong mother company remain the same. So we repay our U.S. dollar bond with our on-hand cash, right? And then we issued the syndicate loan during August 2026 is fully repaid the existing syndicate loan that we are having now. So the total debt of our Hong Kong mother company will be lower by the end of the year.

Don Yew: Okay. Okay. So just to clarify, right? Basically, obviously, you got -- the syndicate loan that is due next June is USD 350 million, right? So of that $350 million, you have obviously gotten the new $150 million syndicate loan to partly refi that. And then the remaining amount of about -- I don't -- close to $200 million, you basically gotten some onshore loans to prefund the syndicate loan?

Yin Shan Law: The remaining outstanding 2027 of the syndicate loan due will be -- because we have done repayment. So the outstanding is around USD 165 million for next...

Don Yew: And for the -- yes, for the $165 million, have you gotten any financing for that?

Yin Shan Law: Yes. We have a few banks that have contacted me, and we will probably draw down a RMB syndicate loan to repay the due 2027 syndicate loan. And we are still under discussion.

Don Yew: Okay. So the RMB syndicate loan will be about $165 million. You're discussing about $165 million in size.

Yin Shan Law: Yes, less than $200 million. Yes -- equivalent US dollars.

Don Yew: And what's the tenure for that?

Yin Shan Law: Probably around 3 -- yes. We usually get our syndicate loan for 3 years with an option of 1 to 2 years extension.

Don Yew: Okay. So this doesn't -- so the question I had was because obviously, at the end of June, the amount of loans have gone up about $860 million, right? So you're saying you got some onshore loans. But I guess the question is, given that you're not really expanding any capacity, what is this additional $860 million of loans that you got in the first half for?

Yin Shan Law: Well, it's easy. We use our on-hand cash to repay the U.S. dollar bond. So we repaid USD 100 million with our on-hand cash. So we use the channel of our Mainland China lower financing costs to help the company to repay its debt.

Don Yew: Okay. Okay. So basically, you use the cash on hand to help to repay the dollar bond and then you replenish that cash by getting onshore loans?

Yin Shan Law: Yes.

Operator: [Operator Instructions] Our next question comes from [ John Zhao ] with AllianceBernstein.

Unknown Analyst: So just some follow-up question on the operating side, just follow Don's question. So on the volume, right, I assume the volume drop is mostly due to the warm winter, the first quarter impact is still there. Because getting into the second quarter, I just want to understand the trend because we previously discussed when the competing energy source price becoming more expensive, it's actually benefiting us -- our gas distribution. Did you see that in the second quarter when energy price started to raise? That's the first question. I will go one by one.

Yin Shan Law: Okay. Thank you. We -- actually, we didn't see the price go up extremely for the second half. As we know that the 3 big oil companies will maintain the procurement price for natural gas -- for the natural gas distributor. As we know that the Mainland China economy is not doing very good. So the government intends to maintain a lower cost for energy price, so all the residential C&I can benefit from that. So we didn't see a big jump of the purchasing price.

Unknown Analyst: Got it. Understand. Then the second question is on the procurement cost, the RMB 2.11 number that we have here, right? Just to try to understand better on the contract that we have with PetroChina. My understanding is other distributors, they have a price or a formula -- procurement price linked to some kind of index that's linked -- further linked to LNG oil or coal oil price. Do we have that similar like formula for our gas from PetroChina?

Yin Shan Law: Well, as I know, we don't have that. We may have a very small portion that have this kind of mechanism. What we did is we usually secure our natural gas volume by the end of the year for the upcoming year. So with that volume, we will secure our natural gas, right? And then for the pricing, it really depends on the PetroChina, they will give us a notice before the end of the year. So we will know the full year the price. So whenever PetroChina or the other big oil companies, they want to increase the price, which means our cost, they need to go through NDRC. So this is not just linked to a market index.

Unknown Analyst: Got it. So it's not floating. It's like a fixed annual reset depending on NDRC's approval of price change.

Yin Shan Law: Yes.

Unknown Analyst: Okay. Cool. That's very comforting. And so since you mentioned that we locked the volume, right, if we are going to see a continued single-digit decline in the total volume this year, are we exposed on the PetroChina front, meaning if we promised to offtake like 1 billion square meters of gas from PetroChina, but at the end of the day, full year, we only consumed or distributed 0.8. Is there a penalty or it's negotiable?

Yin Shan Law: It's a very good question. Yes, this is in the contract because it's one take-or-pay, right? This is what we say in the contract. But what we did with PetroChina is that we will negotiate and sometimes we will transfer this part of natural gas to other province. Some of the provinces, they may have like lack of natural gas because it's all through pipeline, right? So we use the pipeline to transfer it to other provinces or other cities that needed the natural gas. And then if we still have unpaid one, we will negotiate with PetroChina. It won't be a big penalty. No worries. Yes.

Unknown Analyst: Okay. Okay. Okay. Good to know. And then the third question I have is on the pass-through. I know that you just gave us the guidance that the dollar margin is going to be stable. Just to get a sense on the ground, how fast -- if we have to, how fast we can pass through any volatilities to the resi and to the C&I customers?

Yin Shan Law: Okay. For the C&I customer, it's actually passed through directly. It's all written in the contract. For residential, we can do it like less than 1 month because we still need the regional government, the local government, NDRC to approve the price pass-through. So it usually takes around 1 month for residential.

Unknown Analyst: I see. You don't feel that because of the weak economy that the local governments are reluctant to increase the resi gas price. Did you feel that?

Yin Shan Law: Not for now because we don't have an increase yet. But we will discuss with the local government. Because in the past, when we go through the pass-through of residential, the local government, of course, they concern about the increased expense of the residential user. But as our company, we are the one who is paying tax for the local government. So if they make less money, they won't have any income at all. So this is one of the part that we will negotiate with the local government.

Unknown Analyst: Got it. Got it. And last question from my side is on Shengli. Just -- I don't know if it is appropriate for me to get Shengli's information from you or not, but I would just try. May I ask Shengli's volume performance and margin trend first half? Is this -- is it -- I mean based on number, it doesn't look as beautiful as ours, but just to get a sense what is behind those volume decline and the margin decline.

Yin Shan Law: Okay. Actually, Shengli, I don't have the exact numbers on hand right now. It's all on their announcement. I can get back to you for more exact. But as you mentioned about Shengli, we are still under the process to restructuring our company with Shengli. We have injected a few projects into Shengli. And hopefully, we can deal with that by the end of this year. It's still under question by the Stock Exchange of Shenzhen. So Shengli is still our associated company for now. And if we consolidate it, we think it's a very good synergy for China Oil and Gas and Shengli. We will have -- cover more areas and we can share our resources, yes. It will improve both of our sales volume and margin.

Unknown Analyst: Got it. Just I don't know to still ask, but feel free to say that's not available information. So Shengli's procurement price exposure, is it going to be the same like pattern as ours? Or it's going to have like a floating index-linked pricing on the procurement side?

Yin Shan Law: Okay. As I know, it is the same with China Oil and Gas.

Operator: And our next question comes from Gao Xiang with Bank of America Securities.

Xiang Gao: I have one follow-up on the new syndicated loans. Can you share the cost of the new synd loans? And what is the borrowing entity for the loan? Is it the holdco level? Or is it now becomes the onshore level? Also, if you can share more about the expected RMB facility in terms of the cost and borrowing entity, that would be helpful.

Yin Shan Law: Okay. The new syndicated loan finance expense will be SOFR plus 1.3%. The original existing syndicate loan is SOFR plus 1.75%. So we save around 0.45% on our interest. And lending entities is from onshore banks. Ping An Bank and Bank of East Asia is the lead manager. And for the PRC, you mentioned about what's the cost if we lend this loan for on PRC onshore. We haven't set up a platform to do syndicated loan for our onshore subsidiaries yet. So we are still lending on the holdco level with the main entity.

Xiang Gao: Sorry, just to confirm, the lending entity is onshore banks of Ping An and Bank of East Asia, but the borrowing entity is still the offshore holdco, right?

Yin Shan Law: Yes.

Xiang Gao: And this will also apply to the RMB syndicated loan as well?

Yin Shan Law: You mean for the future one that we are still under discussion?

Xiang Gao: Yes.

Yin Shan Law: We still haven't figured out like which bank we are going to use as our lead manager. Ping An is -- wants to get in, and we have our existing syndicated loan CITIC Bank, and we have Bank of East Asia. They are all sending me proposal already, but I haven't really sit down and discussed with them yet. So this is something that we will see in the next 2 or 3 months.

Operator: And the next question comes from William with Aon Analytics.

Unknown Analyst: So my question is also on Shengli. So can management share more about the vision going forward about how we are going to deal with the asset restructuring for Shengli and also China Oil and Gas because after -- if we successfully inject 4 companies into Shengli, are we going to do this more and more going forward? Or it's just like we are just doing this for the 4 companies and maybe we just stop here and see only we are going to do so -- do more if we see other companies that are suitable candidates for this asset injection. Yes.

Yin Shan Law: Okay. This -- I guess we will figure about are we going to inject more assets into Shengli after we have done the existing transaction successfully first. As our vision for the future, we think that the A-share company has a better platform for the -- platform on the Hong Kong Stock Exchange. As our -- you can see our stock price -- share price and our P/B is really, really low. And no equity investor really focus on our shares on 603 shares. So we have a point that we want to use the platform of Shengli. Since the P/E and everything is on the market side, the P/E is 23x and the trading is good, and we can use the Shengli platform to do some placement. And placement is one way to get a lower cost debt, right? This way, we can lower our debt on the whole -- for the whole group. This is what we want to do for now. So for the next step, we will wait for the transaction for now to complete first, and then we will figure our next step.

Unknown Analyst: Okay. And I also want to understand for syndicated loan, especially on offshore, do they have any covenants limiting asset injection into A-share company because once the assets that are injected into the A-share company, the cash flow from those companies are quite difficult -- more difficult to get out from those companies because as we know, A-share companies, when we try to get dividends or cash distribution from the company, then it's subject to quite strategic. So I just wonder if that will affect the holdco bank loans, the covenants.

Yin Shan Law: I'm not sure if I get your question correct. But if you mentioned about the cash from Mainland China back to the mother company, is one way we can do -- we can always pay dividend. And this is one way the cash flow can [indiscernible] back to Hong Kong. And for the bank, for the syndicate loan, we didn't see any confidence on asset injection. The covenants is actually around -- is the same with the existing synd loan that we have.

Operator: We do have a follow-up question from Don with Standard Chartered.

Don Yew: Jenny, just a follow-up to what you mentioned on the longer-term strategy for Shengli, right? I guess looking way ahead, like is there a chance that you guys could potentially try to raise -- I mean, if eventually down the road, you do inject more assets into Shengli, would you try to kind of issue like an offshore bond out of Shengli and then maybe replace that -- or replace the current bond that you're issuing out of China Oil and Gas with the bond that you're issuing out of Shengli, given that eventually will be like kind of the OpCo, right? So that's my first question. And then the second question is just more housekeeping. Can you just provide at a holdco level, what's the current cash balance and then the usual like the dividends received from CCNG and the Canadian subsidiary for this year?

Yin Shan Law: Okay. For the offshore bond by Shengli, yes, we can do that. That's why I said the first step is that we have to complete this transaction first. And then with Shengli platform on our A-share company, they can raise more debt with cheaper finance cost and/or they can do placement to issue shares to some core investor in later future. This is one thing that we will definitely look into. And for the cash on hand, Hong Kong, around 10%, CCNG around 74% and other than CCNG, our Mainland company will have around 17% of the cash position. And for the debt, Hong Kong has like 48% on a mother company level and CCNG around 20% debt, other than -- the other Mainland company will be 30% and our Canadian company will have 2%. And we received around HKD 500 million of dividend from CCNG by the end of June this year. And the Canadian company, they will remain their dividend around CAD 14.3 million by early November this year.

Don Yew: Okay. And just one follow-up, if I may. On the loans receivable from Sino Director, right? I think there's about -- I think at the end of December, you had about HKD 1.2 billion outstanding. What's the repayment plan for this year on that loan?

Yin Shan Law: Yes. They have repaid around HKD 36 million to the mother company during end of May 2026. They have paid already.

Don Yew: Okay. Any further repayment for the second half of the year?

Yin Shan Law: We are still under negotiation with them. Hopefully, they will free up some cash flow, but we will let you know later.

Operator: [Operator Instructions] Jenny, there's no further question at this point in time.

Yin Shan Law: As we have no further questions for now, I would like to bring our meeting to an end. If you have any follow-up questions, please feel free to contact us at info@hk603.com, or call us at 2200-2000 (sic) [ 2200-2222 ]. Thank you very much for joining us today, and our group appreciate your continued support. We wish you all a great day ahead. Thank you, and goodbye.

Operator: Thank you for your participation. This concludes the conference. Thank you.