Sinopec Oilfield Services 2025 Annual Report Analysis: Net profit excluding non-recurring gains and losses soars by 237.9%, net operating cash flow increases by 114.3%

Revenue: Slight dip of 0.5%, business mix shows clear divergence

In 2025, Petrochemical Oil Service & Engineering (石化油服) generated operating revenue of RMB 80.712 billion, down slightly by 0.5% from RMB 80.796 billion in 2024; the overall scale remained stable, but the internal business structure showed pronounced divergence.

Looking at each business segment, engineering construction services became the growth core, generating revenue of RMB 20.64 billion, up 15.9% year over year; this was mainly supported by large orders for long-distance pipeline projects of the State Pipeline Network Group. The overseas business performed strongly, with revenue reaching RMB 20.01 billion, up 10.5% year over year, and its share of total revenue increased to 25.2%. Meanwhile, revenue from drilling services and geophysical services declined 8.3% and 3.1% year over year, respectively; due to adjustments in business structure, traditional oilfield services saw contraction.

• | | 2024 | 810.96 | 1.4 | | 2025 | 807.12 | -0.5 |

Net profit: Steady growth of 4.3%, non-recurring gains and losses remain an important supplement

In 2025, the net profit attributable to shareholders of the listed company was RMB 659 million, up 4.3% year over year; the scale of profitability increased steadily, though the growth rate was relatively moderate.

In terms of profit composition, non-recurring gains and losses continued to make a significant contribution. In 2025, total non-recurring gains and losses amounted to RMB 2.078 billion. Of this, government grants were RMB 983 million, and allowances for the impairment of accounts receivable reversed due to impairment tests conducted separately were RMB 681 million. The two items together accounted for more than 80% of non-recurring gains and losses. If non-recurring gains and losses are excluded, the company’s adjusted net profit (non-GAAP) was RMB 451 million, surging 237.9% year over year. Core business profitability improved significantly, mainly benefiting from cost control and an increased proportion of high value-added businesses.

Earnings per share: Synchronized improvement; adjusted EPS shows a significant increase

In 2025, the company’s basic earnings per share was RMB 0.035 per share, up 6.1% year over year. Adjusted (non-GAAP) basic earnings per share was RMB 0.024 per share, up 242.9% year over year. This aligns with the high growth of adjusted net profit, reflecting the boost to earnings per share from improved profitability of the core business.

Expenses: Strong overall control and clear structural optimization

In 2025, against the backdrop of a slight dip in revenue, the company effectively controlled costs and expenses through measures such as internal resource coordination and optimizing outsourced business management, and continued to optimize the expense structure.

Selling expenses: Stable in scale, aligned with market expansion

In 2025, the company’s selling expense scale remained stable, matching the pacing of market expansion driven by total new contract signings of RMB 95.6 billion (up 4.8% year over year). These expenses mainly went to overseas market development, promotion of high-end business, and other areas, supporting a stable improvement in market share.

Administrative expenses: Cost reduction and efficiency gains become evident

Through internal institutional reform and process optimization, in 2025 the company achieved an effective reduction in administrative expenses. In particular, the underground operations system reform that involved canceling 35 institutions and disbanding 28 teams directly improved management efficiency and reduced unnecessary administrative spending.

Finance costs: Optimized liabilities structure, easing pressure

At the end of 2025, the company’s total assets were RMB 77.255 billion, down slightly by 0.1% compared with the end of 2024. The asset-liability ratio was 88%, down 0.8 percentage points from the beginning of the year. The optimization of the liabilities structure eased pressure on finance costs, creating conditions for improved profitability.

R&D expenses: Heavy investment supports technological breakthroughs

In 2025, the company continued to increase R&D investment. It undertook 177 projects at the provincial/ministerial level and above throughout the year. It applied for 1,078 domestic patents and 10 overseas patents. The company focused R&D efforts toward areas such as high-end instruments and intelligent drilling systems. Breakthroughs were achieved in core technologies such as a 260℃ ultra-high-temperature and high-pressure logging instrument and the Idrilling scientific drilling system, laying the foundation for a transition toward a technology-led enterprise.

R&D personnel profile: Technical talent supports innovation-led transformation

The company places high importance on building its R&D talent team. By improving incentive mechanisms and building national-level and provincial/ministerial-level R&D platforms, it attracts and develops a group of core technical talents to provide human support for tackling key technologies. In 2025, multiple projects led by the company’s core technical teams won national-level and provincial/ministerial-level awards. The results of technology-to-product transformation were significant, driving industrialization and implementation of high-end equipment and featured technologies. The annual output value from product industrialization reached RMB 2.06 billion.

Cash flow: Operating cash flow doubles; cash-generating ability improves significantly

In 2025, the company’s cash flow performance was strong. In particular, net cash flow from operating activities increased sharply, and overall cash flow structure improved in health.

Net cash flow from operating activities: Up 114.3%; stronger cash-generating ability

In 2025, net cash flow generated from operating activities was RMB 6.646 billion, up 114.3% from RMB 3.101 billion in 2024. This was mainly due to improved collection efficiency for project receivables, reduced operating expenditures under cost control, and a higher proportion of engineering construction business with a high collection rate, which substantially enhanced the company’s own cash-generating ability.

Net cash flow from investing activities: Focus on industrial upgrading

Net cash flow from investing activities mainly revolved around industrial upgrading projects such as equipment automation retrofits, research and development of high-end instruments, and construction of industrialization bases. In 2025, the company completed capital expenditures of RMB 3.45 billion in practice, focusing on areas such as electrification retrofits of drilling rigs and R&D of intelligent equipment, laying groundwork for future business transformation.

Net cash flow from financing activities: Optimize the capital structure

As the company’s own cash-generating ability improved, its financing needs declined somewhat. In 2025, net cash flow from financing activities mainly served to optimize the capital structure. By reasonably controlling the scale of liabilities, lowering the asset-liability ratio, and improving financial resilience, the company enhanced stability.

• | | 2024 | 31.01 | -44.4 | | 2025 | 66.46 | 114.3 |

Potential risks: External environment and transformation challenges coexist

Risk of oil price volatility

If international oil prices fluctuate and fall, it may affect oil and gas companies’ capital expenditures for exploration and development, which in turn could transmit to demand in the oilfield services market, putting pressure on the company’s traditional businesses such as drilling and geophysical services.

Risk in overseas markets

With overseas business already accounting for 25.2%, factors such as geopolitical risks, exchange rate fluctuations, and changes in local regulatory policies may create uncertainties regarding overseas project profitability and execution.

Risk of transformation progress

As the company advances its transformation toward high-end, intelligent, and green operations, the pace of industrializing core technologies and cultivating new businesses may be affected by factors such as technology maturity and market acceptance. There is a risk that the transformation may not meet expectations.

Compensation for executives and supervisors: Compensation linked to pay-for-performance

In 2025, compensation for the company’s executives and supervisors was tied to operating performance. The compensation for core management personnel was aligned with the company’s profit growth and value creation:

• The chairman Wu Bozhi’s total pre-tax compensation received from the company during the reporting period was linked to performance indicators such as the company’s net profit growth and market value appreciation, reflecting a binding of governance management and shareholder interests;
• The general manager Zhang Jiankuo’s pre-tax compensation was directly associated with the company’s overall operating indicators and market expansion outcomes, matching the company’s performance in which total new contract signings reached a record high during the year;
• The compensation of senior executives such as the deputy general manager and the chief financial officer was linked to the profitability level of their respective business segments and the effectiveness of cost control, ensuring coordinated development across business segments.

Overall, in 2025, against the backdrop of a slight dip in revenue, through internal reform and structural optimization, Petrochemical Oil Service & Engineering achieved a significant improvement in the quality of earnings. The high growth of adjusted net profit (non-GAAP) and operating cash flow laid a foundation for future development. However, investors still need to be alert to external factors such as oil price volatility and overseas market risks, as well as uncertainties during the transformation process. Investors should focus on changes in key indicators such as the effectiveness of technology transformation and the pace of cultivating new businesses.

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