Good morning, good afternoon, good evening, ladies and gentlemen. Welcome to the conference call. Sophia, please begin your call, and I'll be standing by. Thank you.
Okay.
Please go ahead, ma'am.
Ladies and gentlemen, this is Sophia Xu, Investment Department Manager. On behalf of China Oil And Gas Group, it is with pleasure for me to welcome you all to our 2021 interim result conference call today. I will present the group's 2021 interim results, and our CFO, Ms. Jenny Law, will answer any question you may have after the presentation. Our presentation material for today has been uploaded to our website at www.hk603.com under investment relations and then roadshow presentations, o r you can also access through the link attached in our announcement email from yesterday. 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 20 minutes, and we will have Q&A session at the end.
First, let's start with the financial performance. On page three, it summarized the major highlights of the group for the first half of 2021. As several COVID-19 vaccines became available and popularized, the economies of various countries recovered. All aspects of our group has also returned to the right track with the resumption of work and production in mainland China. In the first half of 2021, the total turnover was HKD 6.952 billion, a year-on-year increase of 49.4%. The main reason was the increase in group's natural gas sales volume and upstream oil prices. Natural gas sales rose 20% year-on-year to 2.425 billion cubic meters, compared with 2.019 billion cubic meters in the same period last year. Gross profit rose 58.1%. Profit for the period was HKD 667 million, a year-on-year increase of 56.6%.
Profit attributable to company owners was HKD 310 million, a year-on-year increase of 63.2%. Earnings per share increased 56.6% to HKD 0.06025. On page five, after deducting one-off items, the profit attributable to company owners increased by 77.1%. Page six and seven, the group's principal activities are divided into four segments, namely sales and distribution of natural gas and other related products, gas pipeline construction and connection, exploitation and production of crude oil and natural gas, and the newly added production and sales of coal gasification and other related products. Revenue was HKD 5.995 billion, HKD 431 million, HKD 223 million, and HKD 303 million respectively, representing an increase of 43.1%, 28.7%, and 66% respectively. The gross profit margin of the segment sales and distribution of natural gas and other related products was the same as last year.
In order to enhance the market competitiveness of the gas pipeline construction and connection business, the gross profit margin of this segment was reduced to 31%. Due to the slower recovery of global crude oil supply versus demand, crude oil prices have risen, and the gross profit margin of the exploitation and production of crude oil and natural gas has increased from 7% in the same period last year to 50% this year. Page eight. Group's EBITDA increased 46% to HKD 1.247 billion. On page nine. The total asset of the group are HKD 22.856 billion, an increase of 19% from the HKD 19.27 billion at the end of 2020. The net assets are HKD 8.092 billion, an increase of 10% from the end of 2020.
On June 23rd, 2021, the group successfully issued an additional $400 million, five-year senior note with a coupon of 4.7% to redeem the $350 million senior note due in 2023. The group completed the early redemption on August 2nd, 2021. As of June 30th, 2021, the group's total debt, including bank borrowings, other borrowings, and senior notes, was HKD 10.643 billion. As of December 31st, 2020, it was HKD 7.749 billion. Cash and cash equivalent and the time deposit were HKD 6.497 billion, compared with HKD 3.763 billion at the end of last year. The increase in total debt and cash is mainly due to the $400 million senior bond that was booked before June 30th, but the $350 million bond has not yet been redeemed at that point.
The group's net debt-to-assets ratio, which was calculated by total debt minus cash and time deposits divided by total assets, is 19.1% versus 20.7% last year. Finance cost, net of capitalization, was similar to the same period last year at HKD 123 million. The weighted average cost of all debt of the group was 4.44%, compared with 5.26% in the same period last year. The main reason was that China Petroleum Finance Corporation gave the group an interest discount. For the six months ended June 30th, 2021, the group's net cash generated from operating activities was HKD 640 million, a 17% year-on-year increase compared with HKD 548 million in the same period last year. Now let's get into operating performance of the group. On page 11 and 12.
The group's total gas sales in the first half of the year increased by 20% year-on-year, and residential gas consumption was the same as the previous year. Gas consumption by industrial and commercial users increased by 28.6%. Gas sales at gas stations increased by 26.9%. Page 13. The proportion of gas sales by various users is relatively stable. Industrial and commercial users account for 66% of the gas sales. Residential users account for 26%, and the gas station sales is 8%. Page 14. The group's gas sales volume in Shanxi and Jiangsu recorded significant growth, resulting in a decrease in the proportion of other provinces. Page 15. The blended dollar margin is CNY 0.45 per cubic meter, an increase of CNY 0.01 from 2020. Page 16.
In the first half of 2021, the group connected more than 84,000 new residential users, an increase of 29% year-on-year, and the cumulative connection of residential users was approximately 1.7 million. 528 new residential and commercial users were connected. The cumulative number of industrial and commercial users connected reached 14,847. Page 17. During the period, the group managed to land one concession right project, namely, the Jixian Industrial Cluster Gas concession rights project in Linfen, Shanxi Province. The group also added one new branch pipeline project in Guizhou Province. In July 2021, the group successfully launched the merger and acquisition of Shandong Shengli. Shandong Shengli Co, Ltd, namely Shengli, is a company listed by the shares established in the PRC, and its issued shares are listed and traded on the main board of the Shenzhen Stock Exchange in accordance with the regulations. Stock code 000407.SZ.
Shengli has extensive business resources in the natural gas field. The group extends an intent to cooperate in depth with Shengli to promote the sustainable and high-quality development of the group, and is in the interest of the company and its shareholders as a whole. In August 2020, the group announced its intent to acquire a total of 17.19% shares of Shengli. Page 18. Up to now, the group has 73 city gas concession rights in 16 provinces in China and has 64 LNG and CNG stations. Let's go to page 20 and talk about upstream business. In the first half of 2021, the upstream oil and gas production business achieved an average output of 4,966 barrels of oil equivalent per day.
The group achieved an average crude oil price of CAD 72.28 per barrel of oil equivalent, an increase of 75.1% from last year's CAD 41.27 per barrel of oil equivalent.
Operating netback increased by 144.9% to CAD 29.54 per barrel equivalent. Thanks, everyone. That is all for my presentation. Now, please allow me to introduce our CFO of our company, Ms. Jenny Law. Please feel free to raise any questions.
Thank you. We will now poll for questions. If you would like to register for a question, please press star one on your telephone. Our first question comes from Wai Mei Chan from Bank of Singapore. Thank you.
Hi. Good morning. Two questions. The first one, you mentioned you get interest discount from China Petroleum. Can you elaborate on this, please? The second question about Shandong Shengli, can you provide also more details and the rationale, and also what kind of synergies do you expect? Thank you.
Hi. The first question, the discount we get is the interest rate is 3.8%. For your second question, Shengli is doing the same business as China Oil And Gas Group. They have 15 concession rights. We can expand our operating area in China, so increase our market shares.
The 3.8%, is it like a loan provided by China Petroleum?
Yes, it's our subsidiaries.
What's the amount of the loan, please?
I think we draw down around CNY 200 million right now.
For Shengli, where are these concession rights?
The concession right, five of them is in Shandong, five of them is in Hebei and Henan. We still have some in Guizhou.
Okay. Thanks.
Thank you.
Thank you. Ladies and gentlemen, should you have any questions, please press star one on your telephone. Thank you. Ladies and gentlemen, that is star one to register for a question. Thank you. Our next question comes from Jocelyn Chiang from Amundi. Thank you.
Hi, Jenny. Thank you for the call. Just a couple of questions here. I think on slide nine, there is an increase in gross debt. I also notice an increase in cash and cash equivalents, in that the net borrowings is only 4% increase only. I am not sure if I missed this, but could you clarify on this increase in cash and the gross debt?
Hi. The cash and cash equivalent increase is because we have the new U.S. dollar bond. We successfully got the U.S. dollar bond on June 23rd. By the end of June 30th, this cash is already deposited into our account. On July 2nd, we actually redeemed our U.S. dollar bond around $350 million. So if you deduct the cash and extra debt we had on our balance sheet, it will balance out. The increase is just a slight increase from the last period.
Okay. All right. Okay. I probably said yes, thank you. On the CapEx, can I understand in terms of the Shengli acquisition, how much are you expecting to pay for this?
The total consideration will be around CNY 784 million.
RMB. Okay. This is for the 17% stake, if I'm not mistaken, 17% stake, right?
Yes, 17.19%.
Okay. In that case, can I understand in terms of your CapEx guidance for this year? Because I think the previous guidance was HKD 1.3 billion, which included some guidance for M&A, but this one is already HKD 784 million. Is there any revised guidance in terms of CapEx?
Yes, the HKD 1.3 billion CapEx before does not include this Shengli acquisition.
Okay. Excluding Shengli, the HKD 1.3 billion will still stand, is it?
Yes.
Okay. For the CapEx that was planned in first half 2021, HKD 700 million. What is the breakdown between gas distribution business and O&G business?
Yes, for the oil and gas business, it is around HKD 100 million. The remaining is from our China operation.
Okay. I guess the HKD 1.3 billion breakdown for HKD 1.1 billion PIC and HKD 100 million for O&G will still be the same for the full year?
Yes.
Okay. Thank you. The next question is on the gas sales volume. You are doing a very good year-on-year growth for the first half. Is there any revised guidance for the full-year gas sales volume for this year?
Yes, the full year growth should be around 15% of sales of natural gas.
Can I understand Shengli acquisitions, would that add into your gas sales volume growth in your information later? Because this is not a subsidiary. How do you report your gas sales volume?
We will just do it separately. We can report, especially for Shengli, how much natural gas it has been sell.
Right. So the 15% sales would really be on the subsidiary only, right?
Yes, not including Shengli.
Okay. Thank you. What is the dollar margin? You are doing, I think, a higher dollar margin this first half. What about the full year? What would be the guidance?
The full year will be around the same.
Same as first half, is it?
Yes.
Right. Thank you. Okay. Can I check on the cash balances that you have? If I were to exclude all that, what would be the current cash balances now, and then how much is residing in the Listco and CCNG?
Around 25% is on the Listco level, and the remaining is in China. For CCNG, it constitutes around 63%-6 4%.
63%- 64% of the total cash consolidated?
Yes, after you deduct the cash that we redeemed U.S. dollar bond.
How much would that be? Sorry, the net after redeeming the U.S. dollar bond? over HKD 3 billion?
Yes. You just take off HKD 3 billion.
Okay, cool. Thank you. What is the expected dividend from CCNG for FY 2021?
Still the same, 50% of their profit. Should be around CNY 100 million -CNY 120 million.
Thank you. My last question would be on the dividend policy. There isn't any dividend declared, if I'm not mistaken, for last year. What is the expectation for this year?
You mean for the Listco?
Yeah, Listco.
I don't know. It depends on the Board of Directors. They may have the meeting by the end of this year and decide are they going to pay a dividend or not.
What is the usual dividend policy? Otherwise, is there a dividend policy? Can you remind me?
We didn't pay out any dividend for the past two years.
Okay. All right. Thank you, Jenny.
Thank you.
Thank you. Our next question comes from [Hai Ling Du] from Principal Global .
Hi, Jenny. Good morning. Thanks for the presentation. I just wanted to follow up on, firstly, that China Petroleum loan. Is that more of a working capital for operations type of loan?
Yes, working capital.
Okay. And total, you mentioned CNY 200 million is drawn. What is the total size?
I have to check, but possibly CNY 500 million.
Okay. That's over one year, right? Working capital?
Yes.
Okay. Revolving type of?
Correct.
Okay. On the Shengli, you hold a 17% stake. Who are the other partners in that entity?
Partners? I didn't get your questions. We acquired—
I said who are the other—
Yes, we acquired 17.19% from the previous shareholders.
Okay. Do they still hold the rest of the stake?
No. One of them actually gave us 3% of the voting rights. One of the shareholders still owns 3% of Shengli, but they signed an agreement to us that for the next three years, we have the voting rights for that. We actually can vote for 20.19%.
Okay. Who holds the voting rights for the remaining 80%?
You can check our announcement dated August 10.
Okay.
Yeah.
Okay. Sure.
Get the details over there.
Sure. The last question is, I think last time you mentioned for the 2023 bond, you are looking at either the bond market or the loan market, to refi or perhaps early redemption. How has that progressed now? Are you still looking to tap the market or are you thinking more of a loan to take that out?
Yes. We have already launched the syndicated loan during early August. All the banks are doing their due diligence, and they are going through their credits.
Okay. The syndicated loan, any rough idea, like in terms of tenure and interest rate?
The interest rate will be approximately 3% for three years.
I see. Okay. All right. Thank you.
Okay. Thank you.
Thank you. Our next question comes from Wai Mei Chan from Bank of Singapore. Thank you.
Hi, Jenny. Follow-up question.
Hi. Yes.
For Shengli, what's the dollar margin? What contribution do you expect from Shengli and Baiwen?
Shengli dollar margin is a bit low, I think. We haven't combined everything together yet because we haven't completed the process of the acquisition. We still have to wait for the answer from Hong Kong Stock Exchange, and we need to have a shareholders' meeting to approve for this acquisition.
Yeah. The second part of the question is, with 17%, what contribution from the JV and associate do you expect?
Yes. We actually complete 5.42% of this 17.19% already. We have 5% from the Shengli company, and they sell 1 billion cubic meters of natural gas last year. You can approximately count that they will contribute around 5% of that to us.
It's not consolidated, right? You only get the—
Yes. It is just an associate company.
Sure. Okay. Thanks.
Thank you. Ladies and gentlemen, if you have any question, please press star one. Thank you. We have our following question come from Jocelyn.
Hi, Jenny. Sorry, one more question that I missed out. On the connection fees, for first half 2021, what was the level for the first half, and what is the expectation that you will be doing for full year as well as the connection? Is it like 130,000? Yeah.
The connection we connect during the first half of 2021 is around 800,000, right?
Okay.
Oh, sorry, 80,000. For the full year, we expect around 150,000-160,000 connection for residential.
Right. What is the connection fee per household in—
Around CNY 2,000-CNY 3,800 .
Is this going to be the same for the full year?
Yeah, around the same.
Okay. All right. Thank you.
Thank you.
Thank you. Our next question comes from [Jane Pang] from HSBC.
Hi, Jenny. I have a follow-up question for the syndicated loan. What kind of size are you looking at for this loan?
We are looking for $250 million or above. It depends on the subscription. Yeah.
Oh, okay. I heard the main user proceeds is likely to tender the call the 2023. But the 2023, I see size around $350 million. How are you going to make the difference between this $250 million and $350 million?
From the information that I get from the banks, we already have oversubscribed up to now. We also have cash on hand.
Oh, okay.
We don't need to worry about that. Thank you.
Oh, okay. Also, for the connection fee, can I have some guidance on your growth rate for the revenue for this segment?
The revenue for the segment actually grew 28% for the first half compared to the first half of 2020.
I mean the whole full-year guidance.
The full-year guidance will be around 25% growth.
Oh, okay. That's for the total revenue or the full—
Total revenue of construction.
Oh, okay. Cool. I also want to check, you have financial assets at fair value through other comprehensive and also investment accounted for using the equity method. What are these investments?
Most of them are U.S. dollar bonds that we receive like regular coupons. Just for cash—
Okay.
—management. Yeah.
Which one is U.S. dollar bond? The fair value one or equity method one?
The fair value equity one. Yeah.
Because there are two different segments. Are these all investment in U.S. dollar bonds?
No, some of them are Hong Kong stocks. Yeah.
Oh, okay. I will say the equity method is the Hong Kong stock, and then the fair value one is more likely the bond investment?
Right.
Okay. How do you manage the risk, or what kind of company do you invest?
We actually diversify our portfolio, and for the stock that we actually hold those stock for over 10 years, 20 years already. So it's on our balance sheet for the back 10 years. For the bonds, we usually have investment grade.
Okay. Is it all investment grade or some are not?
Most of them.
Most of them. Okay. What kind of sector are these bonds at?
We got all sectors. We got real estate, we got energy, we got banks. Yeah.
Okay. How about the stocks? You mentioned the holding one. Are these stocks by the company you collaborate with, or what kind of sector they are from?
No, those are stocks that bought back 10 years, 12 years ago.
Oh, okay. But you don't plan to dispose them?
I plan to dispose them, but some of them need to agree by the Board, that we can sell it out or not. Yeah.
Oh, so it is a kind of meaningful relationship?
No. Some of them is we find that the sector is good, but it is still under development.
Oh, okay. Okay, cool. Thank you. That is it from me.
Thank you.
Thank you. Our next question come from [Chelsea Chung] from Guotai Junan. Thank you.
Hi, Jenny. A quick question on our receivables from the associate companies. May I know how Sino Director net profit this year? As far as I know, it should start to repay the loan from us from this year. May I know, would there be any write-off risk?
As I know, we do not have any write-offs this year, and they will pay back that interest by the end of this year. For the first half, we have not received anything yet.
For the total of around HKD 1 billion, how is the repayment schedule?
You do not have to worry about that. We have valuation report every year, and PwC will write a detailed report on this issue for the past five years already. We do not expect any impairment on that. The Sino Director is starting to repay the loan and interest, starting last year.
Thank you.
Thank you. Once again, ladies and gentlemen, that is all. One to register for questions. Thank you. Ladies and gentlemen, that is all. One to register for questions. Thank you. Sophia Xu, there seems to be no further question at this point in time.
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. Thank you very much for joining us today, and our group appreciate your continued support. Wish you all a great day ahead, and thank you all. Goodbye.
Thank you for your participation. This conclude our conference. Thank you.