AIO Finance Analysis

China Oilfield Technology

We visited China Oilfield Technology (COT) recently to have a look at its operations. Crude oil prices have receded, but are at prices where enhanced oil recovery (EOR) techniques remain feasible. Specifically, EOR will have a starring role as the Chinese economy struggles for energy independence and addresses the mismatch between strong demand and peaking domestic supply. As a proven and major EOR player in a key domestic oil region, the potential for COT's business remains intact.

Current Price: S$0.49
Fair Value: S$1.01

M1

M1 posts 4.8% fall in Q4 net profit to $37.9m. MOBILEONE yesterday reported a 4.8 per cent fall in net profit to $37.9 million for the fourth quarter of 2007 as it spent more on keeping its customers and on higher staff costs. The smallest of three telcos here said that full 2007 net profit was up 4.4 per cent to $171.8 million. The fourth-quarter net profit missed the $41.3 million median estimate of six analysts surveyed by Bloomberg. Q4 revenues rose 2.9 per cent to $206.9 million. M1 announced a final dividend of 8.3 cents, bringing the total payout (including a capital distribution) to 15.4 cents for the year, representing an 8 per cent yield based on the $1.92 closing price yesterday. Chief executive Neil Montefiore said that it had been a tough quarter, and 2008 would be even more challenging. Although its customer base rose 14.8 per cent to 1.54 million, market share fell to 27.4 per cent at the end of November from 28.3 per cent in August and 28.5 per cent in November 2006.

Current Price:S$1.92
Fair Value: S$2.33

China Oilfield bid to enter Russia fails

Russia has rejected a bid by China Oilfield Services Ltd to buy a unit of TNK-BP, smothering what would have been the Chinese firm's first acquisition abroad at the final hurdle and sending its shares 12 percent lower.

State-owned China Oilfield, the drilling and equipment arm of top Chinese offshore oil producer CNOOC Group, had agreed to buy oil services firm STU from TNK-BP for more than $10 million, making its maiden foray into the world's No. 2 oil exporting country.

China Oilfield had expected the Russian deal to be finalised last April. It had already won Beijing's blessing and obtained approval from both companies.

China Oilfield now views Russia, the Middle East and the Gulf of Mexico as strategic markets it needs to explore. It already maintains a presence in Southeast Asia.

But if it eventually wins entry into Russia, it will still lag Western oilfield services giants such as Schlumberger Ltd and Halliburton Co , which have bought into local independents and now control about a third of the Russian service sector. Russian oil majors and independents each hold a third.

China Oilfield Chief Executive Yuan Guangyu told Reuters last August that the company was in advanced talks to buy another foreign firm, in a deal that would dwarf the STU transaction.

I don't think they have the scale to buy any listed company. If they do look it's probably going to be private smaller companies

The firm has operations in more than 10 countries and derived 18 percent of its revenue from abroad in the first half of 2007. It aims to raise that share to 30 percent by 2008.