Rapid Development

    The reborn company experienced its toughest period during its first year in 2005, but it pulled through with significant achievements.

    It accomplished revolutionary restructuring under a difficult situation, transforming its property rights, legal and labor relations, reestablishing the former state-owned subordinate of Shengli Oilfield as a limited company operating independently.

    The new company actively participated in market competition and developed international markets for its pumping units, sucker rods, pipes and special vehicle refitting, achieving international sales of RMB 25.16 million annually. In addition, it expanded its domestic market beyond Shengli Oilfield to oil, petrochemical and coal businesses in other regions.

    Meanwhile, Freet continued with its internal reforms and hired a professional consulting agency to design its modern corporate management system. It streamlined its office staff, and opened leading departmental posts to those most qualified. As a result, seven former departmental leaders were demoted and three ordinary office workers were promoted to lead their departments. Freet also implemented new performance evaluation measures according to the requirements of a modern corporate operation.

    These moves greatly mobilized the initiative of workers and consolidated their unity. Though the tension of market competition never relaxed, the new company progressed steadily in its initial year, and the production of its three main products – pumping units, sucker rods and pipes – was sustained at a full capacity. In 2005, the company achieved a sales revenue of RMB 510 million and an asset yield of RMB 9.07 million.

    Freet also solved the problem of start-up funds for its subsidiaries, who wasted no chance to develop their production and markets.

    2008 saw an outstanding performance by Freet's Hot Extraction Equipment Factory, despite a shortage of raw materials and intensifying competition. The factory expanded its market by concluding a long-term cooperation agreement with the Shanghai-based Baosteel, after enhancing its product quality control and shipping out the first order of high quality oil pipes. While consolidating the market for its traditional products, the factory improved the quality and expanded the production of insulated tubing, and developed Liaohe Oilfield and a few other customer bases, selling 75,446 meters of insulated tubing last year.

    The Freet Pumping Equipment Factory has strengthened cooperation and technical exchanges with a Canadian company and introduced an international standard design concept in order to produce advanced products. It has developed 24 new models, laying a technical base for the exportation of its products. With its efficient quality control and production management, its products have won favorable approval from both domestic and foreign customers, and have been exported to North America. In 2008, a total of 233 pumping units were sold to overseas clients.

    The Oil Equipment Factory has worked hard to upgrade its production line and enhance quality as an answer to erratic market prices, short delivery periods and large single orders. As a result, its sucker rod production capacity has reached 5 million meters, making it Sinopec's largest and best sucker rod producer. Its sales income has continued to rise. The factory has also improved its cost management, saving RMB 1.17 million a year in electricity consumption and RMB 1.3 million in raw materials.

    While consolidating its old market and developing new ones, the Freet Special Vehicle Refitting Factory has adopted a strategy of enhancing its independent design and production capabilities, especially for key parts, and in this way has enlarged its profit margin.

    The Composite Tubing Factory has concentrated on key products, projects and markets, establishing a sound cooperative relationship with several large oil refineries. It has improved its products and expanded its market.

    The Freet Petroleum Steel Pipe Co., Ltd. and Freet Group's joint venture, Faray Petroleum Steel Pipe Co., Ltd., cooperated in designing and constructing their production facilities, and went into production a short time after their launching. They have since operated to high standards in terms of market development, quality control and production management. In 2007, they produced 2,032 tons of ERW (electric resistance welding) special pipes and processed 3,050 tons of casings.

    The Shenggong Petroleum Equipment Co., Ltd. specializes in hoisting equipment and has continuously upgraded its products. Last year, it produced 48 units of hoisting equipment, generating a sales income of RMB 13.4 million.

    With concerted efforts from all concerned, the Freet Company realized a sales revenue of RMB 1.12 billion in 2007, almost tripling sales at the time of its founding, and its profit amounted to RMB 140 million, 14 times the profits at the time of the restructuring. Since 2005, the company has invested RMB 500 million in developing new projects, adding new production capacity worth RMB 2 billion. Total assets have grown from RMB 300 million to 1 billion, and production capacity from RMB 400 million to 2.5 billion.

    The birth of Freet signifies dissociation from an old operation mode. Ma Houquan, chairman of Freet's Board of Directors, said at the time of its founding, "The restructuring is a revolution that has befallen the Machinery Factory; it is an opportunity as well as a risk, a wrestle between success and failure. But no matter how great the difficulties we come across on our way ahead, we will keep moving forward unremittingly to build the reborn firm into a big and strong company."

    This declaration of resolution and confidence summed up the key goal of the new company. Since its founding, Freet has followed an internationalization strategy and has been working hard to fulfill its objective of becoming a world-class petroleum equipment manufacturer and engineering service provider by 2010.