Anton Oilfield Services Group — Management Reports 2013

Jan 22, 2013

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Announcement

Operational Update for the Fourth Quarter of 2012 and Outlook for the First Quarter of 2013

The Board of Directors of Anton Oilfield Services Group (the “ Company ”, and together with its subsidiaries, the “ Group ”) is pleased to announce its operational update and order backlog for the three months from 1 October 2012 to 31 December 2012 (the “ Quarter ” or “ during the period ”) .

OVERVIEW

In 2012 (the “ Year ”), the domestic natural gas market witnessed an accelerated growth, with favorable policies introduced one after another, and the Group’s clients increased spending in major blocks. In the overseas market, investors from China boosted investments and sped up execution of development plans in their strategic areas including the Middle East and Latin America. Amid continuous growth in market demand, the Group enhanced its integrated service capacity to provide its clients with solutions that effectively address their requirements of expanding output and improving efficiency, enabling the Group to harvest fruitful results in each of its service areas. The Group’s total number of jobs completed for the Year reached 2,124.

During this Quarter, the Group’s market development remained robust and its performance exceeded targets in many of its business clusters. At the year end, it won multiple batch orders scheduled to generate workload the following year, having laid a concrete foundation for the business development in the new year.

— 1 —

OPERATIONS IN THE FOURTH QUARTER OF 2012

During the Quarter, market demand exceeded the Group’s expectation. A total of 494 jobs (exclusive of oil production services) were completed for the Group’s core business — oil and gas development technical services, representing an increase of 16 jobs as compared with 478 jobs in the last quarter. Together with the 47 jobs completed for the oil production services during the Quarter, the Group completed a total of 541 jobs. As provision of oil production services has shifted to a project management model rather than provision of services by the number of jobs, the Group does not disclose job number of related services starting from 2013.

The major services saw steady growth compared with the same period of last year. For multistage fracking services, a total of 47 jobs were completed during the Quarter, representing a peak for the Year. Meanwhile, the Group secured batch orders in multistage fracking from China Petroleum & Chemical Corporation (Sinopec) for the third time in a row, bringing the total number of contracted jobs won from the customer to approximately 120. For coiled tubing services, a total of 153 jobs were completed during the Quarter, of which 75 were completed domestically and 78 in overseas markets. During the period, several coiled tubing jobs were completed for shale gas wells in China. For directional drilling services, a total of 25 jobs were completed during the Quarter, of which 14 were completed domestically and 11 overseas. During the period, the directional drilling services achieved diversification in sourcing technologies through increasing the number of partners. In the overseas market, the Group successfully renewed the directional drilling framework contract for the Ahdeb project in Iraq under the term of “one firm plus one optional year”. As for the Group’s integrated services, two jobs were completed during the Quarter.

Remarkable results were also recorded during the Quarter for the two services newly introduced this Year — for oil-based drilling fluid services, 7 jobs were completed and batch order contracts for 5 high-temperature high-pressure wells in the Tarim Basin were also secured, ensuring future large-scale promotion of such service in this region. The Group officially commenced operations in pressure pumping services during the Quarter with 56 jobs completed during the period, and started preparations for initiating cooperation with oilfield service subsidiaries of the oil majors.

The supplementary business — tubular services — implemented several annual service contracts as planned with a strong work volume.

— 2 —

OPERATIONAL SUMMARY OF OIL AND GAS FIELD DEVELOPMENT TECHNICAL SERVICES

							**Number **	**Number **	**of jobs completed **	in		Year-to-date total number of	Year-to-date total number of	Year-to-date total number of
									the Quarter			jobs completed
					Major Product			(Well counts)				(Well counts)
		Business Cluster			Classification		Domestic		Overseas Sub-total			Domestic	Overseas Sub-total			Remark
					Directional drilling		14		11	25		68	39	107		—
					services
		Drilling Technology Cluster			Integrated services			2	—	2		13	—	13		—
					Drilling fluid services			7	—	7		7	—	7		—
					Sub-total		23		11	34		88	39	**127 **		—
					Well completion		28		41	69		118	121	239		Well completion
					integration services											integration services
																released the number
																of jobs counting
																operational projects
																only and excluding
																projects that solely
																trade products
		Well Completion Cluster			Gravel packing services		85		—	85		470	—	470		Gravel packing services released the
																number of jobs
																counting operational
																projects only and
																excluding projects
																that solely trade
																products
					Sub-total		113		41	154		588	121	**709 **		—
					Multistage fracking		47		—	47		139	—	139		—
					services
					Coiled tubing services		75		78	153		222	206	428		—
					Pressure pumping		56		—	56		56	—	56		—
					services
					Tubular helium testing		50		—	50		249	—	249		—
		Down-hole Operation			services
		Cluster			Oil production	services	47		—	47		414	2	416		Oil production
																services released the
																number of jobs
																counting operational
																projects only and
																excluding projects
																that solely trade
																products
					Sub-total		275		78	353		1,080	208	**1,288 **		—
					Total		411		130	541		1,756	368	**2,124 **		—

OPERATIONAL SUMMARY OF TUBULAR SERVICES

						Number of jobs completed in	Number of jobs completed in	Number of jobs completed in	Number of jobs completed in	Number of jobs completed in		**Year-to-date total **	**Year-to-date total **	**Year-to-date total **	**Year-to-date total **	number of	number of	number of
								the Quarter					jobs completed
			Major Product			**(Number of tubular **			pipes)			**(Number **			of tubular pipes)
		Business Cluster Classification				Domestic Overseas Sub-total						Domestic			Overseas		Sub-total			Remark
			Inspection		and	163,110 17,901				181,011		626,957			68,659			695,616		—
			Evaluation (tubular
			inspection)
			Operation			97,994 6,310				104,304		320,417			12,746			333,163		—
			Management and
			Repair (repair,
			welding, coating)
		Tubular Services Cluster Tubular Leasing				752,206 —				752,206 2,102,406					—		2,102,406			Tubular leasing
																				service is
																				measured
																				in terms
																				of the
																				number
																				of tubular
																				pipe days

— 3 —

DEVELOPMENT OF NEWLY WON MAJOR TENDERS OR MAJOR CONTRACTS SIGNED

• As for tight oil and gas, in the Erdos Basin, won an additional tender of 50 jobs of multistage fracking services for the “Packer, Auxiliary Tools and Onsite Services for Horizontal Well Multistage Fracking” project from Sinopec North China E&P Company. The jobs are expected to be completed in the first half of 2013.

• As for highly challenging projects, in the Tarim Basin, successfully won a tender and signed a contract with PetroChina Co. to provide drilling fluid services to 5 wells at an average price of approximately RMB 9 million per well.

• In the Ahdeb Project in Iraq, renewed framework contract for directional drilling services under the term of “one firm plus one optional year”.

PROGRESS IN ALIGNMENT OF STRATEGIC RESOURCES

During the Quarter, the Group added 2 sets of new equipment for directional drilling services which have been put into use, and signed a strategic cooperation agreement with a domestic supplier for procurement of directional drilling equipment. One new set of equipment for coiled tubing has also arrived and been put into use. The Group continued to implement the strategy of vigorously growing the leasing business in tubular services, and had newly purchased a batch of drill pipes during the Quarter to meet the growing demand for tubular leasing services. Construction of industrial bases across various regions in China progressed rapidly as planned.

In pressure pumping, two trucks (with a total capacity of 4,000 HHP) were delivered during the Quarter, boosting the pressure pumping capacity to 24,000 HHP as at the end of the Quarter. During the period, the Group ordered one set of ten 2,000-model pressure pumping equipment (20,000 HHP in total) and another set of ten 1,800-model pressure pumping equipment (18,000 HHP in total) respectively, which are expected to be delivered in 2013. Meanwhile, the Group signed strategic cooperation agreements with leading domestic suppliers of pressure pumping equipment in a bid to reduce procurement costs, secure supplies and shorten delivery lead time.

In human resources, the Group had a talent base totaling 1,613 permanent staff as at the end of the Quarter. The Group introduced a world-class consultancy firm during the Quarter to prepare for building a strategic HR framework aligned with the long-term growth, as part of the Group’s “Talent First” strategy.

— 4 —

OUTLOOK FOR OPERATIONS IN THE FIRST QUARTER OF 2013

In the new year, the Group foresees further opening up of the domestic market in energy exploration and development (E&P) and unconventional natural gas will remain as an investment highlight in E&P. In the overseas market, investors from China are accelerating expansion in the international arena, and the Middle East and Latin American regions will continue to be their primary focus. The multiple batch contracts signed by the Group in this Quarter after successful bidding will start generating workload in the first quarter of 2013. In the meantime, the Group will make concerted efforts to push ahead with the strategic management and control system to fully align corporate management with the setting up and fulfillment of strategic objectives so as to ensure the Group’s fast and sustainable growth.

ORDER BACKLOG OF OIL AND GAS FIELD DEVELOPMENT TECHNICAL SERVICES

							Confirmed jobs in the	Confirmed jobs in the	Confirmed jobs in the	Confirmed jobs in the
							**backlog **			in the Quarter
	Business								(Well counts)				Remark
	Cluster		Major Product Classification Domestic							Overseas Sub-total
	Drilling Technology Cluster		Directional drilling services 20 Integrated services 4 Drilling fluid services 10 Sub-total 34							9 — — 9	29 4 10 **43 **	— — — —
	Well		Well completion		integration 19					21	40	—
	Completion Cluster		services Gravel packing services Sub-total				90 109			— 21	90 **130 **	— —
			Multistage fracking services 97							—	97	—
			Coiled tubing services				19			33	52	—
			Pressure pumping services 50							1	51	—
			Tubular helium testing			services 45				—	45	—
			Oil production services				—			—	—	Project
	Down-hole											management
	Operation											model is
	Cluster											adopted,		job
												number will not
												be	disclosed
												starting from
												2013
			Sub-total				211			34	**245 **	—
			Total				354			64	**418 **	—

— 5 —

Notes:

• The confirmed jobs in the backlog are completed in different progress within the agreed period of time of the order, and the progress of job completion depends on many factors, including but not limited to the construction plans of the clients, the progress of upstream operations, weather conditions, and the availability of all service resources.

• Most of the jobs in the backlog mentioned above will be completed in the next 12 months.

ORDER BACKLOG OF TUBULAR SERVICES

						**Confirmed jobs in the **	**Confirmed jobs in the **	**Confirmed jobs in the **	**Confirmed jobs in the **	backlog	backlog
							in the Quarter
		Major Product				**(Number of Tubular **				Pipes)
		Business Cluster Classification				Domestic Overseas				Remark Sub-total
		Inspection and				168,500		33,000		201,500 —
		Evaluation (tubular
		inspection)
		Operation				86,120		7,100		93,220 —
		Management and
		Tubular Services Repair (repair,
		Cluster welding, coating)
		Tubular Leasing				728,000			—	728,000 Tubular leasing
											service is measured
											in terms of the
											number of tubular
											pipe		days

ALIGNMENT OF STRATEGIC RESOURCES

In the first quarter of 2013, the Group will make appropriate investment in land rigs, build up drilling teams and initiate cooperation with other drilling companies to propel rapid development in turnkey drilling projects; continue pushing the construction of pressure pumping service capacity; accelerate the building of industrial bases to nurture in-house service capacity; step up efforts in talent recruitment to stockpile sufficient human resources for the Group’s fast growth in the future and enhance the alignment of the HR strategy with the Group’s business development.

By order of the Board Anton Oilfield Services Group LUO Lin Chairman

Hong Kong, 22 January 2013

As at the date of this announcement, the executive Directors of the Company are Mr. LUO Lin, Mr. WU Di and Mr. LIU Enlong, the non-executive Director of the Company is Mr. Jean Francois POUPEAU, and the independent non-executive Directors of the Company are Mr. ZHANG Yongyi, Mr. ZHU Xiaoping and Mr. WANG Mingcai.

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