China Oil & Gas Group Ltd

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. Thank you. Thank you.

Good morning, ladies and gentlemen. On behalf of China Oil & Gas Group, it is with pleasure for me to welcome you all to our 2026 Interim Resource Conference Call. Today, our Chief Financial Officer, Ms. Jenny Law, will present the group's 2026 Interim Resource Conference 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 Inventor Relations and then Roll Show Presentations. Or you can also access it through the link attached in our announcement email. 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.

Okay. Thank you, Ruby. Good morning, everyone. Let's start with the PBT. Let's look at the group's core financial highlights. In the first half of 2026, the group gross profit reached HK$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 HK$1,093. , representing a three-year, one-year increase. As of June 30, 2026, net assets amounted to HK$8,000 million, a 3% rise compared with HK$7,755 million at the end of 2025. The shareholders' equity base remained solid. Slide 4. In terms of turnover, revenue total HK$7,854 million in the first half. A slight 1% year-on-year decline. Profit before taxation was HK$705 million. Profit for the period was HK$501 million. Profit attributable to owners of the company was HK$196 million, down 22% year-on-year. Slide 5 This slide shows adjusted profit after stripping out one of items. Reported profit attributable to shareholders fell 22% year-on-year, largely dragged down by non-operating factors, including the fair value changes of financial liabilities and foreign exchange losses. After excluding this one of items, The group's underlying operating profit was HK$228.5 million, down 10%. These are just the figures that 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, standard 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 plus administrative expenses reached $304 million in the period, rising 31% year-on-year. The increase was mainly driven by higher R&D spending within the coal-utilized 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. Line 9 EBITDA amounted to HK$1,160 million, up 3% year-on-year. As debt scale expands, net interest expenses increase. 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 assets was HK$22,130 million. Net assets, HK$8,000 million. Total debt, HK$9,791 million. Cash & Cash Equivalent HK$5,046,000,HK$7,745,000, up 12% compared with year-end of CO2-5. In February CO2-6, the Group issued USD$300,007,000,000 of maturity in CO2-9. In first half of CO2-6, the Group fully resumed the $400,000,000 Bill 2026. Via market buyback, cash tender offers, and existing on-hand cash resources. On August 5, 2026, the group secured a new U.S. dollar $150 million syndicate loan, which was fully applied to repay the existing U.S. dollar $350 million syndicate loan, with a will to reduce future finance costs. The group's greater average cost of all indebtedness, including bank borrowing, other borrowings, and senior notes, stood at 4.5% for first half of GO26. First half of GO25 was 4.7%. On cash flow, that cash flow from operating activities totaled HK$470 million, down 6% year-on-year. Capital expenditure was HK$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 per transmission volume reached 3,763 million cubic meters. in first half of 2026, representing 6% decrease compared to year-on-year. Affected by macroeconomics 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 volume but higher profit. July 15. This shows the volume breakdown. Total gas sales volume down 9% year-on-year. Residential user down 12% year-on-year. D&I down 8% year-on-year. Gas station. down 5% year-on-year. Transmission volume down 3% year-on-year. On slide 14, CNI customer accounted for 67% of gas cell volume and remained the core foundation of the group's revenue and profit. Going forward, the group will continue to prioritize the development of CNI customers in market expansion. Slide 15, by region analysis, Qinghai remains our largest volume province. Shandong, Jiangsu, and Jiangxi post-nocturnal gas sales growth, demonstrating solid progress in our key region expansion. Servio Island Province records 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 branded average selling price, RMB 2.66 per cubic meter. Branded purchase and sales margin, RMB 0.55 per cubic meter. A massive improvement from RMB 0.45 per cubic meter in first half of 2025. Average transmission price remains flat at RMB 0.062 per cubic meter. July 17, the end user base expands steadily as at June 30 of 2026, the group had accumulated 221,560 residential users and 21,089 CNI users. During first half 2026, we add 25,014 new residential households and 394 new CNI customers. Slide 18. Our key business development priorities. Beyond traditional gas sales, the group is actively nurturing second growth curves. First, further deepen value-added service businesses. Push channel penetration for priority brands. Roll out the five unified customer system management systems. and enlarge the project pipeline for gas and integrated energy initiatives. Second, reinforce safe operations in integrated 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, manipulative cities, and autonomous regions in China, with more than 27,235 kilometers of natural gas pipeline invested and built. Let's go to part three, oil and gas production business. Slide 21. Canadian oil and gas optimization. Average production in South Africa 26, 5,209 BOE per day, down 4% year-on-year. Crude oil output, 1,905 barrel per day, down 17% year-on-year. NGL output, plus 4% year-to-year. Natural gas output, plus 5% year-on-year. International crude oil prices rose sharply. WTI averaged U.S. dollar 82.67 barrel in first half of Q26, up 23% year-on-year. The Groups realized crude oil selling price reached Canadian dollar 107.79 barrel per year, per barrel, plus 25% year-on-year. However, rising operating costs and loyalty fees pulled the operating net back down to CAD$30.31 per BOE, down 6% year-on-year. Resource position at the end of 2025. Proofed resource $36.02 million MM-BOE. Proofed plus probable resource $57 MM-BOE. Both reserve categories increased by 13% year-on-year, further solidifying our resource base. Slide 22. The group adopts a prudent development program. We complete six net wells in the first half with a 100% drilling success rate. Unit operating costs were controlled at $10 million, 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 CO2-6, 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 delivers 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, thrive with four growth engines, empower through digital intelligence, different customer-centric operations, We will strengthen and optimize our City Gas core business, foster full-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 CO26 results. This presentation is for reference only and does not constitute investment advice. Please refer to the published interim announcement for food stickers. We will now open the floor for questions. Thank you. Thank you, operator.