1. Incidents. The company released its 2013 annual report. In 2013, it achieved revenue of 397 million yuan, a year-on-year decrease of 4%, net profit attributable to shareholders of 10.1 million yuan, a year-on-year decrease of 10.8%, and a basic income of 0.10 yuan per share; basically in line with expectations. 2. Our analysis and judgment. (1). It is difficult for the existing oil service business to make full use of the company's oil service technology advantages. The company originated from a listed petroleum technology service company restructured by a state-owned enterprise under Xinjiang Oilfield. Since its establishment, it has been engaged in the business of managing inefficient blocks for CNPC. Currently, its main business is oil field dynamic monitoring (well testing, production testing), underground operations (wax removal, anatomy, water blocking, acidification, fracturing, continuous oil pipe operation, new oil pipe operation, oil field nitrogen technology application, well repair); oil storage tank machinery cleaning; construction and safety engineering (oil field engineering construction, transmission and transformation projects, road construction); transportation services and chemical product sales, etc. Currently, the company's petroleum technology services are mainly concentrated in the four major oil field companies in Xinjiang; limited to the relative monopoly mechanism of the domestic petroleum industry, the company's integration capabilities have to be “fragmented” in the face of strong Party A, making it difficult for advanced equipment and rich experience to fully utilize its capabilities. Most of the new continuous tubing, fracturing equipment, oil storage tank mechanical cleaning equipment, and new oil and water well blocking, acidification, and fracturing work equipment purchased in recent years have not met the expected benefits; therefore, the company continues to expand new work areas within the country, expand the scope of business, and vigorously expand the Central Asian market, so it is imperative that the company continues to expand new operations in China, expand its scope of business, and at the same time vigorously expand the Central Asian market. (2). The majority shareholders increased their cash holdings twice to prepare for the company's transformation and integrated petroleum development general contractor. In 2012, the company determined its development strategy as: based on oil fields, oil and gas services, oil and gas, to achieve an industrial transformation from providing technical services to its own technology research and development, product production and sales, forming a development pattern focusing on petroleum technology services and energy product development, supporting industries such as oilfield engineering construction, etc., and gradually developed into a powerful integrated industrial company in western China integrating oil and gas technology services, development, product production and sales. The company has technical advantages in oilfield development and operation, but the company's current capital scale is relatively small, its own capital is insufficient, and its ability to withstand risks and continue to operate is not strong enough, limiting the company's development; at the beginning of last year and April of this year, the majority shareholders of the company increased their shares in the company twice through targeted cash increases to provide long-term capital to the company; by supplementing liquidity to enhance the company's financial strength, the company will gradually expand its share in the Xinjiang market and the Central Asian market, and gradually penetrate the upstream and downstream industrial chains of the petroleum technology service market. In the future, it will have oil and gas development, dynamic monitoring data collection and data interpretation. An upstream and downstream integrated petroleum development contractor for technology such as research and application, preparation of management plans, construction of measures to stabilize production and increase production, and evaluation of effects. (3) The company is expected to benefit from domestic oil and gas reforms, especially the opening up of upstream risk exploration blocks in Xinjiang. Currently, CNPC is actively advancing the pace of upstream oil and gas development. It will be project-based to attract private and social capital, etc., and the maximum shareholding limit for external investors is 49%; forms of cooperation include the establishment of joint venture entities and product sharing contracts; according to CNPC's plan, it will first be piloted in Xinjiang. Influenced by the institutional mechanism that continues throughout history, the field of oil and gas exploration and development in Xinjiang has a single ownership structure, few cooperation projects with local enterprises in Xinjiang, and the absorption of new local labor is limited; most of the oil and gas enterprises in Xinjiang exist in the form of branches, and local tax contributions are not compatible with the total economic volume; there are also a few oilfield taxes, industrial value added, and production statistics that are not in Xinjiang, and some inefficient and low-production oil field resources are idle. By carrying out oil and gas resource development reforms, developing a mixed ownership system, and introducing social capital such as private enterprises, etc., Xinjiang can increase investment in exploration and development, speed up exploration and development, make oil and gas resource development further play a “backbone” role in promoting the economic and social development of Xinjiang, and promote the restructuring of related local industries and accelerate the economic development of Xinjiang. At present, Xinjiang has explored three main modes of cooperation to develop a mixed ownership economy and develop oil and gas resources: local enterprises carry out project cooperation in oilfield blocks, oil and gas refining, inefficient and low-yield oil fields, pipeline construction, etc. in the form of equity participation; in some newly discovered oilfield blocks, local enterprises are the main development subjects, forming joint stock companies with large enterprises such as CNPC and Sinopec; large enterprises have restructured their branches in Xinjiang into subsidiaries of local enterprises, forming mixed ownership companies with diversified equity. The company has over ten years of industry advantages and technical advantages in the field of petroleum technology services, seizes reform opportunities in domestic oil and gas and other related fields, prepares capital in advance through two additional issues, and will actively participate in the construction of an oil and petrochemical mixed ownership economy. Aiming at the corporate strategy formulated in 2012, the company will strengthen the refined petroleum technology service business, continue to work in the direction of energy product development, and seek to enter the field of resource development through contracting and cooperation. Since the company's current capital strength is relatively weak, it is not yet capable of entering the oil and gas block exploration field where investment risk is high. However, at present, the company can seize market opportunities, make use of reform policies, expand its capital strength, integrate its various advantages of being “fragmented” in the early stages, take petroleum technology services as the core, vigorously develop comprehensive and integrated oil field development and management projects, and become a general contractor providing continuous development management for oil and gas development enterprises. (4) The company's oil service business is expected to achieve breakthrough growth this year. In 2014, the company will further implement refined management to control costs and explore potential efficiency gains, which is expected to contribute 5 million yuan to oil service profit growth; at the same time, it will strengthen overseas technical service business, turning losses into profits, contributing 12.5 million yuan to profit; in addition, investing in Shanghai and New Small Loan Companies is also expected to achieve investment income of more than 4 million yuan. The company plans to complete operating income of 43,000 yuan and net profit of 32 million yuan in 2014, an increase of more than 200% over 2013. The performance of the oil service business will achieve breakthrough growth. 3. Investment advice. We expect the company's EPS for 2014-2015 to be 0.24 yuan and 0.28 yuan respectively, giving the company a “careful recommendation” rating for the first time.