China Oilfield Services Suspends Operations of Four Mideast Rigs

By Tracy Qu and Ben Otto

China Oilfield Services has suspended operations of drilling rigs related to a multibillion-dollar contract in the Middle East, a setback for China's largest offshore drilling contractor in one of its most important international markets.

China Oilfield Service said late Wednesday that it recently received a notice from a customer in the region to suspend operations of four drilling rigs.

It didn't name the customer nor provide details about the nature of the suspension, but said the stoppage would pose a short-term challenge to its development in the Middle East and have an impact on the "original business expectation" of operations in the region.

It added that there is no material impact on its overall business and financial position, and that it is in negotiations about the time frame of the suspension and other matters with the customer.

Shares were down 18% in Hong Kong on Friday, the first day of trading since the news of the stoppage, nearly erasing their gains for the year. Markets in China, where shares also trade, were closed for a holiday.

The Middle East is one of China Oilfield Services' biggest markets outside China. The company signed a $1.9 billion deal with the customer in question in 2022, describing it then as a "first-class international oil company in the Middle East" and calling the signing of several long-term drilling rig service contracts "a major breakthrough in overseas markets."

At the end of 2023, 41 of China Oilfield Services' 60 drilling rigs were in China, with the majority of overseas rigs deployed in the Middle East, Indonesia and Mexico. Its Middle East and ex-China Asia-Pacific operations jointly accounted for 11.5% of revenue and almost 13% of Ebitda in 2023.

Citi analysts said in a research note earlier this year that China Oilfield Services' overseas business was growing at a much faster pace than domestic operations, with the company expecting overseas revenue to account for 40% of its total by 2030, up from with 21.5% in 2023.

Write to Tracy Qu at tracy.qu@wsj.com and Ben Otto at ben.otto@wsj.com

(END) Dow Jones Newswires

April 05, 2024 01:45 ET (05:45 GMT)

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