Oilfield Services Sector U740 Refer to Important Disclosures at the End of This Report U740

Regional Energy Regional Energy: Oilfield Services Sector U740 Refer to important disclosures at the end of this report U740

DBS Group Research . Equity 15 Apr 2020

Down and out for now • Depressed crude oil prices in 2020 and forced capital discipline means that the global oilfield Analyst service (OFS) sector will shrink materially in 2020/2021 Jason SUM +65 66823711 [email protected] • Global upstream capital expenditure is estimated to fall by at least 20% in 2020, and by another 5% in 2021 Pei Hwa HO +65 6682 3714 • ChineseU740 OFS companies may fare better, as capital spending by Chinese national oil companies [email protected] is expected to decline by a more moderate 12-14% in 2020, and stage a modest 3-4% rebound in 2021 Suvro SARKAR +65 81893144 • Nevertheless, we have a bearish stance on the Chinese OFS sector – we believe the street’s U740 [email protected] earnings estimates are still too optimistic; and valuation multiples are not low enough to reflect muted earnings prospects and potential financial distress in the sector

ed: TH/ sa:AS, PY, CS

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OILFIELD SERVICES SECTOR WILL REMAIN UNDER CONSIDERABLE PRESSURE IN 2020-2021

1. Subdued crude oil prices and sustained capital restraint by upstream players do not augur well for theU740 oilfield services sector in 2020/21

• Prospective earnings for upstream operators in 2020 have largely evaporated, devastated by a double whammy of significantly lower realised prices (DBS forecast average Brent crude oil price 2020F: US$40/bbl vs 2019A: US$64/bbl) and a decline in production forced by shut-ins at less cost- efficient oilfields.

• A few upstream operators have already announced their intention to file for bankruptcy in the last month as they have no means of servicing their U740 U740 U740 debts.

• This will undeniably have a profound bearing on the oilfield services sector in the short term, as upstream companies will not only be forced to reduce base/core activity levels, but also cut operating costs to the bone and slash capital investments to tide through the period.

• 2021 should bring some relief to the upstream sector, as crude oil prices will be supported by demand recovery following the normalisation of

COVID-19 situation, alongU740 with supply cuts from the OPEC+ alliance, but this is unlikely to filter through meaningfully into the oilfield services (OFS) space as upstream players will remain committed to shoring up free cash flows after the price and volume shock in 2020.

2. Global upstream capital spending will contract by 20-25% and 5-10% in 2020 and 2021 respectively

• If we look at the past, global exploration and production (E&P) spending plummeted by 19% from 2008-2009 and 43% from 2014-2016 respectively.

• Recent revisions to capital budgets by upstream companies globally indicate that 2020 capex cut scenario should be slightly worse than 2009 with a 20-25% fall in E&P spending, while we expect a more modest sequential 5-10% drop in 2021 as existing contracts conclude.

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3. Shale and other onshore capex to be worst hit, offshore to experience more pain in 2021

• Asset class wise, we expect short-cycle shale/tight oil to be the most responsive with an acute decline of capex of around 40% in 2020. U740 • Offshore projects will take more time to react, and capex is projected to fall by 5-10% in 2020, followed by a steeper 15-20% decline in 2021.

• All OFS sub-segments, barring the subsea umbilicals, risers and flowlines (SURF), and subsea equipment markets will contract in 2020, according to Rystad Energy.

U740 U740 U740 4. Anticipate 10-15% price deflation for oilfield services in 2019-2021 timeframe

• Upstream operating costs declined 30-40% on average from 2014-2017 to adapt to a lower oil price environment, of which a third was achieved via improvement in operational efficiencies and high-grading of assets, while the remainder was driven by pricing reduction for oilfield services.

• The chief difference between the current situation and 2014-2017 scenario is that there is limited room to further enhance operational efficiency,

which suggests that the U740vast majority of cost compression over the next two years will be led by service price deflation. Naturally, this will lead to margin erosion and has a pronounced impact on the bottom line of OFS companies.

• COVID-19 will inevitably catalyse consolidation in the OFS sector, given that OFS companies are considerably worse positioned financially for the current predicament compared to previous crises, having not fully recovered from the 2014/2015 oil price crash yet. However, we think a removal of excess supply will be insufficient to move the needle on pricing.

5. China OFS sector slightly less affected but valuations not cheap at only 1 standard deviation (SD) below its 5-year average

• Though China’s quest for energy security and the national service obligations (to maintain employment) of its national oil companies (NOCs) will partially shield Chinese oilfield service providers from the global onslaught (we anticipate a less drastic 12-14% E&P capital spending cut by the Chinese NOCs), we believe that consensus earnings estimates for Chinese OFS players are too optimistic. U740

• The street is still projecting earnings expansion for some OFS players, and only a modest decline for the rest, even though the sector registered a marked decline in revenue and EBITDA for two consecutive years after oil prices crashed in 2014.

• Valuation wise, the sector is trading at -1SD below its 5-year average on a P/BV basis, which is too rich, in our view, given the sector’s lacklustre earnings outlook, high financial leverage, and elevated liquidity risk (for some companies).

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U740 Global upstream capital spending will contract in 2020… and likely in 2021 as well

E&P spending tends to move in tandem with crude oil prices Majors’ upstream capital spending to fall by 20% in 2020

US$bn US$/bbl US$bn 2014 2015 2016 2017 2018 2019 2020E 800 120.0 40.0 Figures represent 700 100.0 35.0 2020E y-o-y change 600 30.0 80.0 500 25.0 -25% 400 60.0 U740 20.0 -21% 300 -18% 40.0 15.0 U740 -15% 200 -15% -23% 10.0 -26% 100 20.0 -3% 5.0 0 0.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 U740 Average Brent crude oil price (RHS) Global upstream capital spending (LHS) U740

Asian NOCs upstream capital spending should be more resilient Capital budgets of shale-focused operators point to a 40% decline in 2020 US$bn US$bn 2014 2015 2016 2017 2018 2019 2020E FiguresU740represent y-o-y change 40.0 16.0 35.0 -13% 14.0 Figures represent 30.0 12.0 2020E y-o-y change 10.0 -38% 25.0 -37% 8.0 -22% 20.0 6.0 15.0 -12% 4.0 -14% 2.0 10.0 -15% +2% -25% 0.0 5.0 +82% 2014 2015 2016 2017 2018 2019 2020E 0.0 Laredo Diamondback Parsley Cimarex Concho Callon Petroleum Earthstone Energy Pioneer Matador Ring Energy Abraxas

Source: IHS Markit, Wood Mackenzie, Companies, DBS Bank

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U740 Few segments of the oilfield services value chain will emerge • Rystad Energy expects shale/tight oil activity to unscathed experience the starkest decline in 2020; correction in offshore activity will lag the other Rystad Energy global upstream capital spending projection resource classes. 2020 vs. 2019 y-o-y US$bn Deepwater Shallow water Deepwater: -5% 900 Shelf: -10% Shale/tight oil • Maintenance capital expenditure (capex) tends to 800 Shale/tight oil: -35% Oil sands U740 be the most stable - E&P companies typically do 700 Other onshore: -15% Other onshore 600 U740 not cut production and maintenance capex for 500 existing fields during a downcycle, as it would 400 immediately impact current production and 300 operating cash flows. However, even 200 U740 maintenance capex will be affected this time 100 - round as the current level of oil prices could lead 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 U740 to 1) shut-ins at marginal fields, as realised prices do not cover the short-run marginal costs, and 2020 y-o-y change in oilfield services purchases (offshore + onshore) even 2) insolvency among upstream operators. U740 Pressure pumping and proppant Engineering Land drillers • Exploratory based capex is the most susceptible Seismic and G&G to cuts, followed by development capex – OCTG Drilling tools and services boosting oil reserves and production will be the Offshore drillers Completion and intervention last items on upstream operators’ agenda amid Construction and installation Offshore vessels the current oil price environment. Hence, we are Operational support Maintenance likely to see relatively larger declines for Subsea services exploratory-related services like seismic and Offshore facility leasing Subsea equipment exploratory drilling services, and development SURF related services like pressure pumping, and well -30.0% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% completion and stimulation services. Source: Rystad Energy, DBS Bank

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U740 Pricing concessions and steep discounts on new contracts to take place again in 2020-2021

Service price compression estimates – between 2014-2017 and 2019-2020 • Upstream players will negotiate aggressively for pricing 2014 to 2017 2019-2020 concessions on existing service contracts, and steep discounts Other Weighted Other Weighted on new contracts, as it becomes more difficult to realise Offshore Shale onshore average Offshore Shale onshore average 0% additional efficiency gains in the short term, given the strong U740 technical and operational progress made by upstream -10% U740 operators during the previous downcycle. With bargaining -20% Service price deflation power firmly in the hands of upstream operators, given

-30% Efficiency gains current supply-demand dynamics, OFS companies will have -40% no choice but to accept depressed rates. We have already U740 seen some upstream companies i) electing to pay termination -50% fees to get out of existing contracts, ii) shortening existing

programU740mes/reducing the scope of existing projects and

Service price index (base year = 2014) letting extension options expire.

110 U740 Maintenance and Operations Well Services and Commodities • Service pricing looks set to revert to 2016 level; 2021 will 100 Drilling Contractors Subsea offer little respite. Whatever progress that the OFS sector has made with regards to pricing power over the past few years 90 EPCI Seismic will come to naught. Pricing compression, coupled with a 80 rapid drop in activity levels, will lead to significant earnings

70 contraction for OFS players in 2020. The bottom line of asset-heavy companies such as drillers and frackers will 60 decline the most, due to the high operating leverage. We 50 expect minimal pricing recovery in 2021 as well, as upstream 2014 2015 2016 2017 2018 2019 2020 operators will remain cautious on spending and instead focus on streamlining their operations to maximise returns. Source: Rystad Energy, DBS Bank

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China’s OFS Sector will be adversely impacted by lower E&P capex by the Chinese NOCs

Historical and projected upstream capital spending by China NOCs • China National Offshore Oil Corp, the parent of listed

CNOOC Ltd, recently announced its intention to trim RMB Bn 500 U740 PetroChina Sinopec CNOOC Ltd annual capital investments by 10-15% in 2020.

400 • China National Petroleum Corporation, the parent of 300 listed PetroChina Ltd, also shared that it will curtail oil U740 production at less economical oilfields, and instead 200 focus its attention on boosting natural gas production. 100 U740

0 • Both PetroChina and Sinopec are currently reviewing 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E their capital budgets, but we expect them to follow CNOOC’s footsteps with capex cuts of similar Trends in financial performance of Chinese OFS sector against China NOC E&P capex U740 magnitude.

y-o-y change China NOC capex • However, we expect Chinese NOCs to increase their 50% Sector revenue 40% Sector EBITDA capital investments by a modest 3-4% in 2021, largely Average Brent crude oil price 30% on the back of a rebound in crude oil prices and a 20% renewed push to bolster domestic oil and gas 10% production to safeguard energy security. 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -10% • At this juncture, we believe that asset-heavy Chinese -20% OFS companies with elevated financial leverage, higher -30% exposure to exploratory and development capex, lower -40% exposure to the domestic market, and near-term -50% U740 liquidity issues are best avoided. -60% U740 Source: Bloomberg Finance L.P., Companies, DBS Bank

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Stock Recommendations – Chinese Oilfield Service Providers

We are pessimistic on the Chinese OFS sector for now – we believe consensus earnings estimatesU740 are still too high, and valuation multiples are not low enough to reflect muted earnings prospects and potential financial distress in the sector.

Company Rec / (BB ticker) 12-mth TP Comments Company Guide • Share performance most correlated to crude oil prices (long-term correlation = 0.9); crude COSL HOLD oil prices are likely to be volatile in the short run until crude oil demand starts to (2883 HK) HK$6.00 (-3%) normalise. • Earnings growth may prove to be elusive until FY2022F; strong contract backlog will cushion the hit to earnings in FY2020F, but FY2021F performance will be even harder hit. • Trading at 0.7x P/BV (FY2020F) against 5% Return on Equity (FY2020F) and 3% dividend yield.

Anton HOLD • Anticipate 18% decline in FY2020F EBITDA, FY2021F earnings may be adversely (3337 HK) HK$0.50 (-9%) impacted by the latest OPEC+ deal, with Iraq (40% of revenue) committing to protracted production cuts until April 2022. • Liquidity is still adequate – Anton has enough cash on hand to pay off US$200m worth of bonds due at end-2020, and has no other material debt maturities until 2022. • Expected to be free cash flow positive despite weaker operating performance. • Trading at 0.5x P/BV (FY2020F) against 5% Return on Equity (FY2020F).

Hilong FULLY VALUED • Expect FY2020F EBITDA to fall by 12%, recovery in FY2021F will be hampered by Russia (1623 HK) HK$0.30 (-26%) and the Middle East’s (36% of revenue) long-term commitment to production cuts until April 2022. • Lack of liquidity is disconcerting – Sources of cash will likely be insufficient to fulfil cash usage needs over the next 12 months. • Trading at 0.2x P/BV (FY2020F); 3% Return on Equity (FY2020F). U740

Source: DBS Bank

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Sector valuation has not bottomed yet; liquidity concerns for some OFS players could surface

Ticker 1033 HK 600583 CH 2883 HK 002353 CH 196 HK 3337 HK 1623 HK 1251 HK 000852 CH Sinopec Oilfield Sinopec Oilfield Company COOEC COSL Yantai Jereh Honghua Anton Hilong SPT Energy Services Equipment

DBS Rating NR NR HOLD U740 NR NR HOLD Fully Valued NR NR 5-year average 2.0 1.2 0.9 2.3 0.6 0.9 0.5 0.9 3.3 Standard deviation (sd) 0.7 0.2 0.2 0.5 0.2 0.2 0.2 0.2 0.9 U740 Historical low multiple 0.2 0.9 0.4 1.5 0.2 0.4 0.1 0.4 2.2 Current multiple +/- sd from 5-year -0.6 -1.4 -0.6 0.3 0.2 -1.7 -1.7 -2.1 -1.2 average % Downside at historical low -87% -10% -45% -40% -70% -16% -31% -15% -4% multiple U740 % Downside at -2.0sd multiple -61% -9% -39% -47% -69% -14% -29% 3% -33%

YTD share price performance -48% -29% -48% -33% -49% -37% -52% -46% -18%

Long-term correlation between 0.8 0.6 0.9 0.8 0.7 0.7 0.7 0.8 0.5 share price with oil price

Net fixed PPE/ 41% 35% 65% 15% 16% 24% 39% 16% 13% total assets (%) % of revenue from domestic U740 78% 73% 74% 71% 79% 47% 25% 68% >90% market Net debt to EBITDA 1.7x Net cash 1.3x Net cash 4.8x 7.7x 2.6x Net cash 2.9x (FY14)

Net debt to EBITDA (current) 3.7x Net cash 2.2x Net cash 4.8x 2.5x 2.5x Net cash 11.6x

Yes, but should Yes, but should Near-term liquidity risk? receive parental No No No Yes No Yes No receive parental support support U740

Source: Bloomberg Finance L.P., Companies, DBS Bank

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Regional and Global Oilfield Services Sector Peer Comparison

FY20F P/BV 2.50

U740 Yantai Jereh

Sinopec Oilfield Equipment 2.00 U740 Yinson Holdings

Serba Dinamik

U740 1.50 Petrofac Ltd Sinopec Oilfield Services Schlumberger Ltd Halliburton 1.00 Companies below the trend line Offshore Oil COSL are more attractively priced against their fundamentals U740

Velesto Energy Anton Oilfield Services 0.50 SPT Energy Baker Hughes TechnipFMC Bumi Armada Sapura Energy Honghua Group Hilong Holdings FY20F Return on Equity 0.00 -5% 0% 5% U740 10% 15% 20% 25%

Source: Bloomberg Finance L.P., Companies, DBS Bank

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Regional and Global Oilfield Services Sector Peer Comparison

P/E EV/EBITDA P/BV Return on Equity Div Yield Net Debt/Equity Company Bloomberg Ticker Market cap (US$m) CY20F CY21F CY20F CY21F CY20F CY21F CY20F CY21F CY20F Current China China Oilfield Services 2883 HK EQUITY 6,602 9.2x 8.7x 7.4x 6.7x 0.7x 0.7x 8% 8% 3% 0.4x Sinopec Oilfield Services 1033 HK EQUITY 4,396 7.9x 6.6x 7.2x 6.2x 1.2x 1.0x 18% 18% 1% 3.8x Yantai Jereh 002353 CH EQUITY 3,376 13.8x 11.4x 10.5x 8.8x 2.1x 1.8x 16% 16% 1% Net cash Offshore Oil 600583 CH EQUITY 3,272 26.4x 18.9x 6.2x 3.7x 0.9x 0.9x 4% 5% 1% Net cash Sinopec Oilfield Equipment 000852 CH EQUITY 570 24.0x 17.0x 14.4x 11.0x 2.0x 1.9x 10% 9% 3% 1.4x Anton Oilfield Services 3337 HK EQUITY 217 6.8x 4.7x 4.7x 3.7x 0.5x 0.4x 8% 11% 0% 0.9x Honghua Group 196 HK EQUITY 187 8.2x 6.3x 9.0x 8.0x 0.3x 0.3x 3% 4% 0% 0.7x Hilong Holdings 1623 HK EQUITY 92 3.1x 2.9x 3.5x 3.4x 0.2x 0.2x 6% 6% 5% 0.6x SPT Energy 1251 HK EQUITY 86 3.2x 2.4x 2.5x 2.2x 0.4x 0.3x 16% 18% 0% Net cash China median: 8.2x 6.6x 7.2x 6.2x 0.7x 0.7x 8% 9% 1% 0.8x Other Asia Yinson Holdings YNS MK EQUITY 1,235 15.7x 14.3x 7.9x 7.8x 2.0x 1.7x 14% 14% 1% 0.6x Serba Dinamik SDH MK EQUITY 1,042 7.9x 7.0x 6.0x 5.2x 1.6x 1.3x 21% 22% 4% 0.8x Sapura Energy SAPE MK EQUITY 370 nm nm 15.3x 11.3x 0.1x 0.1x -1% 0% 0% 0.6x Velesto Energy VEB MK EQUITY 295 22.1x 12.9x 3.5x 3.0x 0.5x 0.4x 2% 4% 0% 0.4x

Bumi Armada BAB MK EQUITY 229 3.3x 3.0x 6.1x 5.8x 0.3x 0.3x 8% U740 8% 0% 2.6x Other Asia median: 12.3x 9.3x 7.8x 6.6x 0.9x 0.8x 9% 9% 1% 1.0x U740 Global Schlumberger Ltd SLB US EQUITY 22,863 25.9x 32.3x 7.4x 7.9x 1.0x 1.1x 5% 6% 10% 0.6x Baker Hughes BKR US EQUITY 13,261 32.4x 26.1x 11.8x 11.2x 0.4x 0.4x 1% 1% 6% 0.1x Halliburton HAL US EQUITY 7,170 41.1x 241.5x 6.4x 7.1x 1.0x 1.1x 3% 3% 9% 1.2x TechnipFMC FTI US EQUITY 3,755 8.8x 9.2x 2.6x 2.8x 0.5x 0.4x 6% 5% 6% 0.1x Petrofac Ltd PFC LN EQUITY 923 5.8x 5.9x 3.1x 3.2x 1.3x 1.4x 22% 7% 13% 0.5x Global median: 25.9x 26.1x 6.4x 7.1x 1.0x 1.1x 5% 5% 9% 0.5x

Source: Bloomberg Finance L.P., DBS Bank

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DBS Bank recommendations are based on an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return, i.e., > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable share price catalysts within this time frame) *Share price appreciation + dividends

Completed Date: 15 Apr 2020 08:11:37 (SGT) Dissemination Date: 15 Apr 2020 08:40:19 ((SGT))

Sources for all charts and tables are DBS Bank unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This U740 document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial

advice. The DBS Group accepts no liability whatsoever for any direct, indirectU740 and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.

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This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

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ANALYST CERTIFICATION U740 The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report,U740 in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily 2 responsible for the content of this research report or his associate does not have financial interests in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary position in China Oilfield Services Ltd recommended in this report as of 31 Mar 2020.

2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services: 3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant. U740

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RESTRICTIONS ON DISTRIBUTION U740 General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. U740 Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

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This report is being distributed in Hong Kong by DBS Bank Ltd, DBS Bank (Hong Kong) Limited and DBS Vickers (Hong Kong) Limited, all of which are registered with or licensed by the Hong Kong Securities and Futures Commission to carry out the regulated activity of advising on securities.

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at [email protected]

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603- 2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

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U740 Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for

U740 matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

United Kingdom This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore.

This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solelyU740 intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai International This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6th Floor, Gate Precinct Building 5, PO Box 506538, DIFC, Financial Centre Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by Emirates the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or takeU740 into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States This report was prepared by DBS Bank Ltd.. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

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U740 Other jurisdictions In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

U740DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 13th Floor One Island East, 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 18 Westlands Road, Capital Square, Marina Bay Financial Centre Tower 3 Quarry Bay, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982

Tel: 852 3668 4181 Kuala Lumpur,U740 Malaysia. Tel: 65 6878 8888 Fax: 852 2521 1812 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] e-mail: [email protected] Company Regn. No. 196800306E

INDONESIA THAILAND PT DBS Vickers Sekuritas (Indonesia) DBS Vickers Securities (Thailand) Co Ltd Contact: Maynard Priajaya Arif Contact: Chanpen Sirithanarattanakul DBS Bank Tower 989 Siam Piwat Tower Building, Ciputra World 1, 32/F 9th, 14th-15th Floor Jl. Prof. Dr. Satrio Kav. 3-5 Rama 1 Road, Pathumwan, U740 Jakarta 12940, Indonesia Bangkok Thailand 10330 Tel: 62 21 3003 4900 Tel. 66 2 857 7831 Fax: 6221 3003 4943 Fax: 66 2 658 1269 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

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