PETROVIETNAM DRILLING AND · PDF filePV Drilling 3 Vision To be an internationally reputable...

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4th FIoor, Sailing Tower, 111A Pasteur St.,Dist.1, Ho Chi Minh City Tel: (84.8) 3914 2012Fax: (84.8) 3914 2021

PETROVIETNAM DRILLING AND WELL SERVICES CORPORATION- PVD

PIONEER OF VIETNAM DRILLERS

PETROVIETNAM DRILLING AND WELL SERVICES CORPORATION- PVD

PV Drilling

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Contents

Vision - MissionCEO’s StatementOrganization Chart Board of Management, Supervisory Board, Board of DirectorsCorporate ProfilePV Drilling Significant Milestone in 20082008 Financial Highlights2008 Financial Results Summary Market Analysis and Development Strategies for PV Drilling in 2009PV Driiling Business Plan 2009Strategies for Steady Growth of PV Drilling Amidst the Volatile Economy in 2009Investor RelationsPublic Relations

Financial Statements

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VisionTo be an internationally reputable and reliable drilling contractor and drilling-related services

provider in the oil and gas industry

MissionTo be a leading regional provider of drilling and

drilling-related services, creating value added for clients by delivering high quality services at

competitive prices

PV Drilling

Pioneer of

Vietnam Drillers

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Dear Shareholders,

The year 2008 has been a difficult and challenging year for all Vietnam companies, including PV Drilling. However, with the right affirmed development strategy concentrating on the supply of drilling services, PV Drilling once again made significant progress. With the continuous increase of financial performance, PV Drilling’s revenue in 2008 was VND 3,729 billion, an increase of 36.2% compared to 2007. The net profit reached VND 922 billion, a significant annual growth of 61.3% from the previous year. In 2008, earning per share was VND 7,431, up 20% from VND 6,192 in 2007.

2008 marked many outstanding achievements in business activities of PV Drilling. PV DRILLING I jack-up rig operation efficiency increased from 86% to 99.6% and has achieved two-year safe operations (LTI free) counting from the first delivery day in March 2007 and broke the record of drilling in the deepest Granite basement with a total depth of 6,526 meter in well 9-2-CNV-2P in Cuu Long basin, Vietnam. During the year, PV Drilling concentrated on investing and developing efficient high-tech equipments and services such as mud logging, slickline… while maintaining its strength in traditional services such as drilling tool rentals, oil spill response, drilling equipment maintenance, drilling materials supply. PV Drilling has been moving forward in expanding manpower supply services to the regional countries as well as in the development of the PVD Training Company. This move drove the initial success of high quality human resources training strategy of PV Drilling which is also capable in undertaking the management and operation of the rig PV DRILLING I currently, as well as PV DRILLING II & III jack up rigs later.

Together with the development of high-tech services, application of modern technology to ensure future steady growth has always been the focus of PV Drilling as it aims to raise the efficiency of corporate governance in general and financial management in particular. In 2008, PV Drilling implemented the ERP system together with material management system-MAXIMO and other systems in oil and gas industry that has been applied successfully in the Company to support its corporate governance and to enhance productivity.

CEO’S STATEMENT

PV Drilling5

At PV Drilling, we always

make great efforts for

Company’s steady

development and

shareholders’ benefits

2008 continued to be a successful year for PV Drilling in its joint-venture activities with oilfield services companies. BJ-PV Drilling JV Company is an example. It has maintained good business performance and contributed significant profits to PV Drilling. In addition, PVD-PTI JV and PVD Tubulars Management JV has operated and gained initial progress since end of 2008.

The merger of PVD Invest, a subsidiary in which PV Drilling owned 51% of the charter capital, into PV Drilling was an important milestone that attracted investors’ attention. The merger aims to ensure PV Drilling’s long-term stable development in its drive to become Vietnam’s leading professional drilling contractor.

Dear Shareholders,

The year 2009 is expected to be more challenging than before in many aspects due to the certain delay which is the consequence of the effects from the global financial crisis to the incomplete joining of Vietnam economy. The plunge in oil price has affected the general oil and gas industry and the drilling industry in particular. As such, the competitions among drilling contractors in the global marketplace is unavoidable. Despite of this, the local market remains the target of PV Drilling during this period. The demand for drilling rigs, especially jack-ups, is forecasted to remain relatively stable. Therefore, opportunities in the local market will still be available. Moreover, in view of the global economy slowdown, a number of investment projects have a tendency to be downward. This will pave the way for PV Drilling leverage on the situation to invest in high tech services that have contributed significant revenue and profit to PV Drilling in 2008, as well as to enhance the expertise and competitive advantage of PV Drilling as an oil and gas services provider.

As a subsidiary of PetroVietnam, PV Drilling has advantages from PetroVietnam by receiving the supports in time and efficiently for its business development. In addition, with modern infrastructure, high technologies, the professional and experienced management and staff, and an efficient corporate governance system, PV Drilling will rise to the demand in the Vietnam’s oil services sector to develop capabilities to maintain the increase in revenue and profit during this difficult period. Based on the potential developments, we are confident for strong growth from 2010 to assure the achievement of long-term objectives to increase shareholders value while aiming to become leading drilling contractor in Vietnam.

On behalf of the Management Board, I would like to express the sincere thanks to the trust and supports of PetroVietnam, esteemed local and foreign shareholders. I would like to thank all of PV Drilling staff for their continual efforts and significant contributions to the success of PV Drilling in the past years. Personally, I am confident that with the right affirmed business strategy, management and operations transparency, and commitment to shareholders’ interests, PV Drilling will continue to move forward to the long-term development and be deserved with the trusts of investors, clients, partners and public.

Sincerely,

President & CEODO VAN KHANH

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008 ORGANIZATION

CHART

SHAREHOLDERS’ GENERAL MEETING

PVD TRADING & TECHNICAL SERVICES CO., LTD(PVD TECH)

PV DRILLING PRODuCTION TESTERS INTERNATIONAL CO., LTD (PVD-PTI) (51%)

PVD OffSHORE SERVICES CO., LTD (PVD OffSHORE)

ADMIN & HR DEPT.

HSEQ DEPT.

PVD DRILLING DIVISION(PVD DRILLING DIVISION)

INTERNAL AuDIT DEPT.

COMMERCIAL & INVESTMENT DEPT.

PVD TECHNICAL TRAINING & CERTIfICATION JS CO.(PVD TRAINING)

(51%)

PVD WELL SERVICES CO., LTD(PVD WELL SERVICES)

BJ SERVICES – PV DRILLING JV CO.(BJ-PVD)

(49%)

ACCOuNTING DEPT.

LEGAL DEPT.

HANOI REPRESENTATIVE OffICE

PETROVIETNAM DRILLING INVESTMENT CORPORATION(PVD INVEST) (51%)

fINANCE DEPT.

MIS DEPT.

PROJECT MANAGEMENT DEPT.

PVD LOGGING SERVICES CO., LTD(PVD LOGGING)

PVD TuBuLARS MANAGEMENT CO., LTD(PVD TuBuLARS MANAGEMENT)

(51%)

BOARD OF MANAGEMENTBOARD OF

DIRECTORS

SUPERVISORY BOARD

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008 BOARD OF MANAGEMENT

MR. DO DINH LUYENChairman Mr. Luyen is the Chairman of PV Drilling since 3 August 2006. from September 1975 to May 1988, he served as Engineer for International Corporation Department of PetroVietnam and later as Deputy Director of PetroVietnam Exploration and Production Company, from May 1988 until September 1997. Mr. Luyen was the General Director of PetroVietnam Insurance Company from September 1997 to January 2001. He was the Director of Gas and Power Division of PetroVietnam until August of 2006.

Mr. Luyen, together with other members of the Board of Management - Dr. Do Van Khanh, Mr. Tran Van Hoat, Mr. Pham Tien Dung - are the representatives for the 50.38% share of PetroVietnam in PV Drilling.

Mr. Luyen graduated with a degree in Petroleum Mechanical Engineering in Romania in 1973. He was awarded BA Degree in Economics in 1993.

MR. NGUYEN XUAN SONMember, Board of Management(Deputy General Director, PVFC)

He is a member of Board of Management since 23 January 2006, and is Director of Vietnam South East Region Gas Project Management Division since March 2009. from 1985-2001, Mr. Son served as Senior Officer for the Commercial Department Vietsovpetro Joint Venture. from 2001 to May 2007, he was the Director of PetroVietnam finance Corporation (PVfC), Ho Chi Minh City Branch. Between May 2007 and January 2008, he was the Deputy General Director of PVfC. from January 2008 to March 2009, Mr. Son held the position as Vice Chairman of PetroVietnam finance Corporation. He graduated with a BA Economics degree from Soviet union in 1984.

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DR. DO VAN KHANHMember, Board of Management (President & CEO, PV Drilling)

MR. TRAN VAN HOATMember, Board of Management

(Vice President, PV Drilling)

MR. PHAM TIEN DUNGMember, Board of Management

(Vice President, PV Drilling)

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SUPERVISORY BOARD

MS. NGUYEN THI THUYChief Supervisor, PV Drilling

MR. NGUYEN HONG NAMMember, Board of Management(Deputy General Director, SSI)

He is a member of Board of Management since 23 January 2006, and Deputy General Director of SSI since 1999. from 1994-1998, Mr. Nam worked as Officer in foreign Investment Department of Planning and Investment Ministry. from 1998 to 1999, he was appointed as Deputy Director of Pan Pacific, and Director of Pan Pacific, HCM Branch. He graduated with a Master Degree in Science from ukraine in 1992.

MR. DAM HAI GIANGMember, Board of Management(Manager, Project & Investment Department, VCB)

He is a member of Board of Management since 23 January 2006. Mr. Giang is Manager of Project & Investment Department, Bank for foreign Trade of Vietnam (Vietcombank), the position he has held since 1994. Mr. Giang graduated with a Master Degree in finance & Banking from united Kingdom.

MS. PHUNG NGUYEN HAI YENMember(Deputy Manager, Financial & Accounting Department, Vietcombank)

MR. NGUYEN KIM LONGMember(Manager, Legal Department, SSI)

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1. Dr. DO VAN KHANH President and CEO, PV Drillling Dr. Khanh joined the oil & gas industry in 1984, bringing with him 24 years of

experience in the drilling field. In 1994, Dr. Khanh was assigned to build and manage PTSC Offshore, the former organization of PV Drilling. from 1984 to 1992, he was a Drilling Engineer with Thai Binh Petroleum II Company and became the Chief Representative of PetroVietnam in Da Nang. from 1992 to 1994, Dr. Khanh held the position of Deputy Director of Odjfell Vietnam Company, a joint venture company of Odjfell Norway and PetroVietnam. from 1994 to 2001, he served as Director of PTSC Offshore, a division of PTSC - a subsidiary of PetroVietnam. Since the establishment of PV Driling in November 2001, Dr. Khanh is the President and CEO of PV Drilling. He graduated as a Drilling Engineer in 1984, and attained a PhD in Petroleum Geology in 2005.

2. Mr. TRAN VAN HOAT Vice President, PV Drilling

Mr. Hoat has 25 years of experience in the oil and gas industry, of which 18 years was with Vietsovpetro - a joint venture company of Vietnam and Russia. He held the positions of Tool Pusher, Chief Engineer and Rig Manager of Cuu Long Jack-up rig. Mr. Hoat had 4 years of working experience at Thai Binh Petroleum I Company. He is the Vice President of PV Drilling since 2001. He graduated with a Petroleum Engineering Degree in 1982. He also holds the Advanced Petroleum Engineering Certificate from Soviet union.

3. Mr. VAN DUC TONG Vice President, PV Drilling

Mr. Tong has 27 years in the oil and drilling machinery industry. He began his career as a Mechanical Drilling Expert in Thai Binh Petroleum I Company in June 1981 and was identified as one of Vietnam’s top experts in drilling rig construction. from 1982 to 1984, Mr. Tong worked as Senior Officer of Drilling College Institution at Vietsovpetro. from 1984 to 1987, he was the Chief Engineer for Vietsovpetro. from 1987 to 2002, Mr. Tong held the positions of Deputy Rig Manager, Deputy Manager of Mechanical Department, Manager of Mechanical Department of Drilling Enterprise, Manager of Automatic-Power and Mechanical Department for Vietsovpetro. Since November 2002, Mr. Tong is the Vice President of PV Drilling. He attained his PhD in Drilling and Production Equipment Technology at Technological Machinery from Romania in 1981.

BOARD OF DIRECTORS

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4. Mr. PHAM TIEN DUNG Vice President, PV Drilling Director, PVD Drilling Division

Mr. Dung has 17 years of experience in the oil & gas industry. He worked for well-known international oil & gas companies in Singapore, Australia, and Thailand. from 2002 to 2005, he served as Director for Drilling Services Enterprise, a division of PV Drilling. from 2005 to July 2006, Mr. Dung was appointed as Deputy General Director of PV Drilling and co-position of Director of Drilling Services Enterprise. Since July 2006, Mr. Dung is the Vice President of PVD, and holds the position of Director of PVD Drilling Division. He graduated with a degree in Mechanical Engineering in 1988.

5. Mr. LUONG TRONG DIEP Vice President, PV Drilling

Mr. Diep has 7 years of experience in the import and export business, and 13 years of experience in the oil & gas industry. from 1995 to 1998, he was the team leader of the Crude Oil Department of Petechim. from 1998 to 2002, he was the Deputy Manager of financial & Accounting Department of Petechim. from february 2002 to March 2006, he served as Manager of Commercial Department of PV Drilling. Since March 2006, Mr Diep is the Vice President of PV Drilling. He graduated with a MBA degree from Australia Master in finance from united Kingdom.

6. Mr. HO VU HAI Vice President, PV Drilling Director, PVD Offshore

from 1994-2001, Mr. Hai was the Leader of Oil Spill Response Division of PTSC Offshore. Since the establishment of PV Drilling in November 2001 to June 2006, Mr. Hai was the Director of Oil Spill Response Services Enterprise, a division of PV Drilling. from July 2006 July 2007, Mr. Hai served as Director of Drilling Services Enterprise, a division of PV Drilling. Since July 2007, Mr Hai is the Director of PVD Offshore- a subsidiary of PV Drilling. In January 2008, he was appointed as the Vice President of PV Drilling and Director of PVD Offshore. Mr. Hai graduated with a Maritime Engineering Degree in 1992.

7. Ms. HO NGOC YEN PHUONG Vice President, PV Drilling

Ms. Phuong has 15 years of experience in the financial and Accounting field, including 12 years as Chief of finance and Accounting in several well-known companies. from 1993 to 1995, she worked as Accountant for Agrimex. from 1995 until 1998, she served as Chief Accountant of fDI VMEP (now SYM) and was later appointed as Deputy Director of finance and Accounting for VMEP-SYM. from 2000 to 2003, she was the finance Controller of Joint Venture Holcim Vietnam. from 2003 to July 2007, Ms Phuong worked as the CfO of S Telecom. from July 2007 to August 2008, she joined PV Drilling as finance Manager and was appointed as CfO of PV Drilling in November 2007. She has been the Vice President and CfO of PV Drilling since August 2008. Ms. Phuong graduated with a Master Degree in International finance and Accounting from Australia.

8. Mr. DOAN DAC TUNG Chief Accountant

Mr. Tung held the postion as Deputy financial and Accounting Manager of PV Drilling from January 2002 to february 2006. Since March 2006 to present, Mr. Tung was appointed to be the Chief Accountant of PV Drilling. Mr. Tung graduated with a Bachelor of Economics Degree from finance and Accounting university in 1994.

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PV Drilling’s Management Board and Staff strongly believe in the development strategy of the Company with the objective to be the international professional drilling contractor

CORPORATE PROfILE

Key Milestones in PV Drilling’s Development

o 1994 – Established PTSC Offshore, a division of Petroleum Technical Services Company (PTSC).

o 26 November 2001 – Established PV Drilling, a subsidiary of PetroVietnam, based on the handover of business activities from PTSC Offshore.

o 15 february 2006 - PV Drilling officially became a joint-stock company under the name of PetroVietnam Drilling & Well Services Joint-Stock Company (PV Drilling).

o 5 December 2006 - PV Drilling stocks were listed on Ho Chi Minh Stock Exchange (HOSE).

o 8 March 2007 - PV Drilling officially held the naming ceremony for its the first jack-up rig named PV DRILLING I.

o 11 May 2007 - PV Drilling transformed to PetroVietnam Drilling & Well Services Corporation under the form of a holding group company.

o 9 November 2008 - PV Drilling held Extraordinary Shareholder’s General Meeting to approve the merger plan of PVD Invest, a subsidiary in which PV Drilling owned 51% equity, into PV Drilling.

Scope of Services

o PV Drilling is a reputable drilling and drilling-related services provider for the oil and gas industry in Vietnam and the region. PV Drilling has expanded its service portfolio to include:

Drillingo Drilling contractor.

Drilling- related services

o Drilling tools rental service

o Mud logging & geologist consultant services

o Tubular handling service

o fishing and P&A services

o Well head service

o Oil spill control service

o OCTG management service

o Inspection, maintenance & refurbishment of OCTG, drilling tools & equipment services

o Drilling manpower supply service

o Procurement of materials, equipment and spare parts for oil & gas and other industries

o Safety & technical training and certification for oil & gas industry as well as other industry

Other services offered in collaboration with international partners include

o Cementing and stimulation services

o Well testing service

o Directional drilling and wireline logging services

o Providing comprehensive package of management, set up and maintenance for OCTG

Organizational Structure

With more than 1,100 employees, PV Drilling and its subsidiaries are structured as follows:

PV Drilling13

Drilling rigs provision is one of PV Drilling’s core services

Subsidiaries wholly-owned by PV Drilling

o PVD DRILLING DIVISION

o PVD Offshore Services Company Limited PVD OffSHORE

o PVD Well Services Company Limited PVD WELL SERVICES

o PVD Logging Services Company Limited PVD LOGGING

o PVD Trading & Technical Services Company Limited PVD TECH

PV Drilling’s Joint-stock companies and Joint ventures

o PetroVietnam Drilling Investment Corporation PVD Invest (51%)

o PVD Technical Training & Certification Joint Stock Company PVD Training (51%)

o BJ Services-PV Drilling Joint Venture Company Limited BJ Services-PV Drilling (49%)

o PV Drilling-Production Testers International Company Limited PVD-PTI (51%)

o PV Drilling Tubulars Management Company Limited PVD Tubulars Management (51%)

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A branch of PV Drilling, specializes in the management and operations of drilling rigs. They have been efficiently operating the jack-

up rig PV DRILLING I and land rig PV DRILLING 11. PVD Drilling Division contributed 40% total revenue and 80% total net profit of PV Drilling in 2008. The result is due to the stable and efficient operations of up to 99.6% of the two rigs, as well as the contributions of best effort in management and operations from Division leaders and staff.

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Awholly-owned subsidiary of PV Drilling, specializes in the provision of drilling manpower, inspection, maintenance and refurbishment of OCTG, drilling

tools and equipment, oil spill control and waste management services. PVD Offshore’s business grew steadily in 2008 with revenue and net profit of VND 309 billion and VND 90 billion, recording a revenue and net profit annual growth of 50.9% and 39.7% respectively. In particular, drilling manpower supply service contributed the highest portion of approximately 56% of the Company’s revenue and net profit, occupying around 90% market share in Vietnam. Besides the supply of drilling manpower for PV Drilling’s two drilling rigs, PVD Offshore also provided for rigs operating abroad including Transocean’s Trident 9 (Singapore) & Trident 16 (Malaysia), Premium’s WillBoss (Philippines), Doosung (South Korea). In addition, PVD Offshore also supplied motormen to drilling ship Neptune Discoverer in Venezuela.

PVD OffSHORE SERVICESCOMPANY LIMITED(PVD Offshore)

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A wholly-owned subsidiary of PV Drilling, focuses on drilling tool rental, tubular running, directional drilling/ MWD/ LWD, coring, fishing and P&A, liner hanger and completion services. In 2008, PVD Well Services increased its market share in Vietnam by from 10% to 80% for directional drilling services, a leading high-tech service of the oil & gas industry. Moreover, the Company successfully implemented the development strategy of professional engineers for directional drilling and tubular running services, contributing a significant increase in self-operating rate and reducing the dependence on foreign partners for provision of these services. With all the above efforts, in 2008, PVD Well Services reached VND 641 billion in revenue, an increase of 64.4% compared to 2007 and VND 47 billion in net profit.

PVD WELL SERVICESCOMPANY LIMITED (PVD Well Services)

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A wholly-owned subsidiary of PV Drilling, specializes in high-tech services such as mud logging, geologist/consultant, slickline, wireline logging and well testing services. In 2008, PVD Logging reached a total revenue of VND 556 billion and net profit of VND 39 billion, an annual growth rate of 71.3% and 28.7% respectively. The results were attributable to the focus of PVD Logging on self-supply services that contributed high return on revenue such as mud logging, slickline and wellsite geologist services. In addition, the Company implemented a strategic human resources development plan with the recruitment of highly experienced and outstanding personnel from international companies, to help strengthen the internals of PVD Logging at low training cost.

PVD LOGGING SERVICESCOMPANY LIMITED

(PVD Logging)

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A wholly-owned subsidiary of PV Drilling, provides materials, spare parts, equipments and technical services for oil & gas and other industries. One of its most outstanding achievements in 2008 is the supply of wellhead rental service for Premier Oil and Truong Son JOC as well as expanding the service internationally by providing services to Nido Company in Philippines. The Company has also completed the investment and started operation of the 2.5-hectare worksite at Dong Xuyen Industrial Zone in Vung Tau City. The worksite is fully equipped with a 30-tonne & 15-tonne crane, 8-tonne forklift, Lincoln & Miller welding machines, lathe, milling machine and others. In 2008, PVD Tech was ranked as the second revenue-generating subsidiary of PV Drilling with amount of VND 706 billion, occupied 19% of PVD’s total revenue. The company also achieved net profit of VND 22 billion, an increase of 84.8% compared to that of 2007.

PVD TRADING & TECHNICAL SERVICESCOMPANY LIMITED (PVD Tech)

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A subsidiary of PV Drilling whereby PV Drilling owns 51% equity. PVD Invest specializes in the investment of drilling rigs and technical equipments for rental services to support PV Drilling development strategy. PVD Invest is the investor of the two jack-up rigs PV DRILLING II & PV DRILLING III that are expected to be delivered by end of 2009. On 25 October 2008, the Extraordinary Shareholders’ General Meeting, PVD Invest ratified a resolution on the approval of the proposed merging plan of PVD Invest into PV Drilling. The merger is expected to complete by the 2nd quarter of 2009, which helps to avoid conflict of interests as well as combines the power of the two companies to raise the intrinsic value and enhance value added for PVD shares. Even during the investment period of the two jack-up rigs, PVD Invest managed to be profitable for two consecutive years. In 2008, the Company reached VND 16 billion in net profit from financial income, up 72.7% from 2007.

PV Drilling’s Joint-stock companies and Joint ventures

PETROVIETNAM DRILLINGINVESTMENT CORPORATION

(PVD Invest)

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A subsidiary of PV Drilling whereby PV Drilling owns 51% equity. PVD Training is the local exclusive partner of TWI (British Institute of Welding Technology) and Seatag Offshore Company (New Zealand). The Company offers internationally recognized competency-based training, certification, professional qualifications, technical services in many disciplines such as welding supervising engineers, cranes, scaffolding skills training, welder training and international certification, offshore safety training, etc. The year 2008 marked the breakthrough of PVD Training with the opening of the high-tech welding training center at Quang Minh Industrial Zone, Me Linh district, Ha Noi and the newly-built office complex, classrooms and worksite at Dong Xuyen Industrial Zone, Vung Tau City. In 2008, PVD Training obtained growth rate of nearly 70% compared to 2007 with a revenue of VND 33 billion and net profit record of almost VND 7 billion together with the main duty that supplies the professional experts for drilling industry.

PVD TECHNICAL TRAINING & CERTIfICATION JOINT STOCK COMPANY(PVD Training)

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A subsidiary of PV Drilling whereby the latter owns 49% equity. BJ-PVD specializes in providing cementing, stimulation, coiled tubing, Nitrogen pumping services, refurbishment, maintenance services and procurement of materials and equipment related to the above services. The year 2008 continued to be an outstanding year of success for BJ-PVD with revenue of approximately VND 420 billion and net profit of VND 110 billion which contributed more than VND 55 billion in profit for PV Drilling, 66.5% increase from 2007.

BJ SERVICES-PV DRILLINGJOINT VENTuRE

(BJ - PVD)

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A subsidiary of PVD Logging whereby PVD Logging owns 51% equity. PVD-PTI provides services to the phases of the exploration, appraisal, development and production of the well services including: Producing, Processing, Renting Early Production facilities (EPf), Extended Well Testing (EWT), Well Testing Services including equipments, Production uplift, Well Processing, Development and Appraisal Well Clean-ups, Well Effluent Management and Clean-up, Process Engineering and Equipments Rental. In its first year of business, PV Drilling-PTI secured the first well-testing service contract with Vietsopetro, promising potentials for the bright future. Currently, PTI is in the investment process.

PV DRILLING-PRODuCTION TESTERSINTERNATIONAL COMPANY LIMITED(PVD-PTI)

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A subsidiary of PVD Tech whereby PVD Tech owns 51% equity. Established in October 2008, its main business offers Total Tubular Management services and other related services for OCTG products such as threading, repair, maintenance, inspection, logistics services and the importation and distribution of OCTG products. PVD Tubulars Management is currently building a 3-hectare worksite complex and an office at Phu My I Industrial Zone, Ba Ria - Vung Tau province.

PV DRILLING-PRODuCTION TESTERSINTERNATIONAL COMPANY LIMITED(PVD-PTI)

PV DRILLING TuBuLARSMANAGEMENT COMPANY LIMITED

(PVD Tubulars Management)

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008 PV DRILLING SIGNIfICANT

MILESTONES IN 2008

PV DRILLING I jack-up rig achieved more than 2-year safety operations (LTI free) since the first delivery day in March 2007.

PVD Tubulars Management – a joint venture of PV Drilling and Marubeni Itochu company, started operations on 7 October 2008.

PV DRILLING I jack-up rig broke the record of drilling in the deepest Granite basement with a total depth of 6,526 meter in well 9-2-CNV-2P in Cuu Long basin, Vietnam.

PV Drilling exceeded the profit target for 2008.

PV DRILLING 11 land rig gained the new Algeria Meterage Record of 208.5 meter with Smith Bit-6’’K505BPX at Hamra Quartzite formation, Algeria.

PV Drilling was honored as one of the top ten stocks in Vietnam by Standard & Poor’s, an international credit rating agency.

Slickline and Karota services performed successfully for Thang Long JOC and Truong Son JOC.

PV Drilling succeeded in capital mobilization for PV DRILLING III jack-up rig in the international finance market.

ERP system – Phase 1 – finance & Accounting Management system applied efficiently since 1 January 2008.

PV Drilling conducted the merger of PVD Invest, a subsidiary in which PV Drilling owned 51% of charter capital into PV Drilling, upon the approval of merger plan at the Extraordinary Shareholders’ General Meeting on 9 November 2008.

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financial highlights unit 2008 2007 2006 2005Revenue VND billion 3,729 2,739 1,349 1,072Profit Before Tax VND billion 929 580 162 73Profit After Tax VND billion 922 572 116 53Debt to Equity Ratio Time 2.29 0.83 1.75 0.67Net Tangible Assets per Share VND 15,228 18,948 796 N/ATotal Assets VND billion 8,633 4,330 2,174 1,185Earnings per Share VND 7,431 6,192 1,712 N/A

2008 fINANCIALHIGHLIGHTS

DEBT TO EQuITY RATIO

0,67

2008

2007

1,752006

0,83

2005

2,29

PROfIT BEfORE TAX (VND BILLION)

73

2008

2007

1622006

580

2005

929

EARNINGS PER SHARE (VND)

1,712

2008

2007 6,192

2006

7,431

PROfIT AfTER TAX (VND BILLION)

53

2008

2007

1162006

572

2005

922

REVENuE (VND BILLION )

1,072

2008

2007

1,3492006

2,739

2005

3,729

TOTAL ASSETS (VND BILLION)

NET TANGIBLE ASSETS PER SHARE (VND)

0

2008

2007

7962006

18,948

2005

15,228

Net Tangible Assets per Share

Total Assets

1,185

2,174

4,330

8,633

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008 2008 fINANCIAL

RESuLTS SuMMARY

The year of 2008 is also a rapid and steady development year of PV Drilling despite the fact

of common difficult economy.

2008 business performance summary

The success and developments of PV Drilling’s business performance in 2008 are reflected in the following financial information:

fINANCIAL RESuLTS unit 2008 2007 2006 2005

Operating resultsRevenue VND billion 3,729 2,739 1,349 1,072Profit before tax VND billion 929 580 162 73Profit after tax VND billion 922 572 116 53

Financial statusEquity VND billion 2,133 1,864 792 711Minority Interest VND billion 491 497 - -Total Assets VND billion 8,633 4,330 2,174 1,185Total Liabilities VND billion 6,008 1,969 1,383 474

Perfomance indicatorsNet Income Margin % 24.73 20.88 8.63 4.90Earnings per Share VND 7,431 6,192 1,712 N/ANumber of Share Million 132.17 110.14 68.00 N/ADividends Ratio after funds Provision % 49.80 38.51 14.00 N/A

Financial indicatorsROE (Return on Equity) % 46.14 43.07 15.50 12.88ROE (Return on Chartered capital) % 74.31 61.92 17.12 53.94ROA % 14.23 17.72 6.93 7.16Quick Ratio Time 0.99 2.42 0.91 1.35Debt to Equity Time 2.29 0.83 1.75 0.67

Note: The above figures were consolidated from Financial Statements of the following subsidiaries:Head Office of PV Drilling PV Drilling Division PVD Logging Services Co., Ltd. (PVD Logging)PVD Well Services Co., Ltd. (PVD Well Service)PVD Offshore Services C., Ltd. (PVD Offshore)PVD Trading & Technical Services Co., Ltd. (PVD Tech)PVD Technical Training & Certification Joint Stock Co. (PVD Training)Petrovietnam Drilling Investment Corporation (PVD Invest)

The above figures are also included profits from Joint Venture BJ-PV Drilling Co. and PV Drilling – Production Testers International Co., Ltd.

PV Drilling29

RevenueDespite the volatile fluctuations of the world economic situation in 2008, PV Drilling’s revenue continues its robust growth, increasing 36.2% from VND 2,739 billion in 2007 to VND 3,729 billion in 2008, scoring 124.3% of targeted.

The strong increase in revenue is attributable to the increase in operation efficiency of the two drilling rigs, of which the first Jack-up rig increased from 86.0% to 99.6% and the Land-rig increased from 94.0% to 99.0%. The continual operations of the first Jack-up rig and the increase of contracts awarded to provide services to customers such as Thang Long, Truong Son, Cuu Long and Premier Oil also contributed to the surge in revenue.

ProfitabilityPV Drilling achieved a remarkable net profit of VND 922 billion, a significant increase of 61.3% as compared to the previous year (VND 572 billion) and achieved 131.7% of targeted. Of the 2008 net profit of VND 922 billion, 80% is contributed by the first Jack-up rig and Land-rig. The remaining is from other well services. In addition to the core drilling business contributions, the

expansion of high-profit margin advanced technological services to customers such as Well testing, Mud logging and Wireline logging together with cost control improvements also contributed to the increased profit of PV Drilling. Net profit margin increased from 20.9% in 2007 to 24.7% in 2008.

DividendThe significant growth in revenue increased shareholder interest in 2008. Return on charter capital achieved 74.3%, higher than last year by 12.1%. Earnings per share increased to VND 7,431 per share in 2008, up 20% from VND 6,192 per share in 2007. The dividend is calculated 49.80% after the stipulated deduction of fund reserves, up 11.3% from the previous year.

Assets and resourcesAs at end of 2008, PV Drilling’s total assets were VND 8,633 billion, higher than previous year by 99.38%, mainly due to the new investment of the two jack-up rigs PV DRILLING II and PV DRILLING III.

30% of the above total assets were funded from shareholders and retained earnings and the remaining from trading credit and loan. In 2008, PV Drilling was successfully approved a syndicated loan of uSD 150 million for the new jack-up rig PV DRILLING III with a term of 6.5 years, in which uSD 115 million was sponsored from foreign banks such as HSBC, ANZ, and RBS and the rest from BIDV with competitive financial expenses. As at end of 2008, the total amount paid to KfELS contractor for the building of two drilling rigs PV DRILLING II and III was uSD 211.1 millions, bearing 53% of the total contract value.

TOTAL REVENuE

VND 3.729 BILLIONTOTAL PROfIT AfTER TAX

VND 922 BILLION

REVENuE TREND (VND BILLION )

1,072

2008

2007

1,3492006

2,739

2005

3,729

NET PROfIT TREND (VND BILLION)

53

2008

2007

1162006

572

2005

922

Profit After Tax

Net Profit Margin

5%

9%

21%

25%

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DEVELOPMENT STRATEGIES fOR PV DRILLING IN 2009

Regional and International Market Analysis

PV Drilling recognizes that 2009 will be a more difficult and challenging year. The global financial crisis and the plunge of oil price had lead to the decline of oil and gas exploration and production activities resulting in the shrink in demand of drilling services. However, in spite of the economic situation in South East Asia and Vietnam, the exploration and production activities are expected to be moderately stable in the current conditions.

According to the specialists’ forecast reports, with the fall in oil price, the reduction in budget for oil and gas exploration and production activities will continue for the next year and gradual recovery can be expected to commence from the second quarter in 2009. uS reported the highest national oil exploration and production budget cuts of 26% to uSD 79 billion, and Canada reported 23% to uSD 22 billion as compared to 2008. However, the budget reduction for oil exploration and production activities in other countries was less acute. The reduction rate of about 6% from 2008 to uSD 300 billion is after a continuous growth of 9 years. This is due to the earlier implementation of the projects by many multi-national and national oil companies in the region. However, the reduction will result in a rise in energy demands leading to the gradual recovery of the oil price at the end of 2009. Oil companies forecasted that there will be drilling plans as the oil price moves toward stabilization in the beginning of 2010.

Vietnam Market Analysis

According to ODS-Petro Data, the forecasted demand for jack-up rigs in Vietnam is approximately 8 rigs for drilling plans that was projected prior to the beginning half of the year 2008 (totally about 44 wells to be drilled and started operations in 2009). Hence, there will be the limit for the developments in domestic market in 2009.

In view of budget reduction for oil and gas exploration and production activities that leads to the decline in oil and gas services demand as analyzed above, PV Drilling is likely to experience moderate shrink in service demand. Currently, there are 7 jack-up and 2 semi-submersible rigs operating in offshore Vietnam.

Challenges to PV Drilling

There will be more difficulties ahead for PV Drilling in its search for opportunities to expand customer base and new contracts. Besides, PV Drilling needs to strengthen its internal resources to be ready for the up-coming opportunities when the market enters recovery stage. This period will see a more rapid growth increase as compared to the pre-crisis stage.

MARKET ANALYSIS

PV Drilling31

PV Drilling maintains its focus on traditional customers for its drilling service who have proven to be significant in the company’s development. They are high potential customers with long-term drilling programs such as JVPC, Hoang Long/ Hoan Vu JOC, Thang Long JOC, Petronas, Vietgazprom, PVEP and Vietsopetro among many others. The development of relationship with these customers strengthens PV Drilling’s ability to bring in more businesses for the Company. PV Drilling also concentrates on building up relationships with potential customers to actively speed up the exploration and production activities in Vietnam such as Phu Quy POC, Bach Dang POC, Premier Oil, Chevron, Santos and companies with demands for drilling service outside Vietnam.

for well and other services, other than the target customers of drilling service, PV Drilling also targets contractors and other customers operating from upstream to downstream business in oil & gas industry. To prepare for the long-term and future strategic developments as well as to enhance PV Drilling position in the world market, the expansion of services to overseas market is one of the targets of the Company. The priority is to develop the foreign markets in which Petrovietnam is performing exploration and production activities or the markets that Petrovietnam has expansion plans. The relationship between Petrovietnam and the partners in these markets will be advantageous for PV Drilling in establishing new businesses. PV Drilling may embark in new markets by forming joint-ventures with the local partners to exploit the customers base of these local firms to tap the market potential.

fOCuS ON TRADITIONAL AND TARGET CuSTOMERS

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INTRODuCTION Of NEW HIGH-TECH SERVICES WITH HIGH RETuRN ON INVESTMENT

One of the proposals of PV Drilling’s services development is the provision of high-tech services with high return on investment (ROI). Riding on the success of 2008, PV Drilling will continue to offer new services such as oil and gas sampling transfer and management, geology predict, slickline, realtime rig-link, fabrication services and steel structure building in 2009.

The expansion of new services will support PV Drilling to gear toward the plan to provide integrated drilling packages to customers. This development strategy will extend the target market for PV Drilling, easing entry into the specialized service sectors dominated by foreign companies. This will strengthen the internal resources of Vietnam Oil and Gas Industry which is in accordance with the development strategy of PVN.

MARKET ANALYSIS AND DEVELOPMENT STRATEGIES

fOR PV DRILLING IN 2009

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PV Drilling will establish a system to collect, analyze and share integrated customer and market information within the company to understand and meet customers demand in a timely manner. The customer service arrangement between subsidiaries and the headquarter is placed in priority. This is key factor to increase the effectiveness of customer service and the professional image of PV Drilling.

PV Drilling will realign its customer service to focus on customer satisfaction to enhance the service quality. In particular, PV Drilling aims to give customers the convenience of speedy and accurate transaction by stringent tracking of contracts with the appointment of only one department or unit to interact with the customer.

Following the recognition of target customers, PV Drilling will focus on the Marketing Plan to implement the

projected business strategy.

fOCuS ON MARKETING PLAN IN 2009

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As one of the top blue-chip companies in Vietnam, PV Drilling has been enhancing the Corporate Governance to raise the business activities efficiency as well as to increase value for PV Drilling’s investors and shareholders.

IT implementation to develop and improve the Corporate Governance System

In 2008, PV Drilling marked its first milestone in IT deployment with the official implementation of the financial-accounting management system of ERP Oracle E-business Suite 11 in the Company.

The system contributes to the efficiencies in finance-accounting management practices such as:

Professionalize accounting and financial activities »and enhance specialized ability of accounting and financial staff.

Perform accounting management in the Company »and help the BOM in decision making on the Company’s operations.

Provide tools in making Consolidated financial »Statement of the whole company accurately in a timely manner and in accordance with financial regulations.

follow the principles of VAS and create the »foundation in complying with the principles of IfRS, especially when PV Drilling prepares for IPO plan overseas.

Cash Management

Payables Management

Fixed Assets

Business Processes

CENTRALIzED MANAGEMENT SYSTEM

Financial Consolidation » Business Intelligence »

FINANCIAL ANALYSIS

CONTROLS & REPORTS

Receivables Management

MARKET ANALYSIS AND DEVELOPMENT STRATEGIES

fOR PV DRILLING IN 2009

ENHANCE CORPORATE GOVERNANCE EffICIENCY BY APPLYING INfORMATION TECHNOLOGY AND IMPROVING CORPORATE GOVERNANCE SYSTEM

PV Drilling35

In addition, Drilling Division of PV Drilling has successfully applied the Computerized Maintenance Management System - MAXIMO in 2008 with the main functions such as: materials and equipments management, setting up maintenance plans, enhance the control in materials and equipments used in business activities of the drilling rigs.

Continuing the development of the applied foundation program which operated in 2008, PV Drilling will carry on to implement the expansion of the modules of ERP Oracle EBS 11i system (ERP Oracle Project-2nd stage) such as purchasing management module, project/contract management module, human resources management module and connecting Maximo. Together with the execution of the applied software systems, PV Drilling will concentrate on building new IT infrastructure; improve the WAN system that connects all the subsidiaries of the Corporation, and a satellite communication connection with PV DRILLING I.

The development of IT in 2009 is an affirmed step towards the building of the Company’s Corporate Governance system. This will help PV Drilling to improve the management efficiency, enhance competitiveness and information transparency as well as bridge the gap within the same industry.

Enhance Corporate Governance efficiency by building up the Corporate Governance system.

Build up accounting management and financial »analysis system to support the decisions of the Board of Management.

Intensify internal audit to provide financial information »transparently, clearly and accurately.

Apply the financial tools to prevent currency risks »such as foreign exchange, interest rate to effectively stabilize business activities.

Vietnam and the global stock markets are currently »still in a challenging phase. Investors are facing with the high levels of disbelief and skepticism as shares’ market price of listed companies decreased. As such, for the year ahead, PV Drilling will prepare for its overseas IPO plan to be ready when the economy recovers to enhance the PVD’s share value.

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PV DRILLING 2009 BuSINESS PLAN

Eventhough the financial and economic crisis is predicted to be continuous in 2009, the downward of oil price will affect to the Company’s revenue that causes the limit to the growth of financial indicators, PV Drilling will always be expanding the business activities for its long-term development.

Based on the oil price of approximately uSD 50 per barrel, the financials of PV Drilling in 2009 is budgeted as below:

Projected Business Performance:

Revenue VND 3,500 billion

Gross Profit VND 770 billion

Net Profit VND 700 billion

Investment Plan: VND 4,442 billion Investment in PV DRILLING II & III jack-up rigs: VND 3,774 billion (disbursement period)

Investment in drilling services equipment : VND 369 billion

Other investments : VND 299 billion

If the oil price hovers at around 70 uSD per barrel, PV Drilling’s targets will be forecasted as follows:

Revenue VND 4,000 billion

Gross Profit VND 884 billion

Net Profit VND 800 billion

PV Drilling remains confident in achieving its objectives in 2009, given the modern technology infrastructures advantages, qualified and experienced staffs, and the preferential support given as a subsidiary of Petrovietnam.

PV Drilling37

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STRATEGIES fOR STEADY GROWTH Of PV DRILLING AMIDST

THE VOLATILE ECONOMY IN 2009

The Vietnam economy has suffered from the impact of the global economic crisis in 2008, causing difficulties to many companies. According to the economists’ forecast, Vietnam economy’s growth rate in 2009 is unlikely to improve due to the lack of profusion of domestic and foreign capital. Vietnam is expected to face more challenges in 2009 with rising unemployment rate, reduction in consumers’ purchasing power, and the decrease in import and export turnover.

The global economic crisis has affected the drilling and well services providers including PV Drilling. The business performance is also affected by the sharp fall in oil price causing a decrease in demand for drilling rigs and other drilling services. In 2008, the oil price of PetroVietnam averaged at about uSD 102 per barrel while the oil price rose to a record high of more than uSD 147 per barrel. According to the forecast 2009, the average global crude oil price is expected to be in downward trend with the price of uSD 60 per barrel compared to the hit price in 2008. However, in South East Asia - PV Drilling’s target market, the number of delayed projects is small as most of the projects had already been implemented when the oil price was low.

PV Drilling recommends the following strategies in face of the above difficulties to meet the objective of stabilizing the business in 2009 while preparing for future growth in 2010:

For PV DRILLING I efficient operations: Continue to maximize the operating efficiency of PV DRILLING I by reducing maintenance process time to increase the revenues, and lower the costs. PV DRILLING I contributed less than 40% of the total revenue in 2008, but the profit was approximately 80% of the total profit of PV Drilling. The gain was due to the increase in the operating efficiency of PV DRILLING I from 95% to 99.5% in 2008. As a matter of fact, in 2009, the operating efficiency maximization of PV DRILLING I will continue to be an important factor toward the increase of revenues, reduction in drilling rigs rental expenses, and improvement business performance of the Company.

For the development of high tech services: In addition to the main traditional service such as drilling services, manpower supply, oil spill response, PV Drilling will concentrate on the development of high-tech services

PV Drilling39

whereby PV Drilling will self-provide to raise higher profits and efficiency. Since its establishment, PV Drilling has been focusing on expanding itself provision capabilities by cooperating with foreign partners and investing in modern technologies to meet the market demand together with qualified personel recruitments and appropriate training policy to provide the services. The reality has proved that the above policy is all the right track. An example of the successful solution is the fact that PVD Logging, a subsidiary of PV Drilling, recorded a net profit of nearly 50% of its total profit in 2008 while its revenue from its high-tech services such as mud logging, slickline... was less than 20% of the total revenue.

For the Market: In addition to the local market, PV Drilling will expand its services overseas. Meanwhile, PV Drilling will participate in projects which PetroVietnam are implementing in Iraq, Venezuela and other countries. The international service expansion aligns with the long-term development strategy of PV Drilling in view of the globalization and Vietnam’s entry to WTO. This solution aims to leverage on PetroVietnam for participation in its projects in countries that have established good relations with Vietnam.

For the Finance: 2008 recorded volatile fluctuations in the financial markets. Hence, PV Drilling needs to lower the costs and increase in the profits by operating and managing effectively all financial resources such as cash flow management, financial instruments implementation, cost control solutions for expenses reduction.

For the Information Technology: Riding on the success of its ERP first phase implemention in 2009, PV Drilling will continue with the second phase by extending it to other areas such as Project Management, HR Management, and Purchasing. PV Drilling will also continue to promote the successful application material management system ‘Maximo’, and other specialized applied systems in oil field to optimize materials management, minimize variable cost, and increase business efficiency.

For the Human Resources: PV Drilling will strengthen internal human resources by planning tailored training programs to develop and enhance the skills of the management team, in particular for Vietnamese staff to gradually take the place of the foreign counterparts. The company will also boost the abilities of independent businesses to reduce reliability on foreign partners for high tech services. These solutions will form the base for the long term and stable development of PV Drilling, as well as brand positioning of PV Drilling as a provider of high tech drilling and drilling-related services with high return on investment.

For the Investment and Construction: To continue control, reseach and evaluate all approved investment projects.

+ For projects in progress: provide management supports to PVD Invest to assist in the building of PV DRILLING II, and III rigs safely, qualitatively and on schedule, within the approved total budget to prevent time loss and materials wastage. Continue with other ongoing projects to complete on schedule benefitting from the current lower cost.

+ For the projects to be implemented: Priority given to important projects with higher efficiency, while eliminating unproductive and unfeasible projects.

faster and stronger recovery can be expected after the recession. PV Drilling will be prepared to take this opportunity to strengthen its developments through long-term and strategic investment projects.

Apart from the strategies mentioned and the advantage as a subsidiary of PetroVietnam, PV Drilling will also have the support from the parent Company in its participation in PetroVietnam’s drilling exploration and production programs locally and internationally.

With the recent support from Vietnamese government to assist local companies and key national industries amidst the economic crisis, PV Drilling submits an appeal to PetroVietnam to have the protectionism from government on key businesses currenly shared by foreign companies.

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Satisfying information demands for investors and shareholders

is always the top priority of PV Drilling

INVESTOR RELATIONS

As one of the blue-chips companies listed on Vietnam Stocks Exchange, PV Drilling is responsible for the interest of its local and foreign shareholders. further to the requests of shareholders, financial consulting companies, management funds and the Press regarding meeting and exchange information, PV Drilling has held many meetings with shareholders, financial consulting companies, management funds and the Press at PV Drilling‘s headquarters to inform them of the Company progress in 2008. Through these meetings, PV Drilling was able to meet investors’ requests to update and share all the related information on business operations as well as open

for discussion about financial indicators and company development strategies so that the investors can evaluate investment opportunities in PVD.

Apart from the Annual Shareholders’ General Meeting held in March 2008, PV Drilling has organized other meetings with the investors to share information, exchange and receive constructive ideas from them to enhance the efficiency in business operations as well as to contribute to improve operation management and corporate governance of PV Drilling:

On 17 March 2009: met with major shareholders in Sheraton Hotel, District 1, Ho Chi Minh City

Please contact us for more information: PetroVietnam Drilling and Well Services Corporation 4th Fl., Sailing Tower, 111A Pasteur, District 1, Ho Chi Minh City.

PV Drilling41

50.38%

9.40%

Petro Vietnam

PVfC

Vietcombank

foreign shareholders

Other shareholders

4.36%

7.34%

28.52%

to update with business activities and company development strategies.

On 21 August 2008: gathered with major shareholders and some Investment funds in Legend Hotel, District 1, Ho Chi Minh City to discuss on the plan of merging PVD Invest (owned 51% of charter capital by PV Drilling) into PV Drilling.

On 9 November 2008: held Extraordinary Shareholders’ General Meeting in Caravelle Hotel, District 1, Ho Chi Minh City to approve the merging of

PVD Invest into PV Drilling and conversion ratio between PVDI share, capital contribution by PVD Invest’s shareholders and PVD share.

With the motto of “satisfying information demand for shareholders”, PV Drilling has received a high appraisal for cooperation, transparency and timeliness in public information related to its business activities from shareholders. We can say the investor relations of PV Drilling is carried effectively and efficiently and this has built up the trust and created the good image of Company for local and foreign investors

Please contact us for more information: PetroVietnam Drilling and Well Services Corporation 4th Fl., Sailing Tower, 111A Pasteur, District 1, Ho Chi Minh City.

As of 20 March 2009

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PetroVietnam Drilling and Well Services Corporation

(PV Drilling) spread joy and warmth to the social community.

PuBLIC RELATIONS

In addition to the drive in business activities in 2008, PV Drilling continues to play a positive and active role in support of charity through its many social activities and community development projects.

In 2008, PV Drilling donated 207 “Great unity Houses” in HCMC, Ba Ria – Vung Tau, Tien Giang, Hau Giang and Can Tho Provinces. The Company also actively supports funds for the poor, seniors, and victims of natural disasters in provinces such as Lai Chau, Son La. The Thien Phuoc Center for Children with Disability, Truong Sa soldiers and the Study Encouragement Society are also beneficiaries of PV Drilling.

PV Drilling43

Along with its community support activities in 2008, PV Drilling also took part in sponsoring the musical evening “Everlasting Green” in honor of the soldiers’ beauty of uniforms and in praise of the ancestors noble traditions.

The sponsors of charity-social activities amounted to VND 3.7 billion in 2008.

Through its active participation in charity, social activities and community development projects, PV Drilling is acknowledged as a caring company with realistic actions and in time supports in sharing difficulties with the society. These values expressed the cultural splendor of PV Drilling, preserving the shared tradition of the Vietnamese nation in general and PV Drilling in particular.

fINANCIAL STATEMENTS

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STATEMENT Of THEBOARD OF DIRECTORS

The Board of Directors of PetroVietnam Drilling and Well Services Corporation (“the Company”) and its subsidiaries (“the Group”) presents this report together with the Group’s audited consolidated financial statements for the year ended 31 December 2008.

THE BOARDS OF MANAGEMENT AND DIRECTORS

The members of the Boards of Management and Directors of the Group who held office during the year and at the date of this report are as follows:

Board of Management

Mr. Do Dinh Luyen ChairmanMr. Do Van Khanh MemberMr. Tran Van Hoat MemberMr. Pham Tien Dung MemberMr. Nguyen Xuan Son MemberMr. Nguyen Hong Nam MemberMr. Dam Hai Giang Member

Board of Directors

Mr. Do Van Khanh Chief Executive Officer and PresidentMr. Tran Van Hoat Vice PresidentMr. Van Duc Tong Vice PresidentMr. Luong Trong Diep Vice PresidentMr. Pham Tien Dung Vice PresidentMr. Ho Vu Hai Vice PresidentMs. Ho Ngoc Yen Phuong Vice President

BOARD OF DIRECTORS’ STATEMENT OF RESPONSIBILITY

The Board of Directors of the Group is responsible for preparing the consolidated financial statements of each year, which give a true and fair view of the financial position of the Group and of its results and cash flows for the year. In preparing these consolidated financial statements, the Board of Directors is required to:

• select suitable accounting policies and then apply them consistently;• make judgments and estimates that are reasonable and prudent;• state whether applicable accounting principles have been followed, subject to any material departures

disclosed and explained in the consolidated financial statements;• prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume

that the Group will continue in business; and• design and implement an effective internal control system for the purpose of properly preparing the financial

statements so as to minimize errors and frauds.

01

PV Drilling

STATEMENT Of THEBOARD OF DIRECTORS

The Board of Directors is responsible for ensuring that proper accounting records are kept, which disclose, with reasonable accuracy at any time, the financial position of the Group and to ensure that the consolidated financial statements comply with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing accounting regulations in Vietnam. The Board of Directors is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Board of Directors confirms that the Group has complied with the above requirements in preparing these consolidated financial statements.

for and on behalf of the Board of Directors,

Do Van KhanhChief Executive Officer and President20 March 2009

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We have audited the accompanying consolidated balance sheet of PetroVietnam Drilling and Well Services Corporation and its subsidiaries (“the Group”) as at 31 December 2008, and the related consolidated statements of income and cash flows for the year ended 31 December 2008. The accompanying consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam.

Respective Responsibilities of the Board of Directors and Auditors

As stated in the Statement of the Board of Directors on pages 1 and 2, these consolidated financial statements are the responsibility of the Group’s Board of Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of the Group for the year ended 31 December 2007 were audited by another auditor whose report dated 15 March 2008, expressed an unqualified opinion on those consolidated statements.

Basis of Opinion

We have conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, the accompanying consolidated financial statements give a true and fair view of, in all material respects, the financial position of the Group as at 31 December 2008 and the results of its operations and its cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing accounting regulations in Vietnam.

Pham Van Thinh Le Dinh TuPartner AuditorCPA Certificate No. D.0028/KTV CPA Certificate No. 0488/KTVfor and on behalf of Deloitte Vietnam Company Limited20 March 2009Ho Chi Minh City, S.R Vietnam

AuDITORS’ REPORTTo: The shareholders of PetroVietnam Drilling and Well Services Corporation

03

PV Drilling

FORM B 01-DN/HNunit: VND

ASSETS Codes Notes 31/12/2008 31/12/2007

A. CURRENT ASSETS 100 2,065,294,939,509 1,659,412,238,630

I. Cash and cash equivalents 110 4 687,790,226,960 521,940,969,552 1. Cash 111 195,122,511,791 216,560,814,654 2. Cash equivalents 112 492,667,715,169 305,380,154,898

II. Short-term financial investments 120 120,000,000,000 - 1. Short-term investments 121 5 120,000,000,000 -

III. Short-term receivables 130 1,056,945,202,837 1,040,549,863,371 1. Trade accounts receivable 131 1,043,280,603,366 711,618,493,896 2. Advances to suppliers 132 10,594,443,966 317,890,490,581 3. Other receivables 135 9,992,206,019 13,751,462,835 4. Provision for doubtful debts 139 (6,922,050,514) (2,710,583,941)

IV. Inventories 140 6 174,461,359,251 45,689,923,892 1. Inventories 141 176,136,789,143 45,689,923,892 2. Provision for devaluation of inventories 149 (1,675,429,892) -

V. Other short-term assets 150 26,098,150,461 51,231,481,815 1. Short-term prepayments 151 15,304,253,492 44,538,100,047 2. Value added tax deductibles 152 5,296,448,738 1,880,930,495 3. Other tax receivable from State budget 154 1,131,403,825 1,131,403,825 4. Other short-term assets 158 4,366,044,406 3,681,047,448

B. NON-CURRENT ASSETS 200 6,567,567,785,523 2,670,501,884,786

I. Fixed assets 220 6,272,698,419,123 2,534,750,434,064 1. Tangible fixed assets 221 7 2,012,619,597,868 2,086,943,238,148 - Cost 222 2,411,225,758,222 2,305,943,197,799 - Accumulated depreciation 223 (398,606,160,354) (218,999,959,651) 2. Intangible assets 227 8 146,890,993,792 26,876,863,689 - Cost 228 152,853,500,592 29,594,443,669 - Accumulated amortization 229 (5,962,506,800) (2,717,579,980) 3. Construction in progress 230 9 4,113,187,827,463 420,930,332,227

II. Long-term financial investments 250 245,120,496,730 77,522,144,578 1. Investments in joint ventures 252 11 74,976,402,570 18,983,644,578 2. Other long-term investments 258 12 172,694,670,160 58,538,500,000 3. Provision for diminution in value of long-term financial investments 259 12 (2,550,576,000) -

III. Other non-current assets 260 46,320,363,334 54,372,236,144 1. Long-term prepayments 261 18,251,152,491 42,585,140,763 2. Deferred tax assets 262 13 10,789,332,833 50,925,160 3. Other non-current assets 268 17,279,878,010 11,736,170,221

IV. Goodwill 270 10 3,428,506,336 3,857,070,000

TOTAL ASSETS 280 8,632,862,725,032 4,329,914,123,416

CONSOLIDATEDBALANCE SHEETAs at 31 December 2008

The accompanying notes set out on pages 10 to 29 are an integral part of these consolidated financial statements

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RESOURCES Codes Notes 31/12/2008 31/12/2007

A. LIABILITIES 300 6,008,458,297,364 1,968,627,891,788

I. Current liabilities 310 3,892,009,691,143 672,053,506,293 1. Short-term borrowings and liabilities 311 14 1,983,809,569,154 109,174,332,022 2. Trade accounts payable 312 1,027,989,526,309 289,795,227,982 3. Advances from customers 313 263,742,121,539 8,757,884,541 4. Taxes and amounts payable to State budget 314 15 52,764,831,015 28,473,913,608 5. Payables to employees 315 29,827,800,836 11,853,166,660 6. Accrued expenses 316 232,344,501,167 163,535,827,594 7. Other current payables 319 301,531,341,123 60,463,153,886

II. Long-term liabilities 330 2,116,448,606,221 1,296,574,385,495 1. Other long-term payables 333 212,198,276,591 - 2. Long-term loans and liabilities 334 16 1,878,918,456,000 1,294,047,113,324 3. Provision for severance allowance 336 25,331,873,630 2,527,272,171

B. EQUITY 400 17 2,133,443,696,017 1,864,223,187,039

I. Shareholders’ equity 410 2,113,823,567,404 1,830,445,769,483 1. Charter capital 411 1,321,675,040,000 1,101,397,300,000 2. Share premium 412 201,153,600,000 201,153,600,000 3. foreign exchange reserve 416 5,974,444,429 9,872,495,037 4. Investment and development funds 417 149,576,096,366 58,751,471,235 5. financial reserve funds 418 79,911,387,199 34,554,623,567 6. Retained earnings 420 355,532,999,410 424,716,279,644

II. Other resources and funds 430 19,620,128,613 33,777,417,556 1. Bonus and welfare funds 431 19,620,128,613 33,777,417,556

C. MINORITY INTEREST 500 18 490,960,731,651 497,063,044,589

TOTAL RESOURCES 600 8,632,862,725,032 4,329,914,123,416



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PV Drilling

FORM B 01-DN/HN

OFF BALANCE SHEET ITEMS 31/12/2008 31/12/2007

1. Goods held under trust or for processing (VND) - 385,975,000 2. foreign currencies - - uSD 7,451,168 1,974,709 EuR 16,497 11,263 GBP 560 560 DINARS 39,418,953 7,108,546

Do Van Khanh Doan Dac TungChief Executive Officer and President Chief Accountant20 March 2009



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CONSOLIDATEDINCOME STATEMENTfor the year ended 31 December 2008



ITEMS Codes Notes 2008 2007

1. Gross sales 01 19 3,728,745,990,771 2,738,605,347,0002. Less deductions 02 - -3. Net sales 10 3,728,745,990,771 2,738,605,347,000 4. Cost of goods sold 11 20 (2,520,350,855,424) (2,031,930,050,000)5. Gross profit 20 1,208,395,135,347 706,675,297,000 6. financial income 21 21 134,722,761,616 31,935,296,0007. financial expenses 22 22 (229,046,603,811) (85,302,968,000)8. Selling expenses 24 (2,569,526,528) -9. General and administration expenses 25 (233,633,166,666) (111,023,714,000)10. Operating profit 30 877,868,599,958 542,283,911,000 11. Other income 31 18,547,726,680 6,897,459,00012. Other expenses 32 (21,783,874,626) (1,804,342,000)13. (Loss)/Profit from other activities 40 (3,236,147,946) 5,093,117,000 14. Income from investment in joint ventures 50 11 54,115,856,630 32,498,277,00015. Profit before tax 60 928,748,308,642 579,875,305,000 16. Current tax expense 61 23 (6,410,872,603) (3,541,205,000)17. Deferred tax income 62 13 10,738,407,833 50,925,00018. Profit after tax 70 933,075,843,872 576,385,025,000 Attributable to: - Minority interest 18 10,817,239,081 4,483,860,207 - The Group’s shareholders 17 922,258,604,791 571,901,164,79319. Earnings per share 80 24 7,431 6,192


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ITEMS Codes 2008 2007

I. CASH FLOWS FROM OPERATING ACTIVITIES1. Profit before tax 01 928,748,308,642 579,875,305,0002. Adjustments for: Depreciation and amortization 02 184,828,166,672 145,302,469,000 Provisions 03 8,437,472,465 2,138,564,000 unrealized exchange losses/(gains) 04 71,131,901,609 (177,371,000) Gains from investing activities 05 (127,655,819,245) (55,963,145,000) Interest expense 06 78,731,366,518 76,857,114,0003. Operating profit before movements in working capital 08 1,144,221,396,661 748,032,936,000Increase in receivables 09 (19,239,343,144) (301,745,567,000)(Increase)/Decrease in inventories 10 (130,446,865,251) 18,904,742,000Increase/(Decrease) in accounts payable 11 951,605,571,545 (110,504,531,000)Decrease/(Increase) in prepaid expenses 12 53,567,834,827 (56,692,609,000)Interest paid 13 (83,494,260,164) (66,784,762,000)Corporate income tax paid 14 (7,838,107,729) (15,961,613,000)Other cash outflows 16 (121,204,945,459) (35,915,065,000)Net cash from operating activities 20 1,787,171,281,286 179,333,531,000

II. CASH FLOWS FROM INVESTING ACTIVITIES1. Acquisition of fixed assets and other long - term assets 21 (3,424,336,178,517) (1,495,497,086,000)2. Investments in other entities 25 (288,334,569,325) (72,196,579,000)3. Interest income and dividends received 27 122,775,262,896 43,329,741,000Net cash used in investing activities 30 (3,589,895,484,946) (1,524,363,924,000)

III. CASH FLOWS FROM FINANCING ACTIVITIES1. Proceeds from issuing stocks 31 7,817,040,913 1,017,353,600,0002. Proceeds from borrowings 33 2,832,685,796,353 972,345,972,0003. Repayments of borrowings 34 (504,049,558,528) (275,321,404,000)4. Dividends paid 36 (367,521,865,001) -Net cash from financing activities 40 1,968,931,413,737 1,714,378,168,000

Net increase in cash and cash equivalents 50 166,207,210,077 369,347,775,000

Cash and cash equivalents at beginning of year 60 521,940,969,552 152,593,194,552

Effect of changes in foreign exchange rates 61 (357,952,669) -

Cash and cash equivalents at end of year 70 687,790,226,960 521,940,969,552

CONSOLIDATEDCASH FLOW STATEMENTfor the year ended 31 December 2008


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CONSOLIDATEDINCOME STATEMENTfor the year ended 31 December 2008


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FORM B 03-DN/HN

Supplemental non-cash disclosures

Cash outflows for purchases of fixed assets and other long-term assets during the year exclude an amount of VND 498,735,992,806 (2007: VND 296,019,592), representing an addition in fixed assets during the year that has not yet been paid. Consequently, changes in accounts payable have been adjusted by the same amount.

Dividends paid during the year exclude an amount of VND 166,767,247,229 (2007: Nil), representing a dividend declared during the year that has not yet been paid. Consequently, changes in accounts payable have been adjusted by the same amount.

During the year 2008, the Group has declared dividends to its shareholders of VND 220,277,740,000 by translating to shares capital. This transaction did not constitute movement of cash and, accordingly, was not presented in the above statement.


PV Drilling

1. GENERAL INFORMATION

Structure of ownership

The Group consisted of PetroVietnam Drilling & Well Services Corporation (the “Company”) and its six (6) subsidiaries and three (3) joint ventures as follows:

The Company

The Company is a joint stock company established in Vietnam in accordance with the Business Registration Certificates No. 4103004335 dated 15 february 2006 and amendment on 18 June 2008 issued by the Department of Planning and Investment (“DPI”) of Ho Chi Minh City. The Company has emerged from the equitization of PetroVietnam Drilling and Well Services Company, a wholly-owned subsidiary of Vietnam Oil and Gas Corporation (hereinafter referred as “PetroVietnam”).

Majority of the Company’s shares are held by PetroVietnam, who currently holds 50.38% of the Company’s shares. The remaining 49.62% is held by other shareholders.

The Company’s registered head office is located at 2nd floor, 12 Nam Ky Khoi Nghia Street, District 1, Ho Chi Minh City, Vietnam.

The Subsidiaries

PetroVietnam Drilling Investment Corporation (“PVD Invest”), initially named Pacific Drilling Investment Corporation, is a joint stock company established in Vietnam in accordance with the Business Registration Certificate No. 4103006510 issued by the DPI of Ho Chi Minh City on 24 April 2007, as amended. PVD Invest’s office is located at 8 Nguyen Hue Street, Nguyen Thai Binh Ward, District 1, Ho Chi Minh City, Vietnam.

PVD Offshore Services Company Limited (“PVD Offshore”) is a one member limited liabilities company established in Vietnam in accordance with Business Registration Certificate No. 4904000114 issued by the DPI of Ba Ria Vung Tau Province on 29 June 2007. PVD Offshore’s registered office is located at 8 Hoang Dieu Street, Ward 1, Vung Tau City, Ba Ria Vung Tau Province, Vietnam.

Well Services Company Limited (“PVD Well”) is a one member limited liabilities company established in Vietnam in accordance with Business Registration Certificate No. 4104001468 issued by the DPI of Ho Chi Minh City on 1 August 2007. PVD Well Services’s registered office is located at 37 Ton Duc Thang Street, Ben Nghe District, Ho Chi Minh City, Vietnam.

Petroleum Well Logging Company Limited (“PVD Logging”) is a one member limited liabilities company established in Vietnam in accordance with Business Registration Certificate No. 4104001513 issued by the DPI of Ho Chi Minh City on 7 August 2007. PVD Logging’s registered office is located at 37 Ton Duc Thang Street, Ben Nghe District, Ho Chi Minh City, Vietnam.

Petroleum Trading and Technical Services Company Limited (“PVD Tech”) is a one member limited liabilities company established in Vietnam in accordance with Business Registration Certificate No. 4104001532 issued by the DPI of Ho Chi Minh City on 9 August 2007. PVD TECH’s registered office is located at 21 Nguyen Trung Ngan Street, Ben Nghe District, Ho Chi Minh City, Vietnam.

PVD Technical Training & Certification Joint Stock Company Limited (“PVD Training”), formerly Cuu Long Company Limited, is a joint stock company established in Vietnam in accordance with Business Registration Certificate No. 4903000441 issued by the DPI of Ba Ria Vung Tau Province on 12 October 2007, as amended. PVD Training’s registered office is located at Dong Xuyen Industrial Zone, 30/4 Street, Rach Dua Ward, Vung Tau City, Ba Ria Vung Tau Province, Vietnam.

The percentage of the Group’s ownership and the subsidiaries’ chartered capital and their capital contribution status are further disclosed in note 10 of the notes to the consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2008

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The Joint Ventures

BJ Services-PV Drilling Joint Venture Company Limited (“BJ-PVD”) is a joint venture company established in Vietnam in accordance with Investment Certificate No. 49202100003 issued by the People’s Committee of Ba Ria Vung Tau Province on 28 September 2006. BJ-PVD’s registered office is located at 65A 30/4 Street, Thang Nhat Ward, Vung Tau City, Ba Ria Vung Tau Province, Vietnam.

PV Drilling Production Testers International Company Limited (“PVD-PTI”) is a joint venture company established in Vietnam in accordance with Investment Certificate No. 491022000098 issued by the People’s Committee of Ba Ria Vung Tau Province on 25 April 2008. PVD-PTI’s registered office is located at 65A 30/4 Street, Thang Nhat Ward, Vung Tau City, Ba Ria Vung Tau Province, Vietnam.

PetroVietnam Drilling Tubulars Management Company Ltd. (“PVD Tubulars”) is a joint venture company established in Vietnam in accordance with Investment Certificate No. 492022000134 dated 07 October 2008 issued by Ba Ria-Vung Tau Industrial Zone Department. PVD Tubulars’s registered office is located in Phu My 1 Industrial Zone, Tan Thanh District, Ba Ria – Vung Tau province, Vietnam.

Principal activities

The Group, through the parent company and its subsidiaries and joint ventures, is principally engaged in providing drilling services, well services, drilling rig, equipment, manpower, oil spill control service and other related services in the oil and gas industry.

2. ACCOUNTING CONVENTION AND FISCAL YEAR

Accounting convention

The accompanying consolidated financial statements, expressed in Vietnam Dong (VND), are prepared under the historical cost convention and in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing accounting regulations in Vietnam.

Fiscal year

The Group’s fiscal year begins on 1 January and ends on 31 December.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, which have been adopted by the Group in the preparation of these consolidated financial statements, are as follows:

Estimates

The preparation of consolidated financial statements in conformity with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing accounting regulations in Vietnam requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


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PV Drilling

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Group up to 31 December each year. Control is achieved where the Group has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group.

All inter-company transactions and balances between group enterprises are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination (see below) and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Business combinations

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired is credited to profit and loss in the period of acquisition.

The interest of minority shareholders is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognized.

Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, which is when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

Where a group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly controlled assets and any liabilities incurred jointly with other ventures are recognized in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably.

Joint venture arrangements that involve the establishment of a separate entity in which each venture has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using the equity method of accounting.

Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of a subsidiary.


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Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is recognized as an asset and is amortized on the straight-line basis over 10 years.

Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate. Goodwill arising on the acquisition of subsidiaries and jointly controlled entities is presented separately as intangible asset in the balance sheet.

On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of unamortized goodwill is included in the determination of the profit or loss on disposal.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Provision for doubtful debts

Provision for doubtful debts is made for receivables that are overdue for three months or more, or when the debtor is in dissolution, bankruptcy, or in similar difficulties.

Inventories

Inventories are stated at the lower of cost and net realizable value. Cost comprises direct materials and where applicable, direct labor costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realizable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

The provision for devaluation of inventories is made for obsolete, damaged, or sub-standard inventories which have a book value higher than net realizable value as at the balance sheet date.

Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost less accumulated depreciation. The cost of purchased tangible fixed assets comprises its purchase price and any directly attributable costs of bringing the assets to its working condition and location for its intended use. The costs of self-constructed or manufactured assets are the actual construction or manufacturing cost plus installation and test running costs. Tangible fixed assets are depreciated using the straight-line method over their estimated useful lives as follows:

2008 2007Years Years

Buildings and structures 6-10 6-10Machinery and equipment 5-8 5-8Other equipment 3-4 4-6Motor vehicles 5-7 5-10Drilling rigs 10-15 7-12

With effect from 1 January 2008, the Group’s management decided to change the Group’s depreciation rate applied for drilling rigs, from 7 years to 10 years for the land-rig and from 12 years to 15 years for the jack-up rig, respectively.


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PV Drilling

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases. finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases. Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.

The Group as lessee

Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Intangible assets and amortization

Intangible assets represent land use rights, goodwill upon equitization and computer software, that are stated at cost less accumulated amortization.

The Goup’s land use right pertain to land for 1,322.8 square meter, located at No. 143 Tran Nao Street, District 2, Ho Chi Minh City where the Company can use for indefinite time. Land use rights with indefinite time are not amortized.

Goodwill upon equitization was recognized from the business revaluation of the Group’s business value upon equitization. Goodwill is recognized as an asset and is amortized on a straight-line basis over 20 years.

Software is amortized on a straight-line basis over 5 years.

Construction in progress

Properties in the course of construction for production, rental or administrative purposes, or for the purposes not yet determined, are carried at cost. Cost includes professional fees, and for qualifying assets, borrowing costs dealt with in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Investments in securities

Investments in securities are recognized on a trade date basis and are initially measured at cost including directly attributable transaction costs. At the subsequent reporting dates, investments in securities are measured at cost, less the amount of diminution in value of investments in securities.

Provision for diminution in value of investments in security investments is made for freely traded securities whose book value is higher than market price as at the balance sheet date.

Long-term prepayments

Long-term prepayments comprise small tools, spare parts, incurred during year which are expected to provide future economic benefits to the Group for more than one year. These expenditures have been capitalized as long-term prepayments and are amortized on a straight-line basis over 3 years.


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Revenue recognition

Revenue is recognized when the outcome of such transactions can be measured reliably and it is probable that the economic benefits associated with the transactions will flow to the Group. Sales of goods are recognized when goods are delivered and title has passed. Sales of services are recognized by reference to the percentage of completion of the transaction at the balance sheet date.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the interest applicable rate.

Dividend income from investments is recognized when the Group’s right to receive payment has been established.

Foreign currencies

Transactions arising in foreign currencies are translated at exchange rates ruling at the transaction date. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rates of exchange prevailing on the balance sheet date. Exchange differences are recognized in the income statement.

Exchange differences arising from the translation of monetary assets and liabilities denominated in foreign currencies, including realized and unrealized, during the construction stage of drilling rigs of PVD Invest, one of the Group’s subsidiary, are recorded in the balance sheet under the account “foreign exchange differences” in the owner’s equity section. Once the drilling rigs are completed, the accumulated realized exchange differences will be charged to the income statement immediately while the accumulated unrealized exchange differences will be amortized over 5 years.

for the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in the local currency using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognized in the income statement in the period in which the foreign operation is disposed of.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the cost of those assets.

All other borrowing costs are recognised in the income statement when incurred.

Provisions

Provisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the management’s best estimate of the expenditure required to settle the obligation at the balance sheet date.


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PV Drilling

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years (including loss carried forward, if any) and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted by the balance sheet date.

Deferred tax is recognized on significant differences between carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using balance sheet liability method. Deferred tax liabilities are generally recognized for all temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realized. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

The determination of the tax currently payable and deferred tax is based on the current interpretation of tax regulations. However, these regulations are subject to periodic variation and their ultimate determination depends on the results of the tax authorities’ examinations.

Other taxes are paid in accordance with the prevailing tax laws in Vietnam.

4. CASH AND CASH EQUIVALENTS

31/12/2008 31/12/2007VND VND

Cash on hand 1,325,160,265 997,324,244Cash in bank 193,785,462,026 214,599,438,188Cash in transit 11,889,500 964,052,120Cash equivalents 492,667,715,169 305,380,155,000

687,790,226,960 521,940,969,552

5. SHORT-TERM INVESTMENTS

Short-term investments represent the bank deposit by VND with recoverability term of one year or less.


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6. INVENTORIES

31/12/2008 31/12/2007VND VND

Goods in transit 7,333,502,107 6,989,274,000Raw materials 70,763,705,102 21,127,565,000Tools and supplies 1,594,368,301 9,122,179,000Work in progress 93,594,244,636 8,173,423,892Merchandise 2,023,885,718 277,482,000Goods on consignment 827,083,279 -

176,136,789,143 45,689,923,892Provision for devaluation of inventories (1,675,429,892) -

174,461,359,251 45,689,923,892

7. TANGIBLE FIXED ASSETS

Buildings and Machinery and Office Motorstructures equipment Equipment Vehicles Others Total

VND VND VND VND VND VNDCOSTAs at 1/1/2008 21,687,230,934 166,212,381,965 18,010,855,938 18,310,870,999 2,081,721,857,963 2,305,943,197,799Additions 857,934,873 67,140,027,890 7,636,473,153 2,404,345,436 15,083,776,824 93,122,558,176Transfer from construction in progress 14,026,605,067 - - - - 14,026,605,067Others increase 849,310,532 - 370,977,966 6,073,932 - 1,226,362,430Disposals (297,532,856) (276,050,565) (859,360,815) (568,926,886) - (2,001,871,122)Other decrease - (720,116,662) (78,832,421) (292,145,045) - (1,091,094,128)

As at 31/12/2008 37,123,548,550 232,356,242,628 25,080,113,821 19,860,218,436 2,096,805,634,787 2,411,225,758,222

ACCUMULATED DEPRECIATIONAs at 1/1/2008 3,357,289,084 73,414,068,600 7,934,451,603 8,283,348,013 126,010,802,351 218,999,959,651Charge for the year 5,031,294,683 21,127,928,172 3,713,765,505 2,046,278,082 149,658,417,854 181,577,684,296Eliminated from disposals (258,411,224) (276,050,565) (795,874,465) (568,926,886) - (1,899,263,140)Other decrease - (72,220,453) - - - (72,220,453)

As at 31/12/2008 8,130,172,543 94,193,725,754 10,852,342,643 9,760,699,209 275,669,220,205 398,606,160,354

NET BOOK VALUE

As at 31/12/2008 28,993,376,007 138,162,516,874 14,227,771,178 10,099,519,227 1,821,136,414,582 2,012,619,597,868

As at 31/12/2007 18,329,941,850 92,798,313,365 10,376,419,396 9,727,507,925 1,955,711,055,612 2,086,943,238,148

As described in note 3 above, with effect from 1 January 2008, the Group’s management decided to change the Group’s depreciation rate applied for drilling rigs, from 7 years to 10 years for the land-rig and from 12 years to 15 years for the jack-up rig, respectively. The Group’s management believes that the application of new depreciation rates reflect more accurately the operation of the business as well as the utilization rate of these rigs. Had the old depreciation rate been applied, depreciation charge for these rigs for the year ended 31 December 2008 would have increased by approximately VND 46 billion and the profit for the year ended would have decreased by the same amount.


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8. INTANGIBLE ASSETS

Land userightsVND

OthersVND

TotalVND

COSTAs at 1/1/2008 - 29,594,443,669 29,594,443,669 Additions 109,833,329,400 13,436,315,800 123,269,645,200 Others increase - 9,411,723 9,411,723Others decrease - (20,000,000) (20,000,000)As at 31/12/2008 109,833,329,400 43,020,171,192 152,853,500,592

ACCUMULATED AMORTIzATIONAs at 1/1/2008 - 2,717,579,980 2,717,579,980Charge for the year - 3,250,482,376 3,250,482,376Other decrease - (5,555,556) (5,555,556)As at 31/12/2008 - 5,962,506,800 5,962,506,800

NET BOOK VALUEAs at 31/12/2008 109,833,329,400 37,057,664,392 146,890,993,792

As at 31/12/2007 - 26,876,863,689 26,876,863,689

9. CONSTRUCTION IN PROGRESS

31/12/2008 31/12/2007VND VND

Drilling Jack-up rig II 1,400,442,580,427 404,389,840,014Drilling Jack-up rig III 2,689,476,352,614 -Others 23,268,894,422 16,540,492,213

4,113,187,827,463 420,930,332,227

During the year, the Group has capitalized borrowing costs amounting to VND 68,132,958,892 (2007: VND 21,532,510,000). These are costs in connection with the loans that have been entered to finance for constructing the Group’s drilling rigs.

10. INVESTMENTS IN SUBSIDIARIES

Details of the Group’s subsidiaries at 31 December 2008 are as follows:

Registered charter capital Contributed charter capital Percent31/12/2008 31/12/2007 31/12/2008 31/12/2007 of interest

Name of subsidiaries VND VND VND VND %

PVD Invest 1,000,000,000,000 1,000,000,000,000 510,000,000,000 510,000,000,000 51PVD Offshore 80,000,000,000 80,000,000,000 57,640,139,096 53,942,337,123 100PVD Well Services 50,000,000,000 50,000,000,000 804,342,798 804,342,798 100PVD Logging 50,000,000,000 50,000,000,000 50,000,000,000 30,930,540,265 100PVD Tech 50,000,000,000 50,000,000,000 50,000,000,000 50,000,000,000 100PVD Training 22,334,500,000 11,755,000,000 15,962,691,000 6,970,091,000 51

The Group has a plan to merge PVD Invest, its subsidiary, into the Company. The general shareholders meeting of the Company has approved the plan. The merger transaction is expected to be completed in the 2nd quarter of 2009.


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On 12 August 2007, the Group acquired 51% interest of PVD Training, formerly Cuu Long Company Limited, for a consideration of VND 6,970,091,000. The acquisition generated a positive goodwill for the Group amounting to VND 4,285,636,640. The movement in goodwill during the year is as follows:

GoodwillVND

COSTAs at 1/1/2008 4,285,636,640 As at 31/12/2008 4,285,636,640

ACCUMULATED AMORTIzATIONAs at 1/1/2008 428,566,640Charge for the year 428,563,664As at 31/12/2008 857,130,304

NET BOOK VALUEAs at 31/12/2008 3,428,506,336

As at 31/12/2007 3,857,070,000

11. INVESTMENTS IN JOINT VENTURES

Summarized financial information in respect of the Group’s joint ventures is set out below:

Registered charter capital

Contributed charter capital

Percentof interest

Name of joint ventures uSD VND %

BJ-PVD 1,000,000 7,880,670,000 49PVD-PTI 4,000,000 34,238,560,029 51PVD Tubulars 3,500,000 20,271,435,771 51

The Group’s share of joint ventures’ profit and investment value:

Cost of investmentas at 31/12/2008

Share’s profit/(loss)in 2008

Profit receivedin 2008 As at 31/12/2008

VND VND VND %

BJ-PVD 7,880,670,000 55,767,447,964 (41,530,119,860) 22,117,998,104PVD-PTI 34,238,560,029 (1,651,591,334) - 32,586,968,695PVD Tubulars 20,271,435,771 - - 20,271,435,771

62,390,665,800 54,115,856,630 (41,530,119,860) 74,976,402,570

12. OTHER LONG-TERM FINANCIAL INVESTMENTS

31/12/2008 31/12/2007VND VND

Government bonds 44,538,500,160 44,538,500,000Investment certificates - Vietnam blue-chips fund (VfMVf4) 4,738,170,000 -Shares of PV Shipyard 8,000,000,000 8,000,000,000Shares of Petro Land 20,000,000,000 6,000,000,000Shares of Sao Mai - Ben Dinh 95,418,000,000 - Provision for diminution in value of long-term investments (2,550,576,000) -

170,144,094,160 58,538,500,000


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The provision represents the diminution in value of listed investments certificate of VfMVf4. for other long-term investment, the Group’s management believes that the market price of these investments has exceeded its cost; hence, no provision for diminution in value of these investments is considered necessary.

13. DEFERRED TAX ASSETS

The following are the major deferred tax assets recognized by the Group, and the movements thereon, during the current and prior reporting periods.

Accruals and other provisions

unrealized foreign exchange losses Total

VND VND VND

Credit to profit for the year 50,925,000 - 50,925,160As at 31 December 2007 50,925,000 - 50,925,160Credit to profit for the year 4,643,582,340 6,094,825,493 10,738,407,833As at 31 December 2008 4,694,507,340 6,094,825,493 10,789,332,833

14. SHORT-TERM BORROWINGS AND LIABILITIES

31/12/2008 31/12/2007VND VND

Short-term loans 1,762,464,258,050 -Current portion of long-term loans (note 16) 221,345,311,104 109,174,332,022

1,983,809,569,154 109,174,332,022

Details of short-term loans are follows:

31/12/2008 31/12/2007VND VND

JP Morgan 408,296,850,000 -DBS Bank Limited 471,111,750,000 -BIDV 513,299,595,000 -Vietcombank 55,681,563,050 -ABN AMRO N.V. Bank (“ABN-AMRO”) 314,074,500,000 -

1,762,464,258,050 -

Short-term loan from JP Morgan represents a short term credit facility with total amount of uSD 24,050,000 received by PVD Invest to finance for the payments to the Contractor, Keppel fels Limited. The principal had been fully repaid on 20 January 2009. The loan bears interest at the rate of LIBOR three-month plus a marginal interest rate.

Short-term loan from DBS Bank Limited represents a short term bridging loan of up to uSD 27,750,000 received by PVD Invest to finance for the payments to the Contractor, Keppel fels. This loan had been partially repaid with amount of uSD 18,500,000 on 13 March 2009, the outstanding balance is expected to be paid on 30 March 2009. The loan bears interest at the rate of SIBOR six-month plus a marginal interest rate.

Short-term loan from BIDV represents the short-term loans with total amount of uSD 30,235,000 received by PVD Invest to finance for the payments to the Contractor, Keppel fels Limited. This loan is secured by a guarantee letter issued by the Group.


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Short-term loans from Vietcombank represent a short-term credit facility in the form of letter of credit in supplement working capital for PVD Tech, which is guaranteed by the Group, the loan bears interest at fixed rate and had been fully repaid on 13 January 2009.

Short-term loan from ABN-AMRO bank represents the short-term credit facility with total amount of uSD 18,500,000 received by the Group in supplement working capital. The loan bears interest at the fixed rate and had been fully repaid on 24 february 2009.

15. TAXES AND AMOUNTS PAYABLE TO STATE BUDGET

31/12/2008 31/12/2007VND VND

Value added tax 33,198,049,613 16,377,812,202 Import tax 1,543,772 - Corporate income tax 1,632,225,298 3,059,460,424 Personal income tax 12,615,945,880 5,218,664,112 Withholding tax 5,317,066,452 3,720,646,426 Other taxes - 97,330,444

52,764,831,015 28,473,913,608

16. LONG-TERM LOANS AND LIABILITIES

31/12/2008 31/12/2007VND VND

Long-term loans 2,100,263,767,104 1,403,221,445,346 Current portion of long-term loans (note 14) (221,345,311,104) (109,174,332,022)

1,878,918,456,000 1,294,047,113,324

Details of long-term loans are as follows:

31/12/2008 31/12/2007VND VND

Vietcombank 1,043,892,165,924 1,155,965,409,396PVfC 213,134,775,525 247,256,035,950BIDV 843,236,825,655 -

2,100,263,767,104 1,403,221,445,346

The Group had entered into a long-term loan agreement with Vietcombank for uSD 80,237,605 to finance its Mobile Offshore Self-elevating Cantilever Drilling Jack-up Rig 90 meter water depth Project. The duration of the loan is 109.5 months (amended from the original duration of 146.5 months) from the first drawndown date including a grace period of 25.5 months. This loan will be repayable on semi-annual installments for 84 months after the grace period. This loan is guaranteed by PetroVietnam, the Group’s major shareholder, and bears interest at the rate of SIBOR six-month plus a marginal interest rate. Interest shall be accrued to the principal every six-month during the grace period.

On 13 November 2006, the Group also entered into a long-term loan agreement with PVfC, a related party, for uSD 18,599,000 to finance its acquisition of land drilling rig. The duration of the loan is 84 months from the first drawdown date, including a grace period of 12 months for both principal and interest. This loan is secured by the assets acquired from the loan at cost of VND 336,081,823,970 and carrying amount as at 31 December 2008 of VND 336,081,823,970 (2007: VND 336,081,823,970). This loan bears interest at SIBOR six-month plus a marginal interest rate. Interest applies every three-month for outstanding amount in arrears. This loan is repayable on 12 semi-annual installments starting from 13 May 2008.


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On 31 December 2007, the Group also entered into a long-term syndicated loan agreement with BIDV, PVfC and Eximbank for uSD 155,000,000 to finance its Mobile Offshore Self-elevating Cantilever Drilling Jack-up Rig II Project. The duration of the loan is 132 months from the first drawdown date, including a grace period of 24 months for both principal and interest. This loan is secured by the assets acquired from the loan with a carrying value of VND 1,400,442,580,427 (2007: VND 404,389,840,014). This loan bears interest at the interest rate of deposit of 12 months by uSD which is calculated on average interest rates of syndicated credit institutions plus a marginal interest rate and it is not exceeding a fixed rate which has been agreed with these credit institutions. Interest applies every three-month for outstanding amount in arrears. This loan is repayable on 18 semi-annual installments starting from 10 July 2011. As at 31 December 2008, unused balance of this loan which is available for withdrawn was uSD 107,059,000.

On 8 December, 2008, the Group entered into a syndicated long-term loan with ABN AMRO Bank N.V., Australia and New Zealand Banking Group Limited, and The Hong Kong and Shanghai Banking Corporation Limited which were subsequently joined by Oversea-Chinese Banking Corporation Limited; first Commercial Bank; far East National Bank and Land Bank of Taiwan for uSD 115 millions to finance for the repayment of short-term bridging loans and payments to the Contractor Keppel fels related to constructing the Drilling Jack-up Rig III Project. This loan is guaranteed by PetroVietnam. As at the balance sheet date, the Group has not withdrawn from this loan.

Long-term loans are repayable as follows:

31/12/2008 31/12/2007VND VND

On demand or within one year 221,345,311,104 109,174,332,022 In the second year 513,349,711,104 109,174,332,022 In the third to fifth years inclusive 1,191,586,717,242 327,522,996,066 After five years 173,982,027,654 857,349,785,236

2,100,263,767,104 1,403,221,445,346 Less: Amount due for settlement within 12 months (shown under current liabilities) (221,345,311,104) (109,174,332,022)Amount due for settlement after twelve months 1,878,918,456,000 1,294,047,113,324

17. EQUITY

According to the Group’s amended Business Registration Certificate, the charter capital is VND 1,321,675,040,000 (2007: VND 1,101,397,300,000).

The Group’s share par value and number of shares as follows:

31/12/2008 31/12/2007VND VND

Authorized 132,167,504 110,139,730Shares issued and fully contributed 132,167,504 110,139,730Par value (VND) 10,000 10,000

The Group has one class of ordinary share which carry no right to fixed income. The shareholders of ordinary shares are entitles to receive dividends as declared from time to time and are entitled to one vote per share at the Group’s shareholders meetings. All shares rank equally with regard to the Company’s residual assets.


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31/12/2008 31/12/2007VND VND

Value of shares held by Petro Vietnam 665,856,000,000 554,880,000,000Value of shares held by other shareholders 655,819,040,000 546,517,300,000

1,321,675,040,000 1,101,397,300,000

Movement of shareholders’ equity and other funds during the year were as follows:

Charter capital Share premium Retained earningsfinancial

reserves fundInvestment and

development fund

foreign exchange

differencesBunus and welfare

fund TotalVND VND VND VND VND VND VND VND

As at 1/1/2007 680.000.000.000 - 86.230.063.353 5.805.723.856 11.611.447.710 - 7.944.352.478 791.591.587.397

Paid-in capital 421.397.300.000 201.153.600.000 - - - - - 622.550.900.000

Profit for the year - - 424.166.216.291 28.748.899.711 56.660.023.525 - 62.326.025.266 571.901.164.793Other increases - - - - - 9.872.495.037 - 9.872.495.037

Dividends (85.680.000.000) (85.680.000.000)Other decreases (9.520.000.000) (36.492.960.188) (46.012.960.188)As at 31/12/2007 1.101.397.300.000 201.153.600.000 424.716.279.644 34.554.623.567 58.751.471.235 9.872.495.037 33.777.417.556 1.864.223.187.039

Stock dividends 220.277.740.000 - (220.277.740.000) - - - - -foreign exchange differences - - - - - (3.898.050.608) - (3.898.050.608)Profit for the year - - 922,258,604,791 - - - - 922,258,604,791 Dividends - - (534.289.112.230) - - - - (534.289.112.230)funds distributions - - (236,875,032,795) 45.356.763.632 90.824.625.131 - 100,693,644,032 -Bonus and welfare fund untilization - - - - - (114,850,932,975) (114,850,932,975)As at 31/12/2008 1.321.675.040.000 201.153.600.000 355,532,999,410 79.911.387.199 149.576.096.366 5.974.444.429 19.620.128.613 2.133.443.696.017

During the year, the Group’s shareholders have decided to increase its charter capital from VND 1,101,397,300,000 to VND 1,321,675,040,000 by issuing additional 22,027,774 shares to existing shareholders using its retained earnings. This was subsequently approved by the Planning Investment Department of Ho Chi Minh City in its Business Registration Certificate No. 4103004335 dated 18 June 2008.

As at 31 December 2008, the Group temporarily appropriated a part of the 2008 consolidated profit after tax for three funds which are financial Reserve fund, Investment and Development fund and Bonus and Welfare fund in accordance with the Group’s Charter. The final amounts of such appropriations will be determined and approved by the shareholders in the general annual shareholders meeting.

During the year, the Group declared and paid total dividends of VND 754,566,852,230 by issuing additional 22,027,774 shares and VND 534,289,112,230 by cash, of that VND 330,418,760,000 was dividends declared and paid from the profit of 2008 at 25% per share.

Details movement of foreign exchange difference:

Exchange rate difference in translating

foreign operation(Algeria Branch)

Exchange rate difference during

construction stage (PVD Invest) Total

VND VND VND

As at 1 January 2007 - - -Additions 9,872,495,037 - 9,872,495,037As at 31 December 2007 9,872,495,037 - 9,872,495,037Additions 18,395,662,657 (43,713,163,264) (25,317,500,607)Attributable to minority interest 21,419,449,999 21,419,449,999As at 31 December 2008 28,268,157,694 (22,293,713,265) 5,974,444,429


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18. MINORITY INTEREST

Minority interest presents the minority’s portion in net assets value and income statement of PVD Invest and PVD Training.

Rate of minority interest was calculated as follow:

PVD Invest PVD Training

Charter capital of subsidiaries 1,000,000,000,000 21,511,660,000Including:Distributed capital of the Group 510,000,000,000 11,390,620,000Distributed capital of Minority interest 490,000,000,000 10,121,040,000Rate of minority interest 49.00% 47.05%

Minority interest in net asset as at 31 December 2008:

PVD Invest PVD Training TotalVND VND VND

Total assets 4,316,397,862,116 28,978,774,152 4,345,376,636,268Total liabilities (3,337,366,392,387) (5,098,797,327) (3,342,465,189,714)Net assets 979,031,469,729 23,879,976,825 1,002,911,446,554Details as follow: Charter capital 1,000,000,000,000 21,511,660,000 1,021,511,660,000 Other funds (41,037,957,932) 323,444,771 (40,714,513,161) Retained earnings 20,069,427,661 2,044,872,054 22,114,299,715

Minority interest 479,725,420,167 11,235,311,484 490,960,731,651Details as follow: Charter capital 490,000,000,000 10,121,040,000 500,121,040,000 Other funds (20,108,599,387) 152,177,817 (19,956,421,570) Retained earnings 9,834,019,554 962,093,667 10,796,113,221

Minority interest in operating result for the year ended 31 December 2008:

PVD Invest PVD Training TotalVND VND VND

Profit for the year 15,757,342,990 6,580,660,964 22,338,003,954Minority interest of operating result 7,721,098,065 3,096,141,016 10,817,239,081

19. GROSS SALES

2008 2007VND VND

Sale of goods 706,391,540,167 795,666,626,000Sale of drilling services 1,503,016,439,145 936,390,848,000Sale of well services and others 1,519,338,011,459 1,006,547,873,000

3,728,745,990,771 2,738,605,347,000

Including in the above sales is the sale of drilling services from the land-rig in Algeria with amount of VND 142,027,947,079 (2007: VND 81,910,009,240). Currently, the service contract has been temporary terminated from 25 July 2008.


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20. COST OF GOODS SOLD

2008 2007VND VND

Cost of goods sold 663,203,344,102 776,543,544,000Cost of drilling services 605,585,984,198 497,162,687,000Cost of well services and others 1,251,561,527,124 758,223,819,000

2,520,350,855,424 2,031,930,050,000

Production cost by nature

2008 2007VND VND

Raw materials and consumables 1,136,690,199,021 808,917,086,000Labor cost 426,668,529,919 204,194,306,000Depreciation and amortization 165,842,679,055 144,871,022,000Out-sourced services 697,254,289,649 796,904,412,000Other expenses 93,895,157,780 77,043,224,000

2,520,350,855,424 2,031,930,050,000

21. FINANCIAL INCOME

2008 2007VND VND

Interest income 73,539,962,615 23,963,583,000 unrealized foreign exchange gain 4,129,326,936 - Realized foreign exchange gain 56,666,398,238 - Other financial income 387,073,827 7,971,713,000

134,722,761,616 31,935,296,000

22. FINANCIAL EXPENSES

2008 2007VND VND

Interest expense 78,731,366,518 76,857,114,000 unrealized foreign exchange loss 75,261,228,545 -Realized foreign exchange loss 72,264,054,767 - Provision for decline in value of investments 2,550,576,000 - Other financial expenses 239,377,981 8,445,854,000

229,046,603,811 85,302,968,000


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23. CURRENT TAX EXPENSE

2008 2007VND VND

Profit before tax 928,748,308,642 579,875,305,000Adjustments for taxable income -Less: non-assessable income (58,319,344,073) (33,796,581,000)Add back: non-deductible expenses 96,287,239,115 12,246,606,000Assessable income 966,716,203,684 558,325,330,000Current tax expense 6,410,872,603 3,541,205,000

Details current tax expense:

PVD Training PVD Invest Others TotalVND VND VND

Profit before tax 7,459,147,303 21,279,750,980 900,009,410,359 928,748,308,642Adjustments for taxable income Less: non-assessable income (74,160,507) (58,245,183,566) (58,319,344,073)Add back: non-deductible expenses 493,293,458 - 95,793,945,657 96,287,239,115Assessable income 7,952,440,761 21,205,509,473 937,558,172,450 966,716,203,684Tax rate 12.4% 28% 0%Current tax expense 983,519,647 5,937,565,332 - 6,921,084,979Tax deduction (64,894,976) (445,317,400) - (510,212,376)Net current tax expense 918,624,671 5,492,247,932 - 6,410,872,603

The Group has the obligation to pay Corporate Income Tax (“CIT”) at the rate of 28% of taxable profits.

Except for PVD Training, BJ-PVD and PVD Invest as discussed below, the Group is entitled to tax exemption for two years (from 2007 to 2008) and a 50% reduction for the following five years. As it is the second year during the tax exemption, no corporate income tax was provided for.

PVD Training has the obligation to pay Corporate Income Tax (“CIT”) at the rates from 0% to 28% of taxable profits for its activities. It is entitled to corporate income tax exemption for two years (from 2005 to 2006) and a 50% reduction for the following seven years for its security training activities; and three years exemption (from 2005 to 2007) and a 50% reduction for seven years for its technical training activities.

BJ-PVD is entitled to tax exemption for two years (from 2007 to 2008) and a 50% reduction for the following three years.

PVD Invest has the obligation to pay CIT at the rate of 28% in 2008 for assessable income from financial activities.

up to the date of this report, the Group has been continuously working with Tax authorities for the tax incentive scheme for PVD Logging, PVD Well Services, PVD Tech and PVD Offshore. However, the Group believed that the Group’s subsidiaries are also entitled the corporate income tax incentive scheme as of the Group. Had the Group’s subsidiaries not be entitled CIT incentive, consolidated current tax expense and profit after tax for the year ended 31 December 2008 would have increased and decreased by VND 38,902,700,979, respectively. Accordingly, the Group’s taxes and amounts payable to State budget and consolidated retained earnings as at 31 December 2008 would have increased and decreased by VND 38,902,700,979, respectively.

The Group’s tax returns are subject to examination by the tax authorities. Because the application of tax laws and regulations for many types of transactions is susceptible to varying interpretations, the amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities.


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24. EARNINGS PER SHARE

The calculation of the basic earnings per share attributable to equity holders of the Group is based on the following data:

2008 2007VND VND

Net profit attributable to ordinary shareholders 922,258,604,791 571,901,164,896Less: unrealized foreign exchange gains (4,129,326,936) - Deferred tax income (10,917,622,720) -Earnings for the purposes of basic earnings per share 907,211,655,135 571,901,164,896Weighted average number of ordinary shares for the purposes of basic earnings per share 122,089,043 92,360,384Earnings per share 7,431 6,192

25. CONTINGENT LIABILITIES

up to the date of this report, the Group has not completed the tax finalization for its branch operation in Algeria. The tax finalization will be done by the Authorities of Algeria upon the completion of Algeria project and the tax liabilities will be determined at that time. The Group’s management believes that there will be no significant additional tax liabilities.

26. COMMITMENTS

Capital commitments

On the 28 May 2007, PVD Invest entered into a contract with Keppel fels Limited to build a 517 feet Jack-up drilling (PV Drilling II) for uSD 191,000,000. As at 31 December 2008, the contractor has completed the construction with estimated value of uSD 98,365,000. The outstanding value of this contract of uSD 92,635,000 will be performed and estimated to complete up to 30 October 2009 and being dealt to have an early completion on 15 September 2009.

On the 22 february 2008, PVD Invest also entered into another contract with the Contractor Keppel fels Limited and Will Alpha to build a 517 feet Jack-up drilling (PV Drilling III) for uSD 185,000,000 and uSD 21,000,000, respectively. As at 31 December 2008, Kepple fels Limited has completed the construction with estimated value of uSD 98,235,000. The outstanding value of this contract will be performed and estimated to complete up to 31 December 2009.


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27. OTHER COMMITMENTS

Lease commitment

At the balance sheet date, the Group had outstanding commitments under non-cancelable operating leases, which fall due as follows:

31/12/2008 31/12/2007VND VND

Within one year 19,094,565,100 4,042,423,000In the second to fifth years inclusive 54,402,896,236 6,933,471,000After five years 18,517,343,594 5,225,432,000

92,014,804,930 16,201,326,000

Operating lease payments represent total rental payable for leasing office premises in Ho Chi Minh City and Vung Tau City. These leases are negotiated for periods from 1 year to 8 years.

Service rendered commitment

On 20 October 2008, the Group has signed with The Joint Operating Company “Vietgazprom” to provide drilling services with estimated day rate of uSD 225,900 per day. The duration of this contract shall be effective for a minimum of 60 days with commencement date from 1 June 2009 to 15 July 2009.

28. RELATED PARTY TRANSACTIONS AND BALANCES

During the year, the Group entered into the following transactions with related parties:

2008 2007VND VND

SalesPetroVietnam Group’s subsidiaries 203,645,992,732 54,097,813,000PetroVietnam’s Joint Ventures/Joint Operating Companies/Petroleum Sharing Contracts 1,818,523,473,578 1,509,491,821,000

Purchases - -PetroVietnam Group’s subsidiaries 3,375,509,152 35,395,968,000PetroVietnam’s Joint Ventures/Joint Operating Companies/Petroleum Sharing Contracts 295,803,054,400 30,017,749,000

Loan from PVFCWithdrawn - 140,889,154,000Repayment 44,954,031,500 43,388,546,000

Directors’ remuneration

Remuneration paid to the Group’s Chairman and Board of Directors during the year was as follows:

2008 2007VND VND

Salaries 4,165,775,341 3,350,866,000Bonus 4,900,163,737 680,015,000Benefits in kind 168,000,000 66,277,000

9,233,939,078 4,097,158,000


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28. RELATED PARTY TRANSACTIONS AND BALANCES (cont’d)

Related party balances at the balance sheet date were as follows:

31/12/2008 31/12/2007VND VND

Receivables PetroVietnam Group’s subsidiaries 889,510,280 7,484,868,000PetroVietnam’s Joint Ventures/Joint Operating Companies/Petroleum Sharing Contracts 111,379,068,171 326,959,746,000

PayablesPetroVietnam Group’s subsidiaries 9,916,738,956 25,496,522,000

Loan payablesPetroVietnam Group’s subsidiaries (PVfC) 213,134,775,525 247,256,035,950

Dividends payablesPetroVietnam 166,464,000,000 -

29. COMPARATIVE FIGURES

Certain reclassifications have been made to the prior year’s figures to enhance their comparability with the current year’s presentation.

30. APPROVAL OF ISSUANCE

The consolidated financial statements for the year ended 31 December 2008 have been approved by the Group’s Board of Management on 20 March 2009.


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