R&D Capabilities

We have established research and development centers in Chengdu and Guanghan. As of August 31, 2007, we have a total of 222 research and development personnel working in these research and development centers. We have advanced technological and engineering expertise and a track record of developing successful new technologies. We are one of the leading developers of land rig technologies in China , and we have created a wide range of patented technologies and proprietary designs which enhance the function and performance of our rigs. We are strongly committed to strengthening the global competitiveness of our rigs and rig parts and components. We have focused on research and development, assembling a team headed by leading Chinese experts in the oil and gas equipment industry. To keep we's products on the leading edge, we has two experienced engineers who are constantly up to date on the latest information technology research. In addition, we has established technology teams in the United States , Egypt , Dubai and Russia , who keep we up to date on information and research.

We are the first rig manufacturer to launch the digitally-controlled VFD rigs in China , which has become our best selling rig line. As a result of our dedication to technological innovation, we have successfully developed globally-competitive products such as our digitally-controlled VFD rigs which, since being developed in 2001, have become our best selling rigs.

Honghua, based in Guanghan City, Sichuan Province, produces a line of drilling rigs that includes(1) mechanical, (2) DC electric (SCR), and (3) AC variable frequency drive with digitally controlled drilling rigs that range in depth from 1000 to 9000 meters (500HP-4000HP). Its innovative AC variable frequency drive technology allows greater control of the drilling process and improves efficiency during tripping operations.

We are in the process of developing top drives and new types of drilling rigs with enhanced capabilities, such as arctic rigs and 12,000-meter depth drilling rigs. We also plan to construct an offshore equipment manufacturing base to produce jack-up rigs and fixed rigs as well as other heavy structures.

Further, we have entered into a Technology License Agreement with Nabors Global giving us access to technology which may enable us to develop and produce products such as offshore platform rigs, land drilling rigs, tubing rigs, workover rigs, jack-up rigs and barge rigs for sale to customers both in the PRC and overseas.