Earnings call transcript: China Oilfield Services Q3 2025 beats EPS forecast

China Oilfield Services Limited (COSL) reported its third-quarter 2025 earnings, showcasing a strong performance with earnings per share (EPS) of $0.26, significantly surpassing the forecasted $0.16. This 62.5% earnings surprise was accompanied by a revenue figure of $11.53 billion. Following the announcement, COSL’s stock price increased by 7.19%, closing at $7.60, reflecting positive investor sentiment.

Key Takeaways

• COSL’s EPS surpassed expectations by 62.5%, indicating strong financial performance.
• The stock price surged by 7.19% post-earnings announcement, signaling market approval.
• Improved operations in Norway contributed to a reduced effective tax rate from 28% to 20%.
• The company repaid $1 billion in debt and plans further debt reduction next year.
• Technological advancements led to a 47% growth in overseas technical contracts.

Company Performance

China Oilfield Services demonstrated robust performance in Q3 2025, driven by strategic improvements and operational efficiency. The company managed to enhance its gross margin despite a slight revenue decline, showcasing effective cost management and technological advancements. Compared to its peers, COSL outperformed in the Well Services segment, while competitors like Halliburton and Baker Hughes experienced declines.

Financial Highlights

• Revenue: $11.53 billion
• Earnings per share: $0.26
• Effective tax rate: Reduced from 28% to 20%
• Overseas technical contract growth: 47%
• Debt repayment: $1 billion repaid, with plans for RMB 3 billion next year

Earnings vs. Forecast

COSL’s actual EPS of $0.26 significantly exceeded the forecast of $0.16, resulting in a 62.5% surprise. This positive deviation underscores the company’s operational improvements and strategic initiatives. Historically, such a substantial earnings beat indicates strong market confidence and potential for sustained growth.

Market Reaction

Following the earnings announcement, COSL’s stock price rose by 7.19%, closing at $7.60. This increase reflects investor optimism, as the stock moved closer to its 52-week high of $7.77. The market’s positive reception aligns with the company’s strong financial results and promising outlook.

Outlook & Guidance

COSL remains optimistic about its future growth, focusing on expanding its overseas operations, particularly in Southeast Asia and the Middle East. The company anticipates a slight revenue increase in Q4 2025 due to account settling and plans to maintain operational efficiency and cost management. Technological innovation and market share growth remain key priorities.

Executive Commentary

• "We are committed to optimizing the structure of large scale equipment, continuously improving profitability," stated the opening speaker.
• CFO emphasized, "We will strive to improve ourselves and maintain all the operational indexes at a high level."
• "Our future growth will be focused on the overseas operations and also on the technical front," added the CFO.

Risks and Challenges

• Potential reduction in upstream investment could impact future revenue streams.
• The company’s reliance on the domestic market, which accounts for over 80% of Well Services revenue, poses a risk if domestic demand decreases.
• Exchange rate fluctuations may affect profitability in international markets.
• The competitive landscape, with major players like Halliburton and Baker Hughes, remains challenging.
• Geopolitical tensions in target expansion regions like the Middle East could disrupt operations.

Q&A

During the earnings call, analysts inquired about the potential restart of rigs in the Middle East, though no confirmed demand was reported. The company also detailed its Well Services segment performance and discussed strategies for financial cost management, highlighting its proactive approach to debt repayment and interest cost reduction.

Full transcript - China Oilfield Services Ltd (2883) Q3 2025:

Moderator/Introducer, China Oilfield Services Limited (COSL): Dear ladies and gentlemen, investors and analysts, good afternoon. Thank you all for joining the twenty twenty five Third Quarter Earnings Call of China Oilfield Services Limited today. COSL, guided by the goal of building a world class energy service company with Chinese characteristics, continuously optimizes resource allocation and enhances the efficiency of capital operation. It focuses on five major development strategies, technology driven, cost oriented, integration, internationalization and regional development. The company is committed to optimizing the structure of large scale equipment, continuously improving profitability, constantly breaking through and perfecting key core technologies and enhancing the core competitiveness of oilfield services.

In the face of a complex and volatile external environment, the company adheres to the goal of world class standards, deepens and broadens strategic planning and intensifies and refines the implementation of strategies. It promotes the coordinated development of production and operation as well as reform and development in an all rounded way. Overall, the company presents a high quality and sustainable development trend. Please allow me to introduce Mr. Chie Qi, the Chief Financial Officer of the company.

Today’s press conference is divided into two parts. First, Mr. Chie will lead us to understand the company’s performance in the 2025. Afterwards, we will open the question and answer session. Now allow me to give the floor to Mr.

Thank you for the management’s introduction. Now we will proceed to the Q and A session. Before asking your questions, please tell us who you are and what your company’s name is. Please note that we will provide competitive interpretation during the Q and A session. So we will allow some time for translations after you have asked your question as well.

We will now invite the first person to raise questions, who is Wang Li Ming from Merrill Lynch. First of all, I would like to congratulate the company for achieving very good results for the third quarter of the year. I have two questions. First of all, I have heard some news about certain drilling rigs, which will restart their operations. And I have heard that would involve six projects in total.

Has the company heard such news? And if that is the case, if certain projects are about to be recommissioned, is it going to have a positive impact on your daily rate and also utilization rate overall? My second question is about the effective tax rate being reduced in the third quarter. I would like to understand the reasons behind that. And do you have any forward looking projections into the fourth quarter or what is your projection for the next year concerning effective tax rate?

Thank you. Thank you very much for your questions. Allow me to first address the first question, which is relevant to the development in Middle East. Actually beginning from the month of August, we have started receiving some news about certain activities, but to date we do not have any well established demand coming from that region. What we need to focus on at the moment is to ensure the high level of efficiency of our operations and at the same time make effective dynamic adjustments to the use of our equipment in the global front so as to optimize the utilization of our equipment instead of just focusing on one single region.

Now allow me to switch over to your second question and share some figures with you. This year, overall speaking, the effective tax rate has returned to a normal level. Previously, it was between 19% and just below 20%. And now if we look at the level for the third quarter, it is slightly over 20%. So by comparing the figures from the third quarter to the previous time periods, I would not say there are any major fluctuations.

So if you look at the figures for Q1 to Q3, which was around 28% in the year 2024 and compare that level with the level we see this year, yes, you may say there is a rather substantial change. So what are the main reasons behind such a reduction in the effective tax rate? Well, I can offer some of my own thinking and analysis. I believe the major reason is in relation to what happened to the operations in Norway. We have enjoyed very good performance there with very high level of daily rate and also the level of losses have been substantially reduced.

At the same time, there was no increase in the profit tax, which is a very good news. So if you look at such situation, I can say that towards the if you compare the first three quarters of last year and that is caused by the operations or special situation in Saudi Arabia. So I would not say that these are generalized trends, but rather I think such change or movements have been caused by certain special events or special activities instead. So combining the two examples I have just given you, the impact would be a drive down of about five points. So if you look at the actual level, 8% to 29%, dropping to around 20%, that is a drop of eight to nine points.

So looking ahead into the fourth quarter and also the full year, I would say that such elements would continue to play a role. And since our effective tax rate has already returned to the normal level, I can tell you I do not expect any substantial changes. Let’s introduce the next questioner, which is Thank you for the opportunity to ask the question. I actually want to ask about your Well Surfaces segment. In the first half, I have examined the figures for the profit situation.

So I would like to ask, can you explain why in the third quarter, the profit trend has shown such a direction? What do you expect the future profit margin to be looking ahead into the final quarter of the year? And also what is the projection for the full year? Thank you very much for your question. Allow me to first answer your first question.

Well, I should say in relation to our Well Services segment, if you look at what has happened in the past three years, I should say that we have seen very good improvement in terms of our scale of operations and also the quality of our operations. And actually, I should say that we have already entered a phase of rapid development. So focusing on this year, we have seen the drop in oil prices and that has caused a lowering of investment sentiment in the upstream. Overall investment reduction is about 6%. So to us and particularly to the rock surfaces segment, I think this trend will continue.

So when we talk about the technical segment, we need to understand that it is still well supported by the huge amount of workload available on the domestic front. So while we see a slight decrease of 3% comparing the first quarter to the third quarter. We can say such a mild drop is still outperforming the global trend or the global situation. So when we talk about the drop in the domestic front, it is still well under control. And for the overseas performance, we do see a mild decline in our profit level.

But still our margin is standing at a relatively high level, which is more than 16%. So basically, we are doing quite well compared to our peers. And we see that from Q1 to Q3, was a drop of three to 4%, but it is comparatively speaking better than the global situation and also some of the other major players in the market. For example, we can see that Harry Bolton has also suffered a decline of their performance by 53% and Baker Hughes dropped by 5% and other peers are also suffering. So you can draw a comparison here and see we are actually doing quite well.

So looking ahead into the future, when it comes to the rail services segment, our future expectation is that we will expand our overseas operations. In particular, we will focus our efforts on the technical front. We will enhance our collaboration with the IOC and AOC and with our sophisticated technology and very outstanding equipment offering, we believe we can expand our market share and improve our profitability. Yes, we will continue to see fluctuations in the market and yes, will continue to be fierce. And at the same time, we see a reduction in the sentiment of investment, but we will strive to improve ourselves and maintain all the operational indexes at a high level.

Thank you very much. Let’s invite the next questioner from BAC. Thank you for the opportunity to raise questions. I have two questions. First of all, I can see the revenue coming down in Q3, but the gross margin has gone up.

Can you please explain why? Second question, if you look at the fourth quarter last year, the trend was a rising revenue, but a substantially dropping profit margin. So is that going to be the trend this year? What are your expectations? Thank you very much for your question.

At the moment, if you look at the progress we are making with our revenue, yes, we do see a mild decline, but that is well within our expectation. And when it comes to the gross margin level, certain activities or elements have created impact on us, especially in the third quarter, but the impact is not going to be as substantial as last year. So I would say together with some savings we have made on the portion of our financial expenses, I think things are well under control. So if we are to look ahead into the fourth quarter, that means we are examining the situation for the full year. I would say this is a usual trend that happens in the world services industry.

In the second half of the year, the revenue level would normally be affected by poor weather. But because of the speeding up of account settling in the final quarter, we expect a slight increase for our revenue level. In relation to our cost factor, because of certain salary and wages limitations stipulated by the state, the cost going into salaries will take up a rather big portion of our overall cost. And all along, our company has been doing well, this balancing act involving our different cost elements. So at the moment, I can tell you we are still confident that the company will maintain a very good growth momentum.

Thank you very much I for the have two questions in total. The first one is concerning the fees you have collected and any changes in such trends for the first half comparing it with the second half. Do you have any major fluctuations that you can share with us on this front? And secondly, it is about South Sea number eight. Concerning this vessel, I think it is supposed to be heading directly to Brazil in the first half of this year.

So what is happening to the latest operations of this vessel, what is happening especially considering the political people in Brazil, is it affecting our operations and services? Thank you. So allow me to answer your first question, which is the systemic charges and fees. I would say this is a new development trend in Mainland China. And if you look at the performance on this front, comparing what happened last year, which was only a single digit, it has already increased to about 50% or so this year.

So in relation to what will happen in the future, we will maintain such a big portion. It really depends on the actual situation on the site of our operations. Well, I would like to share a few points. First of all, concerning such fees or rates, they do not create any big impact on our technical segment. The extent is only about a few hundreds of millions.

Secondly, the impact on the shorter term on our profit level is also quite small. So what we’ll be doing is to optimize our raw materials combination to reduce our cost and actually we have achieved very good results on this front for the first three quarters of the year. So when it comes to the actual extent of such endeavors, it really depends on what is happening to our raw materials. We will need to continuously do our homework and do further development and make necessary timely adjustments. And sometimes when there are changes to the raw materials side, we may need to make adjustments for about a year or so.

So let me move on to your second question, which is about Subsea eight. The vessel is now currently in the stage of being inspected by the Brazilian party. So at this moment, there is no operation for this vessel and the overall adjustment project will be completed once the inspection team is ready to collaborate with us on the adjustment front. Let’s invite the next questioner from Macquarie. Thank you for the opportunity to raise questions.

I have two questions. The first question is about the Drilling Surfaces segment. I have heard that in the second quarter, there are actually no real operations in the Northern Sea. So can you please update us on what is happening? Is there some sort of saturation happening there?

And my second question is about your finance cost. I can see some obvious improvement this year. So what is your plan for your USD debt? And also considering the recent appreciation of renminbi, what is the outlook for next year? Thank you for your question.

Concerning the Drilling Services segment, what happened in Norway in the second and third quarter, I think various vessels have gone under certain repair work. And overall speaking, such repair work is normal repair, well within our plan. So whether the repair activities have gone up or come down, everything is well inside our plan. I can give you some examples. For example, our Innovator in the second quarter is going through some repair work and also the other vessel protector, there’s a short period of repair in September.

So for the fourth quarter, I would say all four vessels will go into normal operations. So you can see if compared to second quarter and the third quarter in relation to the fees, you may say that the performance in Q3 is much better compared to Q2. In relation to the second question, from the first quarter all the way into the third quarter, we have made substantial phasing in terms of our finance cost because we have been actively managing our debt and optimizing our debt. For example, between June and July, we have repaid $1,000,000,000 debt and we have also repaid other high interest bearing debt. So in relation to our overseas market changes, we will continue to keep a close eye on that.

And at the moment, we are making arrangements to swap out high cost debt. Whether renminbi is appreciating or depreciating, its impact on our profit, well, I should say that there are real fluctuations involved. But based on the control mechanism of the state, a certain level or range of fluctuation is permitted. So we will make our best effort in managing exchange rate risk, so that they will not create any major impact on our operations. So in relation to the Well Surfaces segment, we are going to repay this mature debt of up to RMB3 billion next year.

By that time, we will decide with more details in relation to repayment of all the debt. And we will have the purpose or ultimate objective of optimizing our financial scale and also reducing our finance cost. We are swapping out the high interest debt for lower interest debt. So the benefit in the longer term from that front should be sufficient to offset anything on the depreciation side for the short term currency changes. Thank you very much for the previous questions and our management’s Due to time constraints, we are now going to bring in the final question from Chang Jiang Securities.

Thank you very much for the opportunity. I only have one question, which is in relation to the wealth services segment. I can see that our peers have higher level of revenue. So I would like to ask for a breakdown in relation to our revenue comparing domestic operations with overseas operations. And can you tell me something about the future trends concerning such split?

And what will be the regions or areas of your focus looking ahead? Thank you very much for that one question, but it’s actually a very rich question. So I will do my best to answer that. In relation to the Well Services segment, first of all, I would like to share a number of characteristics about this segment with you. It is focused on the domestic front.

I think the portion here is over 80%, while the overseas operations, the scale, it is about CNY5 billion. Concerning profitability, it is around 16% to 17%. And overall speaking, profitability is stronger on the domestic front compared to the international operations. Secondly, I would like to talk about our current arrangement and development In relation to our Well Surfaces segment, I think our future growth will be focused on the overseas operations and also on the technical front. I believe we will expand further and solidify our market share in Southeast Asia and also increase our level of competitiveness in the Middle East market.

We have already seen some real results inside Middle East. I also want to add some personal sharing. If you look at the first nine months, our locked overseas contract in relation to technical contracts, there’s a growth of 47% and our bundled services have improved by 255% and we have also 36% of new contracts signed. So if you look at the total sum or overall quality and also our ability of risk aversion, I can tell you we are making improvements on all fronts. Thank you.

That’s the end of my answer. Thank you all for your questions and the detailed answers from our management. We appreciate your attention and support for the company. Due to time constraints, this call is coming to an end. If you have any further questions, please contact us at any time.

This concludes our meeting. Thank you.

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