Huashang Energy (00206) is forecasting a medium-term loss of about 9.3 million US dollars in profit and loss year-on-year

Zhitong Finance App News, Huashang Energy (00206) issued an announcement. Compared with the profit margin of about 2.78 million US dollars for the 6 months ending June 30, 2025, the Group is expected to lose about 9.3 million US dollars for the period up to June 30, 2026.

The board of directors believes that the expected shift from profit to loss is mainly due to the company's expectation to confirm impairment losses of about US$9.5 million (provision) for ongoing projects in the six months ending June 30, 2026. The main reason for the provision is related to the recent cooperation project between the Group and Petromexico (PETROMEX) on drilling and equipment supply and service, which terminated the unimplemented portion of the project after completing several independent milestones of the project. Petromexico is a state-owned oil and gas company of the United Mexican States, and is also one of the largest oil companies in the world. In view of the local commercial and macroeconomic environment, PetroMexico's management, commercial strategy, and treasury practices have changed, causing its various projects to face more stringent budget restrictions. The slow progress of payments made by Petromexico to the Group affected the progress of the project, yet the Group continued to incur expenses. The Group did everything it could to negotiate with Petromexico to get the project back on track, but ultimately failed to achieve the expected results.

After considering the current situation and operational risks, the parties decided not to continue to implement the remaining parts of the project to prevent both parties from continuing to incur huge expenses. In this regard, the company expects to make a one-time provision, mainly for the costs previously incurred for the entire project (with the exception of completed milestones). The Group is still in close consultation with Petromexico and will do its best and take appropriate measures to recover outstanding contract payments under the project (such payments have been confirmed by PETROMEX). According to preliminary analysis carried out by the Group, the overall return (including contract payments) of projects terminated early can offset most of the costs and expenses already incurred, causing only a relatively small estimated loss. In view of this, the Company believes that terminating the project is a strategic decision aimed at controlling the Group's financial and operational risks, and is in the overall interests of the Company and its shareholders.