Key investment points The recovery of the oil service industry and effective cost reduction and efficiency measures have helped the company reverse losses. The company achieved total revenue of 541 million yuan in the first half of 2018, an increase of 29.1% compared to 419 million yuan in the same period last year; net profit attributable to the parent company was 20 million yuan, an increase of 55 million yuan over the same period last year, achieving the first profit correction since 2015, with a profit of 0.012 yuan per share; and the board of directors decided not to announce an interim dividend. The company's operating performance turned a loss into a profit, mainly due to the recovery in international oil prices. Domestic and foreign oil companies increased capital expenditure for upstream exploration and development, and the operating conditions of the oil service industry improved; at the same time, the company insisted on implementing cost control measures during the reporting period, effectively improving profitability. Revenue from the reservoir sector is stable, and the drilling and completion sectors are growing rapidly. In the first half of 2018, the operating income of the three main segments of the company's operations all increased compared to the same period last year. During the reporting period, the reservoir sector achieved revenue of 228 million yuan, a slight increase of 3.2% over the previous year. The drilling and completion sector is showing a clear growth trend as the market picks up. Among them, the drilling sector achieved revenue of 222 million yuan, an increase of 50.6% over the previous year; the completion sector achieved revenue of 92 million yuan, an increase of 79.1% over the previous year. Abundant orders in hand. The total amount of new and deferred orders signed and deferred by the company in the first half of the year was approximately RMB 1.89 billion, an increase of about 62.4% over RMB 1,166 billion in the same period last year. The new orders mainly come from the southwest shale gas project and the northwest Tarim project. Our view: Huayu Energy (1252.HK) is one of the few non-state oil field service providers in China that can provide comprehensive oilfield services. The scope of services covers reservoir research, drilling, completion and other related services. The company's flagship business, reservoir research, has continued to maintain a good business situation over the years, and the company currently has many orders, and the development prospects are good. With the current gradual recovery of the oilfield service industry, the company's drilling business and completion business have returned to normal, and it is expected that the company's performance will improve further. Risk warning: Fluctuations in international oil prices; project implementation falls short of expectations; exchange rate risk.