2021
Archer Limited
ANNUAL REPORT
3
Archer 2021 Annual Report
Board of Director’s Report 4
Responsibility Statement 25
Independent auditors’ report to the members of Archer Board 28
Consolidated Statement of Operations for the years ended
December 31, 2021 and 2020
35
Consolidated Statement of Comprehensive loss for the years
ended December 31, 2021 and 2020
36
Consolidated statement of accumulated other comprehensive
Income/(loss) for the years ended December 31, 2021 and 2020
36
Consolidated Balance Sheet as of December 31, 2021 and 2020 37
Consolidated Statement of Cash Flows for the years ended
December 31, 2021 and 2020
38
Consolidated Statement of Changes in Shareholders’ Equity
for the years ended December 31, 2021 and 2020
39
Notes to the Consolidated Financial Statements 40
Appendix A — Corporate Governance 72
Appendix B — List of Signiicant Subsidiaries 77
Contents
Archer 2021 Annual Report
4 5
Board of Directors’ Report
Business overview
Archer Limited (Archer or the company), along with its subsidiaries
(the Group), is a global services provider with a heritage in drilling
and well services that stretches back over 50 years. We employed
approximately 4,500 people in our global drilling and well services
operations as of December 31, 2021. We deliver high quality
products and services, provided by our experienced workforce,
with an outstanding record of performance and safety. We aim
to deliver the best drilling and well services to the global energy
industry.
Our comprehensive drilling and work-over services include
platform drilling, land drilling, modular drilling rigs, engineering
services, and equipment rentals as well as a select range of support
services and products.
Our global well services capabilities include a wide range of
products and services for, well imaging, well integrity, production
logging, well interventions, wellbore and blowout preventer clean
outs, casing cutting and sidetracks, temporary or permanent
plugging and abandonments, and decommissioning, all of which
are aimed at improving well performance and extending well life,
while reducing overall service operating time. We support our
customers in critical processes such as well construction, well
completion, well intervention and well plugging and abandonment.
Our dierentiated technologies in well bore imaging, well
construction and well integrity are an important and integral part
of our strategy to support our customers in delivering better wells.
We operate primarily in Norway, the United Kingdom and
Argentina, but we also have operations in Asia, Oceania, Eastern
Europe, North America, South America, the Middle East and Africa.
Archer Limited was incorporated in Bermuda on August 31, 2007,
with registration number 40612, as an exempted, limited company
and is organized and exists under the laws of Bermuda.
Archer’s registered oice is at Par la Ville Place, 14 Par la Ville Road,
Hamilton HM 08, Bermuda. Archer is listed on the Oslo Stock
Exchange under the ticker symbol ARCHER.NO and our web site is
www.archerwell.com.
Principal markets
The company’s principal operations are in the North Sea and
Argentina. Globally, we have operations in 40 countries in in Asia,
Oceania, Europe, North America, South America, the Middle East
and Africa. We report our results under two reporting segments,
Eastern and Western Hemisphere. Western Hemisphere includes
our land drilling operations in Latin America. All our other divisions,
which primarily operate in Norway and the UK, are reported under
the Eastern Hemisphere segment.
We have facilities and oices in Argentina, Australia, Bermuda,
Bolivia, Brazil, Canada, Dubai, Malaysia, New Zealand, Norway,
Poland, the United Arab Emirates, the United Kingdom and the
United States.
Strategy
Our strategy and focus is to deliver better wells and to be
the “supplier of choice” for drilling services, well integrity, well
interventions as well as plug and abandonments. We aim to achieve
this by continuously improving our service and product quality and
by utilizing people who demonstrate Archer’s values and deliver
excellence. This approach enables us to further broaden our reach,
both geographically and technically, and it will be the foundation to
secure longer term proitable growth. We will continue to pursue
opportunities to beneit from economies of scale, to selectively
strengthen our geographical footprint and to develop proprietary
technologies.
We have further established three overarching strategic directions
for Archer. All our business units and cross divisional activities will
be focused on supporting and developing; 1) Resilient oil and gas
oering, 2) low carbon agenda, and 3) renewables and transition.
Archer is committed to contributing to the ongoing energy
transition, through continuous development of new low carbon
technologies and services. We have developed our roadmap to net
zero in 2050. The majority of our business is focused on brownield
development. Brownield operations are in mature ields that have
been developed, where infrastructure is in place and when the
ields are already producing. We are conident Archer`s market
position in brownield services is a solid foundation for decades
to come. Archer will also explore business opportunities within the
green and renewable energy space, with special focus on wells for
geothermal and carbon storage.
2021 Operating results
Revenue for the year ended December 31, 2021 was $936.1 million
or 13,6% higher than the revenue in 2020 with increased revenue
from our Platform Drilling, Wireline, Oiltools and Land Drilling
operations, partly oset by reduced revenue in our Engineering
segments. The increase in revenue was exceptionally high in our
Wireline division, which experienced an increase of 185% compared
to 2020. Increased revenue for Wireline division relates to the
award and start up of the Equinor intervention contract in May
2021. Despite a 13.3% increase in revenue from our Land Drilling
division, our operations in Argentina continued to be negatively
impacted by the eect of the Covid-19 pandemic during 2021.
Archer is committed to contribut-
ing to the ongoing energy transition,
through continuous development
of new low carbon technologies and
services.
Archer 2021 Annual Report
6 7
Aberdeen
Kuala Lumpur
Jakarta
Perth
Miri
Kemaman
Newfoundland
Tartagal
Comodoro Rivadavia
Neuquén
Rincon de los Sauces
Tierra del Fuego
Odessa, TX
Houston, TX
Conroe, TX
Rio de Janeiro
Congo
Macae
Buenos Aires
Santa Cruz de la Sierra
Lagos
Luanda
Esbjerg
Abu Dhabi
Dubai
Al Khobar
Doha
Aberdeen
Kuala Lumpur
Jakarta
Perth
Darwin
Miri
Kemaman
Newfoundland
Comodoro Rivadavia
Neuquén
Tierra del Fuego
Houston, TX
Rio de Janeiro
Congo
Macae
Buenos Aires
Santa Cruz de la Sierra
Lagos
Luanda
Esbjerg
Abu Dhabi
Dubai
Al Khobar
Doha
Bergen
Stavanger
Mozambique
Mauritania
Myanmar
Romania
Vietnam
Ivory coast
Netherlands
Phillipines
Azerbaidjan
Alaska
Egypt
Oman
Sakhalin
Saudi
Board of Directors’ Report
Organisational reach
Archer 2021 Annual Report
8 9
Board of Directors’ Report
Financial review
EBITDA, (Earnings before Interest and Other inancial items, Taxes,
Depreciation and Amortization) for the year ended December 31,
2021 was $85.1 million, representing an increase of 12.6% compared
to 2020. The increase in reported EBITDA is driven by the
improvement in our Well Services segments which consists of our
Oiltools and Wireline divisions. In particular, Wireline improved its
contribution to Archer’s consolidated EBITDA. Within our Platform
Drilling division, the improved EBITDA contribution by our modular
rigs was more than oset by theresults from our engineering which
was impacted by poor results from two ixed price contracts as
well as lower activity within platform drilling operations. Despite
the continued negative impact of the Covid-19 pandemic in 2021,
our Land Drilling division improved their contribution compared to
2020, but continues to be below satisfactory levels.
Eastern Hemisphere revenue was 13.7% higher than in 2020 with
increased revenue in Platform Drilling, Modular Rigs, Wireline
and Oiltools. In particular, the contribution from the Wireline
contributed to the reported increase in revenue. The increased
revenue from Wireline is partly explained by the Equinor contract,
wherein Archer uses Schlumberger and Welltec as sub-contractors
to perform a substantial portion of the overall contract scope. Year
on year EBITDA, improved by 11.5% due to higher activity.
Western Hemisphere revenue increased by 13.3% compared with
2020, relecting a modest improvement from the impact of the
lockdown in Argentina. The depreciation aects our reported USD
revenue in Argentina. Year on year EBITDA, improved by 15.2% due
to higher activity.
Total expenses, including reimbursable expenses and depreciation
for the year ended December 31, 2021 amounted to $920.7 million,
an increase of 14.4% compared to the year ended December 31,
2020.
Our depreciation and amortization expenses for the year ended
December 31, 2021 amounted to $53.8 million, an increase of 12.2%
compared to $48.0 million for the year ended December 31, 2020.
The increase primarily results from the additional assets acquired
in the acquisition of the DeepWell business (see note 6).
We test our ixed assets for impairment as a matter of routine
each year during the fourth quarter. In 2021 we have recorded
impairment charges totalling $16.4 million relating to our land rigs
deployed in Latin America. Our detailed review involves the use
of estimated future cash lows per rig and independent valuations
obtained from specialist appraisers. In 2021 we have recognized
additional impairments of $16.4 million which reduce the carrying
value of rigs which have been idle for 5 or more years to zero. This
is a more conservative approach than in previous years which we
believe is appropriate due to the ongoing challenges in the Oil and
Gas Sector in Latin America resulting from the Covid Pandemic,
local strikes and Government iscal limitations.
We are conident that the carrying values of our remaining rigs
are supported by current contracts, estimated future cash low
forecasts and valuation reports from independent appraisers.
In 2021 we sold part of the business operated by our equity
investment, C6 Technologies AS (“C6”) to IKM Gruppen AS (“IKM”)
who owned the other 50% of C6. We retained 50% ownership of
the Comtrac technology developed by C6, which was transferred
to a new entity Comtrac AS, in which we have a 50% stake. The
partial sale of C6 resulted in a gain of $0.6 million which we have
recognized in Other comprehensive income due to the related
party nature of C6. This transaction is further discussed in note 24.
Our general and administrative expenses for the year ended
December 31, 2021 amounted to $38.4 million, an increase of 13.3%
compared to $33.9 million for the year ended December 31, 2020.
The increase is partly driven by increasing activity in all divisions,
in addition the cost increase relates to the implementation and
update of new accounting software. A substantial portion of
corporate cost is denominated in Norwegian kroner, which has
strengthened against our reporting currency of US Dollar.
Interest expense for the year ended December 31, 2021 amounted
to $29.0 million, a decrease of 13.4% compared to $33.5 million for the
year ended December 31, 2020. The reduction in interest expense
primarily relects reduced drawing under our facilities, following
an good cash low generated over the year combined with lower
interest rates in 2021 than in 2020. Net interest-bearing debt was
$500.0 million at December 31, 2021, compared to $504.3 million
on December 31, 2020.
In the second quarter of 2021 we recognized a non recurring gain
on bargain purchase of $11.4 million following our acquisition of
DeepWell, a Norwegian well intervention business which provides
high-tech wireline services which complement Archer’s service
portfolio. The purchase, and assets acquired are discussed in more
detail in Note 6.
Other inancial items for the year ended December 31, 2021,
amounted to a net cost of $6.8 million, compared to income
totalling $33.1 million for the year ended December 31, 2020. Other
inancial items included foreign exchange gains and losses. We are
exposed to the eect of currency exchange movements. In 2021,
we recorded an exchange loss of $7.0 million (2020: $6.7 million)
which is largely explained by movements in an internal loan
denominated in NOK recorded in our holding company which
has USD as the functional currency. The exchange loss related to
internal loans have no cash eect.
The net gain in 2020 included a one-o gain of $42.2 million, related
to our debt restructure, as further described in note 17.
Our total income tax charges for 2021 amounted to a tax expense
of $7.7 million as compared to an expense of $11.6 million for 2020.
The Group`s net tax expense primarily relates to tax expense from
operations in Europe, driven by underlying improved proitability
for the Norway operations.
Net loss from continuing operations for the year ended December
31, 2021 amounted to $14.8 million, compared to net loss of $7.5
million for the year ended December 31, 2020.
We have proposed no dividends for the year ended December 31,
2021.
Balance sheet
Our total current assets were $273.9 million at December 31, 2021,
an increase of 11.8% compared to $245.0 million at December 31,
2020. Accounts receivable have increased by $16.4 million, or 15%
relecting an increase in business activity. Cash and restricted cash
increased by $11.9 million or 22.2%.
Our total noncurrent assets were $576.7 million at December 31,
2021 and consisted primarily of ixed assets used in our operations,
goodwill, and right of use assets under operating leases. The
reduction of $23.7 million or 3.9% compared to a 2020 total of
$600.4, is mainly due to the impairment of some of our land rigs
and translation adjustments.
As of December 31, 2021, our total assets amounted to $850.7
million, an increase of $5.3 million, or 0.6%, as compared to
December 31, 2020.
Our total current liabilities were $214.2 million at December 31, 2021
compared to $178.9 million at 31 December 2020, an increase of
$35.3 million or 19.8%. The increase is driven by increased activity
which resulted in higher working capital, as well as a higher portion
of our revolving credit facility has been classiied as short term due
to scheduled repayments in 2022.
Our total non-current liabilities were $547.9 million at December
31, 2021 and consisted primarily of the revolving credit and term
loan facility, subordinated related party loan and operating lease
liabilities. Our net interest bearing debt was $500 million at
December 31, 2021 compared to $504 million at the end of 2020.
Additions to our balance sheet which resulted from the acquisition
of DeepWell are discussed in note 6 to our inance statements.
Archer 2021 Annual Report
10 11
Board of Directors’ Report
Financial review
Cash lows
The following table summarizes our cash lows from operating,
investing and inancing activities for the years ended December
31, 2021 and 2020.
Cash low from operating activities decreased in 2021, compared to
2020 resulting in part from an increase in our net working capital
and continuing higher extraordinary costs, deined below under
key igures, following the pandemic outbreak.
In 2020 and 2021 we limited our investments in assets to essential
overhauls/recertiication of operational equipment, apart from our
two modular rigs which have been recertiied and made ready for
service contracts secured in 2019.
In 2021 cash provided by inancing activities amounted to $5.9
million, which was the result from additional net drawing on our
revolving credit facility as well as the establisihmment of a new
syndicated loan in Argentina of $6.9 million. In 2020 cash used in
inancing activities of $29.1 million consisted mainly of repayments
under our long-term loan facility.
Going concern
Our Board of Directors conirms their assumption of the Group as
a going concern for the foreseeable future, being a period of not
less than 12 months from the date of this report. This assumption is
based on the liquidity position of the Group, forecasted operating
results, and the market outlook for the oil service sector as at
December 31, 2021. The Board believes the annual report provides
a fair presentation of the Group’s assets and debt, inancial position
and inancial performance.
Key igures
2021 2020
Revenue In $ millions 936 824
EBITDA In $ millions 85 76
EBITDA before exceptional items In $ millions 93 99
Net (loss) / income from continuing operations In
$ millions
(15) (8)
Net interest bearing debt In $ millions 500 504
Employees at December 31 4,473 4,564
EBITDA is deined as earnings before Interest and Other inancial items, Taxes,
Depreciation, Amortization and Impairments. This non-GAAP measurement is widely
used by analysts and investors for assessing the company’s underlying performance
and comparisons with other companies within the industry.
Exceptional items include severance payments, costs of idle personnel in Latin
America and oice closure costs which are non-recurring and are not directly
related to our current business operations, as disclosed in Note 4 to the consolidated
inancial statements.
In $ millions
2021 2020
Net cash provided by operating activities 52.7 70.0
Net cash used in investing activities (42.6) (31.5)
Net cash (used in) / Provided by inancing
activities
5.9 (29.1)
Eect of exchange rate changes on cash and
cash equivalents
(4.1) 0.1
Cash and cash equivalents, including restricted
cash at the beginning of the year
53.6 44.1
Cash and cash equivalents, including
restricted cash, at the end of the year
65.5 53.6
Archer 2021 Annual Report
12 13
Board of Directors’ Report
Health, Safety and Environmental
Archer’s HSE philosophy is to establish and maintain an incident-
free workplace where accidents, injuries or losses do not occur.
Safety is one of our key values. The value is embedded in the way
we work: in compliance with our procedures, with the authority
to ‘stop work’ if safety is compromised, planning before we act,
evaluating performance to ensure we improve, and maintaining a
positive working environment.
Measuring performance is a key element in Archer’s continuous
improvement process, and results are monitored constantly and
systematically. A selection of KPIs relecting Archer’s policies and
objectives are reviewed down to installation level and reported to
management on a monthly basis.
External and internal audits, veriications, inspections and
management visits oshore are carried out to measure compliance
towards requirements.
The close monitoring of the KPI results facilitates analysis of trends
and causes, enabling the management to implement corrective
actions if and when required. Together with the outcome of audits and
inspections and the discussions in our management reviews, these
results are used in the preparation of the annual HSE focus plans.
The main element in the Archer 2021 HSE plan has been the
further follow-up of the Archer safety culture program; The big
5. Via dierent initiatives during the year, Archer reinforced the
message in the program.
The Big 5 is an Archer initiated safety culture program, the focus
for the program is the personal motivation each of us have to stay
incident free. The main theme is to stay incident free so that we
can go back home and do what we love the most. The Big 5, are
each employee’s most important reasons to stay safe at work. The
question we ask is, how will a serious injury impact your life and
your Big 5.
The Big 5 will continue to play a central role in the Archer HSE plan
for 2022, ensuring a continued improvement in the Archer total
recordable injury frequency (“TRIF”) trend.
Archer continued its focus on the IOGP Life-saving rules. The rules
describe key actions to prevent fatal injuries related to 9 dierent
high-risk activities. Archer rolled out 4 information packages related
to Life saving rules in 2021 using video material, presentation
material and group work tasks. The adherence to the Lifesaving
Rules were veriied using internal inspections and management
hands-on activities.
Compared with 2020, the 2021 TRIF trend had an impressive drop
from 0.85 to 0.41 and the Lost Time Injury trend decreased from
0.14 to 0.13 during 2021. Archer injury trend is based on number
of injuries during 200,000 worked hours. All the incidents Archer
experienced during the year had minor personal impact.
Most incidents can easily be avoided, which is why we keep
consistent and high QHSE focus. To ensure this is highlighted and
to ensure we reach our success criteria the following actions will be
put in place and monitored during the 2021:
• Management leadership inspections
• The Big 5 implementation
• Safety leadership
• Hazard hunt training
• Life-saving rules training packages
The following table provides a summary of our work injury statistics.
The table above illustrates the total amount of recordable personnel
injuries in both Eastern and Western Hemisphere. Archer will focus
and continue to work to continue the positive trend we had in 2021
into 2022
Archer is actively working to minimize the risk of damage to the
environment as a result of operations. This includes the systematic
registration of emissions and discharges and pre-emptive action in
selecting chemicals that cause minimum harm to the environment.
However, there are still risks of environmental damage and negative
consequences for the company. In 2021 Archer had 0 reportable
spills (2020 2 spills).
The Archer Management system is certiied according to the ISO
9001:2015 certiicate. In addition, the UK and Brazil operations and
Wireline Norwegian operations are accredited to the ISO 14001:2015
for Environmental Management Standards. Archer has described
the social responsibility in its management system and made clear
commitments throughout the year.
Sustainability
The company published its Environmental, Social, Governance
report (ESG) for 2021 on March 31, 2022. The ESG report has
been prepared in accordance with the framework established
by the Sustainability Accounting Standards Board (SASB) for Oil
and Gas Services. This report allows us to identify, manage and
report on material Environmental, Social and Governance (ESG)
factors speciic to our Industry. The report is published to provide
investors, banks and other stakeholders with easy access to extra-
inancial information. More information is available in the ESG 2021
report on our homepage, please visit https://www.archerwell.com/
sustainability/
Employees and diversity
Our global workforce`s everyday dedication to demonstrating our
values and delivering excellence to our clients, has been impressive
throughout 2021. Their response to an ever-changing pandemic
has been lexible to both how, when and where they conduct their
work.
Increased use of digitalization has been essential to solve
diiculties with reduced mobility and home oice requirements
to retain safe and eicient operations. We have experienced new
technology to be used at all levels in the organization. The last two
years with the pandemic have caused employees at all locations to
have signiicantly more lexibility in working hours and workplace.
Employee surveys from some locations, can indicate that
experienced lexibility has contributed to the workforce being able
to better handle their personal lives and cope with the pandemic.
In spite of another year with challenging travel restrictions and
business protection within country borders, we managed to keep
our client promises and delivered our operations in a safe manner
according to adjusted plans. The variety in the global market
activity required us to focus even more on the pandemic situation
to keep our human resources safe, and to have enough manpower
available to support our operations
Our diverse global workforce represents 42 nationalities. Most of
our employees are working oshore at rig installations or in ield
locations at onshore drilling rigs. Female employees make up 21%
of our onshore workforce, with 18% of those female employees
holding leadership positions. The total female ratio is 4.9%, an
increase of 0.6% from 2020.
The total headcount for Archer was stable during 2021, with 4,473
employees at year end. However, there was some variety within
the divisions during the year. The service divisions, Oiltools and
Wireline, had a signiicant increase in headcount of 194 additional
employees representing a 49% increase, primarily due to the
signiicant Wireline contract award from Equinor and acquisition of
DeepWell AS during 2021. The headcount within Platform drilling &
Engineering segment was reduced by 7,4%, or 155 employees, over
the year due to a drop in activity within Platform drilling in the UK
and Norway. The overall headcount for the Western Hemisphere
had a small 1,5% decrease over the year.
The Archer Group is an equal opportunity employer and exercises
fair treatment to all individuals regardless of race, color, religion,
gender, national origin, age, disability, or any other status protected
by law. This commitment applies to all employment decisions
and in all the countries in which Archer entities operate. Included
within our Human Rights policy is our commitment to respect the
principles in the UN Guiding Principles on Business and Human
Rights, the International Bill of Human Rights, and the ILO Core
Conventions on Labor Standards. Archer complies with established
international labor standards and employment legislation where
we operate and is committed to the prevention of child and forced
labor, non-discrimination in the workplace, the right of freedom of
association and assembly, and the right to collective bargaining.
Archers HSE philosophy is to estab-
lish and maintain an incident-free
workplace where accidents, injuries
or losses do not occur.
The Archer Group is an equal oppor-
tunity employer and exercises fair
treatment to all individuals regard-
less of race, colour, religion, gender,
national origin, age, disability or any
other status protected by law.
2021 2020
Area
Loss Time
Injuries
Medical
Treatment
Cases
Loss Time
Injuries
Medical
Treatment
Cases
Eastern Hemisphere 5 9 5 22
Western Hemisphere 1 4 1 8
Archer Total 6 13 6 30
Archer 2021 Annual Report
14 15
Board of Directors’ Report
Risk factors
Risks Relating to the Group and the Industry in which the
Group Operates
The Group’s business depends on the development and
production in the North Sea and internationally, and the level of
activity of oil and natural gas exploration.
The Group’s business depends on the development and
production in the North Sea and internationally, level of activity
of oil and natural gas exploration, and in particular, development
and production expenditures of the Group’s customers. Demand
for the Group’s drilling and well services is adversely aected by
declines in exploration, development and production activity
associated with depressed oil and natural gas prices. Even the
perceived risk of a decline in oil or natural gas prices often causes
exploration and production companies to reduce their spending.
A decline in oil and natural gas prices may cause a reduction in
drilling, completion and other production activities of the Group’s
customers and related spending on the Group’s products and
services. These eects could have a material adverse eect on the
Group’s inancial condition, results of operations and cash lows.
Legal requirements, conservation measures and technological
advances could reduce demand for oil and natural gas, which
may adversely aect the Group’s business, inancial condition,
results of operations and cash lows.
Environmental and energy matters have been the focus of
increased scientiic and political scrutiny and are subject to various
legal requirements. International agreements, national laws, state
laws and various regulatory schemes limit or otherwise regulate
energy-related activities, such as emissions of greenhouse
gases, and additional restrictions are under consideration by
governmental entities.
The Group’s Argentina operations could be aected by
government action.
Land drilling activity in Argentina remains at low levels. Argentina’s
default on its sovereign debt combined with capital restrictions
have led to a challenging situation for the oil and gas sector in the
country, including the oil service industry. How the government
of Argentina invests in the energy sector, makes changes to
employment and labor legislation, and formulates policy around
taxation, currency control and exchange, national debt repayment,
and commodity pricing could all have a signiicant eect on the
Group’s business in Argentina.
Global political, economic and market conditions inluence, and
could negatively impact, the Group’s business.
The Group’s operations are aected by global political, economic
and market conditions. A worldwide economic downturn could
reduce the availability of liquidity and credit to fund business
operations worldwide. This could adversely aect the operations of
the Group’s customers, suppliers and lenders which in turn could
aect demand for the Group’s services. In addition, an economic
downturn could reduce demand for oilield services negatively and
impact the Group’s activity levels and pricing of its services and
thus adversely aect the Group’s inancial condition and results of
operations.
Employee and customer labor problems could adversely aect
the Group.
Archer and its subsidiaries are parties to collective bargaining
agreements material to the Group’s operations in Argentina, Brazil,
the United Kingdom and Norway. We have experienced strikes,
work stoppages or other slowdowns in the past. A prolonged
strike, work stoppage or other slowdown by our employees or by
the employees of our customers could cause us to experience
a disruption of our operations, which could adversely aect our
business, inancial condition and results of operations.
The Group is subject to numerous governmental laws and
regulations, some of which may impose signiicant liability on
the Group.
The Group is subject to various local and foreign laws and
regulations, including those relating to the energy industry in
general and the environment in particular, and may be required
to make signiicant capital expenditures to comply with laws
and the applicable regulations and standards of governmental
authorities and organizations. Moreover, the cost of compliance
could be higher than anticipated. The Group’s operations are
subject to compliance with international conventions and the laws,
regulations and standards of other countries in which the Group
operates, including anti-bribery regulations. It is also possible that
existing and proposed governmental conventions, laws, regulations
and standards, including those related to climate and emissions
of “greenhouse gases,” may in the future add signiicantly to
the Group’s operating costs or limit the Group’s activities or the
activities and levels of capital spending by the Group’s customers.
The Group is primarily engaged in the oil and gas service
industry, and the ongoing energy transition may limit the activity
in these areas in the future
Our long-term success depends on our ability to eectively address
the energy transition, which will require adapting our technology
portfolio to potentially changing government requirements and
customer preferences, as well as engaging with our customers
to develop solutions to decarbonize oil and gas operations. If the
energy transition landscape changes faster than anticipated or
in a manner that we do not anticipate, demand for our products
and services could be adversely aected. Furthermore, if we fail
or are perceived to not eectively implement an energy transition
strategy, or if investors or inancial institutions shift funding away
from companies in fossil fuel-related industries, our access to capital
or the market for our securities could be negatively impacted.
The loss of the services of key executives could hurt the Group’s
operations.
The Group is dependent upon the eorts and skills of certain
directors of the Group and executives employed by the company to
manage the Group’s business, identify and consummate additional
acquisitions and obtain and retain customers.
Severe weather conditions could have a material adverse impact
on the Group’s business.
The Group’s business could be materially and adversely aected
by severe weather in the areas where it operates. Repercussions of
severe weather conditions may include:
• curtailment of services;
• weather-related damage to facilities and equipment resulting in
suspension of operations;
• inability to deliver materials to job sites in accordance with
contract schedules; and
• loss of productivity.
A terrorist attack or armed conlict could harm the Group’s
business.
Terrorist activities, anti-terrorist eorts and other armed conlicts
in, or involving any region of the Group’s activities or other oil
producing nation may adversely aect local and global economies
and could prevent the Group from meeting their inancial and
other obligations.
The political environment in oil and natural gas producing
regions, including uncertainty or instability resulting from civil
disorder, terrorism or war, such as the recent conlict between
Russia and Ukraine could adversely aect the Group’s business.
On 24 February 2022, Russia launched a military invasion of
Ukraine. Following the invasion, there has been ongoing battles on
Ukrainian soil, creating signiicant uncertainties regarding global
political and economic stability. Several countries have condemned
the invasion by Russia, and severe sanctions have been imposed
on banks, certain oligarchs, and the state itself. The war has caused
signiicant business disruption, volatility in international debt and
equity markets and disruption to the global economy in the short
term. There is signiicant uncertainty around the breadth and
duration of all disruptions related to the invasion, as well as its
impact on the global economy. The extent to which the invasion
impacts the company’s results will depend on future developments,
which are highly uncertain and diicult to predict, including new
information which may emerge on an ongoing basis. The energy
markets are heavily impacted by the invasion and the following
sanctions, and oil and gas prices have spiked from an already high
level since the announcement on 24 February 2022.
Russia is a key exporter of gas to Europe, and it is expected that
volumes will decline both due to infrastructure breaches, sanctions
making it cumbersome to trade, and potential unwillingness
from Russia to export to the rest of the global community. There
is signiicant uncertainty regarding how the invasion and the
following sanctions will impact the access to energy, and the price
of oil and gas and other commodities in the coming period, and
the company’s operations and results may be adversely impacted.
The ongoing conlict in Ukraine could potentially lead to increased
risk of cyber-attacks.
Archer 2021 Annual Report
16 17
Board of Directors’ Report
Risk factors
The Group has recorded substantial goodwill as the result of
its acquisitions and goodwill is subject to periodic reviews of
impairment.
The Group performs purchase price allocations to intangible assets
when it makes acquisitions. The excess of the purchase price after
allocation of fair values to tangible assets is allocated to identiiable
intangibles and thereafter to goodwill. The Group conducts periodic
reviews of goodwill for impairment in value. Any impairment would
result in a non-cash charge against earnings in the period reviewed,
which may or may not create a tax beneit, and would cause a
corresponding decrease in shareholders’ equity. In the event that
market conditions deteriorate or there is a prolonged downturn,
the Group may be required to record an impairment of goodwill,
and such impairment could be material.
The Group has operated at a loss in the past and recently, and
there is no assurance of its proitability in the future.
Historically, the Group has experienced periods of low demand
for its services and has incurred operating losses. In the future,
it may not be able to reduce its costs, increase its revenues, or
reduce its debt service obligations suicient to achieve or maintain
proitability and generate positive operating income. Under such
circumstances, the Group may incur further operating losses and
experience negative operating cash low.
The Group may be subject to litigation if another party claims
that the Group has infringed upon its intellectual property rights.
Third parties could assert that the tools, techniques, methodologies,
programs and components the Group uses to provide its services
infringe upon the intellectual property rights of others. Infringement
claims generally result in signiicant legal and other costs and may
distract management from running the Group’s core business.
Additionally, if any of these claims were to be successful, developing
non-infringing technologies and/or making royalty payments
under licenses from third parties, if available, would increase the
Group’s costs.
The Group could be adversely aected if it fails to keep pace
with technological changes and changes in technology could
have a negative result on the Group’s market share.
The Group provides drilling and well services in increasingly
challenging onshore and oshore environments. To meet its
clients’ needs, the Group must continually develop new, and
update existing, technology for the services it provides. In addition,
rapid and frequent technology and market demand changes can
render existing technologies obsolete, requiring substantial new
capital expenditures, and could have a negative impact on the
Group’s market share.
The Group may be subject to claims for personal injury and
property damage, which could materially adversely aect the
Group’s inancial condition and results of operations.
Substantially all of the Group’s operations are subject to hazards
that are customary for exploration and production activity,
including blowouts, reservoir damage, loss of well control, cratering,
oil and gas well ires and explosions, natural disasters, pollution and
mechanical failure. Any of these risks could result in damage to
or destruction of drilling equipment, personal injury and property
damage, suspension of operations, or environmental damage.
The Group may also be subject to property, environmental and
other damage claims by oil and natural gas companies and other
businesses operating oshore and in coastal areas. Litigation
arising from an accident at a location where the Group’s products or
services are used or provided may cause the Group to be named as
a defendant in lawsuits asserting potentially large claims. Generally,
the Group’s contracts provide for the division of responsibilities
between the Group and its customer, and consistent with standard
industry practice, the Group’s clients generally assume, and
indemnify the Group against, some of these risks. There can be no
assurance, however, that these clients will necessarily be inancially
able to indemnify the Group against all risks. Also, the Group may
be eectively prevented from enforcing these indemnities because
of the nature of the Group’s relationship with some of its larger
clients. Additionally, from time to time the Group may not be able
to obtain agreement from its customers to indemnify the Group for
such damages and risks.
To the extent that the Group is unable to transfer such risks to
customers by contract or indemniication agreements, the Group
generally seeks protection through customary insurance to protect
its business against these potential losses. However, the Group has
a signiicant amount of self-insured retention or deductible for
certain losses relating to general liability and property damage.
There is no assurance that such insurance or indemniication
agreements will adequately protect the Group against liability from
all of the consequences of the hazards and risks described above.
The occurrence of an event for which the Group is not fully insured
or indemniied against, or the failure of a customer or insurer to
meet its indemniication or insurance obligations, could result in
substantial losses.
The Group’s insurance coverage may become more expensive,
may become unavailable in the future, and may be inadequate
to cover the Group’s losses.
The Group’s insurance coverage is subject to certain signiicant
deductibles and levels of self-insurance, does not cover all types
of losses and, in some situations, may not provide full coverage for
losses or liabilities resulting from the Group’s operations.
Archer Limited is a holding company, and as a result is dependent
on dividends from its subsidiaries to meet its obligations.
Archer Limited is a holding company and does not conduct any
business operations of its own. Archer Limited’s principal assets
are the equity interests it owns in its operating subsidiaries, either
directly or indirectly. As a result, the Archer Limited is dependent
upon cash dividends, distributions or other transfers it receives
from its subsidiaries to repay any debt it may incur, and to meet
its other obligations. The ability of Archer’s subsidiaries to pay
dividends and make payments to Archer Limited will depend on
their operating results and may be restricted by, among other
things, applicable corporate, tax and other laws and regulations
and agreements of those subsidiaries. For example, the corporate
laws of some jurisdictions prohibit the payment of dividends by
any subsidiary unless the subsidiary has a capital surplus or
net proits in the current or immediately preceding iscal year.
Payments or distributions from Archer’s subsidiaries also could
be subject to restrictions on dividends or repatriation of earnings
under applicable local law, and monetary transfer restrictions in
the jurisdictions in which Archer’s subsidiaries operate. Archer’s
subsidiaries are separate and distinct legal entities. Any right that
Archer Limited has to receive any assets of or distributions from
any subsidiary upon the bankruptcy, dissolution, liquidation or
reorganization of such subsidiary, or to realize proceeds from the
sale of the assets of any subsidiary, will be junior to the claims of
that subsidiary’s creditors, including trade creditors.
Regarding payment of dividends to Archer shareholders, under
the Bermuda Companies Act, dividends cannot be paid if there
are reasonable grounds for believing that (a) The company is, or
would after the payment be, unable to pay its liabilities as they
become due; or (b) The realizable value of the company’s assets
would thereby be less than its liabilities The Company has not
declared a dividend since its inception, and there are restrictions
in the inancing arrangement eectively preventing the Company
from distributing dividend to its shareholders before the loan has
been repaid, reinanced or a dividend distribution is approved by
our Lenders.
The Group’s tax liabilities could increase as a result of tax audits,
inquiries or settlements.
The Group’s operations are, and may in the future become,
subject to audit, inquiry and possible re-assessment by dierent
tax authorities. In accordance with applicable accounting rules
relating to contingencies, management provides for taxes in the
amounts that it considers probable of being payable as a result
of these audits and for which a reasonable estimate may be
made. Management also separately considers if taxes payable in
relation to ilings not yet subject to audit may be higher than the
amounts stated in the Group’s iled tax return and makes additional
provisions for probable risks if appropriate. As forecasting the
ultimate outcome includes some uncertainty, the risk exists that
adjustments will be recognized to the Group’s tax provisions in later
years as and when these and other matters are inalized with the
appropriate tax authorities.
The Group’s operations are subject to a signiicant number of tax
regimes, and changes in legislation or regulations in any one of
the countries in which the Group operates could negatively and
adversely aect the Group’s results of operations.
The Group’s operations are carried out in several countries across
the world, and the Group’s tax ilings are therefore subject to the
jurisdiction of a signiicant number of tax authorities and tax
regimes, as well as cross-border tax treaties between governments.
Furthermore, the nature of the Group’s operations means that
the Group routinely has to deal with complex tax issues (such as
transfer pricing, permanent establishment or similar issues) as well
as competing and developing tax systems where tax treaties may
not exist or where the legislative framework is unclear. In addition,
Archer 2021 Annual Report
18 19
Board of Directors’ Report
Risk factors
the Group’s international operations are taxed on dierent bases
that vary from country to country, including net proit, deemed net
proit (generally based on turnover) and revenue based withholding
taxes based on turnover.
Cyber-attacks could adversely aect the Group’s business.
The Group’s operations are subject to the risk of cyber-attacks. If
the Group’s systems for protecting against cybersecurity risks
are circumvented or breached, this could result in the loss of the
Group’s intellectual property or other proprietary information,
including customer data, and disruption of its business operations,
which could adversely aect the Group’s inancial condition and
results of operations.
Outbreaks of pandemic and pandemic diseases and govern-
mental responses thereto could adversely aect our business.
Our operations are subject to risks related to outbreaks of infectious
diseases. The COVID 19 pandemic, has already and may continue
to negatively aect economic conditions, our operations and the
operations of our customers, suppliers and other stakeholders.
Governments in aected countries may impose travel bans,
quarantines and other emergency public health measures in
2022. Those measures may continue and increase depending on
developments in the virus’ outbreak, mutation, and the vaccination
program of aected countries. As a result of these measures our
oshore sta may be restricted from embarking and disembarking
in ports located in regions aected by Coronavirus and our land
drilling sta may be restricted from mobilization to well sites. The
possible eects of the pandemic are discussed more fully under
Going Concern in Note 1 to our inancial statements.
Risks relating to the company’s inancing
No assurance can be given that the company’s current inancing
arrangements will be suicient and that the Group will not re-
quire additional funding to fund operations and capital expendi-
ture or for other purposes.
To the extent the company does not generate enough cash from
operations the company and its subsidiaries may need to raise
additional funds through public or private debt or equity inancing
or reinance its debt facilities. Adequate sources of funds may not
be available or available at acceptable terms and conditions, when
needed, and the company may not be able to reinance its debt
facilities on acceptable terms and conditions or at all.
Banks and other inancial institutions have due to historical lossess
in the sector and due to concerms in relation to ESG, decided to
restrict lending to the oil and gas related industry. As a consequence,
the availale bank lending to the industry is meaningfully reduced,
with a negative eect on the the funding cost for capital in the oil
and gas service industry
The Group`s Revolving Credit Facility matures on October
1
st
, 2023.
The Group has a signiicant level of debt, and could incur
additional debt in the future, which could have signiicant
consequences for its business and future prospects.
As of December 31, 2021, the Group had total outstanding interest-
bearing debt of $552 million. This debt represented 65% of the
Group’s total assets. See note 17 to the inancial statements for
further analysis of our debt. The Group’s debt and the limitations
imposed on the Group by its existing or future debt agreements
could have signiicant consequences for the Group’s business and
future prospects, including the following:
• The Group may not be able to obtain necessary inancing in the
future for working capital, capital expenditures, acquisitions, debt
service requirements or other purposes;
• The Group may not be able to repay the debt as it comes due,
obtain extension of maturities or secure suicient reinancing;
• The Group will be required to dedicate a substantial portion of its
cash low from operations to payments of principal and interest
on its debt;
• The Group could be more vulnerable during downturns in its
business and be less able to take advantage of signiicant business
opportunities and to react to changes in the Group’s business and
in market or industry conditions; and
• The Group may have a competitive disadvantage relative to its
competitors that have less debt.
Adjustments to the Group’s capital structure could be required to
retain suicient lexibility and competitiveness for the company
and Group going forward, and the capital structure will be
considered more closely by the company going forward.
The Group’s Revolving Credit Facility imposes inancial covenants
and restrictions on the Group that may limit the discretion of
management in operating the Group’s business and that, in turn,
could impair the Group’s ability to meet its obligations.
The Group’s existing credit facility contains various restrictive
covenants and undertakings that limit management’s discretion
in operating its business. In particular, at December 31, 2021, these
covenants undertakings limit its ability to, among other things:
• make certain types of loans and investments;
• incur or guarantee additional indebtedness;
• pay dividends, redeem or repurchase stock, prepay, redeem or
repurchase other debt or make other restricted payments;
• use proceeds from asset sales, new indebtedness or equity
issuances for general corporate purposes or investment into its
business;
• invest in joint ventures;
• create or incur liens;
• enter into transactions with ailiates;
• sell assets or consolidate or merge with or into other companies;
and
• enter into new lines of business.
There is also a change of control clause in the loan agreement
which would be triggered in the case of Hemen Holding Limited
reduces its shareholding to below 7.5%.For further information
about our inancing arrangements please see Note 17 to the
inancial statements.
Liquidity risk
Liquidity risk is the risk that our group is unable to meet our
inancial obligations. Our approach to secure liquidity is to ensure,
as far as possible, that we always have suicient liquidity reserves to
meet our liabilities when due. This requires us to maintain suicient
cash and available overdraft facilities supplemented by additional
liquidity through committed credit lines as appropriate.
Should our access to debt markets become more diicult, or we
are unable to reinance or repay debt when they come due, our
availability of liquidity may be insuicient to service our inancial
obligations, and the impact on our liquidity could have a material
adverse eect on our operations. Our inancing costs could also be
aected by interest rate luctuations.
The Group’s results of operations may be adversely aected by
currency luctuations.
Due to its international operations, the Group may experience
currency exchange losses when revenues are received and
expenses are paid in nonconvertible currencies, or when the Group
does not hedge an exposure to a foreign currency. The Group
may also incur losses as a result of an inability to collect revenues
because of a shortage of convertible currency available to the
country of operation, controls over currency exchange or controls
over the repatriation of income or capital. The Group attempts to
limit the risks of currency luctuation and restrictions on currency
repatriation where possible by obtaining contracts providing for
payment of a percentage of the contract indexed to the U.S. dollar
exchange rate. To the extent possible, the Group seeks to limit its
exposure to local currencies by matching the acceptance of local
currencies to the Group’s local expense requirements in those
currencies.
The Group’s cost of funding is impacted by changes in the
interest rate level.
The Group is generally inanced using loating interest rates, and
changes in the interest rate will impact the cost of inancing. The
Group has entered into interest rate cap agreements, securing
interests on a portion of its debt against general increases in interest
rates above certain levels. See note 17 for additional information.
The Group is exposed to credit risk and would be impacted by
inancial losses if one or more contractual partners do not meet
their obligations.
To mitigate this risk the Group trades predominantly with
recognized, creditworthy third parties. Receivable balances are
monitored on an ongoing basis. The Group enters into derivative
transactions only with counterparties with whom it has an
established business relationship.
Archer 2021 Annual Report
20 21
Board of Directors’ Report
Share capital issues and Corporate Governance
Share Capital issues
At December 31, 2021, the number of shares issued was 148,758,612
corresponding to a share capital of $1,487,586.
At December 31, 2021, our authorised share capital was $10,000,000
consisting of 1,000,000,000 shares each with a par value of $0.01.
All of our shares are of the same class.
At December 31, 2021, the number of shares issued was 148,758,612
corresponding to a share capital of $1.5 million.
The issued shares are fully paid, and all issued shares represent
capital in the company. The shares are equal in all respects and
each share carries one vote at our General Meeting of shareholders.
None of our shareholders have dierent voting rights. The Board is
not aware of any other shareholders agreements or any take-over
bids during the year.
All of our issued shares are listed on the Oslo Stock Exchange and
the split of the shareholders, as registered in the Norwegian Central
Securities Depository (VPS), was as per the table below.
Shareholder overview as of December 31, 2021
Hemen Holding Ltd, or Hemen, a Cyprus holding company is
indirectly controlled by trusts established by Mr. John Fredriksen,
for the beneit of his immediate family.
Corporate governance
The Board has reviewed our compliance with various rules and
regulations, such as the Norwegian Accounting Act, the Norwegian
Code of Practice for Corporate Governance, as well as the
respective Bermuda law. A detailed discussion of each item can be
found in the compliance section of this annual report in Appendix
A. The Board believes that we are in compliance with the rules and
regulations except for certain sections where the reasons for this
noncompliance are provided.
SEADRILL JU NEWCO BERMUDA LIMITED 15.5%
HEMEN HOLDING LIMITED 12.2%
SKANDINAVISKA ENSKILDA BANKEN AB 3.2%
STAVANGER FORVALTNING AS 3.1%
Others 66.0%
Archer 2021 Annual Report
22 23
Board of Directors’ Report
Board of Directors
Composition of the Board
Overall responsibility for the management
of Archer Limited and its subsidiaries rests
with the Board. Our bye-laws provide that
the Board shall consist of a minimum of
two directors and the shareholders have
currently approved a maximum of nine
directors. Archer maintains Directors &
Oicers liability insurance against liabilities
incurred in their capacity as Director or
oicer. The policy has a limit of $15 million..
Archer Limited’s business address at Par-
la-Ville Place, 14 Par-la-Ville Road, Hamilton
HM 08, Bermuda, serves as c/o addresses
for the members of the Board in relation to
their directorships of the company.
Kjell-Erik Østdahl
Chairman of the Board
Kjell-Erik Østdahl joined Archer Limited as
Chairman of the Board in September 2019,
prior to which he spent 21 years at Schlum-
berger in a number of senior positions
within operations, business development,
marketing and executive management
in China, Norway, UK, France and US. He
served as Executive Vice President, Opera-
tions, Schlumberger from 2011 to 2013 and
was senior partner at HitecVision from 2014
to 2015. Mr. Østdahl is a professional inves-
tor in technology start-up companies and
real estate. In addition, he is a senior advi-
sor to Ferd and Sumitomo Corporation. Mr
Østdahl serves as Chairman on the Boards
of Sekal AS, Keystone AS, Earth Science
Analytics AS, Interwell AS, Servi AS and is a
board member of Windspider AS. Mr. Øst-
dahl holds an MSc in Electrical Engineering
from the Norwegian University of Science
and Technology (NTNU). Mr. Østdahl is a
Norwegian citizen and resides in Norway.
James O’Shaughnessy
Director
Mr. James O’Shaughnessy has served
as Director and Chairman of the Audit
Committee since September 2018. Prior to
joining Archer Limited’s board of directors,
Mr O’Shaughnessy served as Executive
Vice President, Chief Accounting Oicer
and Corporate Controller of Axis Capital
Holdings Limited since March, 2012. Prior to
that Mr. O’Shaughnessy has served as Chief
Financial Oicer of Flagstone Reinsurance
Holdings and as Chief Accounting Oicer
and Senior Vice President of Scottish Re
Group Ltd., and Chief Financial Oicer of XL
Re Ltd. at XL Group plc. Mr. O’Shaughnessy
received a Bachelor of Commerce degree
from University College, Cork, Ireland in
1985 and is both a Chartered Director, Fellow
of the Institute of Chartered Accountants of
Ireland and an Associate Member of the
Chartered Insurance Institute of the UK. Mr.
O’Shaughnessy earned a Master’s Degree
in Accounting from University College
Dublin in 1986. Mr. O’Shaughnessy is an
Irish, British and Bermudan citizen, residing
in Bermuda.
Giovanni Dell’ Orto
Director
Giovanni Dell’ Orto was appointed as a
Director in February 2011. Mr. Dell’ Orto was
president and chief executive oicer of DLS
Drilling, Logistics and Services from 1994 to
August 2006. He is a member of the board
of Energy Developments and Investments
Corporation (EDIC). Mr. Dell’ Orto also has
served as chairman and Chief Executive
Oicer of Saipem and was a board member
of Agip and Snam. Mr. Dell’ Orto is an
Argentinean citizen, resident in Switzerland.
Jan Erik Klepsland
Director
Jan Erik Klepsland has served as Director
in Archer since October 2021. Mr. Klepsland
is an Investment Director of Seatankers
Management Norway AS. He holds a MSc
in Finance from the Norwegian School
of Economics (NHH). Prior to joining
Seatankers, he held the position as Partner
at ABG Sundal Collier. Prior to ABG he held a
position as a Director in Nordea Investment
Banking. Mr. Klepsland also serves as Chief
Financial Oicer of St Energy Transition
Ltd. He has experience within equity/
debt inancing, M&A and restructuring.
Mr. Klepsland is a Norwegian citizen and
resides in Oslo, Norway.
Peter Sharpe
Director
Mr. Sharpe was appointed as a Director in
November 2019. Mr. Sharpe retired from
Shell in 2017 after holding a diverse range
of Executive Management positions at
various international locations over a
period of 37 years. He Served as Executive
Vice President of Shell for over 10 years,
with responsibility for managing Shell
upstream investments in well construction
and maintenance globally. He served as
chairman of Sirius Well Manufacturing Pte,
an independent joint venture between Shell
and China National Petroleum Corporation
from 2012 to 2017 and as a non-executive
director of Xtreme Drilling and Coil Services
Corporation from 2008 to 2014.
Board independence
The Chairman of the company’s ive-
member Board of Directors is elected
by the Board of Directors and not by the
shareholders as recommended in the
Norwegian Code of Practice. This is in
compliance with normal procedures under
Bermuda law.
Archer 2021 Annual Report
24 25
Board of Directors’ Report
Executive management
Board of Directors’ Report
Responsibility Statement
Dag Skindlo
Chief Executive Oicer
Mr. Skindlo joined Archer in April 2016 as
Chief Financial Oicer before becoming
Chief Executive Oicer in March, 2020.
Mr. Skindlo is a business-oriented execu-
tive with 30 years in the energy industry.
He joined Schlumberger in 1992 where he
held various inancial and operational po-
sitions before he joined the Aker Group of
companies in 2005. His experience from
Aker Kvaerner, Aker Solutions and Kvaerner
includes both global CFO roles and Manag-
ing Director roles for several large industrial
business divisions. Prior to joining Archer
Mr. Skindlo was the Chief Executive Of-
icer of Aquamarine Subsea. Mr. Skindlo
brings with him extensive international
experience including working for more
than twelve years in countries like the US,
Indonesia, Scotland, and China. Mr. Skindlo
currently serves as Director of the Nasdaq
listed oilield service company KLX Energy
Services Holdings, Inc.
Mr. Skindlo is a Norwegian citizen with a
Master of Science in Economics and Busi-
ness Administration from the Norwegian
School of Economy and Business Adminis-
tration (NHH).
Espen Joranger
Chief Financial Oicer
Mr. Joranger was appointed Chief
Financial Oicer for Archer in March 2020.
Mr. Joranger has more than 10 years’
experience in the Oil and Gas industry.
Espen joined Archer in May 2013 as Finance
Director North Sea Region and held the
position as Group Controller prior to his
appointment as Chief Financial Oicer in
Archer. Before joining Archer, he worked for
Seadrill as Director of Financial Accounting
for 3 years and 8 years for Ernst & Young.
Mr. Joranger is a State Authorized Public
Accountant from the Norwegian School of
Economics and Business Administration
(NHH) and is a Norwegian citizen and
resides in Stavanger, Norway.
Adam Todd
General Counsel
Mr. Todd was appointed General Counsel in
September 2017.
Mr. Todd started his career with Canadian
law irms focusing on commercial litigation
before moving to Oslo in 2009 to join Aker
Solutions. He spent 8 years with Aker So-
lutions in various roles based in Oslo and
London including head of legal positions
for Europe and Africa and Tendering and
Partnering. Mr. Todd brings with him ex-
tensive international oil and gas services
experience in corporate, contracting, M&A,
litigation, and compliance matters.
Mr. Todd holds a juris doctorate from the
University of Alberta, received in 2003.
Mr. Todd is a Canadian citizen and resides
in Oslo, Norway.
We conirm that, to the best of our knowledge, the inancial statements for 2021 have been prepared in accordance with the current
applicable accounting standards, and give a true and fair view of the assets, liabilities, inancial position and proit or loss for the Company
and the Group.
We also conirm that the Board of Director’s Report includes a true and fair review of the development and performance of the business
and the position of the Company and the Group, together with a description of the inancial risks and uncertainties facing the Company
and the Group.
March 30, 2022
The Board of Archer Limited
Kjell-Erik Østdahl
(Chairman)
Giovanni Dell’ Orto
(Director)
James O’Shaughnessy
(Director)
Jan Erik Klepsland
(Director)
Peter Sharpe
(Director)
Archer 2021 Annual Report
26 27
Financial Statements
2021
27
Independent Auditor's Report - Archer Limited
(2)
in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. The Group’s business
activities are largely unchanged compared to last year. We have not identified regulatory changes,
transactions or other events that qualified as new key audit matters except for the acquisition of
Deepwell AS & DW Quip AS. The impairment assessment for goodwill and rigs have the same
characteristics and risks this year as the previous year and consequently have been an area of focus
also for the 2021 audit.
Key Audit Matter How our audit addressed the Key Audit Matter
Valuation of certain modular and land-
based rigs
The value of the group’s land-based and
modular rigs is material to the financial
statements and constitute a major part of
the carrying values of property plant and
equipment of $ 343.6
million as at 31
December 2021
. Due to the general
downturn in the industry, management
has assessed the carrying values for
impairment. Managements assessed and
compared the sum
of the undiscounted
cash flows that the asset is expected to
generate, including any estimated disposal
proceeds to the carrying values. Where the
undiscounted cash flows for a rig was less
than it’s
carrying value, management
adjusted the carrying value, by recording
an impairment, to its estimated
recoverable value. An additional
impairment assessment has been made for
idle rigs.
An impairment of $16.4 million has been
recorded in 2021, and
majority of the
impairment charge for 2021 related to idle
land-based rigs.
We focused on this area due to the
significant carrying value of the rigs and
the judgement inherent in the impairment
review.
Management explains their impairment
process and assumptions in notes 5 and 13
to the financial statements.
We evaluated and challenged management’s assessment
of indicators of impairment and the process by which
this was performed.
Our procedures included the
following:
We assessed management’s accounting policy against
US GAAP and obtained explanations from management
as to how the specific requirements of the standards, in
particular ASC 360, were met. We also assesse
d the
consistency year on year, of the application of the
accounting policy.
Management considers each rig to be cash generating
unit («CGU) or («rig») in their assessment of
impairment indicators, consequently we assessed for
impairment indicators on the same basis.
We assessed the significant assumptions management
used in their forecast. This included tracing input data
to actual contracts and considering whether key
assumptions, such as estimated utilisation rates and day
rates, were
consistent with historical performance,
expected market rates and our knowledge of the
industry. We also performed a sensitivity analysis on the
assumptions made by management, using various
scenarios.
In order to assess management’s estimate of the fair
value of the land-based rigs, we considered the evidence
obtained from an external valuation firms and also the
objectivity and competence of the firms
to provide
reliable estimates.
The valuation of land-based rigs and modular rigs are
inherently uncertain due to the judgmental nature of the
PricewaterhouseCoopers AS, Kanalsletta 8, Postboks 8017, NO-4068 Stavanger
T: 02316, org. no.: 987 009 713 MVA, www.pwc.no
Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap
To the General Meeting of Archer Limited
Independent Auditor’s Report
Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of Archer Limited and its subsidiaries (the
Group), which comprise the consolidated balance sheet as at 31 December 2021, the consolidated
statement of operations, consolidated statement of comprehensive income/(loss) consolidated
statement of changes in shareholders' equity and consolidated statement of cash flows for the year
then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion the accompanying consolidated financial statements give a fair presentation of the
financial position of the Group as at December 31, 2021, and its financial performance and its cash
flows for the year then ended in accordance with the accounting principles generally accepted in the
United States of America.
Our opinion is consistent with our additional report to the Audit Committee.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Group as required
by laws and regulations and the International Ethics Standards Board for Accountants’ International
Code of Ethics for Professional Accountants (including International Independence Standards)
(IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit
Regulation (537/2014) Article 5.1 have been provided.
We have been the auditor of the Group for 2 years from the election by the general meeting of the
shareholders on 26 May 2021 for the accounting year 2020.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current period. These matters were addressed
Archer 2021 Annual Report
28 29
Independent Auditor's Report - Archer Limited
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items in the balance sheet and the
judgement inherent in the purchase price
allocation.
Management explains
the business
acquisition in note 6
to the financial
statements
We found that the acquisition analysis used recognized
methods based on the requirements of US GAAP and
that the estimated values were based on appropriate
data and reasonable assumptions. Our testing also
showed that the calculations in the acquisition analysis
were carried out with mathematical accuracy.
We read note 6 (Gain on bargain purchase) and assessed
this to be in line with the requirements. No matters of
consequence arose from the procedures above.
Other Information
The Board of Directors (Management) is responsible for the other information. The other information
comprises information in the annual report, except the financial statements and our auditor's report
thereon.
Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report
• is consistent with the consolidated financial statements and
• contains the information required by applicable legal requirements.
Our opinion on the Board of Director’s report applies correspondingly to the statements on Corporate
Governance and Corporate Social Responsibility.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation of financial statements that give a fair presentation in
accordance the accounting principles generally accepted in the United States of America., and for such
internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Independent Auditor's Report - Archer Limited
(3)
underlying estimates. This risk is still prevalent due to
the current market conditions.
From the evidence obtained we found the assumptions
and methodology used to be appropriate.
We read note 5 (Impairments) and note 13 (Property,
plant and Equipment) and assessed this to be in line
with the requirements. No matters of consequence arose
from the procedures above.
Valuation of goodwill
The value of
the group’s goodwill is
material to the financial statements and
constitute approximately 1/5 of the values
in the balance sheet.
The Group is required to, at least annually
perform impairment assessments of
goodwill. Management has conducted a
qualitative assessment for 2021 and
concluded that goodwill was not impaired
as of 31 December 2021.
We focused on this area due to the
significant carrying value of goodwill and
the judgement inherent in the impairment
review.
Management explains
their impairment
process and assumptions in note 14 to the
financial statements.
We obtained and considered management’s written
assessment supporting the carrying value of goodwill at
31 December 2021.
Our procedures included the
following:
We evaluated management’s impairment assessment
and the process by which this was performed. We found
support for the carrying value of goodwill from the fact
that it primarily relates to North Sea operations where
the group has been able to secure material new
contracts.
We assessed management’s accounting policy against
US GAAP and obtained explanations from management
as to how the specific requirements of the standards
were met.
We also calculated the market capitalization at 31
December 2021 based on the quoted share price and
considered share price movements since year-end.
We read note 14 (Goodwill) and assessed this to be in
line with the requirements. No matters of consequence
arose from the procedures above.
Acquisition of Deepwell AS & DW Quip AS
On 9 May 2021, Archer acquired Deepwell
AS and DW Quip AS. The agreed purchase
price was $19.9 million. Management
carried out a purchase price allocation in
accordance with ASC 805. Based on the
purchase price allocation, management
recognized a bargain purchase gain of
$11.4 million.
We focused on this matter
due to the
transaction's significant impact on key
We have obtained and read the purchase agreement
between Archer and Moreld AS and conducted meetings
with the management to understand the details of the
transaction.
Management has assessed the fair value and allocated
the purchase price to identified intangible assets and
selected tangible assets in connection with the
transaction. We obtained the purchase price allocation,
evaluated the method used and checked mathematical
accuracy.
Archer 2021 Annual Report
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Independent Auditor's Report - Archer Limited
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Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
• identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. We design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group's internal control.
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• conclude on the appropriateness of management’s use of the going concern basis of
accounting, and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group's ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
• evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves a fair presentation.
• obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
Independent Auditor's Report - Archer Limited
(6)
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on Other Legal and Regulatory Requirements
Report on compliance with Regulation on European Single Electronic Format
Opinion
We have performed an assurance engagement to obtain reasonable assurance that the consolidated
financial statements with file name archerlimited-2021-12-31-en have been prepared in accordance
with Section 5-5 of the Norwegian Securities Trading Act (Verdipapirhandelloven) and the
accompanying Regulation on European Single Electronic Format (ESEF).
In our opinion, the consolidated financial statements have been prepared, in all material respects, in
accordance with the requirements of ESEF.
Management’s Responsibilities
Management is responsible for preparing and publishing the consolidated financial statements in the
single electronic reporting format required in ESEF. This responsibility comprises an adequate process
and the internal control procedures which management determines is necessary for the preparation
and publication of the consolidated financial statements.
Auditor’s Responsibilities
Our responsibility is to express an opinion on whether the financial statements have been prepared in
accordance with ESEF. We conducted our work in accordance with the International Standard for
Assurance Engagements (ISAE) 3000 – “Assurance engagements other than audits or reviews of
historical financial information”. The standard requires us to plan and perform procedures to obtain
reasonable assurance that the financial statements have been prepared in accordance with the
European Single Electronic Format.
As part of our work, we performed procedures to obtain an understanding of the Group’s processes for
preparing its financial statements in the European Single Electronic Format. Our work comprised
reconciliation of the financial statements under the European Single Electronic Format with the
audited financial statements in human-readable format. We believe that the evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Stavanger, 30 March 2022
PricewaterhouseCoopers AS
Gunnar Slettebø
State Authorised Public Accountant
Archer 2021 Annual Report
32
3534
Consolidated Statement of Operations for the years ended
December 31, 2021 and 2020
35
Consolidated statement of comprehensive Income/(Loss) for
the years ended December 31, 2021 and 2020
36
Consolidated statement of accumulated other comprehensive
loss for the years ended December 31, 2021 and 2020
36
Consolidated Balance Sheets as of December 31, 2021 and 2020 37
Consolidated Statement of Cash lows for the years ended
December 31, 2021 and 2020
38
Consolidated Statement of Changes in Shareholders’ Equity
for the years ended December 31, 2021 and 2020
39
Notes to the Consolidated Financial Statements 30 40
Consolidated Financial Statements 2021
(In USD millions) YEAR ENDED DECEMBER 31
NOTE 2021 2020
Revenues
Operating revenues 813.1 715.1
Reimbursable revenues 123.0 108.9
Total revenues 936.1 824.0
Expenses
Operating expenses 682.3 595.9
Reimbursable expenses 122.3 108.7
Operating lease costs 18 8.0 9.9
Depreciation and amortization 13 53.8 48.0
(Gain)/loss on sale of assets 13 (0.6) 0.5
Impairment charges 5 16.4 7.6
General and administrative expenses 38.4 33.9
Total expenses 920.7 804.6
Operating (loss) / income 15.4 19.4
Gain on bargain purchase 6 11.4 —
Financial items
Interest income 2.4 3.8
Interest expenses 17 (29.0) (33.5)
Share of results in associated companies 12 (0.5) (18.7)
Other inancial items 7 (6.8) 33.1
Total inancial items (33.9) (15.3)
(Loss)/gain from continuing operations before taxes (7.1) 4.1
Income tax expense 8 (7.7) (11.6)
(Loss)/gain from continuing operations (14.8) (7.5)
Net (Loss) / gain (14.8) (7.5)
Loss per share - basic (0.10) (0.05)
Loss per share - diluted (0.10) (0.05)
Weighted average number of shares outstanding
Basic 9 148.2 148.1
Diluted 9 148.2 148.1
See accompanying notes that are an integral part of these Consolidated Financial Statements.
Archer Limited and subsidiaries
Consolidated statement of operations
Archer 2021 Annual Report
36 37
Consolidated Statements of Comprehensive Income/(Loss)
(in USD millions) YEAR ENDED DECEMBER 31
2021 2020
Net (loss) / gain (14.8) (7.5)
Other comprehensive (loss) / income
Currency translation dierences (6.4) 7.7
Gain on sale of equity investment 0.6 —
Total other comprehensive income (loss) (5.8) 7.7
Total comprehensive income (loss) (20.6) 0.2
Accumulated Other Comprehensive Loss
(in USD millions) Translation dierences Other comprehensive income Total
Balance at December 31, 2019 5.9 — 5.9
Total other comprehensive income during 2020 7.7 7.7
Balance at December 31, 2020 13.6 — 13.6
Total other comprehensive income during 2021 (6.4) 0.6 (5.8)
Balance at December 31, 2021 7.2 0.6 7.8
See accompanying notes that are an integral part of these Consolidated Financial Statements.
Archer Limited and subsidiaries
Consolidated statement of comprehensive Income/(Loss)
(In USD million) Note December 31, 2021 December 31, 2020
ASSETS
Cash and cash equivalents 50.7 41.2
Restricted cash 14.8 12.4
Accounts receivables 3 125.6 109.2
Inventories 10 52.1 54.2
Other current assets 30.7 28.0
Total current assets 273.9 245.0
Investment in associated 12 3.4 4.7
Marketable securities 2.9 6.1
Property plant and equipment, net 13 343.6 355.2
Right of use assets 18 26.7 29.9
Deferred income tax asset 8 20.6 16.3
Goodwill 14 167. 5 172.7
Other intangible assets, net 0.6 0.6
Deferred charges and other assets 11.4 15.0
Total noncurrent assets 576.7 600.4
Total assets 850.7 845.4
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of interest-bearing debt 26 25.3 10.5
Accounts payable 43.5 34.4
Operating Lease liabilities 18 5.2 8.5
Other current liabilities 140.2 125.5
Total current liabilities 214.2 178.9
Long-term interest-bearing debt 26 509.5 519.1
Subordinated related party Loan 26 15.9 15.9
Operating Lease liabilities 18 21.5 21.4
Deferred tax 8 1.0 0.8
Other noncurrent liabilities 0.0 0.2
Total noncurrent liabilities 547.9 557.4
Shareholders’ equity 88.5 109.1
Total liabilities and shareholders’ equity 850.7 845.4
See accompanying notes that are an integral part of these Consolidated Financial Statements.
Archer Limited and subsidiaries
Consolidated balance sheet
Archer 2021 Annual Report
38 39
(In USD millions) YEAR ENDED DECEMBER 31
2021 2020
Cash Flows from Operating Activities
Net (loss)/proit from continuing operations (14.8) (7.5)
Adjustment to reconcile net loss to net cash provided by operating activities
Depreciation and amortization 53.8 48.0
Impairment of ixed assets 16.4 7.6
Gain on debt restructure (42.2)
Share-based compensation expenses 0.4 0.8
(Gain)/loss on assets disposals (0.6) 0.5
Share of losses of unconsolidated ailiates 0.5 18.7
Amortization of loan fees 1.3 1.4
Mark to market of inancial instruments (5.1) 1.8
Mark to market of marketable securities 3.2 3.4
Change in deferred and accrued taxes 4.5 8.5
Gain on bargain purchase (11.4) —
Decrease/(increase) in accounts receivable and other current assets (17.3) 27.1
Decrease/(increase) in inventories 2.2 (0.7)
(Decrease)/increase in accounts payable and other current liabilities 13.8 (4.9)
Change in other operating assets and liabilities net, including non-cash fx eects 5.7 7.5
Net cash provided by operating activities 52.7 70.0
Cash Flows from Investing Activities
Capital expendtures (33.5) (32.0)
Proceeds from asset disposals 3.2 1.9
Proceeds from partial sale of equity investment 1.9 -
Loans to associated entities (0.9) (1.4)
Investment in suibsidiaries net of cash acquired (13.3) —
Net cash used in investing activities (42.6) (31.5)
Cash Flows from Financing Activities
Borrowings under revolving facilities, other long-term debt and inancial leases 58.5 101.5
Repayments under revolving facilities, other long-term debt and inancial leases (52.3) (125.9)
Fees paid on restructuring and cash settlement of RSUs (0.3) (4.7)
Net cash provided by inancing activities 5.9 (29.1)
Eect of exchange rate changes on cash and cash equivalents (4.1) 0.1
Net increase in cash and cash equivalents 11.9 9.5
Cash and cash equivalents, including restricted cash, at beginning of the period 53.6 44.1
Cash and cash equivalents, including restricted cash, at the end of the period 65.5 53.6
Interest paid 27.6 32.1
Taxes paid 3.9 3.1
See accompanying notes that are an integral part of these Consolidated Financial Statements
Archer Limited and subsidiaries
Consolidated statement of cash ows
(In USD millions)
COMMON
SHARES
ADDITIONAL
PAIDIN CAPITAL
ACCUMULATED
DEFICIT
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
CONTRIBUTED
SURPLUS
TOTAL
SHAREHOLDERS’
EQUITY
Balance at December 31, 2019 1.5 927.6 (1,566.7) 5.9 740.1 108.4
Share based compensation — 0.8 0.8
Translation dierences — 7.7 7.7
Cash Settlement of RSUs — (0.4) (0.4)
Net income — (7.5) (7.5)
Balance at December 31, 2020 1.5 928.1 (1,574.2) 13.6 740.1 109.1
Share based compensation — 0.3 0.3
Translation dierences — (6.4) (6.4)
Cash Settlement of RSUs — (0.3) (0.3)
Gain on sale of equity investment — 0.6 0.6
Net income — (14.8) (14.8)
BALANCE AT DECEMBER 31, 2021 1.5 928.1 (1,589.0) 7.8 740.1 88.5
See accompanying notes that are an integral part of these Consolidated Financial Statements.
Archer Limited and subsidiaries
Consolidated statement of changes in shareholders’ equity
Archer 2021 Annual Report
40 41
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 1 — General Information
Archer is an international oilield service company providing a variety of oilield products and services through its global organizations.
Services include Platform Drilling, Land Drilling, Modular Rigs, Engineering services, Wireline services, production monitoring, well imaging
and integrity management tools.
As used herein, unless otherwise required by the context, the term “Archer” refers to Archer Limited and the terms “company”, “we”, “Group”,
“our” and words of similar import refer to Archer and its consolidated subsidiaries. The use herein of such terms as Group, organization, we,
us, our and its, or references to speciic entities, is not intended to be a precise description of corporate relationships.
Archer was incorporated on August 31, 2007, and conducted operations as Seawell Ltd., or Seawell, until May 16, 2011, when shareholders
approved a resolution to change the name to Archer Limited.
Basis of presentation
The inancial statements are presented in accordance with generally accepted accounting principles in the United States of America (US
GAAP). The amounts are presented in United States Dollars, USD, or $ rounded to the nearest million, unless otherwise stated.
We present our inancial statements on a continuing business basis and separately present discontinued operations.
The accounting policies set out below have been applied consistently to all periods in these consolidated inancial statements.
Basis of consolidation
Investments in companies in which we directly or indirectly hold more than 50% of the voting control are generally consolidated in our
inancial statements.
Entities in which we do not have a controlling interest but over which we have signiicant inluence are accounted for under the equity
method of accounting. Our share of after-tax earnings of equity method investees are reported under Share of results of unconsolidated
associates.
A list of all signiicant consolidated subsidiaries is attached – see Appendix B.
Intercompany transactions and internal sales have been eliminated through consolidation.
Reclassiications
Certain amounts in the prior years’ consolidated inancial statements may be reclassiied when necessary to conform to the current year
presentation.
Going concern
Our Board of Directors conirms their assumption of the Group as a going concern for the foreseeable future, being a period of not less
than 12 months from the date of this report. This assumption is based on the liquidity position of the Group, forecasted operating results,
and the market outlook for the oil service sector as at December 31, 2021. The Board believes the annual report provides a fair presentation
of the Group’s assets and debt, inancial position and inancial performance.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 2 — Accounting Policies
Use of estimates
The preparation of inancial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that aect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the inancial statements, as well as the reported amounts of revenues and expenses during
the reporting period. Future events and their eects cannot be predicted with certainty. Accordingly, our accounting estimates require the
exercise of judgment. While management believes the estimates and assumptions used in the preparation of the consolidated inancial
statements are appropriate, actual results could dier materially from those estimates. Estimates are used for, but are not limited to,
determining the following: allowance for doubtful accounts, recoverability of long-lived assets, goodwill and intangibles, useful lives used
in depreciation and amortization, income taxes and valuation allowances and purchase price allocations. The accounting estimates used
in the preparation of the consolidated inancial statements may change as new events occur, as more experience is acquired, as additional
information is obtained and as our operating environment changes.
Revenue from contracts with customers
The activities that primarily drive the revenue earned from our drilling contracts include:
• Providing specialist crew for the operation of, or repair, maintenance or modiications of Customer’s platform rigs;
• Providing land drilling rigs and modular rigs, and the crew and supplies necessary to operate the rigs;
• Mobilizing and demobilizing land rigs between well sites;
• Wireline services; and
• Rental of equipment.
Consideration received for performing these activities consist primarily of contract day rates. We account for our integrated services as a
single performance obligation that is (i) satisied over time and (ii) consists of a series of distinct time increments. Occasionally we receive
lump mobilization fees and ixed fees for engineering projects.
We recognize consideration for activities that correspond to a distinct time increment within the contract term in the period when the
services are performed. We recognize consideration for activities that are (i) not distinct within the context of our contracts and (ii) do not
correspond to a distinct time increment, rateably over the estimated contract term.
We determine the total transaction price for each individual contract by estimating both ixed and variable consideration expected to be
earned over the term of the contract. The amount estimated for variable consideration may be constrained and is only included in the
transaction price to the extent that it is probable that a signiicant reversal of previously recognized revenue will not occur throughout the
term of the contract. When determining if variable consideration should be recognized, we consider whether there are factors outside of
our control that could result in a signiicant reversal of revenue as well as the likelihood and magnitude of a potential reversal of revenue.
We re-assess these estimates each reporting period as required. Refer to Note 3 - Revenue from Contracts with Customers.
Day rate Drilling Revenue - Our contracts generally provide for payment on a day rate basis, with higher rates for periods when the drilling
unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The day rate invoices billed
to the customer are typically determined based on the varying rates applicable to the speciic activities performed on an hourly basis.
Such dayrate consideration is allocated to the distinct hourly increment it relates to within the contract term, and therefore, recognized in
line with the contractual rate billed for the services provided for any given hour.
Mobilization Revenue - We may receive fees (on either a ixed lump-sum or variable day rate basis) for the mobilization of our rigs. These
activities are not considered to be distinct within the context of the contract and therefore, the associated revenue is allocated to the
overall performance obligation and recognized rateably over the expected term of the related drilling contract. We record a contract
liability for mobilization fees received, which is amortized rateably to contract drilling revenue as services are rendered over the initial term
of the related drilling contract.
Demobilization Revenue - We may receive fees (on either a ixed lump-sum or variable day rate basis) for the demobilization of our rigs.
Demobilization revenue expected to be received upon contract completion is estimated as part of the overall transaction price at contract
inception and recognized over the term of the contract. In most of our contracts, there is uncertainty as to the likelihood and amount
of expected demobilization revenue to be received. For example, the amount may vary dependent upon whether or not the rig has
additional contracted work following the initial contract. Therefore, the estimate for such revenue may be constrained, as described above,
depending on the facts and circumstances pertaining to the speciic contract. We assess the likelihood of receiving such revenue based
on past experience and knowledge of the market conditions.
Archer 2021 Annual Report
42 43
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Revenues Related to Reimbursable Expenses - We generally receive reimbursements from our customers for the purchase of supplies,
equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement.
Such reimbursable revenue is variable and subject to uncertainty, as the amounts received and timing thereof is highly dependent on
factors outside of our inluence. Accordingly, reimbursable revenue not recorded and not included in the total transaction price until the
uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer. We are generally considered
a principal in such transactions and record the associated revenue at the gross amount billed to the customer, at a point in time, as
“Reimbursable revenues” in our Consolidated Statements of Operations.
Foreign currencies
For subsidiaries that have functional currencies other than the USD, the statements of operations are translated using the average
exchange rate for the month and the assets and liabilities are translated using the year-end exchange rate. Foreign currency translation
gains or losses are recorded as a separate component of other comprehensive income in shareholders’ equity.
Transactions in foreign currencies during the year are translated into the functional currency of the respective entity at the rates of
exchange in eect on the date of the transaction. Foreign currency assets and liabilities are translated using rates of exchange at the
balance sheet date. Foreign currency transaction gains or losses are included in the consolidated statements of operations.
Current and noncurrent classiication
Assets and liabilities are classiied as current assets and liabilities respectively if their maturity is within one year of the balance sheet
date. Assets and liabilities not maturing within one year are classiied as long term, unless the facts or circumstances indicate that current
classiication is otherwise appropriate.
Cash and cash equivalents
Cash and cash equivalents consist of cash, demand deposits and highly liquid inancial instruments purchased with an original maturity
of three months or less and exclude restricted cash.
Restricted cash
Restricted cash consists mainly of bank deposits arising from advance employee tax withholdings.
Receivables
Accounts receivable are recorded in the balance sheet at their full amount less allowance for doubtful receivables. We establish reserves
for doubtful receivables on a case-by-case basis. In establishing these reserves, we consider changes in the inancial position of the
customer, as well as customer payment history. Uncollectible trade accounts receivables are written o when a settlement is reached for
an amount that is less than the outstanding historical balance or when they are considered irrecoverable. If a previously written o debt
is subsequently recovered it is recorded as a credit to bad debt expense.
Net bad debt expense for 2021 was $0.0 million (2020: $0.2 million).
Inventories
Inventories are valued at the lower of irst-in, irst-out cost or market value. On a regular basis we evaluate our inventory balances for excess
quantities and obsolescence by analyzing demand, inventory on hand, sales levels and other information. Based on these evaluations,
inventory balances are written down, if necessary.
Equity Method Investments
Investments in which we have the ability to exercise signiicant inluence, but do not control, are accounted for under the equity method
of accounting and are reported under Investments in unconsolidated associates in the Consolidated Balance Sheet. Signiicant inluence
is generally deemed to exist if the company has an ownership interest in the voting stock of the investee between 20% and 50%, although
other factors such as representation on the investee’s Board of Directors and the nature of commercial arrangements are considered in
determining whether the equity method of accounting is appropriate.
Under this method of accounting, our share of the net earnings or losses of the investee, together with other-than-temporary impairments
in value and gain/loss on sale of investments, is reported under Share of gains/losses of unconsolidated associates in the Consolidated
Statement of Operations.
We evaluate our equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such
investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss
is recorded in earnings in the current period.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Property, plant and equipment
Property, plant and equipment are recorded at historical cost less accumulated depreciation. The cost of these assets’ less estimated
residual value is depreciated on a straight-line basis over their estimated remaining economic useful lives. The estimated economic useful
lives of our ixed assets are in the following ranges:
• Buildings 3 – 40 years
• Drilling and well service equipment 2 – 30 years
• Oice furniture and ixtures 3 – 10 years
• Motor vehicles 3 – 7 years
We evaluate the remaining useful life of our property, plant and equipment on a periodic basis to determine whether events and
circumstances warrant a revision.
Expenditures for replacements or improvements are capitalized. Maintenance and repairs are charged to operating expenses as incurred.
Fully depreciated assets are retained in property, plant and equipment and accumulated depreciation until disposal. Upon sale or
retirement, the cost of property and equipment, related accumulated depreciation and write-downs are removed from the balance sheet
and the net amount, less any proceeds from disposal, is charged or credited to the consolidated statement of operations.
Assets under construction
The carrying value of assets under construction represents the accumulated costs at the balance sheet date and is included in property,
plant and equipment on the face of the balance sheet. Cost components include payments for installments and variation orders,
construction supervision, equipment, spare parts, capitalized interest, costs related to irst-time mobilization and commissioning costs. No
charge for depreciation is made until commissioning of the new builds has been completed and it is ready for its intended use.
Finance Leases
We lease oice space and equipment at various locations. Our Oiltools division also leases operating equipment which in turn is leased
out to Archer customers. Where we have substantially all the risks and rewards of ownership, the lease is classiied as a inance lease.
Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased asset or the present value of the future
minimum lease payments. Each lease payment is allocated between the corresponding inance lease liability and inance charges so as
to achieve a constant rate on the liability outstanding. The interest element of the capital cost is charged to the Consolidated Statement
of Operations over the lease period.
Depreciation of assets held under capital leases is reported within “Depreciation and amortization expense” in the Consolidated Statement
of Operations. Capitalized leased assets are depreciated on a straight-line basis over the estimated useful economic lives of the assets or
a straight-line basis over the lease term, whichever is shorter.
Operating leases
Our operating leases relate to oice and warehouse space. We recognize on the balance sheet the right to use these assets and a
corresponding liability in respect of all material lease contracts with duration, or lease term, of 12 months or above. We estimate discount
rates used for calculating the cost of operating leases, which take into account the type of assets subject to the lease and the geographical
region in which it is leased and used. The amortization of right of use assets is presented in operating costs on our statement of operations.
In relation to our operating leases, prior periods were not restated to relect the recording of the right of use asset/liability related to these
leases.
Intangible assets
Intangible assets are recorded at historical cost less accumulated amortization. The cost of intangible assets is generally amortized on
a straight-line basis over their estimated remaining economic useful lives. The estimated economic useful lives of our intangible assets
range from 2 to 20 years. We evaluate the remaining useful life of our intangible assets on a periodic basis to determine whether events
and circumstances warrant a revision of the remaining amortization period. Once fully amortized, the intangible’s cost and accumulated
amortization are eliminated.
Trade names under which we intend to trade for the foreseeable future are not amortized. In circumstances where management decides
to phase out the use of a trade name, the relevant cost is amortized to zero over the remaining estimated useful life of the asset.
Acquired technology is not amortized until ready for marketing.
Archer 2021 Annual Report
44 45
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Goodwill
We allocate the cost of acquired businesses to the identiiable tangible and intangible assets and liabilities acquired, with any remaining
amount being capitalized as goodwill. Goodwill is not amortized but is tested for impairment at least annually. We test goodwill by
reporting unit for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more
likely than not reduce the fair value of a reporting unit below its carrying amount. The reporting units have been identiied in accordance
with Accounting Standards Codiication 35020 “Intangible Assets–Goodwill,” as the business components one level below the reporting
segments, each of which we identiied as:
• constituting a business;
• for which discrete inancial information is available; and
• whose operating results are reviewed regularly by segment management.
We aggregate certain components with similar economic characteristics.
The goodwill impairment test involves an initial qualitative review to determine whether it is more likely that not that goodwill is impaired.
If the initial review indicates a possible impairment, we follow with a one-step process involving a comparison of each reporting unit’s fair
value to its carrying value. If a reporting unit’s fair value is less than its carrying value, an impairment charge equal to the shortfall is made
against the relevant goodwill, until the balance is zero.
We estimate the fair value of each reporting unit using the income approach. The income approach incorporates the use of a discounted
cash low method in which the estimated future cash lows and terminal values for each reporting unit are discounted to a present value.
Cash low projections are based on management’s estimates of economic and market conditions that drive key assumptions of revenue
growth rates, operating margins and capital expenditures. The discount rate is based on our speciic risk characteristics, its weighted
average cost of capital and its underlying forecasts. There are inherent risks and uncertainties involved in the estimation process, such as
determining growth and discount rates.
Impairment of long-lived assets and intangible assets other than goodwill
The carrying values of long-lived assets, including intangible assets that are held and used by us are reviewed for impairment if factors
are identiied that suggest that the carrying value may be more than the assets fair value. As prescribed by US GAAP, for step one of
the impairment test, we assess our major assets/asset groups for recoverability of the carrying value of the asset by estimating the
undiscounted future net cash lows expected to result from the asset, including eventual disposal. If the future net cash lows are less than
the carrying value of the asset, an impairment charge is required. We then use various methods to estimate the fair value of our assets,
using all and best available relevant data, including estimated discounted cash-low forecasts, relevant market data where available, and
independent broker valuations for our land rigs. Once the fair value has been determined, the potential impairment is recorded equal to
the dierence between the asset’s carrying value and fair value.
Research and development
All research and development (“R&D”) expenditures are expensed as incurred. Under the provisions of ASC 805, ‘Business Combinations’
acquired in-process R&D that meets the deinition of an intangible asset is capitalized and amortized.
Income taxes
Archer is a Bermuda company. Under current Bermuda law, Archer is not required to pay taxes in Bermuda on either income or capital
gains. We have received written assurance from the Minister of Finance in Bermuda that, in the event of any such taxes being imposed,
Archer will be exempted from taxation until 2035.
Certain of our subsidiaries operate in other jurisdictions where taxes are imposed, mainly Norway, the United States, Argentina, Brazil and
the United Kingdom. For legal entities operating in taxable jurisdictions, we compute tax on income in accordance with the tax rules and
regulations of the taxing authority where the income is earned. The income tax rates imposed by these authorities vary. Taxable income
may dier from pre-tax income for accounting purposes. To the extent that dierences are due to revenues or expense items reported in
one period for tax purposes and in another period for inancial accounting purposes, an appropriate provision for deferred taxes is made.
A deferred tax asset is recognized only to the extent that it is more likely than not that future taxable proits will be available against which
the asset can be utilized. When it is more likely than not that a portion or all of a deferred tax asset will not be realized in the future, we
provide a valuation allowance against that deferred tax asset. The amount of deferred tax provided is based upon the expected manner
of settlement of the carrying amount of assets and liabilities, using tax rates enacted at the balance sheet date.
The impact of changes to income tax rates or tax law is recognized in periods when the change is enacted.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Signiicant judgment is involved in determining the provision for income taxes. There are certain transactions for which the ultimate
tax determination is unclear due to uncertainty in the ordinary course of business. Our tax ilings are subject to regular audit by the tax
authorities in most of the jurisdictions in which we conduct our business. These audits may result in assessments for additional taxes
which are resolved with the authorities or, potentially, through the courts. We recognize the impact of a tax position in our inancial
statements if that position is more likely than not to be sustained on audit, based on the technical merits of the position. The level of
judgment involved in estimating such potential liabilities and the uncertain and complex application of tax regulations, may result in
liabilities on the resolution of such audits, which are materially dierent from our original estimates. In such an event, any additional tax
expense or tax beneit will be recognized in the year in which the resolution occurs.
Earnings per share or EPS
Basic earnings per share are calculated based on the income/(loss) for the period available to common stockholders divided by the
weighted average number of shares outstanding for basic EPS for the period, including vested restricted stock units. Diluted EPS includes
the eect of the assumed conversion of potentially dilutive instruments, for which we include share options and unvested restricted stock
units.
Deferred charges
Loan-related costs, including debt arrangement fees, incurred on the initial arrangement are capitalized and amortized over the term of
the related loan using the straight-line method, which approximates the interest method. Amortization of loan-related costs is included
in interest expense. Subsequent loan costs in respect of existing loans, such as commitment fees, are recognized in the Consolidated
Statement of Operations within “Interest expense” in the period in which they are incurred. Unamortized loan costs are presented as a
reduction of the carrying value of the related debt.
Share-based compensation
We have established a stock option plan under which employees, directors and oicers of the Archer Group may be allocated options to
subscribe for new shares in Archer.
The fair value of the share options issued under our employee share option plans is determined at grant date, taking into account the
terms and conditions upon which the options are granted and using a valuation technique that is consistent with generally accepted
valuation methodologies for pricing inancial instruments, and that incorporates all factors and assumptions that knowledgeable, willing
market participants would consider in determining fair value. The fair value of the share options is recognized as personnel expenses with
a corresponding increase in equity over the period during which the employees become unconditionally entitled to the options.
The Board has from time to time granted restricted stock units, or RSU’s, to members of Archer’s management team. The RSUs vest
typically with 1/4th on each date falling approximately one, two, three and four years after the grant date.
Compensation cost in respect of share options and RSUs is initially recognized based upon grants expected to vest with appropriate
subsequent adjustments to relect actual forfeitures. National insurance contributions will arise from such incentive programs in some tax
jurisdictions. We accrue an estimated contribution over the vesting periods of the relevant instruments.
Financial instruments
From time to time, we enter into interest rate swaps or caps in order to manage loating interest rates on debt. Interest rate swap/cap
agreements are recorded at fair value in the balance sheet when applicable. A hedge of a forecasted transaction or of the variability of
cash lows to be received or paid related to a recognised asset or liability may be designated as a cash low hedge.
When the interest swap qualiies for hedge accounting we formally designate the swap instrument as a hedge of cash lows to be paid
on the underlying loan, and in so far as the hedge is eective, the change in the fair value of the swap in each period is recognized in the
“Accumulated other comprehensive loss” line of the Consolidated Balance Sheet. Changes in fair value of any ineective portion of the
hedges are charged to the Consolidated Statement of Operations in “Other inancial items.” Changes in the fair value of interest rate swaps
are otherwise recorded as a gain or loss under “Other inancial items” in the Consolidated Statement of Operations where those hedges
are not designated as cash low hedges.
Discontinued operations
The disposal of a component of an entity or a group of components of an entity is reported in discontinued operations if the disposal
represents a strategic shift that has (or will have) a major eect on an entity’s operations and inancial results.
Segment reporting
A segment is a distinguishable component of the company that is engaged in business activities from which it earns revenues and incurs
expenses, whose operating results are regularly reviewed by the chief operating decision maker and which is subject to risks and rewards
that are dierent from those of other segments.
Archer 2021 Annual Report
46 47
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
We are presenting our business under two reporting segments:
• Eastern Hemisphere
• Western Hemisphere
Western Hemisphere comprises our land drilling and related operations in Latin America, plus our Frac Valve producing facility in North
America (which was sold during 2019) and our 8.8% interest in KLX Energy Services Holdings Inc. The Eastern Hemisphere segment
contains Platform Drilling operations in the North Sea, plus our global Oiltools and Wireline Service divisions In addition we report corporate
costs, and assets as separate line items.
Segmental information is presented in Note 25.
The accounting principles for the segments are the same as for our consolidated inancial statements.
Related party transactions
Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise signiicant inluence over the other
party in making inancial and operating decisions. Parties also are related if they are subject to common control or common signiicant
inluence.
Recently issued accounting pronouncements
Accounting standards that became eective January 1, 2021, did not have a material impact on the consolidated inancial statements and
related disclosures.
In March 2020, the FASB issued ASU No. 202004, Facilitation of the Eects of Reference Rate Reform on Financial Reporting (Topic
848). The ASU provides optional expedients and exceptions for applying GAAP to transactions aected by reference rate (e.g., LIBOR)
reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the eects of)
reference rate reform on inancial reporting. The ASU is eective as of March 12, 2020 through December 31, 2022. We continue to evaluate
transactions or contract modiications occurring as a result of reference rate reform and determine whether to apply the optional guidance
on an ongoing basis. The ASU has not and is currently not expected to have a material impact on our consolidated inancial statements.
In June 2016, the FASB issued ASU No. 201613, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, which revised guidance for the accounting for credit losses on inancial instruments within its scope. The new standard
introduces an approach, based on expected losses, to estimate credit losses on certain types of inancial instruments and modiies the
impairment model for available-for-sale debt securities. The guidance became eective January 1, 2020, with early adoption permitted.
Entities are required to apply the standard’s provisions as a cumulative-eect adjustment to retained earnings as of the beginning of the
irst reporting period in which the guidance is adopted. The adoption, eective January 1, 2020, did not have a material impact on the
consolidated inancial statements and related disclosures.
ASU 201704 (ASC 350 Intangibles - Goodwill)
The Company has adopted this update eective January 1, 2020, which simpliies the test for goodwill impairment. The accounting
update eliminates Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to
perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets
and liabilities) following the procedure that would be required in determining the fair value of the assets acquired and liabilities assumed
in a business combination. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value
of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit’s fair value, however the loss recognized should not exceed the total amount of goodwill allocated to
the reporting unit. The Company will apply the one step approach in our quantitative impairment assessments henceforth which may
result in the recognition of impairment losses sooner as compared to the two-step impairment test. There has been no impact of this
accounting standard on the Company’s Consolidated Financial Statements on adoption or as of December 31, 2020 and December 31,
2021 and the years then ended.
ASU 201813 (ASC 820 Fair Value Measurement)
The Company has adopted this update eective January 1, 2020, which removes, modiies and adds speciic disclosure requirements in
relation to fair value measurement with the aim of improving the eectiveness of disclosures to the inancial statements. The standard
update did not materially impact the Consolidated Financial Statements on adoption or as of December 31, 2020 and December 31, 2021
and the years then ended.
Accounting standard updates issued by the FASB
The FASB has issued several further updates not included above. We do not currently expect any of these updates to materially aect our
consolidated inancial statements and related disclosures either on transition or in future periods.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 3 — Revenue from contracts with customers
The following table provides information about receivables, contract assets and contract liabilities from our contracts with customers:
Our accounts receivable balance includes $39.0 million unbilled and accrued revenue (2020 : $34.8 million)
Provision for bad debts - We do not currently have provisions for bad debts in our balance sheet. Any anticipated unrecoverable revenues
are taken into account under our revenue recognition policy and subsequent bad debts are written o as they are recognized.
Practical expedient - We have applied the disclosure practical expedient in ASC 606105014A(b) and have not included estimated variable
consideration related to wholly unsatisied performance obligations or to distinct future time increments within our contracts, including
day-rate revenue. The duration of our performance obligations varies by contract.
Revenue from contracts with customers
(In USD millions) December 31, 2021 December 31, 2020
Accounts receivable net 125.6 109.2
Note 4 —Compensation, and severance expenses
The following table shows a summarized analysis of our total employee compensation costs.
During 2021 and 2020 we have continued our focus on cost reductions. We continued to downsize our operations in Argentina according
to current reduced levels of activity, rationalize our corporate function and consolidate oice facilities. The Covid 19 pandemic has resulted
in increased severance costs due to the reduction in activity caused by the pandemic. In total we expensed $8.0 million in connection with
our restructuring actions in 2021 and $23.6 million in 2020 the amounts being included in operating expenses.
An analysis of these costs is tabulated below:
($ in millions) Year ended December 31, 2021 Year ended December 31, 2020
Severance costs Other costs Severance costs Other costs
Eastern Hemisphere 1.3 0.6 3.3 0.2
Western Hemisphere 2.5 3.6 20.1
-
Total 3.8 4.2 23.4 0.2
YEARS ENDED DECEMBER 31
($ in millions) 2021 2020
Salary costs 351.8 306.3
Pension costs 25.5 23.3
Employers tax 51.2 49.0
Other compensation costs 21.4 14.7
Total compensation costs 449.9 393.3
Archer 2021 Annual Report
48 49
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 5 — Impairments
Our long-lived assets predominantly consist of land drilling rigs and equipment utilized by our Land drilling division in South America,
and our two modular rigs. The carrying values of these assets are reviewed for potential impairment whenever events or changes in
circumstances indicate that the carrying amount of a particular asset, or group of assets, may not be fully recoverable, and at least once
each year as part of our annual reporting routine.
During 2021 we recognized total impairment losses of $16.4 million (2020: $3.6 million) relating to rigs and land drilling equipment in our
South American business. The impairments were recognized as part of our annual detailed review of ixed assets and assessment of
carrying values. In response to the on-going diiculties in Latin America resulting from the covid Pandemic, strike actions and government
iscal restrictions, we have expanded our recognized indicators for asset impairment which are historically the comparison of carrying
values with estimated future cash lows and independent broker valuations, to include rigs which have remained idle for a period of ive
or more years. We have impaired rigs which have been idle for this length of time to a zero carrying value. This additional test added to
our 2021 procedure resulted in additional impairment charges of $15 million.
All of the 2021 impairment charges relate to land drilling rigs and equipment utilized in our Land drilling division in Latin America.
As stated in our accounting policy, we use various methods to estimate the fair value of our assets, each of which involves signiicant
judgment. We use the most relevant data available at the balance sheet date, including speciic independent valuations for our land rigs.
The key inputs and assumptions used in the various valuations included future market growth rates, EBITDA margins, discount factors
and asset lifetimes. Reasonable variations in these assumptions could give rise to additional impairment, particularly in relation to the
modular rigs and the Latin America drilling rigs.
Whilst acknowledging the uncertainty and the level of judgment involved in our estimates of value, we believe our determination of
impairment charges to be reasonable and prudent as at 31, December 2021.
Please refer to Note 14 for further details on the calculation of goodwill impairments.
Note 6 — Gain on bargain purchase
The gain on bargain purchase of $11.4 million relates to the acquisition of all of the shares in DeepWell AS and DW Quip AS (collectively
referred to as DeepWell), from Moreld AS, an unrelated third party. DeepWell AS was merged into Archer AS in the fourth quarter of 2021.
DeepWell provides well intervention and cased hole services from its base in Norway. Archer’s interest in acquiring DeepWell was driven
by the fact that DeepWell’s business complements Archer’s wireline division. The utilization of DeepWell’s equipment and personnel and
its advanced technology will enable Archer to improve and expand its wireline business. Prior to the acquisition, Archer was already
renting some equipment from DeepWell.
Purchase consideration for the DeepWell totalled NOK 170.4 million (or $19.9 million) and settled as follows:
Purchase consideration
(In NOK millions) (In USD million equivalent)
Cash settlement 2.0 0.2
Repayment of DeepWell's external loan 121.4 14.2
Seller’s credit, due in January 2022 47.0 5.5
Total consideration 170.4 19.9
YEARS ENDED DECEMBER 31
(In USD million) 2021 2020
Foreign exchange gains/(losses) (7.0) (6.7)
Mark-to-market of inancial investments and marketable securities 1.9 (5.2)
Gain on debt restructuring 42.2
Other items (1.8) 2.8
Total other inancial items (6.8) 33.1
Note 7 — Other Financial Items
Foreign exchange losses include foreign exchange gains and losses on an intercompany loan balance denominated in Norwegian Kroner.
The intercompany loan is held in a USD functional entity, while the corresponding intercompany debt is held in a Norwegian Kroner
functional entity. The inancial impact of the entity with Norwegian Kroner functional currency is classiied as other comprehensive
income. Mark to market of inancial investments and marketable securities, include the mark to market of our investment in KLX Energy
Services Holdings Inc. and our interest rate caps agreements.
In second quarter 2020 we recorded a non-routine gain of $42.2 million which resulted from our debt restructure, which is discussed in
note 17.
The excess of fair value of the assets acquired over the purchase consideration is reported as a separate line item, “Gain on bargain
purchase” the gain arises primarily from the recognition of a deferred tax asset upon the acquisition relating to DeepWell’s carried forward
tax losses, which Archer can utilize going forward.
The gain on the bargain purchase results from our preliminary calculations, based on all information available to date. The calculation may
change if further information materializes within 12 months from the acquisition date of June 3, 2021, which would result in adjustment to
the reported gain and relevant carrying values acquired.
The acquisition and future operation of DeepWell are included in our Eastern Hemisphere reporting segment. For the period from the
acquisition until the end of June 2021, Archer recognized a total of $1.1 million in external revenue from.
The fair value of the assets acquired at the acquisition date of June 3, 2021 were as follows:
Fair value of assets acquired (preliminary)
(In NOK millions) (In USD million equivalent)
Cash and restricted cash 9.7 1.1
Other current assets 57.5 6.7
Tangible ixed assets 194.4 22.7
Intangible assets 2.4 0.3
Deferred tax asset 84.3 9.8
Liabilities (77.4) (9.3)
Total fair value of assets acquired 270.8 31.3
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Archer 2021 Annual Report
50 51
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
YEARS ENDED DECEMBER 31
($ in millions) 2021 2020
Income taxes at statutory rate -
Taxable losses at local tax rate from continuing operations* (8.2) (22.1)
Eect of impairment charges 6.1 0.9
Eect of other non-deductible expenses (2.2) (0.7)
Eect of share of losses of unconsolidated associates 0.4 1.2
Eect of non-deductible interest 3.4 3.8
Eect of tax exempted income and credits 8.9 16.5
Eect of tax and exchange rate on temporary movements 9.6 1.8
Eect of valuation allowances 12.9 3.2
Eect of adjustments from prior years 1.5 5.9
Eect of state and withholding taxes 1.1 1.1
Actual tax expense/ (beneit) recognized 7.7 11.6
*Figures exclude non-taxable income in Bermuda (net gain of $12.1 million, 2020: $11.2 million)
The income taxes for the years ended December 31, 2021 and 2020 diered from the amount computed by applying the statutory
income tax rate in Bermuda, of 0% as follows:
YEARS ENDED DECEMBER 31
($ in millions) 2021 2020
Current tax expense 4.5 3.8
Deferred tax expense / (beneit) 3.2 7.8
Total income tax expense / (beneit), net 7.7 11.6
YEARS ENDED DECEMBER 31
($ in millions) 2021 2020
North America 0.5 0.3
South America 0.8 (0.7)
Europe 4.5 11.1
Others 1.8 0.9
Total 7.7 11.6
Note 8 — Income Taxes
Our income tax consists of the following:
Tax expense is impacted by the de-recognition of deferred tax assets which we do not expect to be able to utilize within the foreseeable
future. We have booked valuation allowances against deferred tax relating to net operating losses and foreign tax credits in Argentina,
Brazil, Canada and North America, and other timing dierences in Norway and the UK.
The company, including its subsidiaries, is taxable in several jurisdictions based on its operations. A loss in one jurisdiction may not be
oset against taxable income in another jurisdiction. Thus, the company may pay tax within some jurisdictions even though it might have
losses in others.
Income tax expense / (beneit) can be split in the following geographical areas:
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
DECEMBER 31
($ in millions) 2021 2020
Pension 0.2 0.2
Tax losses carry forward 816.1 798.7
Impairments of tangible and intangible assets 1.8 1.8
Property dierences 83.6 87.4
Provisions 13.6 11.1
Other 294.8 290.0
Gross deferred tax asset 1,210.1 1,189.2
Net deferred tax asset basis before valuation allowance 1,210.1 1,189.2
Valuation allowance (1,133.9) (1,132.6)
Net deferred tax asset basis 76.2 56.6
Net deferred tax asset 19.6 15.5
Deferred Income Taxes
Deferred income taxes relect the impact of temporary dierences between the amount of assets and liabilities recognized for inancial
reporting purposes and such amounts recognized for tax purposes. The net deferred tax assets consist of the following:
Tax losses carry forward of $816.1 million shown in the table above, principally relates to carried forward tax losses of $727 million originating
in the United States, and which expire over a period of 20 years, and tax losses of $46.9 million originating in Brazil. The Brazilian tax losses
can be carried forward indeinitely.
Overall, deferred tax assets increased in 2021 due to the acquisition of DeepWell ($9.6 million). This is oset by net proit in Norway ($ 4.1
million) For tax losses incurred in 2021 for Argentina, Canada and in the United States, the increase in deferred tax assets are oset by an
increase in the valuation allowance, resulting in no net eect in the 2021 inancial statements.
In total, the valuation allowance is a provision against deferred tax assets relating to tax operating losses, foreign tax credits and excess tax
values on drilling equipment, for which we do not, at the balance sheet date, have a suiciently documented tax strategy for realization
against future tax liabilities.
DECEMBER 31
($ in millions) 2021 2020
Deferred tax asset 20.6 16.3
Deferred tax liability (1.0) (0.8)
Net deferred tax asset 19.6 15.5
Deferred taxes are classiied as follows:
No provision has been made in respect of deferred tax on unremitted earnings from subsidiaries (2020: $Nil). No tax would be expected
to be payable if unremitted earnings were repatriated to the ultimate parent.
The Group operates in a number of jurisdictions and its tax ilings are subject to regular audit by the tax authorities. The Group’s principal
operations are located in Argentina, Australia, Brazil, Malaysia, Norway and the UK with the earliest periods under audit or open and
subject to examination by the tax authorities, within these jurisdictions, being 2016, 2017, 2018 ,2019, 2020 and 2021.
As in previous years, all beneits and expenses in relation to uncertain tax positions have been analyzed in terms of quantiication and risk,
and we have provided for uncertain beneits and expenses where we believe it is more likely than not that they will crystalize.
The Group’s accounting policy is to include interest and penalties in relation to uncertain tax positions within tax expense. Withholding
taxes are expensed as and when withheld and are credited to the income statement if and when recovered.
Archer 2021 Annual Report
52 53
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
NET LOSS
($ in millions)
WEIGHTED AVERAGE
SHARES OUTSTANDING
LOSS PER
SHARE (IN $)
2020
Basic loss per share from continuing operations (7.5) 148,050,298 (0.05)
Eect of dilutive options * —
Diluted loss per share (7.5) 148,050,298 (0.05)
NET LOSS
($ in millions)
WEIGHTED AVERAGE
SHARES OUTSTANDING
LOSS PER
SHARE (IN $)
2021
Basic loss per share from continuing operations (14.8) 148,217,188 (0.10)
Eect of dilutive options * —
Diluted loss per share (14.8) 148,217,188 (0.10)
* Share-based compensation of 1,716,422 shares were excluded from the computation of diluted earnings per share for the year ended December 31, 2021, and of 1,442,233 shares
were excluded from the computation for year ended December 31, 2020, as the eect would have been antidilutive due to the net loss for the period.
Note 9 — Earnings Per Share, or EPS
The components for the calculation of basic EPS and diluted EPS and the resulting values are as follows:
DECEMBER 31
($ in millions) 2021 2020
Prepaid expenses 11.3 13.3
VAT and other taxes receivable 9.7 7.0
Other short-term receivables 9.6 7.7
Total other current assets 30.7 28.0
Note 11 — Other Current Assets
Our other current assets include:
(In USD millions) DECEMBER 31, 2021 DECEMBER 31 , 2020
Manufactured:
Raw materials 1.1 1.8
Finished goods 9.7 9.8
Work in progress 0.4 0.4
Total manufactured 11.2 12.0
Drilling supplies 14.5 13.6
Chemicals 1.0
Other items and spares 26.4 27.6
Total inventories 52.1 54.2
Other items - Other items and spares primarily relate to parts and spares for the land rigs used in our Latin America operation and spares and parts used in the Oiltools operations.
Note 10 — Inventories
Our inventories include the following:
Provisions for obsolescence amounting to $3.6 million (2020: $3.3 million) are included under Other items and spares.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
DECEMBER 31
($ in millions) 2021 2020
C6 Technologies AS 4.7
Comtrac As 3.4 —
Total investments in unconsolidated associates 3.4 4.7
The carrying amounts of our equity method investments are as follows:
2021 2020
C6 Technologies AS 50.0%
Comtrac As 50.0% —
Note 12 — Investments in Unconsolidated Associates
We have the following participation in investments that are recorded using the equity method:
($ in millions) 2021
Comtrac AS C6* Total
Net book value at beginning of year 4.7 4.7
Transfer of loan advances 3.4 (3.4) -
Sale of remaining balances 1.3 1.3
Additional capital investment 0.9 0.9
Share in results of associates (0.5) (0.5)
Translation adjustment (0.4) (0.4)
Carrying value of investment at end of year 3.4 — 3.4
* Equity and loan investments combined
The components of investments in unconsolidated associates are as follows:
Quoted market prices for C6 Technologies AS and Comtrac AS are not available because the shares are not publicly traded.
($ in millions) 2020
QES C6* Total
Net book value at beginning of year 21.3 10.0 31.3
Additional capital investment 1.4 1.4
Share in results of associates (1.8) (1.3) (13.1)
Impairment of investment and loan (10.0) (5.3) (5.3)
Conversion to KLX shares (9.5) (9.5)
Translation adjustment (0.1) (0.1)
Carrying value of investment at end of year — — —
Carrying value of loan to associate at end of year — 4.7 4.7
* Equity and loan investments combined
Archer 2021 Annual Report
54 55
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Investment in QES
On July 28, 2020 Quintana Energy Services Inc. and KLX Energy Services Holdings Inc. (“KLXE”) completed a merger whereby they
combined their services. Archer received a total of 919,998 shares in KLXE in exchange for its interest in QES. KLXE will continue to
be listed on Nasdaq. Our KLXE shares are reported as Marketable securities in our balance sheet, and are adjusted to market value,
based on share price, each reporting period. The change in fair value of this investment is reported in Other inancial items. We do not
equity account for this investment in the way that we did for the QES shares since we do not have the ability to signiicant inluence the
operations of KLX. Our percentage interest in the KLXE is 8.8%.
Investment in C6 Technologies AS
Our investment in C6 comprised equity investment and a loan. Our share of the losses incurred by C6 in 2020 exceeds the carrying
value of our capital investment. We have applied the excess share of the losses as a reduction of the carrying value of the loan due from
the entity. In December 2020, we entered into a sale and purchase agreement with IKM, the other 50% shareholder of C6. Under the
agreement our investment in the Comtrac technology developed by C6 is transferred to a new joint venture in which we continue to hold
a 50% interest.
Comtrac AS is inanced by the transfer of loans advanced to C6 by the original shareholders. The carrying value of our investment in
the new entity has been adjusted to relect historical adjustments made to the original investment in C6 which related to the Comtrac
technology.
We received the sales consideration of $1.9 million from IKM for our shares in C6, after the carve-out of the Comtrac business. The resultant
gain of $0.6 million has been recognized in other comprehensive income.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
($ in millions)
OPERATIONAL
EQUIPMENT
OTHER
FIXED ASSETS
ASSETS UNDER
CONSTRUCTION
TOTAL
Cost
As of December 31, 2019 868.1 31.9 10.7 910.7
Net Additions 31.3 2.8 (2.1) 32.0
Translation adjustments 1.5 0.4 1.9
As of December 31, 2020 900.9 35.1 8.6 944.6
Net purchased additions 24.9 2.3 6.3 33.5
Assets recognized on DeepWell acquisition 64.7 64.7
Translation adjustments (12.1) (1.1) (0.1) (13.3)
As of December 31, 2021 978.4 36.3 14.8 1,029.5
Accumulated depreciation and impairments
As of December 31, 2019 (510.9) (25.9) (536.8)
Depreciation (46.7) (1.3) (48.0)
Impairments (3.6) (3.6)
Translation adjustments (0.5) (0.5) (1.0)
As of December 31, 2020 (561.7) (27.7) (589.4)
Depreciation (51.8) (1.6) (53.4)
Impairments (16.4) (16.4)
Accumulated depreciation recognized on DeepWell acquisition (42.1) (42.1)
Translation adjustments 14.5 0.9 15.4
As of December 31, 2021 (657.5) (28.4) (685.9)
Net book value December 31, 2021 320.9 7.9 14.8 343.6
Net book value December 31, 2020 339.2 7.4 8.6 355.2
Operational equipment includes drilling and well services equipment. Included in the cost of operational equipment is $30.9 million in
respect of assets held under capital leases (2020: $30.8 million). Other ixed assets include land and buildings, oice furniture and ixtures,
and motor vehicles. At December 31, 2021, $7.7 million of ixed assets have been pledged in respect of inance agreements for their
acquisition (2020 $8.0 million).
During 2021 we recognized total impairment losses of $16.4 million (2020: $3.6 million) relating to rigs and land drilling equipment in
our South American business. The impairments were recognized as part of our annual detailed review of ixed assets and assessment
of carrying values. Our testing of our two modular rigs, which uses expected undiscounted cash lows, indicated that the rigs are not
impaired. We reached a similar conclusion in our testing for 2020.
The testing for impairment of our modular and land rigs, and other long lived assets, involves signiicant judgment and assumptions to
be made in connection with the future performance of the various components of our business operations, including assumptions about
future cash lows, discount rates applied to these cash lows and current market estimates of value. Based on the uncertainty of future
revenue growth rates and other assumptions used to estimate our assets’ fair value and future reductions in our expected cash lows,
current market conditions worsening or persisting for an extended period of time could lead to future material non-cash impairment
charges in relation to our major assets.
In reviewing our land rigs for impairment, we also rely on valuations provided by independent appraisers. The experts we use have extensive
experience in the market in which our rigs are deployed and is also familiar with our assets, one of the experts has performed several
valuations for us. For rigs where we have no short term future cash lows to evaluate, or where our irst review of estimated future cash lows
indicates a possible impairment, we use the appraiser valuations based on an orderly liquidation valuation scenario as our benchmark for
fair value. In response to the on-going diiculties in Latin America resulting from the covid Pandemic, strike actions and government iscal
restrictions, we have expanded our recognized indicators for asset impairment which are historically the comparison of carrying values with
estimated future cash lows and independent broker valuations, to include rigs which have remained idle for a period of ive or more years.
Please see Note 5 for further discussion on our impairment review process and the impairment charges recognized in 2021.
Note 13 — Property Plant and Equipment
Archer 2021 Annual Report
56 57
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
($ in millions) 2021 2020
Asset value Impairment Net Value Asset value Impairment Net Value
Value at beginning of year 861.2 (688.5) 172.7 855.6 (684.5) 171.1
Impairments during the year (4.0) (4.0)
Currency adjustments (5.2) (5.2) 5.6 5.6
Net book balance at end of year 856.0 (688.5) 167.5 861.2 (688.5) 172.7
Note 14 — Goodwill
Goodwill represents the excess of purchase price over the fair value of tangible and identiiable intangible assets acquired, which relates
primarily to intangible assets pertaining to the acquired workforce and expected future synergies. All of our remaining goodwill relates to
our Eastern Hemisphere reporting segment.
We test goodwill for impairment on an annual basis during the fourth quarter and between annual tests if an event occurs, or circumstances
change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
The testing of the valuation of goodwill can involve signiicant judgment and assumptions to be made in connection with the future
performance of the various components of our business operations, including assumptions about future cash lows of each reporting
unit, discount rates applied to these cash lows and current market estimates of value. Based on the uncertainty of future revenue growth
rates, gross proit performance, and other assumptions used to estimate our reporting units’ fair value, future reductions in our expected
cash lows, should current market conditions worsen or persist for an extended period of time, could lead to a future material non-cash
impairment charge in relation to our remaining goodwill.
During 2020, mindful of the fact that the carrying value of our assets may be adversely aected by the volatility of oil price and eect of
the Coronavirus pandemic which have occurred during 2020 we conducted a detailed quantitative review of the carrying value of our
remaining goodwill. Speciically, there were indicators that goodwill relating to our wireline division might be impaired as this division’s
results were reported below expectations. The conclusion of our testing was that the carrying value as at December 31, 2020 was not
impaired.
Our qualitative review of our goodwill carrying value at December 31, 2021 has concluded that our goodwill is not impaired. The main
observations leading us to this conclusion were:
• The amount of headroom indicated by our 2020 quantitative testing, coupled with
• Secured key long term contracts in Norway for Equinor and COPNO within our Well Services division
• The improvement in results in 2021 compares to 2020 in the divisions to which the goodwill is allocated.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 15 — Other Noncurrent Assets
Our other noncurrent assets are composed of the following:
($ in millions) DECEMBER 31
2021 2020
Deferred mobilization costs 1.3 8.9
Financial instruments 7.0 1.9
Other 3.1 4.2
Total other noncurrent assets 11.4 15.0
Note 16 — Other Current Liabilities
Our other current liabilities are comprised of the following:
($ in millions) DECEMBER 31
2021 2020
Accrued restructuring costs 0.6 3.3
Accrued expenses and prepaid revenues 106.0 90.9
Taxes payable (0.4) (0.7)
VAT, employee and other taxes 28.7 32.0
Other current liabilities 5.4 -
Total other current liabilities 140.2 125.5
Archer 2021 Annual Report
58 59
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
December 31, 2021 December 31, 2020
(In USD millions) Loan balance
Unamortized
debt issuance
costs
Loan balance less
unamortized debt
issuance costs
Loan balance
Unamortized
debt issuance
costs
Loan balance less
unamortized debt
issuance costs
Multicurrency term and revolving facility 516.4 (2.1) 514.3 510.3 (3.4) 506.9
Related party subordinated loan 15.9 15.9 15.9 15.9
Hermes-covered term loans 4.4 4.4 9.6 9.6
Other loans and capital lease liability 16.1 16.1 13.1 13.1
Total loans and capital lease liability 552.8 (2.1) 550.7 548.9 (3.4) 545.5
Less: current portion (25.3) (25.3) (10.4) (10.4)
Long-term portion of interest-bearing debt 527.5 (2.1) 525.4 538.5 (3.4) 535.1
Note 17 — Debt
Multicurrency term and revolving credit facility
The total amount available under the Multicurrency term and revolving credit facility (the “Facility”) is $571.4 million, split between $341.0
million under a term loan and $230.4 million in revolving facilities. In addition, a total of $11.2 million of the Facility is carved out into an
overdraft facility of $ 11.2 million. A total of $516.4 million was drawn as at December 31, 2021 under the Facility of which the equivalent
of $31.2 million was drawn in Norwegian Kroner. The Facility is secured by pledges over shares in material subsidiaries, assignment over
intercompany debt and guarantees issued by the material subsidiaries.
The interest payable on the Facility is the aggregate of 1, 3 or 6-month NIBOR, LIBOR or EURIBOR, plus between 2.25% and 4.35% per
annum, depending on the ratio of the net interest-bearing debt to EBITDA. In the event our total consolidated net interest bearing debt,
after adjustments of the related party subordinated convertible loan amount, exceeds 6.0x the last twelve months Nominal EBITDA
measured at December 31, 2021, 2022 and/or August 31, 2023, the loan will accrue an additional 1% PIK margin for 2021, 2022 and/or from
January 1st to October 1st 2023. In June 2022 quarterly instalments of $4 million will commence. In addition to the scheduled installments,
there is a cash sweep mechanism in the Facility agreement whereby 90% of the available liquidity above $90 million, calculated each
December and June after certain adjustments, is applied towards prepayment under the Facility. The inal maturity date of the Facility is
October 1, 2023.
The Facility contains certain inancial covenants, including, among others:
• Archer will ensure that the ratio of net interest-bearing debt (after certain adjustments) to 12 months rolling Nominal EBITDA (after
certain adjustments) at the inancial quarter ending from December 31, 2021 to June 30, 2022 shall not exceed 7.5x, at September 30,
2022 shall not exceed 7.25x, at December 31, 2022 shall not exceed 6.75x, at March 31, 2023 shall not exceed 6.00x, at June 30, 2023
shall not exceed 5.5x and 5.0x thereafter.
• Archer shall maintain $30 million in freely available cash and undrawn committed credit lines.
• Archer shall ensure that the capital expenditures shall not exceed $40 million per year.
The Facility contains events of default which include payment defaults, breach of inancial covenants, breach of other obligations, breach
of representations and warranties, insolvency, illegality, unenforceability, curtailment of business, claims against an obligor’s assets,
appropriation of an obligor’s assets, failure to maintain exchange listing, material adverse eect, repudiation and material litigation. In
addition, there are cross default clauses in the event of the obligor defaulting on other issued debt.
As of December 31, 2021, the Company is compliant with all covenants as agreed with its lenders under this Facility.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Related party subordinated loan
In Q2, 2017 we established a subordinated convertible loan from Seadrill Ltd. with face value of $45 million. In April 2020 we renegotiated
the terms of the subordinated loan, with a new face value of $13.1 million. The loan matures on April 1, 2024 and bears PIK interest of 5.5%
per year. The conversion rights attached to the loan are exercisable, enabling Seadrill to convert the debt at a rate of 2.5 ordinary shares in
Archer for each $1.00 of loan and accrued interest. The interest up to the maturity date has been accrued to the loan balance, increasing
the book value of the loan from $13.1 million to $15.9 million.
Hermes covered term loan
On December 6, 2013 Archer Topaz Limited, a wholly owned subsidiary of Archer, signed a €48.4 million Hermes covered term loan
agreement for the inancing of the modular rig, Archer Topaz. The loan matures December 31, 2022, and contains covenants aligned
to those of the multi-currency term loan and revolving credit facility. The interest rate applied to this loan is 1.45% above EURIBOR. At
December 31, 2021 the equivalent of $4.4 million was outstanding under this facility.
Other loans and capital leases
As described above, a total of $11.2 million of the Facility is carved out into an overdraft facility. Net borrowing under the overdraft facility
was $0.0 million at December 31, 2021.
At December 31, 2021 net borrowing under short-term facilities in Argentina and in Bolivia was $3.4 million. In addition, net borrowing
on the 600 million Argentinian pesos syndicated loan facility in Argentina was equivalent to $3.5 million dollars. The syndicated loan is
repayable in monthly instalments which commenced April 2021 and continue until January 2023.
We have inance arrangements relating to equipment in our Oiltools and Platform Drilling divisions. At December 31, 2021, the balance
under these arrangements was $9.1 million.
Interest rate cap agreement
We have entered into USD interest rate cap agreements, securing the interest rate against luctuations above 1.65% on $198 million until
February 2025 and $102 million until February 2023. Furthermore, we have entered into USD interest rate cap agreements, securing the
interest rate against luctuations above 0.85% on $200 million until December 2025. The fair value of the instruments as of December 31,
2021 was an asset of $7.0 million and is included within other non-current assets. We have not designated the interest rate caps as hedging
instruments and the movement in the fair value of theseinstruments is reported within other inancial items.
Our outstanding interest bearing debt as of December 31, 2021, is repayable as follows:
($ in millions)
CAPITAL
LEASE
OTHER
DEBT
TOTAL
Year ending December 31
2022 2.6 22.3 24.9
2023 2.7 505.5 508.1
2024 2.3 15.9 18.2
2025 and thereafter 1.6 1.6
Total debt 9.1 543,7 552.8
Archer 2021 Annual Report
60 61
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 18Lease Obligations
Finance leases
We have entered into inance arrangements for the purchase of some items of equipment, mainly well plugs for use in our Oiltools division
and some rental equipment in our Platform Drilling division. The leases are entered into under a frame agreement with the bank, and the
lease term is typically 5 years.
Assets leased under inance leases with a carrying value of $7.7 million are included in property, plant and equipment and the liability is
included in the interest-bearing debt.
Operating Leases
The company has historically leased some operating assets, oice and warehouse facilities and oice equipment under operating leases.
With eect from January 1, 2019, for material operating leases, we have recognised the relevant right of use assets and lease liabilities in
our balance sheet. The leases have remaining lease terms of 1 to 12 years at December 31, 2021. Some operating leases include options to
extend the leases for up to 3 years. We have sub-let unused oice space, for which we received rental income of $1.3 million during 2021.
We have calculated an incremental borrowing rate, or IBR, for discounting each lease’s cash-lows to arrive at an initial value for the lease
liability and right of use asset. The IBR is calculated as a function of the following elements/considerations;
• Base rate – generally the inter-bank lending rate in the relevant jurisdictions,
• Credit spread – we estimate the eect of the lessee credit worthiness
• Country risk premium
• Inlation dierential
• Contract term
• Security or collateral provided in the lease contract.
Signiicant judgment is required in estimating some of these elements. We apply a consistent methodology in estimating IBR for each
lease.
We have elected not to recognise the right of use asset and lease liability for short term leases.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Supplemental information pertaining to the Company’s leasing activities for the year ended December 31, 2021 was as follows;
Estimated future minimum rental payments are as follows:
(In USD millions)
Year Ended
December 31, 2021
Finance Lease costs
Amortization of right of use assets 2.3
Interest on lease liabilities 0.4
Operating lease costs 8.0
Short term lease costs 22.9
Total Lease costs 33.6
Other information
Cash paid for amounts included in measurement lease liabilities
Operating cash lows from inance leases 2.2
Operating cash lows from operating leases 8.0
Financing cash lows from inance leases 0.4
Right of use assets obtained in exchange for new inance lease liabilities 2.8
Right of use assets obtained in exchange for new operating lease liabilities —
Weighted average remaining lease term – inance leases 3.6 years
Weighted average remaining lease term – operating leases 8.7 years
Weighted average discount rate – inance leases 4.1%
Weighted average discount rate – operating leases 5.8%
($ in millions)
OPERATING
LEASE OBLIGATIONS
YEAR
2022 5.3
2023 4.2
2024 4.3
2025 4.3
Thereafter 16.3
Total 34.4
Archer 2021 Annual Report
62 63
Note 19 — Commitments and Contingencies
Purchase commitments
As of December 31, 2021, we have committed to purchase obligations including capital expenditures amounting to $10.9 million, (2020:
$15.1 million).
We have no material contingent liabilities.
Legal Proceedings
From time to time, we are involved in litigation, disputes and other legal proceedings arising in the normal course of our business. We
insure against the risks arising from these legal proceedings to the extent deemed prudent by our management and to the extent
insurance is available, but no assurance can be given that the nature and amount of that insurance will be suicient to fully indemnify us
against liabilities arising out of pending and future legal proceedings. Many of these insurance policies contain deductibles or self-insured
retentions in amounts we deem prudent and for which we are responsible for payment. If there is a claim, dispute or pending litigation
in which we believe a negative outcome is probable and a loss by the company can be reasonably estimated, we record a liability for the
expected loss. As of December 31, 2021, we are not aware of any such expected loss which would be material to our inancial position and
results of operations. In addition, we have certain claims, disputes and pending litigation in which we do not believe a negative outcome
is probable or for which the loss cannot be reasonably estimated.
Other than the above, we are not involved in any governmental, legal or arbitration proceedings (including any such proceedings which
are pending or threatened) which may have, or have had in the recent past, signiicant eects on our inancial position or proitability.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Shareholder overview as of December 31, 2021
SEADRILL JU NEWCO BERMUDA LIMITED 15.5%
HEMEN HOLDING LIMITED 12.2%
SKANDINAVISKA ENSKILDA BANKEN AB 3.2%
STAVANGER FORVALTNING AS 3.1%
Others 66.0%
Note 20 — Share Capital
Archer shares are traded on the Oslo Stock exchange with the ticker “ARCH”
The Board has indicated that no dividend will be distributed in respect of the results for the inancial year 2021.
The Board has indicated that no dividend will be distributed in respect of the results for the inancial year 2021.
Under the Bermuda Companies Act, dividends cannot be paid if there are reasonable grounds for believing that (a) The company is,
or would after the payment be, unable to pay its liabilities as they become due; or (b) The realizable value of the company’s assets
would thereby be less its liabilities The Company has not declared dividend since its inception, and there are restrictions in the inancing
arrangement eectively preventing the Company from distributing dividend to its shareholders before the loan has been repaid,
reinanced or a dividend distribution is approved by our Lenders. Some of the jurisdictions in which we operate impose restrictions on
dividend payments from subsidiaries to holding companies.
Hemen Holding Ltd, or Hemen, a Cyprus holding company is indirectly controlled by trusts established by Mr. John Fredriksen, for the
beneit of his immediate family.
($ in millions) DECEMBER 31
2021 2020
All shares are common shares of
$0.01 par value each
All shares are common shares of
$0.01 par value each
SHARES $ MILLION SHARES $ MILLION
Authorized share capital 1,000,000,000 10.0 1,000,000,000 10.0
Issued, outstanding and fully paid share capital 148,758,612 1.5 148,050,298 1.5
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 21 — Audit fees
Total auditors’ remuneration to PricewaterhouseCoopers was an audit fee of $0.5 million for the year ended December 31, 2021 and $0.6
million for the year ended December 31, 2020. Archer Ltd ($0.2 million) received the main amount of cost, in addition to Archer (UK) Ltd
($0.1 million) and Archer Norge AS ($0.1 million). The compensation to the auditor is paid in GPB, NOK and USD. The USD igure is not
totally comparable year on year.
($ in millions) DECEMBER 31
2021 2020
Legally required audit 0.5 0.6
Attestation services 0.0 0.0
Other services - -
Total audit fee 0.5 0.6
Archer 2021 Annual Report
64 65
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 22 — Directors and executive compensation and share option plan
Directors and executive compensation
During the year ended December 31, 2021, we paid aggregate cash compensation of approximately $1.8 million and an aggregate amount
of approximately $31 thousand for pension and retirement beneits to our executive oicers and directors. In addition, we recognized
stock compensation expense of approximately $0.1 million in respect to options and restricted stock units granted to our directors and
executive oicers.
Share Option Plans
We have granted share options to our senior management that provide the management with the right to subscribe for new shares. The
options are not transferable and may be withdrawn upon termination of employment under certain conditions. Options granted under
the scheme will vest at a date determined by the Board of Directors. The options granted under the plan vest over a period of one to ive
years.
As of December 31, 2021, Archer has one active option program.
The following summarizes share option transactions related to the Archer programs in 2021 and 2020:
No income was received in 2021 as a result of share options being exercised (2020: $ nil).
Outstanding options may be exercised up to March 1, 2022. The exercise price is NOK 10.00 per share. On December 31, 2021, 600,000
options were outstanding, and all of the options were exercisable. The weighted average remaining contractual life of outstanding options
is 14 months (2020: 26 months).
We pay the employers’ national insurance contributions related to the options, while the option holders will be charged for the individual
income taxes.
When stock options are exercised we have traditionally settled the obligation by issuing new shares.
Valuation:
We use the Black-Scholes pricing model to value stock options granted. The fair value of options granted is determined based on the
expected term, risk-free interest rate, dividend yield and expected volatility. The expected term is based on historical information of past
employee behaviour regarding exercises and forfeiture of options. The risk-free interest rate assumption is based upon the published
Norwegian treasury yield curve in eect at the time of grant for instruments with a similar life. The dividend yield assumption is based on
history and expectation of dividend pay-outs.
2021 2020
OPTIONS
WEIGHTED
AVERAGE EXERCISE
PRICE - NOK
OPTIONS
WEIGHTED
AVERAGE EXERCISE
PRICE - NOK
Outstanding at beginning of year 600,000 10.00 650,001 14.45
Forfeited/expired (50,001) 67.88
Outstanding at end of year 600,000 10.00 600,000 10.00
Exercisable at end of year 600.000 10.00 600.000 10.00
($ in millions) DECEMBER 31
2021 2020
Salary including bonus 1.8 1.6
Other remuneration 0.1 0.2
Pension contribution 0.0 0.0
Total compensation 1.9 1.8
We use a blended volatility for the volatility assumption, to relect the expectation of how the share price will react to the future cyclicality
of our industry. The blended volatility is calculated using two components. The irst component is derived from volatility computed from
historical data for a period of time approximately equal to the expected term of the stock option, starting from the date of grant. The
second component is the implied volatility derived from our “at-the-money” long-term call options. The two components are equally
weighted to create a blended volatility.
Archer did not grant any new options in 2021 or 2020.
Restricted Stock units
The Board has from time to time granted restricted stock units, or RSU’s, to members of Archer’s management team. The RSUs typically
vest over three to four years after the grant date. As of December 31, 2021 a total of 1,062,365 RSUs was outstanding.
RSU awards do not receive dividends or carry voting rights during the performance period. The fair value of the restricted stock award is
the quoted market price of Archer’s stock on the date of grant.
The following table summarizes information about all restricted stock transactions:
Accounting for share-based compensation
The fair value of the share options and RSUs granted is recognized as personnel expenses. During 2021, NOK 3.2 million ($0.4 million) has
been expensed in our Statement of Operations ($0.8 million in 2020).
As of December 31, 2021, total unrecognized compensation costs related to all unvested share-based awards totalled NOK 1.7 million ($0.2
million), which is expected to be recognized as expenses in 2022 and 2023 of USD 1.2 million and NOK 0.5 million respectively.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
2021 2020
RSU’s
Weighted average
grant date fair
value NOK
RSU’s
Weighted average
grant date fair
value NOK
Unvested at beginning of year 2,583,353 4.67 4,157,364 4.97
Granted 110,000 2.20
Vested/released (1,341,104) (1,445,126)
Forfeited (179,884) (238,835)
Unvested at end of year 1,062,365 3.78 2,583,353 4.67
Note 23 — Pension Beneits
Deined Contributions Plans
We contribute to a private deined contribution pension plan for our UK onshore workforce. Eligible employees may contribute a minimum
of 4% of their salary to the scheme, and we contribute between 5% and 7.5% to participants’ plans. In 2021 we contributed $3.9 million
(2020: $3.6 million) to the plan.
In Norway we also have a deined contribution pension plan both for our Norwegian onshore workforce in addition to our employees
working oshore on the Norwegian continental shelf from 2019. For onshore employees we contribute 5% of salary between 1 and 6 G
and 8% of salary between 6 and 12 G. For oshore employees we contribute 3% of salary up to 7.1 G and 15% of salary between 7.1 and 12
G. (G represents the minimum base salary used in the Norwegian National Insurance scheme, and for 2021 is equivalent to approximately
$12,380). In 2021 we contributed $9.8 million (2020 $8.5 million) to the plan in Norway.
Archer 2021 Annual Report
66 67
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 24 — Related Party Transactions
In the normal course of business we transact business with related parties conducted at arm’s length.
Transactions with C6 Technologies AS and Comtrac AS:
At December 31, 2020, we owned 50% of C6 Technologies AS (“C6”), an oilield technology company oering new solutions for well
intervention and conveyance utilizing composite materials. Because we did not control this entity we have reported its inancial results
using the equity method of accounting since its creation in 2010. As described in note 12 above, during the second quarter of 2021 we
concluded a sale and purchase agreement to sell our share of C6 to the other 50% shareholder. The sale was contingent upon the carve
out of the Comtrac technology developed by C6 into a new entity, Comtrac AS, under the same shared ownership as C6.
The sale of the remainder of our investment in C6 resulted in a gain of $0.6 million which is reported in Other comprehensive income.
We transferred a loan investment with a carrying value of $3.4 million from C6 to Comtrac AS, in addition to which we have made further
advances to Comtrac AS during 2021 totaling $0.9 million.
Transactions with other related parties
The following are related parties, being companies in which Archer’s largest shareholder, Seadrill and/or Hemen Holding Ltd have a
signiicant interest:
• Seadrill Group
• Frontline Management (Bermuda) Limited, (“Frontline”)
• Seatankers Management Company Limited (“Seatankers”)
During the 12 months ended December 31, 2021, we supplied Seadrill Limited and ailiates (“Seadrill”) with services amounting to $3.4
million, mainly relating to the provision of oshore equipment and rental of warehouse space to Seadrill by our Aberdeen facility. This
amount has been included in operating revenue. At December 31, 2021 Seadrill owed us $0.1 million in respect of these services.
Frontline and Seatankers provide management support and administrative services to us, and we have recorded fees of $0.1 million for
these services from Frontline in 2021. In the second quarter we received a credit note from Seatankers resulting in the reporting of total net
negative costs of $0.1 million in 2021.These expenses are included in General and administrative expenses in the Consolidated statement
of operations.
Note 25 — Reporting and Geographical Segment Information
The split of our organization and aggregation of our business into segments is based on dierences in management structure and
reporting, location of regional management and assets, economic characteristics, customer base, asset class and contract structure.
We present our business under two reporting segments based on geographical location;
• Eastern Hemisphere
• Western Hemisphere
The Eastern Hemisphere segment contains Platform Drilling, Modular rigs, Engineering, Wireline and Oiltools service divisions.
Western Hemisphere comprises our land drilling operations in Latin America.
We report our corporate costs and assets separately and do not allocate them to the segments. Corporate costs include costs for the
corporate management team, director’s fees, corporate audit fees, stock-based compensation costs and other related costs which are
centrally managed.
We report our corporate costs and assets separately and do not allocate them to the segments. Corporate costs include costs for the
corporate management team, director’s fees, corporate audit fees, stock-based compensation costs and other related costs which are
centrally managed.
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
(In USD millions) YEAR ENDED DECEMBER 31
2021 2020
Revenues from external customers
Eastern Hemisphere 725.5 638.1
Western Hemisphere 210.6 185.9
Total revenue 936.1 824.0
Depreciation and amortization
Eastern Hemisphere 22.7 17.2
Western Hemisphere 31.1 38.8
Total depreciation and amortization 53.8 48.0
Operating income/net income
Eastern Hemisphere 56.9 51.6
Western Hemisphere (31.2) (26.0)
Corporate Cost (10.2) (5.4)
Stock compensation cost (0.3) (0.8)
Total operating (loss)/income 15.4 19.4
Total inancial items (33.9) (15.3)
Gain on bargain purchase 11.4 —
Income taxes (7.7) (11.6)
Net (loss)/income (14.8) (7.5)
Capital Expenditures
Eastern Hemisphere 22.5 21.0
Western Hemisphere 11.0 11.0
Total 33.5 32.0
Archer 2021 Annual Report
68 69
Goodwill
($ in millions)
EASTERN
HEMISPHERE
WESTERN
HEMISPHERE
TOTAL
Balance at December 31, 2019 171.1 171.1
Exchange rate luctuations on goodwill measured in foreign currency 1.6 1.6
Balance at December 31, 2020 172.7 172.7
Exchange rate luctuations on goodwill measured in foreign currency (5.2) (5.2)
Balance at December 31, 2021 167.5 167.5
Geographic information by country
FOR THE YEARS ENDED DECEMBER 31
($ in millions) 2021 2020
Revenue
Norway 534.5 475.4
Argentina 207.9 171.0
United Kingdom 79.7 85.2
Other 114.0 92.4
Total 936.1 824.0
Property plant and equipment
($ in millions) AS OF DECEMBER 31
2021 2020
United States 1.7 1.7
Latin America 206.8 243.6
New Zealand 31.2 29.9
Norway 100.7 76.1
United Kingdom 1.9 2.5
Other 1.3 1.3
Total 343.6 355.2
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Total assets
(In USD millions) December 31, 2021 December 31, 2020
Eastern Hemisphere 527.8 495.1
Western Hemisphere 313.2 347.8
Corporate 10.8 2.5
Total 850.7 845.4
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 26 — Risk Management and Financial Instruments
Our functional and reporting currency is US Dollars. We have operations and assets in a number of countries worldwide, and receive
revenues and incur expenditures in other currencies, causing our results from operations to be aected by luctuations in currency
exchange rates, primarily related to Argentine Pesos, Norwegian kroner and British pounds. We are also exposed to changes in interest
rates on variable interest rate debt, and to the impact of changes in currency exchange rates on debt denominated in currencies other
than US Dollar. There is thus a currency risk and interest rate risk, which could have a negative eect on our cash lows as well as our
reported inancials.
Interest rate risk management
Our exposure to interest rate risk relates mainly to our variable interest rate debt and balances of surplus funds placed with inancial
institutions. Currently, the interest rate risk is managed by the application of interest rate caps for a portion of our US Dollar denominated
debt.
The extent to which we utilize interest rate swaps and other derivatives to manage our interest rate risk is determined by reference to
our net debt exposure and our views regarding future interest rates. At December 31, 2021, we had entered into USD interest rate cap
agreements, securing the interest rate against luctuations above 1.65% on $198 million until February 2025 and $102 million until February
2023 and 0.85% on $200million until December 2025. We have not applied hedge accounting principles to these instruments. The fair
value of the instruments as of December 31, 2021 was an asset of $7.0 million and is included within other non-current assets.
Foreign currency risk management
We are exposed to foreign currency exchange movements in both transactions that are denominated in currency other than USD,
and in translating consolidated subsidiaries who do not have a functional currency of USD. Transaction losses are recognized in “Other
inancial items” on our Consolidated Statement of Operations in the period to which they relate. Translation dierences are recognized as
a component of equity. The total transaction loss relating to foreign exchange recognized in the Consolidated Statement of Operations in
2021 amounted to $7.0 million (2020: $6.7 million).
Credit risk management
We have inancial assets, including cash and cash equivalents, trade receivables and other receivables. These assets expose us to credit
risk arising from possible default by the counterparty. We consider the counterparties to be creditworthy inancial institutions and do not
expect any signiicant loss to result from non-performance by such counterparties. In the normal course of business, we do not demand
collateral.
Archer 2021 Annual Report
70 71
Fair values
Carrying value of inancial instruments
(In USD millions) December 31, 2021 December 31, 2020
Assets / (Liabilities)
FAIR VALUE CARRYING VALUE FAIR VALUE CARRYING VALUE
Nonderivatives
Cash and cash equivalents 50.7 50.7 41.2 41.2
Restricted cash 14.8 14.8 12.4 12.4
Marketable securities 2.9 2.9 6.1 6.1
Accounts receivable 125.6 125.6 109.2 109.2
Accounts payable (43.5) (43.5) (34.4) (34.4)
Current portion of interest-bearing debt (25.3) (25.3) (10.5) (10.5)
Current portion of operating lease liability (5.2) (5.2) (8.5) (8.5)
Long-term interest-bearing debt (509.5) (509.5) (519.1) (519.1)
Operating lease liability (21.5) (21.5) (21.4) (21.4)
Subordinated related party loan (15.9) (15.9) (15.9) (15.9)
Derivatives
Interest cap agreements 7.0 7.0 1.9 1.9
The above inancial assets and liabilities are disclosed at fair value as follows:
Level 1: Quoted prices in active markets for identical assets
Level 2: Signiicant other observable inputs
Level 3: Signiicant unobservable inputs
In USD millions) DECEMBER 31 2021 FAIR VALUE MEASUREMENTS AT REPORTING DATE USING
Fair Value Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents 50.7 50.7 —
Restricted cash 14.8 14.8 —
Marketable securities 2.9 2.9 —
Accounts receivable 125.6 125.6 —
Interest cap agreements 7.0 7.0 —
Liabilities:
Accounts payable (43.5) (43.5) —
Current portion of interest-bearing debt (25.3) (25.3) —
Current portion of operating lease liability (5.2) (5.2) —
Long-term, interest bearing debt (509.5) (509.5) —
Operating lease liability (21.5) (21.5) —
Subordinated related party loan (15.9) (15.9) —
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
We used a variety of methods and assumptions, which are based on market conditions and risks existing at the time, to estimate the
fair value of our inancial instruments as of December 31, 2021, and 2020. For certain instruments, including cash and cash equivalents,
receivables and accounts payable, it is assumed the carrying amount approximates to fair value due to the short-term maturity of those
instruments.
The fair value of the current portion of long-term debt is estimated to be equal to the carrying value, since it is repayable within twelve
months.
The fair value of the long-term portion of loating rate debt is estimated to be equal to the carrying value since it bears variable interest
rates. This debt is not freely tradable and cannot be purchased by us at prices other than the outstanding balance plus accrued interest.
The fair value of interest rate caps is calculated using well-established independent market valuation techniques applied to contracted
cash lows and relevant interest rates.
The fair value of the subordinated related party debt is considered not to be materially dierent from its carrying value as the ixed interest
rate payable on the loan is considered a fair market rate as at December 31, 2021.
We consider the eect of Archer’s own credit risk when estimating the fair value of our inancial instruments.
Retained risk
We retain the risk, through self-insurance, for deductibles relating to physical damage insurance on our capital equipment. In the opinion
of management, adequate provisions have been made in relation to such exposures, based on known and estimated losses.
Concentration of risk
The following table summarizes revenues from our major customers as a percentage of total revenues from continuing operations
(revenues in excess of 10 percent for the period):
CUSTOMER
2021 2020
Equinor 45% 44%
Pan American Energy 13% 15%
ConocoPhillips 7% 6%
YPF SA 5% 4%
Customer <10% 30% 31%
Total 100% 100%
Archer Limited and subsidiaries
Notes to the consolidated nancial statements
Note 27 — Subsequent Events
In February 2022, Archer was awarded a two-year contract extension from PanAmerican for drilling services covering 4 drilling units, 13
workover units and 13 pulling units in Argentina. The extension will commence in Q2, 2023, in direct continuation of the current contract.
In February 2022, Archer was awarded a two-year contract extension from Equinor for platform drilling services on Statjord A, B and
C, Gullfaks A, B and C, Grane, Njord, Sleipner A, Snorre A and B, and Visund. The extension will commence on October 1, 2022 in direct
continuation of the current contract.
The recent Russian invasion of Ukraine has disrupted supply chains and caused instability in the global economy, while the United States
and the European Union, among other countries, announced sanctions against Russia. The ongoing conlict could result in the imposition
of further economic sanctions against Russia. Currently, Archers operations in Russia have been suspended and have denied requests for
any further work in Russia. Archer currently owns a subsidiary in the country which we are evaluating the ongoing need for as well as the
process to wind up. For the Archer group there are approximately $0.7 million outstanding from customers in Russia where recoverability
may be at risk. Archer will continue to comply with all applicable sanctions.
Archer 2021 Annual Report
72 73
As used herein, unless otherwise required by the context, the terms “Archer”, “Company”, “we”, “our” and “us” refer to Archer Limited and
its consolidated subsidiaries. The Norwegian Code of Practice for Corporate Governance, as updated October 14, 2021 (the “Code”) applies
to us to the extent that the provisions of this Code do not conlict with the legislation of our national jurisdiction. The Code is a “comply or
explain” guideline and we generally aim at complying with the recommendations of the Code. However, we will, to some extent, deviate
from certain recommendations of the Code, partly due to dierent practice and principles under which Bermuda companies operate. The
status of noncompliance and the explanations therefore is set out below.
The Code is available in its entirety at the Oslo Stock Exchange website (www.euronext.com/nb/markets/oslo) and the website of The
Norwegian Corporate Governance Board (www.nues.no).
Section 1 Implementation and reporting on corporate governance
Archer Limited is a limited liability company registered in Bermuda and listed on the Oslo Stock Exchange (Oslo Børs). The foundation
for Archer’s governance structure is Bermuda law as well as regulations for foreign companies listed on the Oslo Stock Exchange. In line
with the directions given by the Board of Directors of Archer Limited, (the “Board”), Archer conducts its business on the basis of three
fundamental values:
Safety: We are committed individually and as a team, to protect the health and safety of its employees, customers and communities.
Integrity: We are committed to maintaining an environment of trust, built upon honesty, ethical behaviour, respect and candour.
Performance: We are committed to eiciently and eectively perform to all Archer standards and those of our customers.
The Board reviews the actual performance for all the values mentioned above and where applicable compares the key performance
indicators against the plan regularly. With regard to integrity, Archer has implemented a Code of Conduct, which is available on our
website (www.archerwell.com). It is Archer’s policy that an employee who becomes aware of a possible violation of the Company’s policies
regarding legal or ethical business conduct must report the violation. This includes possible violations of policies set forth in the Code of
Conduct, or other policies, manuals, or guides distributed by the Company in addition to all applicable laws. On a quarterly basis the Audit
Committee reviews reported potential violations of the Company’s Code of Conduct and discusses required actions, if any.
The Board has deined clear objectives, strategies, and risk proiles for our business activities and integrates considerations related to
our stakeholders to create value and deliver results. The Board evaluates these objectives, strategies and risk proiles at regular intervals.
The Board has reviewed the overall performance of the Company compared to its values and its corporate governance for the inancial
year 2021 in line with the Code and conirms it is in compliance with the Code, except for deviations which are highlighted in the detailed
description of the main provisions of the Code below:
Section 2 Business
In accordance with normal practice for Bermuda companies, our by-laws do not include a speciic description of our business. According
to the memorandum of association, no restrictions apply as to the purpose of the Company and the reasons for its incorporation. As a
Bermuda incorporated company, we have chosen to establish the constitutional framework in compliance with the normal practice of
Bermuda and accordingly deviate from section 2 of the Code.
The Company provides an annual ESG Report, published on our website (https://www.archerwell.com/sustainability/esg-reporting/) which
outlines our activities, performance, and strategy in relation to the environment, social issues, working environment, equality and non-
discrimination, human rights, and anti-corruption.
Section 3 Equity and dividends
In accordance with Bermuda law, the Board is authorized to repurchase treasury shares, and to issue any unissued shares within the limits
of the authorized share capital. These authorities are neither limited to speciic purposes nor to a speciic period as recommended in
section 3 of the Code. While we aim at providing competitive long-term return on the investments of our shareholders, we do not currently
have a formal dividend policy.
The Board ensures that the Company has a capital structure that is appropriate to the Company’s objective, strategy and risk proile.
Archer Limited and subsidiaries
Appendix A – Corporate Governance
Section 4 Equal treatment of shareholders
In accordance with the company laws of Bermuda, the shareholders can resolve an amount of authorized capital within which the Board
may decide to increase the issued capital at its discretion without further shareholder approval. There is no legal framework providing for
speciic time-limited or purpose-limited authorizations to increase the share capital. The Board will propose to the shareholders that they
consider and, if necessary, resolve to increase the authorized capital of the Company that will allow the Board some lexibility to increase
the number of issued shares without further shareholder approval. As such, we may deviate from the Code’s recommendation in section
4. Any increase of the authorized capital is, however, subject to approval by the shareholders by 2/3 majority of the votes cast. Neither our
by-laws nor Bermuda company laws include regulation of pre-emptive rights for shareholders in connection with share capital increases.
Our by-laws provide for the Board in its sole discretion to direct a share issue to existing shareholders at par value or at a premium price.
We are subject to the general principle of equal treatment of shareholders under the Norwegian Securities Trading Act section 514. The
Board will, in connection with any future share issues, on a case-by-case basis, evaluate whether deviation from the principle of equal
treatment is justiied.
Section 5 Shares and negotiability
We do not limit any party’s ability to own, trade or vote for shares in the Company. As such, we are in compliance with Section 5 of the
Code.
Section 6 General meetings
As a Bermuda registered company, the general meetings of the Company can be conducted through proxy voting. The VPS registered
shareholders are holders of interests in the shares and thus represented by the VPS Registrar in the general meetings and not through
their own physical presence. This is in line with the general practice of other non-Norwegian companies listed on Oslo Børs. We believe
we comply in all other respects with the recommendations for general meetings as set out in the Code.
Section 7 Nomination committee
We have not established a nomination committee as recommended by the Code section 7 and our bye-laws do not include the
requirement for one. In lieu of a nomination committee comprised of independent directors, the Board is responsible for identifying and
recommending potential candidates to become Board members and recommending directors for appointment to board committees.
Section 8 Board of directors: composition and independence
The Chairman of our ive-member Board has been elected by the Board and not by the shareholders as recommended in the Code. We
are not in compliance with the requirement to have both genders on our Board.
Section 9 The work of the board of directors
The Board sets an annual plan for the upcoming year in December which includes a review of strategy, objectives and their implementation,
the review and approval of the annual budget and review and monitoring of our current year inancial performance. The Board meets at
least four times a year, with further meetings held as required to react to operational or strategic changes in the market and Company
circumstances. The Board receives frequent and relevant information to carry out its duties. It has delegated authority to the Company’s
executive management by the means of a delegation of authority guideline.
The Board has established an Audit Committee, which has a formal charter and terms of reference approved by the Board. The Audit
Committee is comprised of directors Peter Sharpe and James O’Shaughnessy. The committee is responsible for ensuring Archer has an
independent and eective external audit system. In addition we have an internal audit program. The Audit Committee supports the Board
in the administration and exercise of its responsibility for supervisory oversight of inancial reporting and internal control matters and
to maintain appropriate relationships with our auditors. Appointment of the auditor for audit services is approved at our annual general
meeting and the Board is given authority to approve the fees to be paid to the auditor. Our auditor meets with the Audit Committee
annually regarding the preparation of the annual inancial statements and also to present their report on the internal control procedures.
The Audit Committee holds separate discussions with our external auditor on a quarterly basis without executive management being
present. The scope, resources, and the level of fees proposed by the external auditor in relation to our audit are approved by the Audit
Committee.
The Board ensures through an internal check that members of the Board and executive personnel advise the Company of any material
interests that they may have in items to be considered by the Board.
Archer Limited and subsidiaries
Appendix A – Corporate Governance
Archer 2021 Annual Report
74 75
Archer Limited and subsidiaries
Appendix A – Corporate Governance
The Board and executive management will consider and determine on a case-by-case basis whether independent third-party evaluations
are required if entering into agreements with related parties in accordance with the Code section 9. The Board may decide, however, due
to the speciic agreement or transaction, to deviate from this recommendation if the interests of the shareholders in general are believed
to be maintained in a satisfactory manner through other measures.
Other than related party transactions disclosed in note 24, the Company did not enter into any transactions with its shareholders or
closely associated entities.
Section 10 Risk management and internal control
The Board ensures that Archer follows guidelines to minimize the overall risk to the Company and its shareholders and implements and
complies with an adequate internal control framework. Archer’s system of internal control is designed to manage rather than eliminate the risk
of failure to achieve business objectives and can only provide reasonable but not absolute assurance against material misstatement or loss.
We have implemented clear lines of responsibility and limits of delegated authority. Comprehensive procedures provide for the appraisal,
approval, control and review of expenditures. The senior management team meets with its geographic and divisional leadership on a
regular basis to discuss particular issues aecting each region and business unit, including their key risks, health and safety statistics and
legal and inancial matters. We have also implemented a process to assess the company’s projected inancing needs and compliance with
covenants under its inancing arrangements. The results are presented to and discussed with the Board on a regular basis so adequate
corrective measures can be taken if and when necessary.
Integrity is part of our core values and high ethical standards are paramount to achieve our business objectives. Our Code of Conduct
describes Archer’s commitment related to ethics for both personal and business matters. We comply with applicable laws and regulations
and act in an ethical and socially responsible manner. Our Code of Conduct applies to everyone working for Archer, including the members
of the Board. The Code of Conduct is available at www.archerwell.com. Archer has implemented a dedicated ethics helpline that can be
used by employees who wish to express concerns or seek advice regarding the legal and ethical conduct of our business.
We comply with the Code related to this section.
Section 11 Remuneration of the board of directors
There is no obligation to present the guidelines for remuneration of the Board of Directors to the shareholders of a Bermuda incorporated
company. We will provide information to our shareholders regarding remuneration of the Board in compliance with United States generally
accepted accounting principles (“US GAAP”) but will not implement procedures that are not generally applied under Bermuda law. We
therefore deviate from this part of section 11 of the Code. There are no service contracts between the Company and any of our directors
providing for beneits upon termination of their service.
Section 12 Salary and other remuneration for executive personnel
There is no obligation to present the guidelines for remuneration of the executive management to the shareholders of a Bermuda
incorporated company. We provide information to our shareholders regarding remuneration of the executive management in compliance
with US GAAP, but will not implement procedures that are not generally applied under Bermuda law. In the view of the Company there
is suicient transparency and simplicity in the remuneration structure and information provided through the annual report and inancial
statements are suicient to keep shareholders adequately informed. We therefore deviate from this part of section 12 of the Code.
Section 13 Information and communications
The Board has established guidelines requiring interim inancial reporting on a quarterly basis according to a inancial calendar that
is publicly available. We hold a quarterly inancial results conference call, which is accessible to all participants in the securities market.
Timing and venue for such events are announced through public press releases. For speciic events the Board requests that the Company
hold investor meetings allowing for more detailed information. The information shared in such meetings is published on our website.
Section 14 Take-overs
The Board of Directors has adopted all recommendations in the Code related to takeovers, which requires that all shareholders are given
suicient information and time to form an independent view of a potential takeover oer.
We comply with the Code related to this section.
Archer Limited and subsidiaries
Appendix A – Corporate Governance
Section 15 Auditor
The Board’s Audit Committee is responsible for ensuring that the Group is subject to an independent and eective audit. Our independent
registered public accounting irm (independent auditor) is independent in relation to Archer and is appointed by the general meeting of
shareholders. The independent auditor’s fee must be approved by the general meeting of shareholders.
The Audit Committee is approved by the Board and is responsible for ensuring that the Company is subject to an independent and
eective external audit. On an annual basis the independent auditor presents a plan to the Audit Committee for the execution of the
independent auditor’s work.
The independent auditor participates in all meetings of the Audit Committee which concern inancial statement ilings, and participates in
reviewing the Company’s internal control procedures, including identiied weaknesses and proposals for improvement.
When evaluating the independent auditor, emphasis is placed on the irm’s competence, capacity, local and international availability, and
the size of its fee. The Audit Committee evaluates and makes a recommendation to the Board, the corporate assembly and the general
meeting of shareholders regarding the choice of independent auditor, and it is responsible for ensuring that the independent auditor
meets the requirements in Norway.
The Audit Committee considers all reports from the independent auditor before they are considered by the Board. The Audit Committee
holds regular meetings with the independent auditor without the Company’s management being present.
We comply with the Code related to this section.
During 2020, the Company was notiied that the UK Financial Reporting Council’s Audit Quality and Review Team (the “AQRT”) would
carry out a review of the Company’s previous Auditor PricewaterhouseCoopers LLP’s working papers in relation to their audit of the
Company’s consolidated inancial statements for the year ended 31 December 2019. The Company has received a copy of the AQRT’s
report following this review and their indings which related to the audit process. The actions required were discussed with the Company’s
former Auditor, PricewaterhouseCoopers LLP, and the Company’s new Auditor, PricewaterhouseCoopers AS, in March 2021.
Norwegian Accounting Act Section 33 b
In addition to the Norwegian Code of Practice for Corporate Governance, the Norwegian Accounting Act has set out additional
requirements for corporate governance. We have established a set of guidelines related to internal control and corporate governance.
Risk Oversight
It is management’s responsibility to manage risk and bring our most material risks to the attention of the Board. The Board has delegated
to the Audit Committee the responsibility to discuss with management our major inancial risk exposures and the steps management
has taken to monitor and control those exposures, including our risk assessment and risk management. The Audit Committee reports as
appropriate to the full Board. Each operational division head is responsible to report risks related to each segment to the Chief Executive
Oicer, who in turn reports to the Board.
Internal control
Our management is responsible for establishing and maintaining adequate internal control over inancial reporting. Our internal control
over inancial reporting is a process designed to provide reasonable assurance regarding the reliability of our inancial reporting and the
preparation of our inancial statements for external purposes in accordance with US GAAP. Our control environment is the foundation
for our system of internal control over inancial reporting and is an integral part of our Code of Conduct and Business Ethics for the
Chief Executive Oicer, Chief Financial Oicer and Chief Accounting Oicer, which sets the tone of our Company. Our internal control
over inancial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly relect our transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of our inancial statements in accordance with US GAAP, and that receipts and expenditures are
being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material eect on our
inancial statements.
Archer 2021 Annual Report
76 77
Archer Limited and subsidiaries
Appendix A – Corporate Governance
Audit committee
The Audit Committee currently consists of James O’Shaughnessy and Peter Sharpe. The Audit Committee assists our Board in fulilling its
oversight responsibility by overseeing and evaluating (i) the conduct of our accounting and inancial reporting process and the integrity of
our inancial statements; (ii) the functioning of our systems of internal accounting and inancial controls; (iii) the performance of our internal
audit function and (iv) the engagement, compensation, performance, qualiications and independence of our independent auditors.
Compensation committee
The role of a Compensation Committee is currently performed by all members of the Board. The Board formulates and oversees the
execution of our compensation strategies, including making recommendations with respect to compensation arrangements for senior
management, directors and other key employees. The Board also administers our stock compensation plans.
Communications with the Board
Shareholders and other interested parties wishing to communicate with the Board or any individual director, including the Chairman, should
send any communication to the Corporate Secretary, Archer Limited, Par-la-Ville Place 14 Par-la-Ville Road, Hamilton HM 08, Bermuda. Any
such communication must state the number of shares beneicially owned by the shareholder making the communication. The Corporate
Secretary will forward such communication to the director or directors to whom the communication is directed, unless the Corporate Secretary
determines that the communication does not relate to the business or aairs of the Company or the functioning or constitution of the Board
or any of its committees, or it relates to routine or insigniicant matters that do not warrant the attention of the Board, or is an advertisement
or other commercial solicitation or communication, or is frivolous or oensive, or is otherwise not appropriate for delivery to directors.
Communication from the company
Information of relevance to our share price is communicated through our website, and includes information relating to results and
economic development. Our policy is to comply with all applicable standards aimed at securing a good information low.
We publish annual and quarterly reports on our website. We acknowledge the importance of providing shareholders, and the equity
market in general, with correct and relevant information about us and our activities.
Other than the items mentioned above, we have not established any further guidelines regulating the work of the Board and its committees.
Archer Limited and subsidiaries
Appendix B – List of signicant subsidiaries
Name Country of Incorporation Holding Field of Activity
Archer (UK) Limited Abu Dhabi (Branch) ABU DHABI 100% Drilling and well service operations
DLSArcher Ltd. S.A. ARGENTINA 100% Land drilling operations
DLS Argentina Ltd. Argentina (Branch) ARGENTINA 100% Land drilling operations
DLA Argentina Fluidos S.A. ARGENTINA 100% Provides luids services
Archer Well Company (Australia) Pty Ltd AUSTRALIA 100% Well service operations
Archer Well Company International Azerbaijan (Branch) AZERBAIJAN 100% Oiltools services
Archer (UK) Ltd (Branch) AZERBAIJAN 100% Oiltools services
Archer Emerald (Bermuda) Limited BERMUDA 100% Owns modular rig
Archer Topaz Limited BERMUDA 100% Owns modular rig
Archer DLS Corporation Bolivia (Branch) BOLIVIA 100% Land drilling operations
Archer do Brasil Serviços de Petróleo Ltda BRASIL 100% Guarantor company
BCH Energy do Brasil Serviços de Petróleo Ltda BRASIL 100% Drilling service operations
Archer DLS Corporation BVI 100% Holding company
DLS Argentina Limited BVI 100% Land drilling operations
DLS Argentina Holding Ltd BVI 100% Holding company
Archer BCH (Canada) Ltd CANADA 100% Oiltools services and land rigs owner
Archer BCH (Canada) Branch GUYANA 100% Oiltools services
Archer Oil Tools AS Congo (Branch) CONGO 100% Oiltools services
Archer Oshore Denmark AS DENMARK 100% Well service operations
Archer (UK) Limited France (Branch) FRANCE 100% Oiltools services
Archer Services Limited HONG KONG 100% Provides international personnel services
PT Archer INDONESIA 95% Well service operations
Archer Well Company (M) SDN BHD MALAYSIA 100% Well service operations
Archer Well Solutions Sdn Bhd MALAYSIA 49% Well service operations
Archer Wellcompany International Ltd. MOZAMBIQUE 100% Oiltools services
Archer AS NORWAY 100% Drilling and well service operations
Archer Consulting AS NORWAY 100% Provides engineering and crew services
Archer Norge AS NORWAY 100% Drilling and well service management
Archer Oil Tools AS NORWAY 100% Oiltools services
Bergen Technology Center AS NORWAY 100% Research and development
Archer Integrated Services AS NORWAY 100% Well service operations
DW Quip AS NORWAY 100% Well service operations
Comtrac AS* NORWAY 50% Research and development
Archer Well Services Nigeria Limited NIGERIA 100% Oiltools services
Archer Well Technologies LLC RUSSIA 100% Oiltools services
Rawabi Archer Company SAUDI ARABIA 10% Oiltools services
Archer Well Company (Singapore) Pte Ltd SINGAPORE 100% Well service operations
Archer (UK) Limited Jebel Ali Free Zone (Branch) UAE 100% Well service operations
Archer (UK) Limited UK 100% Drilling and well service operations
Archer Assets UK Limited UK 100% Holding company
Archer Consulting Resources Limited UK 100% Drilling service operations
Archer Well Company International Ltd UK 100% Well service operations
Limay Drilling Rigs Ltd UK 100% Land rig owning company
Archer Well Services (Saudi Arabia) Ltd UK 100% Oiltools services
Archer Holdco LLC USA 100% Holding company
Archer Oiltools LLC USA 100% Oiltools services
Archer Well Company Inc. USA 100% Holding and management company
KLX Energy Services Holdings Inc ** USA 8.8% Drilling and well service operations
* see note 12 for details regarding Comtrac AS.
** see note 12 for explanation of KLX Energy Services Holdings Inc.
Global Oces
Main Office
Sandnesveien 358
4312 Sandnes
Norway
Tel: +47 5130 8000
Argentina
Carlos Pellegrini 1023 Piso 7º
C1009ABU – Ciudad Autónoma
de Buenos Aires
Argentina
Australia
17 Truganina Road
Malaga
Western Australia 6090
Brazil
Av. Presidente Wilson n 231
– Sala 1601M
Rio de Janeiro – RJ
CEP: 20030-905
Brazil
Bolivia
Centro Empresarial
Gardenia II – El Cubo – Piso 6 “B”
Av. Beni esq. calle 3
Santa Cruz – Bolivia
Malaysia
Level 11, Tower 1, Etiqa Twins
No.11, Jalan Pinang
50450 Kuala Lumpur
Malaysia
Norway
Kokstadflaten 5
5257 Bergen
Norway
Midtunhaugen 13
5224 Nesttun
Norway
Sandnesvegen 358
4312 Sandnes
Norway
Bryggegata 3
0250 Oslo
Norway
UK
Archer House
Main Road
Blackburn
Aberdeen AB21 0BP
United Kingdom
USA
5510 Clara Road
Houston, TX 77041
United States of America
archerwell.com