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2021
Table of contents
Notice from the chairman..................................................................................... 3
Board of directors’ report ..................................................................................... 7
Corporate governance report...............................................................................32
Reporting on payments to governments ...............................................................49
Financial statements ..........................................................................................52
Independent auditor’s report............................................................................. 108
Table of contentsPage 2
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Annual report 2021
Notice from the chairman
2021 was a year of significant transition for OKEA. The industry saw a gradual recovery
during 2021, driven principally by access to vaccines for the Covid-19 virus, which led to an
increase in oil and gas prices during the year as governmental policies of lock-down and
containment were lifted. The speed of recovery surprised manypeople and saw Brent crude
trading in the 70-80/bbl range for much ofthe second half of the year. The renewed need for
energy, coupled with seasonal impacts on demand, also resulted in a rapid increase in
gas prices in the second half of 2021 peaking at approximately 400 pence/therm.
The rapid increase in resource prices had a very positive effect on OKEA’s financial
position.
The company has also had a very strong year operationally. OKEA management
established and implemented effective protocols during the year that meant the Draugen
field was able to maintain full operations. This, together with the continued excellent
operational performance, has been reflected in consistently high levels of uptime at the
Draugen field. A final investment decision (FID) was also taken in May to develop the
OKEA operated Hasselmus gas discovery, which will be tied back to the Draugen platform.
This is consistent with the company’s focus on adding value to existing production hubs.
Hasselmus will be OKEA’s first operated development project and will deliver a gross
plateau production of more than 4,400 boepd (2,000 boepd net to OKEA) when
production commences in Q4 2023. OKEA is also currently working to mature a concept to
deliver power to the Draugen platform from onshore green energy sources, which will have
a significant impact on the company’s CO2 emissions. The Gjøa field has also delivered
consistently high production during the year. The two new wells in the Gjøa P1 segment
which came onstream in February have contributed to increased reserves at the field
compared to year end 2020 by 2.1 million boe. It was an important milestone for the
company when first oil was announced from the Yme field in October. When fully
commissioned, Yme is anticipated to produce at a plateau rate of 56 kboepd (8.4 kboepd
net to OKEA). The start-up of Yme gives OKEA an additional material production hub and
consequently improves the underlying robustness of the company’s production base.
The combination of high production volumes and high market prices during 2021 led to
OKEA’s best financial results since the company was established. In fourth quarter OKEA
reported a net after tax profit of NOK 283 million, which was approximately three times of
the equivalent period in 2020. This has enabled the company to significantly reduce the
net debt and has allowed for buy-back part of the outstanding bonds to reduce the
interest cost. OKEA now has a much stronger balance sheet, and considerably greater
financial robustness, than 12 months ago.
OKEA has also been able to take advantage ofthese macroconditions to continue to build
its portfolio, notably through the addition of additional 2P volumes and production
through asset acquisitions and maturing projects in the portfolio such as Hasselmus and
Notice from the chairmanPage 4
a new well at Draugen. Including the increased equity position in the Ivar Aasen field
effective from 1 January 2022, the year-on-year increase in 2P reserves was 16%.
There were some major changes to the OKEA executive management team during the
year. Erik Haugane retired as CEO in June and was replaced by Svein J. Liknes. Erik had
been the CEOof the company since it was founded and was the principal driver in building
the strong and committed team, the portfolio of assets and the culture of delivery which
characterises today’s “can do attitude” in OKEA. I would like to take this opportunity to
personally thank Erik for his passion and commitment in building OKEA to this point. It
was a pleasure to work with Erik and I wish him every success in his retirement. I would
also like to welcome Svein to the team and look forward to OKEA’s successes continuing
over the coming years under his leadership. 2021 also saw some changes to the board of
directors, with Grethe Moen replacing Liv Monika Stubholt. Grethe brings a wealth of
experience to the board, particularly in the area of ESG, and is a valuable addition to the
Company. Saowapap Sumeksri also replaced Prisana Praharnkhasuk on the board. I
would like to welcome Grethe and Saowapap to the board and thank Liv Monika and
Prisana for their contributions over the past few years.
The company has used these changes, together with the rapidly evolving macro
environment in which we are operating, as an opportunity to redefine the corporate
strategy. In particular, we have reaffirmed our focus on creating value from mid to late-life
producing assets on the Norwegian continental shelf, as we are already doing on
Draugen. OKEA took over operatorship of the Draugen field from Shell in 2018 and, since
then, has consistently demonstrated that it has the operational and commercial strength
and depth to become Norway’s leading operator of late life assets. The operational
efficiencies that OKEA can bring to these late life projects can reduce production costs
and make the company more robust. Importantly, it will allow us to take advantage of
periods of high resource pricing, such as we are seeing at the present time, to deliver
strong profitability and shareholder returns. We also took the decision to limit OKEA’s
participation in smaller, more marginal fields. Going forward, we will mainly focus on
those which are clearly commercially supportable, and which are within tieback distance to
existing and preferably operated infrastructure. This resulted in the termination of the
Vette and Grevling projects and I believe that this evolution of strategy will result in a
more robust and profitable company. Going forward, we will focus our efforts on
identifying and pursuing inorganic growth opportunities where we believe that OKEA can
add value without compromising the company’s financial strength.
Notwithstanding these changes, we have continued to maintain our focus on
environment, social and governance matters (ESG). The board of directors continues to
take its responsibilities in this area very seriously and we believe that this will constitute an
increasingly important element of OKEA’s “licence tooperate” in the future. We believe that
substantial value can still be realised from late-life assets, which will naturally have higher
emissions/barrel metrics than younger fields, but it will be important for us to minimise
these emissions through effective field management processes and innovative
Notice from the chairmanPage 5
technical solutions. We have also continued to develop and implement strong corporate
governance policies to assure that OKEA continues to be an attractive, safe and fair place to
work.
The solid operational and financial performance has also resulted in a doubling of the
share price over the year and a cash position that is substantially higher than we had
anticipated at the beginning of the year. We consequently move into 2022 with a very
strong position to take advantage of a range of growth opportunities, both organic and
inorganic, which will allow the continued evolution of the company. The company has
also an ambition to announce a dividend plan in 2022, which will mark an important new
stage of the company’s development and equity story.
Finally, I would like to thank the board of directors, the OKEA management team and all
OKEA employees for their ongoing commitment and support. I must also thank OKEA’s
shareholders, bondholders, and other stakeholders for their continued confidence in the
company and look forward to continued success during 2022.
Signed
Notice from the chairmanPage 6
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Annual report 2021
The board of directors
Chaiwat Kovavisarach – chairman of the board
Non-executive.
Chaiwat Kovavisarach (born 1966) has been the President and Group CEO of Bangchak
Corporation Public Company Limited since 2015. He also serves on the board of several
listed and non-listed companies including, vice-chairman of BCPG and Director of BBGI,
and is the chairman of Thai-Europe Business Council, chairman of Innovation Institute for
Industry vice chairman of the Federation of Thai industries, the executive chairman of the
Board of Trustees of the Asian Institute of Technology and a Director of the
International Chamber of Commerce for Thailand. He holds a Master of Engineering from
the Asian Institute of Technology (AIT), an MBA from Thammasat University and a
Bachelor of Engineering from King Mongkut’s Institute of Technology Ladkrabang
(KMITL).
Mike Fischer – board member
Non-executive. Member of the people and organisation committee and member of sustainability
and technical risk committee.
Mike Fischer (born 1958) has nearly 40 years’ experience in the oil and gas industry. He is
currently an Executive Advisor to the Natural Resources business unit of Bangchak. Dr.
Fischer has previously held senior management positions at Ophir Energy, OMV,
Woodside Energy and BP. He holds a PhD from the University of Wales and a BSc from the
University of Leeds.
Nicola Gordon – board member
Independent, non-executive. Chair of the sustainability and technical risk committee.
Nicola Gordon (born 1957) has many years of experience from the energy industry. Ms.
Gordon holds several board positions, among others as Chair of the audit committee at
the Scottish Environment Protection Agency and on Heriot-Watt University’s Institute of
GeoEnergy Engineering’s Strategy Advisory Board. Gordon’s experience at the Royal
Dutch Shell Group includes vice president for Shell International, asset manager and
board director at A/S Norske Shell and managing director at Shell Denmark. She is a
Chartered Engineer and Fellow of the Energy Institute and holds an MSc in Petroleum
Engineering from Heriot-Watt University and a BSc in Chemical Engineering from
University of Newcastle upon Tyne.
Board of directors’ reportPage 8
Finn Haugan – board member
Independent, non-executive. Chair of people and organisation committee and member of audit
committee
Finn Haugan (born 1953) was from 1991 to May 2019 the CEO of SpareBank 1 SMN,
before that deputy CEO of Fokus Bank (Danske Bank). Mr Haugan now holds positions as
chairperson for the listed companies Norbit ASA and SpareBank 1 Sørøst-Norge.
Furtheron he holds the position as chairperson for the non-listed companies Forte Asset
Management AS, Sinkaberg Hansen AS, Elekt AS and Solon Eiendom AS and as deputy
chairperson for LL Holding AS. Mr Haugan holds a master’s degree in business
administration (MBA).
Jan Atle Johansen – board member
Member of the sustainability and technical risk committee.
Jan Atle Johansen (born 1969) has 25 years of experience as a Production Technician at
the Draugen oil production platform. Mr Johansen is the trade union leader for SAFE
(union forpersonnelworkingin theenergysector).Heholdsfouryearsoftechnicalhigher
education and has served in the Royal Norwegian Navy in the Coastal artillery.
John Kristian Larsen – board member
Employee elected. Member of the audit committee.
John Kristian Larsen (born 1978)has20yearsofexperiencefromtheoilandgasindustry
in Norway. He currently serves as Lead Integrity and Intervention Engineer at OKEA. He
has previously held most positions on- and offshore within Drilling and Wells for Norsk
Hydro, Statoil, Det norske and AkerBP. He holds an MSc in Petroleum Engineering from
Norwegian University of Science and Technology (NTNU), including an exchange year at
UNSW, Sydney.
Grethe Moen – board member
Independent, non-executive. Member of people and organisation committee.
Grethe Moen (born 1960) has close to 40 years of experience in leadership positions
within the oil, gas and energy industry, including 25 years (1982-2007) with Equinor
(Statoil) and four years (2007-2011) with Shell Europe. From 2013 to 2021, she served as
CEO of Petoro AS, the Norwegian State-owned oil company managing the State Direct
Financial Interest in Joint Ventures (SDFI/SDØE), and previously as Vice President of
Petoro from 2011 to 2013. She is currently member of the boards of NEO Energy (UK)
and TGS-NOPEC ASA and chair of the board of Trolltunga Robotics as well as member of
the boards of the technology companies Ideation, toCircle, Exedra and ThinkTank Maths
Norway. She is also member of the Advisory Board to DNV’s Cyber Security Business and
Business Development Advisor to Accenture. Mrs Moen holds a master’s degree in
Chemical Engineering from NTNU.
Board of directors’ reportPage 9
Paul Murray – board member
Non-executive. Member of the sustainability and technical risk committee.
Paul Murray (born 1969) has over 25 years’ experience in venture capital and private
equity investment across technology and natural resources. He was previously a director of
3i’s technology investment team, Cazenove Private Equity,apartnerat DFJ Esprit, and one
of the founders of Seacrest Capital Partners. He holds a degree in Mathematics from Oxford
University.
Rune Olav Pedersen – board member
Independent, non-executive. Chair of the audit committee.
Rune Olav Pedersen (born 1970) has been President & CEO of PGS ASA since 2017. Mr.
Pedersen has previously held the position of executive vice president & general counsel at
the company. Prior to joining PGS he was partner in the oil and gas department of the law
firm Arntzen de Besche. He has a law degree from the University of Oslo, a post-
graduate diploma in European competition law from Kings College London and an
Executive MBA from London Business School.
Anne Lene Rømuld – board member
Employee elected. Member of the people and organisation committee.
Anne Lene Rømuld (born 1971) has 25 years of oil & gas industry experience. She
currently serves as Principal Engineer Control & Automation at OKEA. Prior to Joining
OKEA, Ms. Rømuld held the position as senior Reliability Engineer at A/S Norske Shell
andManagerofControl andAutomation atShellCanadaLtd. Sheholdsan MScin Process
Automation from Telemark University College and a BSc in Automation and Electrical
Engineering from The Arctic University of Norway.
Saowapap Sumeksri – board member
Non-executive. Member of the audit committee.
Saowapap Sumeksri (born 1968) has 25+ years of experience in finance from the oil and
gas industry. She is currently the executive vice president Financial Controller at
Bangchak Corporation Public Company Limited. Ms. Sumeksri also serves as a board
member at Winnonie Company Limited, a green energy innovator. She has extensive
experience in funding with various types of financial instruments. She holds an MBA from
West Coast University USA and a BBA from Chulalongkorn University.
Board of directors’ reportPage 10
Board of directors’ report 2021
2021 was a strong year for OKEA. Production reliability and availability were high at
both the Draugen and Gjøa fields. In addition, production from the Repsol-
operated Yme field started in October, adding new volumes, and OKEA’s position in
the Ivar Aasen field was strengthened through the acquisition of an additional
2.223% working interest from Neptune Energy in November. Supported by
strong oil prices and record high European gas prices, OKEA’s financial position
has strengthened significantly during the year. The total liquidity position
exceeded NOK
2.2 billion by year-end and OKEA is in a solid position to execute on
the growth strategy launched in October.
1.0.Description of the company
OKEA is a leading mid-to late-life operator on the Norwegian continental shelf (NCS). The
company has a strong asset portfolio including the Draugen field, which is operated by
OKEA, as well as non-operated positions in the Gjøa, Ivar Aasen and Yme fields. In 2021,
the portfolio produced an average of 15,530 boepd and the target production for 2022 is
18,500-20,000 boepd. Furthermore, OKEA has activities in projects under development,
including the Hasselmus gas discovery and Draugen power from shore, as well as
discoveries being evaluated for development and exploration licences with planned and
possible wells.
OKEA has its head office in Trondheim, with a major operations centre in Kristiansund
and representative offices in Stavanger and Oslo.
As an operator on the NCS, OKEA carries out various activities related to production of
hydrocarbons from existing assets, as well as development of new oil and gas fields.
These activities take place at multiple locations both offshore and onshore. Each of the
business functions within OKEA contributes to this work in a highly collaborative team
effort, working closely with our third-party contractors and licence partners.
Environmental, social and governance (ESG) matters are of significant importance to the
board of directors. Continuous focus on reducing emissions is essential for the company’s
licence to operate as well as enabling long-term value creation for the shareholders.
1
Total liquidity position = cash and cash equivalents + financial investments
Board of directors’ reportPage 11
Operational review
In 2021, OKEA participated in production from four fields: Draugen (44.56% and
operator), Gjøa (12%), Ivar Aasen (0.554%) and Yme (15%), where production started in
October. Net production for the year averaged 15,530 (16,147) boepd, split between
liquids and gas by 69% and 31% respectively. Net sold volumes for the year averaged
15,843 (15,871) boepd.
Draugen (Operator, 44.56%)
Draugen is an oil field in the southern part of the Norwegian sea. The water depth in the
area is 250 metres. Draugen was discovered by Shell in 1984, the plan for development
and production (PDO) was approved in 1988, and production started in 1993. The field
was developed using a fixed concrete facility with integrated topsides and production is
fromboth platformandsubseawells.Draugen extractsoilfromtwo formations.Themain
reservoir is in sandstone of Late Jurassic age (the Rogn Formation) while the western
part of the field also produces from sandstone of Middle Jurassic age (the Garn
Formation). The reservoirs lie at a depth of 1,600 metres, are of good quality and are
relatively homogeneous across the field. Stabilised oil is stored in tanks at the base of the
facility and two pipelines connect the facility to a floating loading-buoy from where it is
offloaded and exported by tankers. Associated gas is currently used for power
generation at the platform.
Net production from Draugen was 7,084 (7,774) boepd in 2021. Production reliability
was 98% (99%) and production availability
was 93% (90%). The reduced production in
2021 was mainly due to general field decline as well as cessation of gas and NGL export
since October 2020 in relation to the gas import project where the associated gas
produced at Draugen along with imported fuel gas from the Åsgard pipeline provide
power supply at the platform and reduce the need for imported diesel. Since taking over
the operatorship of Draugen in 2018, OKEA has been able to reduce unplanned down
time and optimise production resulting in high production reliability levels.
A licence and lifetime extension program was launched in 2019 with the aim to extend the
Draugen licenceandlifetime from 2024 to 2040. The program is comprehensive and
involves several disciplines across the operation organisation preparing a new application to
document prudent HSE level and resource management towards 2040. Third
-
party
analysis and evaluations are used where relevant to document the conclusions, including
identifying and initiating modification requirements. An extensive plan is put in place to
enableacomprehensiveapplicationthat needstobesent tothePetroleumSafety Agency
2
Production reliability = actual production / (actual production + unscheduled deferment)
3
Production availability = actual production / (actual production + scheduled deferment + unscheduled
deferment)
Deferment is the reduction in production caused by a reduction in available production capacity due to an
activity, an unscheduled event, poor equipment performance or sub-optimum settings.
Board of directors’ reportPage 12
and Norwegian Petroleum Directorate respectively at the latest 9 March 2023, which is
one year prior to expiry of existing consent.
Managing the Covid-19 pandemic has been a key priority also in 2021. OKEA had
mitigating measures in place to manage the situation, including multiple testing prior to
departure for all offshore personnel. As infection pressure in the society in general
increased towards the latter part of the year, the importance of the mitigating measures
became higher. There were no Covid-19 infections offshore impacting the Draugen
operations in 2021.
During 2021, OKEA initiated work to mature additional reserves potential at Draugen
through increased oil recovery initiatives. Several initiatives have been considered and
will be further developed towards concept selection and final investment decisions in
2022. Both the Hasselmus gas field development project and a new Draugen production
well (D-1 BH) were sanctioned in 2021, increasing reserves on the field significantly. The
Power from shore project also made a concept selection decision in October.
Gjøa (Partner, 12.00%)
The Gjøa field, operated by Neptune Energy Norge AS, was discovered in 1989, and the
developmentplanwasapprovedbytheNorwegianauthoritiesin2007.Productionstarted
in 2010. The field was developed using a semi-submersible production facility with five
subsea templates tied back to the facility for processing and export. Oil is exported by
pipeline to Mongstad, and gas is exported by pipeline to St. Fergus in the UK. The semi-
submersible Gjøa production unit is partly electrified by power from shore.
The Gjøa P1 segment, located in the northern part of the field, was developed as a tie-
back to the main subsea facility via a 5 km oil pipeline and a 2 km gas pipeline at a water
depth of 340 metres. Production from this new development started in February 2021.
The Gjøa field, produced 8,137 (8,059) boepd net to OKEA in 2021. Production reliability
for the year was as high as 99% (99%) and production availability was 85% (86%). The
increased production was mainly driven by the P1 project as well as solid performance
from the other Gjøa wells, partly offset by general field decline. Production availability
was impacted byplanned shutdowns related tomaintenanceatthegas plantinSt.Fergus
andtie-inactivitiesforDuvaandNova. TheGjøapartnersstartedreceivingcompensation
for the deferred production related to Duva tie-in scope in 2021 and is expecting further
volumes also from Nova once it comes onstream expectedly in 2022.
Ivar Aasen (Partner, 0.554%)
The Ivar Aasen field, operated by Aker BP ASA, was discovered in 2008 and is located on
the Utsira High in the North Sea. First oil from the field was produced on 24 December
2016, four years after the plan for development and operation (PDO) was submitted.
Board of directors’ reportPage 13
The Ivar Aasen field produced 255 (314) boepd net to OKEA in 2021. Production
availability was 97% (94%). The lower production was mainly driven by general field
decline.
Asannouncedin thepressreleaseon 12November,OKEAhasenteredintoan agreement
with Neptune Energy Norge AS to purchase an additional 2.223% working interest in the
Ivar Aasen field. Total consideration is USD 12 million. Effective date for the transaction is
1 January 2022 and completion of the transaction is subject to customary government
approvals which is expected in H1 2022.
Yme (Partner, 15.00%)
The Yme oil field was discovered by Statoil in 1987 and started producing in 1996. Low oil
prices led to abandonment of the field in 2001. OKEA acquired a 15% ownership
interest in Yme in 2016 and started preparing a new plan for development and operation
(PDO). Repsol Norge AS is the operator for the field. The oil is transported with tankers
and the associated gas is used for power consumption or is reinjected in the reservoir.
2021 was an exciting year at Yme with commencement of production on 25 October.
During the initial production period, certain issues related to operation of the subsea
storage tank with heavy emulsions and high oil in watercontent halted production. These
issues were resolved, and the storage tank is currently fully operational.
Following production start in October, the reorganisation of the Inspirer rig was
completed. The reorganisation of operations includes a change in ownership structure of
the jack-up production unit, Maersk Inspirer, from Maersk Drilling to Havila Sirius, and
Repsol taking over the operation and maintenance of the rig from Maersk Drilling. Under
the new structure OKEA will be considered owner for tax purposes for the 15% working
interest of the lease contract from Havila. The transaction has been accounted for as an
asset acquisition financed by lease debt from Havila. The contract provided significant
cost improvement and cash flow benefits to the Yme licence and OKEA.
Activities to complete hot commissioning and clean-up of remaining wells to bring the
asset to full production is continuing into the first half of 2022.
Development projects
Hasselmus (Operator, 44.56%)
As operator of Draugen, OKEA is currently developing the Hasselmus field as a single
subsea gas well with direct tie-back to the Draugen platform for further processing and
export.
The Final Investment Decision (FID) was made in the Draugen licence in May 2021.
Production start is planned for fourth quarter 2023 with gross plateau gas production of
more than 4,400 boepd.
Board of directors’ reportPage 14
The Hasselmus project is the first field development project for OKEA as an operator and
demonstrates OKEA’s ability to deliver on its organic growth potential. Hasselmus is an
important enabler for the long-term development of Draugen and also supports the
potential for Draugen as a hub in the area.
Draugen power from shore (Operator, 44.56%)
On behalf of the Draugen licence, OKEA is maturing the opportunity to provide power
from shore to the Draugen production platform. The project also includes extension of
the power supply to the nearby Njord field, and the Draugen and Njord licences have
entered into a joint study agreement for concept evaluation of a common infrastructure
for power from shore.
Concept selection (DG2) was passed in the fourth quarter of 2021 in both the Draugen
and Njord licences. The project is planning for a Final Investment Decision and PDO
submission in Q4 2022.
The power from shore project is scheduled to be ready for operation in 2025 and will
reduce the annual CO
2
emissions from Draugen alone by approximately 200,000 tonnes
which corresponds to a reduction of 95% (reference year: 2019).
Exploration licences
In the first quarter of 2021, the Chrysaor-operated Jerv exploration well 15/12-25 was
drilled in PL973 (WI 30%). A 40-metre gas condensate column was discovered in a good
quality reservoir (Ty Formation), but the reservoir pressure was highly depleted and it
was concluded that the discovery was non-commercial.
In the second quarter of 2021, the Chrysaor-operated Ilder exploration well 15/12-26
was drilled in PL973 (WI 30%). A 60-metre good quality sandstone was encountered in
the target reservoir (Ula Formation), but no hydrocarbons were observed, and the well
was plugged as a dry well. Total planning and drilling expenses for the two wells
amounted to NOK 162 million net OKEA.
As operator of the Vette licence (PL972), OKEA made a decision to propose to the licence
partners not to develop the Vette discovery towards a DG2 decision due to the project’s
insufficient financial robustness. OKEA has also worked to improve the economics of the
Grevling/Storskrymten discoveries (PL038 D/PL974) along with the licence partners over
the last few years. Although significant reductions in break-even cost had been achieved, it
was deemed insufficient to warrant a stand-alone field development and the licences have
been relinquished.
The Equinor-operated Ginny exploration well in PL1060 (WI 40%) was spudded at the
end of 2021 and was announced as a dry well on 2 February 2022.
Board of directors’ reportPage 15
In the fourth quarter of 2021, OKEA acquired 3D seismic data to further support
exploration activities in the Norwegian Sea and the Gjøa area.
In January 2022, OKEA was awarded four new licences in the 2021 Awards in Predefined
Areas (APA), three of which as operator. The three new OKEA-operated licences are
located in the Norwegian Sea. The fourth licence, to be operated by Spirit Energy, is
located in the North Sea, north and east of the Aurora discovery. Three of the licences
have a work programme leading to a drill or drop decision in early 2024 and one licence
has a work programme leading to a feasibility decision (BoK) or drop, also in early 2024.
There are no well commitments.
OKEA has firm plans to participate in two further exploration wells in 2022, the Hamlet
well in the Gjøa licence (WI 12%) which was spudded in February 2022 and the Calypso
well in PL938 (working interest 30%) which is planned for the fourth quarter.
Aurora (Operator, 65.00%)
OKEA acquired the Aurora gas discovery, including the operatorship, from Equinor in
2020. A field development project, utilising existing nearby infrastructure for processing
and export for Aurora, has been initiated with a concept based on a low-cost tie-back to
the Gjøa production facility. An appraisal well is currently considered for 2022 or 2023 to
ascertain the commerciality of the Aurora discovery and to test an additional prospect in
the licence. The project is working towards a potential FID in 2024 with production start in
2026.
Reserves and resources
At 31 December 2021, OKEA’s 2P/P50 reserves were estimated to 46.6 (41.6) million
barrels of oil equivalent (mmboe). The main contributors to the 12% increase in reserves
are the Hasselmus development project, a new well at Draugen, upward revision of the
reserves at Gjøa and a lifetime extension at Yme. The 2.233% increased working interest at
IvarAasenwill furtherincrease2P reserveswith 1.7mmboewith effectfrom1January
2022 to a total of 48.3 mmboe.
Contingent resources (2C/Base) were 24.2 (53.6) mmboe, including increased oil
recovery volumes on Draugen and the Aurora and Galtvort discoveries. The decrease is
mainly due to transfer from resources to reserves related to sanction of the Hasselmus
project and Ymelifetimeextension, andrelinquishment of theGrevlingandStorskrymten
discoveries.
Board of directors’ reportPage 16
2.0.Strategy
The board annually evaluates the company’s financial status, strategy and goals. In the
fall of 2021, OKEA launched a refreshed strategy based on the vision of being the leading
mid-to-late-life operator on the NCSand by continuing tofindvalue where others divest.
The company’s refreshed strategic direction is built on the three pillars of growth, value
creation and capital discipline and the company is working on three growth levers to
deliver continued shareholder value:
The strategy also includes a clear capital allocation prioritisation with an overall aim to
maximise shareholder return and a target to maintain a clear and credible ESG position.
OKEA shall maintain a competent organisation fit for growth with direct management
engagement and involvement in key projects and use risk-cost-benefit evaluations in all
phases of the company’s business activities.
3.0.The financial statements
OKEA prepares its financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU) and additional
requirements following the Norwegian Accounting Act. New standards and amendments to
standards and interpretations effective from 1 January 2021 did not have any
significant impact on the company’s financial statements and hence the accounting
principles are in all material respects the same as in the financial statements for 2020.
Board of directors’ reportPage 17
4.0.Statement of comprehensive income
Increased prices for petroleum products in combination with excellent operational
performance on both operated and non-operated fields contributed to OKEA’s best
financial results ever for 2021. The average realised price for liquids (oil and natural gas
liquids) was 80% higher than previous year, while average gas price was up as much as
464%.
Total operating income for 2021 amounted to NOK 3,882 (1,730) million. Sold volumes
were 5,782,585 (5,808,830) barrels of oil equivalents (boe). The average realised price
forliquidswasUSD 65.3(36.3)perboe,whiletheaveragegaspricewasUSD0.62 (0.11)
per standard cubic metre.
Other operating income amounted to NOK 101 (78) million and included tariff income at
Gjøa of NOK 62 (53) million, net gain relating to commodity hedging of NOK 16 (10)
million and income from joint utilisation of logistics resources of NOK 23 (15) million.
Production expenses amounted to NOK 860 (696) million and the produced volume was
5,668,579 (5,909,921) boe. The decrease in produced volumes compared to 2020 was
mainly due general field decline at Draugen including the associated gas that is currently
being used as power supply rather than exported together with the NGL. Production
expenses per boe was NOK 134 (105). The increase in cost per boe mainly relates to
increased prices for CO
2
quotas and imported fuel gas at Draugen and Yme commencing
production in October 2021 but with limited volumes in the ramp-up phase, in addition to
the reduction in produced volumes. Reference is made to note 6 to the financial
statements for further details.
Exploration and evaluation expenses amounted to NOK 343 (97) million. Expenses in
2021 mainly related to the drilling of exploration wells Jerv and Ilder on PL973 which
were concluded as non-commercial discovery and dry, respectively, and the exploration
well Ginny on PL1060 which was concluded dry in February 2022. Other exploration and
evaluation expenses related to seismic purchases and other activities on exploration
licences. Reference is made note 7 to the financial statements for further details.
Depreciation amounted to NOK 672 (699) million. The reduction was due to lower
produced volumes.
Total impairment (-)/reversal of impairment was NOK 364 (-1,387) million which related to
the Yme asset with an offsetting change in deferred tax of NOK -284 (570) million. The
key driver for the reversal of impairment was the production start of the Yme asset in
October 2021 combined with significantly increased forward prices of oil during 2021 as
well as the transfer of ownership and operatorship of the Inspirer rig. Previous year’s
impairment mainly related to the Yme asset due to significant adverse development in oil
prices during 2020. Reference is made note 9 to the financial statements for further
details.
Board of directors’ reportPage 18
General and administrative expenses amounted to NOK 95 (87) million and represent
OKEA’s share of costs after allocation to licence activities in addition to various expenses
related to corporate activities.
Net financial income/expenses (-) amounted to NOK -192 (-12) million. Interest
expenses and fees to bondholders amounted to NOK -211 (-291) million, partly offset by
capitalisation of borrowing costs in relation to development projects of NOK 117 (124)
million. In addition, NOK -75 (152) million in net exchange rate gain/loss (-) was
recognised, largely relating to the two USD denominated bond loans. Gain/loss (-) on
buy-back of OKEA02 bonds amounted to NOK -6 (24) million, while other financial
expenses amounted toNOK-9 (-17) million. Referenceismadetonote12tothefinancial
statements for further details.
Profit/loss (-) before income tax amounted to NOK 2,106 (-1,231) million. Tax
income/expense (-) amounted to NOK -1,503 (628) million, whereof tax refund/payable (-
) amounted to NOK -706 (740) million and changes in deferred tax were NOK -797 (-112)
million. The effective tax rate of 71% (51%) deviates from the standard tax rate of 78%
mainly due to positive effects on uplift both from the transfer of ownership of the Inspirer
rig and other investments with a total effect of NOK 197 million, as well as the gain on the
sale and leaseback transaction of the regional headquarter in Kristiansund being taxed
with 22% of NOK 40 million. Previous year’s low tax rate was mainly due to impairment of
technical goodwill not being tax-deductible compared to a loss before income taxes.
Net profit/loss (-) was NOK 603 (-603) million and total comprehensive income/loss (-)
was NOK 603 (603) million.
5.0.Statement of financial position
Total assets as per 31 December 2021 amounted to NOK 12,373 (9,776) million. The
increase was mainly due investments in fields in production, a net reversal of impairment at
the Yme asset, transfer of ownership of the Inspirer rig on the Yme licence and
increased cash balance.
Goodwill amounted to NOK 769 (769) million whereof ordinary and technical amounted to
NOK 163 (163) million and NOK 606 (606) million, respectively. Reference is made to note
16 to the financial statements for further details.
Oil & gas properties amounted to NOK 4,685 (3,758) million. The increase from previous
year was mainly due to investments in fields in production and under development of
NOK 1,250 (1,125) million and impairment reversal (-)/impairment of NOK -364 (730)
million, partly offset by unit of production depreciation of NOK 645 (672) million.
Board of directors’ reportPage 19
Right-of-use assets amounted to NOK 234 (162) million. During fourth quarter, a sale
and leaseback of OKEA’s regional headquarter in Kristiansund was completed with net
sales proceeds of NOK 108 million. The book value of the sold property of NOK 79 million
was reclassified from fixed assets to right-of-use assets.
Total asset retirement reimbursement right amounted to NOK 3,108 (3,029) million and
relates to Shell’s obligation to cover decommissioning costs for Draugen and Gjøa,
whereof NOK 3,025 (3,029) million was classified as non-current assets and NOK 83 (0)
million as current. Reference is made to note 18 to the financial statements for further
details.
Financial investments amounted to NOK 210 (0) million and relates to liquid investments in
low-risk money-market funds and combinations funds as an alternative to bank
deposits.
Cash and cash equivalents amounted to NOK 2,039 (871) million. The significant increase
frompreviousyearwasmainly duetohighcashflowfromoperatingactivities, asmargins
for sale of petroleum products increased, in addition to net taxes received and proceeds
from the sale and leaseback of the regional headquarter in Kristiansund. These cash
inflows were partly offset by cash used in investing activities like development projects
and drilling activities, placement of excess liquidity in low-risk money-market funds and
combination funds, and cash used in financing activities including a partial buy-back of
OKEA02 and interest payments on both bond loans.
Total provisions for asset retirement obligations amounted to NOK 4,237 (4,120),
whereof the non-current portion amounted to NOK 4,113 (4,120) million and current
NOK 104 (0) million. The obligation is partly offset by the total asset retirement
reimbursementright.Reference ismade tonote 24tothe financialstatementsfor further
details.
Deferred tax liabilities amounted to NOK 1,736 (941) million at balance sheet date. The
increase is largely explained by accelerated tax depreciation compared to depreciation
for accounting purposes. Reference is made to note 13 to the financial statements for
further details.
Interest-bearing loans, bonds amounted to NOK 2,295 (2,400) million, and comprise the
remaining outstandingamounts on theOKEA02 andOKEA03 bonds.The decreasemainly
related to buy-back of OKEA02 of NOK -217 million, partly offset by unrealised FX loss of
NOK 83 million. Reference is made to note 25 to the financial statements for further
details.
Total other interest-bearing liabilities was NOK 493 (0) million, whereof the non-current
sharewasNOK 455(0) million andthecurrentsharewasNOK 39(0)million.Theamount
represents OKEA’s share of the net present value of the future obligations under the
Board of directors’ reportPage 20
bareboat charter (BBC) agreement between the Yme licence and Havila Sirius AS for the
Inspirer rig.
Income tax payable amounted NOK 773 (14) million and mainly comprise accrued tax
payable for 2021.
At the balance sheet date, OKEA had issued a total of 103,870,350 (102,502,650)
ordinary shares. Each ordinary share has one vote at general meetings. A total of 80,000
(985,000) warrants remained outstanding.
The share capital amounted to NOK 10 (10) million and total equity amounted to NOK
1,708 (1,083) million, corresponding to an equity ratio of 14% (11%). Total liabilities
amounted to NOK 10,664 (8,694) million.
6.0.Statement of cash flows
Net cash flows from operating activities amounted to NOK 2,515 (621) million, including
net taxes received/paid (-) of NOK 355 (169) million. The increase was mainly due to
higher margins on sold volumes of liquids and gas following the significant increase in
prices during the year.
Net cash flows used in investing activities amounted to NOK 941 (1,043) million and
mainly related to investments in oil and gas properties of NOK 664 (1,001) million and
investments in exploration and evaluation assets of NOK 167 (28) million.
Net cash flows used in financing activities amounted to NOK 422 (390) million and
comprised paid interest of NOK 184 (223) million, partial buy-back of OKEA02 bonds of
NOK 217 (121) million and payments of lease arrangements of NOK 36 (46) million.
Net increase/decrease (-) in cash and cash equivalents, including exchange rate effect
on cash held, amounted to NOK 1,168 (-792) million.
7.0.Going concern and liquidity
Pursuant to §3-3 of the Norwegian Accounting Act, the board confirms that conditions for
continued operation as a going concern are present for the company and the annual
financial statements for 2021 have been prepared under this assumption.
During2021theoiland gasindustry hasrecoveredfromthe marketturmoilthatfollowed
from the Covid-19 pandemic. OKEA’s financial position strengthened significantly during
2021 supported by strong oil prices and record high gas prices. OKEA’s current financial
position and liquidity is solid, and the company is well positioned for executing on the
Board of directors’ reportPage 21
growthstrategy. Cashflowfromoperations,combinedwithavailableliquidity, isexpected
to be sufficient to finance the company’s commitments in 2022.
In the board’s view, the annual accounts give a true and fair view of OKEA’s assets and
liabilities, financial position and results. The board is not aware of any factors that
materially affect the assessment of OKEA’s financial position as of 31 December 2021, or
the result for 2021, other than those presented in the board of directors’ report or that
otherwise follow from the financial statements.
8.0.Allocation of profit for the year
Total comprehensive profit for 2021 amounted to NOK 603 million. The board proposes
the following allocation:
Profit for the year of NOK 603 million is to be transferred to accumulated loss.
After the transfer, accumulated loss amounts to NOK 249 million per 31 December 2021.
9.0.Risks related to OKEA’s business and
industry
Comprehensive, transparent, inclusive and dynamic risk management, supported by
necessary structures, framework, tools and practice, is of great importance for OKEA’s
ability to deliver on stated goals, operations and strategy. The overall purpose of risk
management in OKEA is to ensure the balance between creating value and avoiding
accidents, damages and losses. As aresult, thecompany is continuously undertaking risk
management activities, embedded in the company’s management system and
operational practices, at all levels of the organisation. Both senior management and the
board of directors regularly review major risks.
Necessary measures and actions to manage and mitigate risks are identified, followed-up
and reported on a continuous basis. Assurance and verification of the company’s
management systems and structures is governed by risk-based and dynamic audit and
verificationplans. Theplansaredevelopedandmaintainedbasedonthecompany’sthree
lines of defence model, which differentiates verification activities owned by operational
management and activities with a higher degree of independence.
The company’s business, results of operations, value of assets, reserves, cash flows,
financial condition and access to capital depend significantly upon, and may be adversely
affected by, strategic, operational as well as financial risk factors.
Board of directors’ reportPage 22
OKEA currently has production from four fields: Draugen, Gjøa, Yme and Ivar Aasen. The
Yme field started production in October 2021andin November 2021, OKEA entered into
an agreement to increase the ownership share in the Ivar Aasen field by 2.223%. Asset
diversificationhasthereforeimprovedduring2021.However,operationalissuesaffecting
availability and reliability of production from any of these fields may have a material
impact on the company. Further growth and diversity in the company’s production
portfolio will seek to mitigate this risk.
The company’s exploration and project portfolios (operated and non-operated) are
associated with technical, geological and operational uncertainty. The company, together
with licence partners, continuously strives to mitigate exploration and project risks and
ensure progress to meet defined targets and milestones. However, the inherent
complexity of projects may result in delays, cancellations and/or cost increases.
Changes in national and/or international framework conditions, (e.g. changes in
regulations related to ESG, QHSE or taxation) can lead to increased costs, reduced value of
the company’s asset base, and can potentially impact feasibility of new development
projects. Unfavourable changes to governmental regulations for the petroleum industry,
such as potential lack of new exploration areas granted, reduced production permits or
failureto extendproductionpermitsmay haveconsiderableimpactstoOKEA’sbusiness.
Activities throughout the company value chain (exploration, development and
production) within the oil and gas industry haveconsiderable inherentenvironmental and
safety risks. In case of incidents, these risks can result in significant losses and cost
increases. OKEA is continuously working to assess such risks and to implement business
measures to both eliminate the probability of occurrence and mitigate any adverse
consequences of such incidents. This work includes focusing on both threats and
opportunities with respect to the company’s overall strategy, as well as operational and
field development related activities. ESG is embedded in the business and all operational
activities, and identifying, managing and controlling all material issues related to ESG is of
key importance to OKEA. This includes assessing financial risk exposure imposed by
climate related risk. This work is further addressed in the ESG report for 2021.
Alignment with both internal and external stakeholders and partners is of great
importance to OKEA. OKEA has several key partners and suppliers and relies on their
competence and capacity to a larger extent than many comparable companies within the
Norwegianoiland gas industry.Thesepartners arecriticaltoOKEA’s successfulexecution
of the company’s strategy and roadmap. OKEA foresees a high activity level in the
industry in the upcoming years, with potential capacity and competence constraints and
cost inflation. Any adverse events or conditions impacting our key suppliers’ ability to
deliver as agreed may impact the company’s performance, lead to increased costs,
operational disruptions or project delays. In addition, the company is dependent on
alignment with and endorsement from licence partners for operated assets. For non-
operated assets, although OKEA exercises it’s “see-to-duty” diligently through regular
Board of directors’ reportPage 23
partner meetings, the company is dependent on the various operators’ management and
performance and the voting arrangements in each joint venture.
The company is dependent on the robustness, competence and capability of personnel in
senior management positions, as well as throughout the entire workforce. Not being able to
hire, retain or replace key members of the organisation, or lack of short- or long-term
access to competent critical staff, may result in an inability to realise the company
strategy and further expand the business.
Information security events (e.g., cyber-attacks) may threaten the confidentiality,
integrity andavailability of companydataandinformationwhich, inturn, couldnegatively
impact the company’s business activities. These events can come fromboth targeted and
random events, and may result in loss of information, interruption in operational
activities, and/or increased expenditure.
The Russia-Ukraine armed conflict which started in late February 2022 and remains
ongoing at the date of this report, has resulted in arapidly evolving geo-political situation
and introduced a new set of challenges with respect to maintaining business continuity. In
response, OKEA has enforced control mechanisms to manage the elevated security
threats imposed to the industry and maintain a close dialogue with the Norwegian Oil &
Gas Association (NOROG) and relevant authorities. OKEA is monitoring international
sanctions and trade control legislation in order to mitigate the potential impact on the
company’soperationparticularly inrespectofpotential interruptionsof supply chainsand
third-party services.
Financial risk factors
OKEAisexposedtoavariety of financial risk factors. Oil andgaspricesarehighly volatile,
and the company may from time to time enter into derivative contracts in order to hedge
portions of its oil and gas production to limit market price risk. Reserves and contingent
resources are by their nature uncertain with respect to inferred volumes which are also
sensitive to oil and gas prices. OKEA will continue to manage these risks in accordance
with a defined risk management policy.
OKEA is exposed to foreign exchange rate risk as revenues are denominated in USD for oil
sales and in GBP and EUR for gas sales, whilst operational and development costs are
mainly denominated in NOK, and all income taxes are denominated in NOK. All
outstanding bond debt was issued in USD. OKEA manages currency risk by frequent
currency exchanges. However, fluctuations in exchange rates may adversely affect the
financial performance of the company. All outstanding bond debt was issued in USD.
OKEA’s net interest-bearing debt was reduced significantly during 2021 which limits
refinancing risk. In addition, refinancing risk is mitigated by different durations for the
Board of directors’ reportPage 24
two bonds where OKEA02 matures in June 2023 and OKEA03 matures in December
2024.
OKEA also has an interest-bearing liability in USD which represents OKEA’s share of the
net present value of future obligations under the bareboat charter (BBC) agreement
between the Yme licence and Havila Sirius AS for the Inspirer rig. This liability will be
repaid quarterly until October 2031.
OKEA’s exposure to interest rate risk relates to the OKEA02 bond loan, which is subject to
floating interest rate of the three months LIBOR. The company has no other interest-
bearing debt with floating interest rate as the OKEA03 USD 120 million senior secured
bond loan and the Inspirer liability carriy fixed interest rates.
The agreements associated with the bonds may limit OKEA’s ability to enter into new
financing arrangements. The key financial covenants under the bonds comprise Capital
Employment Ratio (paid-in equity divided by paid-in equity plus interest-bearing debt),
Leverage Ratio (net interest-bearing debt divided by 12-month EBITDA), and minimum
free liquidity of USD 10 million.
Operating in a capital-intensive industry, OKEA is exposed to liquidity risk and has taken
mitigating actions to ensure that sufficient liquidity is secured under normal as well as
extraordinary circumstances. The company conducts detailed cash flow forecasting,
including sensitivity analyses on key variables, to meet financial liabilities as they fall due
without incurring unacceptable losses or risking damage to the company’s reputation.
OKEA’s exposure to credit risk for counterparties to default on their payment obligations is
considered limited, as sales agreements are only entered into with solid customers and
derivative contracts are entered into with reputable counterparties.
Financial risk is managed by the finance department under policies approved by the
board. OKEAmanagement continuously monitorstherisk pictureandreportsto theboard
regularly but not less than monthly. The overall risk management policy seeks to
minimise potential adverse effects on financial performance from unpredictable
fluctuations in financial and commodity markets.
The fiscal regime for the Norwegian petroleum sector has largely remained unchanged
since the tax reform in 1992. Following the impact from the Covid-19 pandemic and
market turmoil in the beginning of 2020, the Norwegian Parliament resolved to
implement temporary changes to the petroleum tax regime to stimulate increased
activity and secure employment and competence in the Norwegian oil services industry.
The temporary changes were highly favourable for OKEA’s cash position as well as for the
financial parameters for qualifying projects and continues to apply for projects where a
PDO is submitted prior to the end of 2022 and approved prior to the end of 2023.
However, theNorwegiangovernment mayimplement furtherchangestothefiscal regime
in the future which could have adverse impacts on OKEA’s net income and cash flow
Board of directors’ reportPage 25
going forward. A new tax regime has been proposed by the government and presented
through a public consultation. The closing date for submitting responses to the public
consultation was early December 2021 and responses are currently under consideration
by the Ministry of Finance. In the proposal, the rules on depreciation and tax-free income in
the special tax for petroleum are replaced by immediate expense recognition of
investmentsinthespecial tax regime(cashflowtax) from2022. Theproposal isexpected
to be processed in the Parliament during the spring session 2022. The new tax regime is
not expected to significantly impact the financial position and solidity of OKEA.
OKEA is listed on Oslo Stock Exchange (ticker “OKEA”) and the market valuation of, and
active trading in, OKEA’s shares, and bonds are important for the company’s ability to
obtain funding at favourable terms.
10.0.Environmental, social and
governance (ESG) topics
Acting in line with established and acknowledged international guidelines and references
within ESG topics, such as the UN Sustainable Development Goals – in addition to
ensuring compliance with all regulatory requirements is a vital part of being a prudent
operator on the NCS. Sustainable energy and resource management is an integral part of
OKEA’s decisions and objectives
.
OKEA continuously works towards more efficient
exploitation of petroleum reserves, including implementation of new and innovative
technology.
The board of directors of OKEA takes the company’s environmental responsibility
seriously and is committed to reduce the environmental impact from the company’s
activities going forward in balance with the ability to create shareholder value.
Pursuant to section 3-3a and 3-3c of the Norwegian Accounting Act, section 26a of the
Norwegian act on equal treatment and non-discrimination and requirements from Oslo
Stock Exchange, OKEA has prepared an ESG Report for 2021, describing how the
company addresses ESG matters. Information regarding research and development
activities is also included in the ESG report. The report is available at
Quality, health, safety and environment (QHSE)
Safe production with adherence to the highest standards within health, safety and
environmental (HSE) performance and continuous focus on reducing emissions are
essential factors for the company’s licence to operate as well as enablers of long-term
value creation for the company’s shareholders. OKEA considers its employees and
contractors key assets and is focused on motivating employee participation, innovation,
Board of directors’ reportPage 26
and experience transfer to create and sustain a company culture which fosters the most
efficient and cost-effective solutions and best possible QHSE, operational and financial
performance.
OKEA had no serious incidents in the company’s activities and operations in 2021. Two
medicaltreatmentcases wererecordedatDraugen,butboth hadlowpotentialforsevere
personal harm or long-term health effects to the personnel involved. The total recordable
injuriesfrequency (TRIF) increased marginally to3.51 in2021comparedto3.42in 2020. A
more detailed reporting on QHSE matters in the ESG report for 2021. The report is
available at
Organisation and equal opportunities
OKEA promotes a healthy working environment for all employees, vendors and
contractors involved in its activities. OKEA has established a working environment
committee covering all locations, offshore and onshore. In 2021, the sickness absence
rate in OKEA was 3.3%.
The company endeavours to maintain a working environment with equal opportunities
for all based on qualifications, irrespective of race, gender, age, disability, sexual
orientation, religion, political views, national or ethnic origin ethnicity or any other
characteristic that may compromise the principle of equality. The company’s code of
conduct contains principles and standards for promoting equality and preventing
discrimination and harassment, including sexual harassment. There is no tolerance for
unlawful unequal treatment, exclusion or discrimination of colleagues or others working
for its organisation.
A large part of our workforce work within engineering and technology, including offshore
work, which are disciplines that have traditionally attracted most male applicants. This is
reflected in the workforce demographics, which as of end of the year consisted of 22%
female and 78% male. At the end of 2021, the senior management team consisted of
two females (25%) and six males. The board of directors consisted of eleven members,
four of whom are female, with three deputy members, of whom two are female.
The working environment in OKEA during 2021 was considered “very good” by the
employees as demonstrated by an employee satisfaction survey which was conducted
during the autumn of 2021. The employee engagement index was above 85%, which
places us among the leading companies across a range of industries. The response rate
was excellent with a total of 98% and 96% participation amongst onshore and offshore
employees respectively.
Pursuant to section 3-3a and 3-3c of the Norwegian Accounting Act and section 26a of the
Norwegian Act on Gender Equality and Prohibition of Discrimination, the board of
directors has provided a more detailed reporting on organisation and equal opportunities
Board of directors’ reportPage 27
mattersintheESGReportfor2021.Thereportisavailableat
Corporate governance
The company is committed to create sustained shareholder value and respects the
company’s various stakeholders. In achieving this, the company will remain committed to
maintaining a high standard of corporate governance. The company has established
policies and guidelines that lay out how business shall be conducted, including clearly
defining the roles and responsibilities of the board and the senior management of the
company, as well as therelationship between them. Corporate governance principles and
implementation within OKEA are subject to annual reviews and sign-off by the board of
directors.
Pursuant to section 3-3b of the Norwegian Accounting Act the 2021 statement on
corporategovernanceisprovidedina separatesectionoftheannualreport.Thecompany
complieswithrelevantrulesandregulationsfor corporategovernance,includingthemost
recent version of the Norwegian Code of Conduct for Corporate Governance, published on
14 October 2021.
Reporting of payments to governments
OKEA has prepared a report of government payments in accordance with the Norwegian
Accounting Act §3-3d and the Norwegian Securities Trading Act §5-5a. These regulations
state that companies engaged in activities within the extractive industries shall on an
annual basis prepare and publish a report containing information about their payments to
governments at country and project level. The report is provided in a separate section of
the annual report.
11.0.Insurance for board members and chief
executive officer
The company has an insurance policy for the board members and the chief executive
officer for potential liability to the company and third parties. The board considers the
coverage to be reasonable.
Board of directors’ reportPage 28
12.0.Subsequent events
Ginny exploration well
The Equinor operated Ginny exploration well was announced as a dry well on 2 February
2022. Cost incurred as of 31 December 2021 amounted to NOK 18 million and has been
expensed in 2021.
APA 2021 licence awards
Through the Awards in Pre-defined Areas (APA) for 2021 OKEA ASA has been offered
interests in four new production licences on the Norwegian continental shelf, three of
which as operator. The three new OKEA-operated licences are located in the Norwegian
sea. The fourth licence, to be operated by Spirit Energy, is located in the North Sea,
north-east of the Aurora discovery.
Hamlet
The Neptune-operated Hamlet exploration well in the Gjøa licence (PL153) was spudded in
late February 2022. OKEA announced on 21 March that hydrocarbons have been
observedfromlogsonenteringthereservoirinthewell (35/9-16S)andcoringisinitiated
according to plan. The reservoir operations are at an early stage and final results will be
announced when available.
Buy-back of bonds
In the first quarter of 2022, OKEA has bought back additional parts of the OKEA02 bond for
a nominal amount of USD 31.5 million at an average price of 103.6 to par. At the date of this
report, OKEA had bought back OKEA02 bonds for a nominal value of USD 69.2 million at
an average price of 99.2 to par, of which USD 6.3 million have been cancelled.
Forward contracts gas
OKEA has entered into additional contracts for forward sale of gas in 2022 for a total of 2
390 000 therms at fixed prices between 397 and 412 p/th with expiration during 2022. At
the date of this report, OKEA had sold forward 30% of the net after tax exposure for
natural gas for Q1-22 at an average price of 304 GBp/th, 30% for Q2-22 at an average
price of 278 British pence per therm (GBp/th), 30% of Q3-22 at an average price of
275GBp/th and 10% of Q4-22 at an average price of 408 GBp/th.
13.0.Outlook
Followingthedramaticdeclineinpetroleumprices during theCovid-19 pandemicin2020,
oil and gas prices continued to increase throughout 2021. The Russia-Ukraine armed
conflict,which remainsongoingatthedateofthisreport,has further increasedpetroleum
prices. The volatility in prices has been significant in recent months, but at very high
levels. Management is continuously assessing the market to mitigate commodity price
volatility and have entered into forward sales contracts for gas for 30% of the net after
Board of directors’ reportPage 29
tax exposure until and including third quarter of 2022 at prices ranging 275-300 GBp/th
and 10% of the net after tax exposure in the fourth quarter of 2022 at prices ranging
400-412 GBp/th.
TheRussia-Ukrainearmedconflicthasresultedinarapidly evolvinggeo-political situation
and introduced a new set of challenges with respect to maintaining business continuity. In
order to mitigate the potential impact on the company’s operation particularly in
respect of potential interruptions of supply chains and cyber risk, OKEA is monitoring
international sanctions and trade control legislation closely and has enforced control
mechanisms to manage the elevated security threats imposed to the industry.
OKEA’s cash position has strengthened significantly during 2021 and the company has a
solid basis for executing on the growth strategy which was launched in October.
OKEA’s clear ambition is to deliver competitive shareholder returns driven by growth,
valuecreationand capitaldiscipline,andthestrategy will becentredaroundthreegrowth
levers:
·actively pursue further value creation in current portfolio,
·pursuing mergers and acquisitions to add new legs to the portfolio, and
·considering organic projects either adjacent to existing hubs or pursuing new hubs,
dependent on financial headroom and attractive risk-reward.
The company intends to announce a dividend plan in 2022, which will mark an
important new stage of the company’s development and equity story.
OKEA’s production guiding for 2022 is 18,500 - 20,000 boepd including the increased
ownership in the IvarAasen field
.
Capex guiding, excluding capitalised interests, for2022 is
NOK 950 - 1,150 million
.
Production outlook for 2023 is 17,000 - 19,000 boepd
including the increased ownership in the Ivar Aasen field.
Board of directors’ reportPage 30
Board of directors, Trondheim, 30 March 2022
Chaiwat Kovavisarach
Chairman of the board
Grethe Moen
Board member
Mike Fischer
Board member
Paul Murray
Board member
Nicola Carol Gordon
Board member
Rune Olav Pedersen
Board member
Finn Haugan
Board member
Anne Lene Rømuld
Board member
Jan Atle Johansen
Board member
Saowapap Sumeksri
Board member
John Kristian Larsen
Board member
Svein Jakob Liknes
CEO
Board of directors’ report
Page 31
Annual report 2021
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Statement on corporate
governance 2021
1.0.Governance principles and objectives
OKEA ASA («OKEA» or «the company») seeks to create sustained shareholder value and to
paydue respect to the company’s various stakeholders. These include its shareholders,
employees, business partners, authorities, and society in general. OKEA is committed to
maintain a high standard of corporate governance.
OKEA is a public limited liability company incorporated and registered in Norway and
subject to Norwegian law. The company’s shares are listed on OsloStock Exchange under
the ticker OKEA. As of the date of this statement, the company also has two bonds on
issue, OKEA02 and OKEA03, which are listed on Oslo Stock Exchange.
As a public limited liability company with listed shares and bonds, the company is required to
report on its corporate governance in accordance with the Norwegian Accounting Act
section 3-3b, 3rd subsection as well as Oslo Rule Book II - Issuer Rules2, section 4.
“Continuing obligations for Issuers of Shares” available at The Issuer Rules / Regulations
/
Oslo Børs / Home - Oslo Børs (oslobors.no)
. Further, the Oslo Stock Exchange requires
listed companies to report annually on the company’s corporate governance policy in
accordance with the Norwegian Code of Practice for Corporate Governance (the “Code”).
The Code is available on www.nues.no
.
OKEA has an established corporate governance policy, code of conduct and various
corporate governance instructions and guidelines that addresses the framework of
guidelines and principles regulating the interaction between the company’s shareholders,
the board of directors (the “board”), the Chief Executive Officer (the “CEO”) and the
company’s executive management team. The corporate governance policy and relevant
instructions and guidelines are available at https://www.okea.no/investor/corporate-
governance-principles/
. The board of OKEA is responsible for adherence to sound
corporate governance standards and follow upthe company’s objectives and strategies.
The principles and implementation of corporategovernanceare subject to annual reviews
and discussions by the company’s board of directors. This report discusses OKEA’s main
corporate governance policies and practices and how OKEA has complied with the code in
the preceding year.
Corporate governance reportPage 33
OKEA complies with the current edition of the code, unless otherwise specifically stated.
The following statement on corporate governance 2021 is organised in line with the
structure of the Norwegian Code of Practice for Corporate Governance, most recently
revised 14 October 2021.
Deviations from the code: None
2.0.Business
The company’s operations comply with the business objective set forth in its articles of
association:
“The company’s business as set out in the Articles of Association is petroleum activities on
the Norwegian continental shelf (NCS), including development and production of oil and
gas, and all other business activities as are associated with the above objectives, and
share subscription or participation by other means in such operations alone or in
cooperation with others.”
OKEA is a leading mid-to late-life operator on the NCS. The company has a strong asset
portfolioincluding the Draugen field, operated by OKEA, as well as non-operated positions in
Gjøa, Ivar Aasen and Yme. In 2021, the portfolio produced close to 16,000 boepd and the
target production for 2022 is 18,500-20,000 boepd. In addition, OKEA has activities in
projects under development, including the Hasselmus gas discovery and Draugen
power from shore, as well as discoveries being evaluated for development and
exploration licences with planned and possible wells.
The company’s strategic direction is built on the three pillars of growth, value creation
and capital discipline. The company works on various growth levers to deliver continued
shareholder value:
Current portfolio – actively pursue value creation in current portfolio
Inorganic path – mergers and acquisitions to add new portfolio legs
Organic path – mature projects to replenish current portfolio and develop optionality
near existing hubs as well as considering new hub exploration and development.
Pursuant to section 3-3a and 3-3c of the Norwegian accounting act and requirements
from Oslo Stock Exchange, OKEA has prepared an ESG Report for 2021, which describes
how the company addresses ESG matters. The report is available at
www.okea.no/investor/reports/
.
Deviations from the code: None
Corporate governance reportPage 34
3.0.Equity and dividends
3.1.Capital adequacy
As of 31 December 2021, OKEA’s total equity was NOK 1 709 million. The board aims to
maintain a satisfactory equity ratio in support of the company’s goals, strategy and risk
profile, thereby ensuring there is an appropriate balance between equity and other
sources of financing.
As per the date of this report, the board considers the capital structure to be satisfactory.
The board continuously monitors the company’s capital situation, to be prepared to
take necessary steps if the company’s equity and/or liquidity position is considered less
than adequate including in order to pursue investment opportunities considered to be
value accretive and supportive for such potential new funding.
3.2.Dividends and dividend policy
OKEA is growing its business and a major part of surplus cash is anticipated to be used to
fund ongoing and future projects and to manage its debt obligations. The company has a
stated ambition to establish a clear dividendpolicy in line with its strategy in 2022.
3.3.Board authorisations
At the ordinary general meeting on 3 May 2021, the board was granted an authorisation to
increase
the share capital by a maximum amount of NOK 1 030 054 in one or more share
capital increases through issuance of new shares.
The authorisation is valid from the date of registration with the Register of Business
Enterprises until the annual general meeting in 2022, however no longer than until 30
June 2022.
For supplementary information, reference is made to the minutes of the ordinary general
meeting held on 3 May 2021, available from https://www.okea.no/investor/reports
and
www.newsweb.no
.
Deviations from the code: None
Corporate governance reportPage 35
4.0.Equal treatment of shareholders and
transactions with close associates
4.1.Basic principles
The company has one class of shares with equal rights for all shareholders.
As of 31 December 2021, BCPR PTE. LTD. (BCPR) owned 45.71% of OKEA. BPCR is a
wholly owned subsidiary within Bangchak Corporation Plc. Group (BCP) and the second
largest shareholder OKEA HOLDINGS LTD owned 15.47% of OKEA.
OKEA is committed to equal treatment of all shareholders. The board is of the view that it
is positive for OKEA that BCP and OKEA HOLDINGS LTD. assume the role of active
owners and are actively involved in matters of major importance to OKEA and all
shareholders. The cooperation with BCP and OKEA HOLDINGS LTD. offers OKEA access to
expertise and resources within upstream business activities, technology, strategy,
transactions and funding. It may be necessary to offer BCP and OKEA HOLDINGS LTD.
special access to commercial information in connection with such cooperation. Any
information disclosed to BCP and OKEA HOLDINGS LTD.’s representatives in such a
context will be disclosed in compliance with the laws and regulations governing the stock
exchange and the securities market.
Since the second half of 2021, BCP has been consolidating OKEA as a subsidiary in its
financial statements. To enable BCP to execute this consolidation, OKEA discloses
information as required for this purpose in line with the regulations in the Securities
Trading Act. OKEA publishes its financial statements prior to publication of BCP’s financial
statements.
4.2.Approval of agreements with shareholders and close
associates
Any agreements between the company and any of the shareholders or other close
associates shall be made in writing and entered into on arm’s length terms. If applicable,
the agreements will be presented for approval by the general meeting in accordance with
the Norwegian Public Limited Liability Companies Act section 3-8. Related party
transactions are disclosed in the company’s financial statements.
Wavier of pre-emptive rights of excising shareholders were decided in share capital
increases for long term incentive shares to employees, in accordance with the mandate
given to the board 3 May 2021.
Deviations from the code: None
Corporate governance reportPage 36
5.0.Shares and negotiability
OKEA’s shares are freely negotiable securities and the company’s articles of association do
not impose any form of restriction on their negotiability. The company’s shares are listed
on the Oslo Stock Exchange and the company works actively to attract the interest of
Norwegian and foreign shareholders. There is only one class of shares in the Company and
all shares carry equal rights.
Deviations from the code: None
6.0.General meetings
The general meeting is the company’s highest decision-making body. The general
meeting is an effective forum for communication between the shareholders and the board
and OKEA encourage shareholders to participate in the general meetings. Shareholders
who cannot attend a general meeting in person will be given the opportunity to vote via
advance electronical voting and/or proxies, both including options to vote on each
individual matter.
The ordinary general meeting is normally held no later than the end of June, which is the
latest date permitted by the Public Limited Liability Companies Act. The date of the next
ordinary general meeting is included in the company’s financial calendar, which is
available at https://www.okea.no/investor/share-information/
. Extraordinary general
meetings can be called by the board of directors at any time, or by shareholders
representing at least 1/10 of share capital.
The board of directors decides whether to hold a general meeting as a physical or
electronic meeting, in accordance with the Norwegian public limited liabilities companies
act section 5-8.
According to the company’s articles of association section 7, the documents pertaining
matters to be handled at a general meeting shall be made available to shareholders at the
company’s webpage. This rule also applies for documents which according to
statutory law shall be included in or attached to the notice of the general meeting.
Further, according to the company’s articles of association section 7, the right to
participate and vote at general meetings of the company can only be exercised for shares
which have been acquired and registered in the shareholders register in the shareholders
on the fifth business day prior to the general meeting. The board may decide that
shareholders shall be able to cast their votes in writing, including through the use of
electronic communications, for a period prior to the general meeting. For such voting, a
reassuring method must be used to authenticate the sender. In 2021 the board allowed
Corporate governance reportPage 37
for advance voting through the use of electronic communications, with an option to vote
on individual matters including elections.
Resolutions of the general meeting shall be bysimple majority, unless a qualified majority
is required by law.
The board proposes the agenda for the ordinary general meeting. The main agenda items
are determined by the requirements of the Norwegian Public Liability Companies Act.
The chairman of the board of directors shall attend the general meeting and the meetings
are normally chaired bythe chairmanof the board, or a person appointed by the chairman of
the board. If the chairman of the board is conflicted in respect of any matters on the
agenda, another person will be appointed to chair the meeting.
Minutes from the general meetings, including voting results, are published on
www.okea.no
.
Deviations from the code: None
7.0.Nomination committee
In accordance with the articles of association, the company’s general meeting shall elect a
nomination committee, including its chair. The general meeting has approved a set of
guidelines for the nomination committee’s work. The nomination committee and
procedures around the organisation of the nomination committee is further laid down in
the company’s articles of association. The articles of association states that the
committee shall consist of three members. The nomination committee’s main purpose is to
propose candidates for election to the board and their respective remuneration.
Deviations from the code: None
8.0.The board of directors; composition and
independence
In accordance with the company’s articles of association, the board of directors shall
consist of three to eleven board members. Board members and the chairman are elected by
the general meeting for a term of two years. Members of the board of directors may be re-
elected.
In addition to the board members elected by the general meeting, and pursuant to the
public limited liabilities act section 6-4, the employees of the company have three elected
Corporate governance reportPage 38
board members and three deputy board members. The employee elected members are
elected for terms of two years.
OKEA has an agreement with the employees of OKEA not to have a corporate assembly, in
accordance with the Norwegian Public Limited Liability Companies Act section 6-35 (2) and
has expanded employee representation in the board of directors as detailed above.
At 31 December 2021, the board of directors consisted of eleven board members,
whereof four women, and three deputy board members, whereof two women.
The composition of the shareholder elected board members is based on broad
representation of the company’s shareholders. The board shall have the adequate
competency to independently evaluate the cases presented by the senior management
team as well as the company’s operation. It is also considered important that the board
can function well as a collegiate body. The board shall comply with all applicable
requirements as set out in the Norwegian Public Limited Liability Companies Act, the Oslo
Rule Book II – Issuer Rules and the recommendations set out in the Norwegian Code of
Practice for Corporate Governance.
The composition of the board of directors is in compliance with the independence
requirements of the Code, meaning that (i) the majority of the members of the board of
directors elected by the company’s shareholders are independent of the company’s
executive management and material business contacts, (ii) at least two board members
elected are independentof the company’s main shareholders (shareholders holding more
than 10% of the shares in the company), and (iii) no member of the company’s senior
management team serves on the board of directors.
Members of the board of directors are encouraged to own shares in the company. The
individual shareholdings for each board member are specified in note 10 to the financial
statements.
In 2021, the board held a total of 7 board meetings. The attendance was at 100%. The
table below shows attendance on meetings in period the person was part of and available
for the board in 2021.
Corporate governance reportPage 39
9.0.The work of the board of directors
The board of directors is responsible for the overall management of the company and
shall supervise the company’s day-to-day management and the company’s activities in
general.
The board has prepared instructions to allocate duties and responsibilities between the
CEO and the board. The instructions are based on applicable laws and well-established
practices.
The board of directors is responsible for determining the company’s overall goals and
strategic direction, principles, risk management, and financial reporting. The board of
directors is also responsible for ensuring the company has a competent management
with clear internal distribution of responsibilities, as well as ongoing performance
evaluation of the work of the CEO. Guidelines for the CEO, including clarification of duties,
authorities and responsibilities, have been adopted.
In accordance with the company’s guidelines, members of the board of directors and
senior management are expected to notify the board if they have any material direct or
indirect interest in any transaction entered into by the company. The board has routines
Deviations from the code: None
Corporate governance reportPage 40
for handling of conflict ofinterest and disclosure. If a conflict occurs, the relevant member
of the board will abstain from participating inthe board’s discussion and decision making.
The board holds a yearly training session on governance and stock exchange related
topics, as per requirements from Oslo Stock Exchange. In 2021 the training session also
covered new regulations due to the implementation of the EU marked abuse regulation
(MAR). Senior management contributes through the board meetings with developing the
board’s collective knowledge on topics and issues relevant to the company’s business.
Evaluation of the board
The board evaluates its performance and expertise annually. Identified areas of
improvement are implemented immediately if required or incorporated in the plan for the
following year.
9.1.Board committees
The board establishes its own committees based on legal requirements and the board’s
needs. The board will assess competence and interest when selecting members for its
committees. As of the date of this report, the board has established the following sub-
committees of the board:
Audit committee
The Company has established an audit committee in accordance with the rules of the
Public Limited Liability Companies Act chapter 6 V.
The function of the audit committee is to prepare matters to be considered by the board
and to support the board in the exercise of its management and supervisory
responsibilities relating to financial reporting, statutory audit, internal control and
collaboration with the Financial Supervisory Authorities. Furthermore, the audit
committee shall perform a separate financial review of contract commitments exceeding
NOK 100 million (gross amount for operated licences and not for non-operated licences) as
part of the internal control of major commitments.
The board has established a charter for the audit committee, stating its tasks and duties.
Sustainability and technical risk committee (“STR committee”)
The company has established an STR committee as a sub-committee to the board. The
STR committee shall follow up the company’s management of ESG related matters,
review main risks for projects and investments, and monitor overall risk management
and internal control. The STR committee shall further contribute to the board’s review of
the company’s most important areas of exposure to risk and its internal control
arrangements.
Corporate governance reportPage 41
The board has established a charter for the STR committee, stating its tasks and duties.
People and organisation committee (P&O committee)
The company has established a P&O committee as a sub-committee to the board. The
P&O committee shall evaluate and propose the compensation of the company’s CEO,
administer the company’s bonus incentive program and provide advice on general
compensation and organisation related matters to the board and produce an annual
report on the compensation of the senior management team and other leading persons,
pursuant to applicable rules and regulations. The P&O committee shall also advise the
CEO on matters relating to other material employment issues in respect of the senior
management.
The P&O committee shall also endorse the overall limits for the annual salary adjustments
for employees, within the budget set by the Board.
The board has established a charter for the P&O committee, stating its tasks and duties.
In addition to the above-mentioned committees, the board may establish various sub-
committees with limited duration and mandate as deemed necessary.
Deviations from the code: None
10.0.Risk management and internal control
The board shall ensure that the company has sound internal control and systems for risk
management that are appropriate in relation to the extent and nature of the company’s
activities. The internal control and the systems shall encompass the company’s corporate
values and ethical guidelines as well as material aspects and risks related to ESG. OKEA
applies a risk-based management approach in planning, execution and monitoring
activities as reflected throughout OKEA’s management system.
Risk management is of paramount importance for OKEA’s ability to achieve its goals and
deliverables. The following governing principles apply for risk management in OKEA:
Uncertainty is handled through the continuous risk management processes in top
management, as well as in departments and projects
Risk management shall be reflected throughout the company management system
framework
Risk management shall be an important foundation for all major decisions
An updated enterprise risk picture shall be maintained
Risk shall be managed at the lowest possible level in the organisation
Risk management shall address both threats and opportunities
Risk management in OKEA shall be transparent, inclusive and dynamic
Corporate governance reportPage 42
OKEA’s overall governing principles for risk management are incorporated in the
management system manual. Risk management activities are further integrated in
processes and documents in the management system. The company’s operational
activities are limited to Norway and are subject to Norwegian regulations. All activities
taking place in a production license are subject to supervision and audits from
governmental bodies (e.g. the Petroleum Safety Authority Norway and the Norwegian
Environment Agency), and license partners. OKEA’s risk management shall be in
accordance with the Norwegian regulations relating to health, safety and the environment in
the petroleum activities in addition to certain onshore facilities (the Framework
Regulations section 11).
The CEO is the overall responsible for risk management in OKEA. Responsibility for
managing risk on department or project/activity level belongs to the appointed manager.
The SeniorVice President business performance is responsible for coordinating enterprise
risk management across the company and provide the board with a status of the internal
control, most important risks and mitigation measures on a monthly basis. The board
and the STR committee regularly review major risks.
The internal control of the financial reporting system shall ensure reliable and timely
financial information and reporting. The company has implemented a framework for risk
managementand internal control of financial reporting based on the framework published
by the committee of Sponsoring Organisations of theTreadway Commission (COSO). The
framework has the following five components:
1. Control Environment
2. Risk Assessment and objective setting
3. Control Activities
4. Information and Communication
5. Monitoring Activities
The established framework and established processes are integrated in the company’s
management system and enable:
Appropriate and effective identification of risks and events
Establishment of relevant controls
Information and communication of risks
Monitoring of process compliance
Provision of relevant, timely and reliable financial reporting that provides a fair view
of the company’s business
Prevention of manipulation/fraud of reported figures
Compliance with relevant requirements of IFRS
OKEA makes use of external professional accounting expertise to support its internal and
external financial reporting. Meetings are held regularly to ensure alignment and proper
Corporate governance reportPage 43
assessment of new events, risks and issues, to provide updates of status of operations
and projects, and to provide additional capacity if required.
The company’s internal control environment is characterised by clearly defined
responsibilities and roles between the board of directors, audit committee, management,
the finance department and the accounting service providers.
OKEA has formalised and implemented processes in the management system for all areas
deemed to have high risk of errors in the financial reporting or otherwise deemed
important for internal control purposes. The formalised processes comprise:
Assess impairment of goodwill and tangible and intangible assets
Estimates for asset retirement obligations
Tax assessment and tax calculation
The financial statement closing process
Revenue recognition
Financial modelling and forecasting
The company has implemented a combination of manual and automatic controls, both
preventive and detective. OKEA has formalised documentation and monitoring of internal
controls in several areas. The processes established and the controls implemented are
deemed to be appropriate for a company of OKEA’s size and complexity. The internal
control of financial reporting is continuously improved and adapted to the company’s size
and complexity.
Deviations from the code: None
11.0. Remuneration of the board of
directors
The ordinary general meeting in 2021 approved the following remuneration:
Of the board of directors:
For the chairman: NOK 42,500/month with an additional NOK 10,000/meeting
For other shareholder elected members of the board: NOK 28,000/month with an
additional NOK 7,000/meeting
For the employee elected members of the board: NOK 16,000/month with an
additional NOK 4,000/meeting
Additional committee fees:
For the committee chair: NOK 17,500/meeting
For the shareholder elected members of the committee: NOK 12,500/meeting
For the employee elected members of the committee: NOK 7,500/meeting
Corporate governance reportPage 44
Committee fees are capped at NOK 140,000/year for the chair, NOK 100,000/year for
shareholder elected members and NOK 60,000/year for the employee elected members.
The cap is based on committee fees for maximum of 8 committee meetings.
For board members participating in more than one committee the committee fees are
capped at NOK 170,000/year for the chair, NOK 150,000/year for the shareholder elected
members and NOK 90,000/year for the employee elected members. The cap is based on
committee fees for maximum of an additional 4 committee meetings.
The board shall approve any consultancy work by a member of the board, including the
remuneration of such work.
Total remuneration of the board of directors for 2021 was NOK 5.1 million. The individual
remuneration of the board members is specified in note 10 to the annual financial
statements.
Nomination committee fees:
For the committee chair: NOK 5,000/meeting
For members of the committee: NOK 4,000/meeting
The nomination committee fees are capped at NOK 40,000 per year and NOK 32,000 per
year for the nomination committee chair and members respectively, based on a
maximum of 8 committee meetings.
Deviations from the code: None
12.0.Remuneration of the senior
management
Combined remuneration of senior management was NOK 47.8 million for 2021, with
executive management defined as CEO, CFO, senior vice president level and selected
vice presidents.
The individual remuneration of senior management is specified in a separate report
“Remuneration of leading persons” and in note 10 to the financial statements.
Revised guidelines for salaries and other benefits to leading persons will be presented for
voting to the annual general meeting in 2022 and subsequently published on
www.okea.no
, pursuant to appliable rules and regulations.
Deviations from the code: None
Corporate governance reportPage 45
13.0.Information and communications
The board places great emphasis on open, honest and timely dialogue with shareholders
and other participants of the capital markets to build trust and credibility, and to support
access to capital and a fair valuation of the company’s listed shares and debt. The board
seeks to present the information factually, transparently, and accurately. All information is
published in English, which is OKEA’s corporate language.
OKEA’s investor relations (IR) team comprises the CEO, CFO, and vice president investor
relations. The main responsibility for the company’s IR work rests with the vice president
investor relations.
The primary channel for communication is OKEA’s web page, www.okea.no
.
OKEA provides interim and annual financial statements and issues other notices when
appropriate, in accordance with Oslo Rule Book II - Issuer Rules2, section 4. “Continuing
obligations for Issuers of Shares” and quarterly financial statements as required under
the company’s bond agreements. The information is made available on the company’s
website and at www.newsweb.no
.
Deviations from the code: None
14.0.Takeovers
The board has established procedures for how to act should a take-over bid be made.
In a take-over process, the board and the executive management team each have an
individual responsibility to ensure that the company’s shareholders are treated equally
and that there are no unnecessary interruptions tothe company’s business activities. The
board has a particular responsibility to ensure that the shareholders have sufficient
information and time to assess the offer.
In the event of a take-over process, the board shall ensure that:
1. the board will not seek to hinder or obstruct any takeover bid for the
company’s operations or shares unless there are particular reasons for doing
so;
2. the board shall not undertake any actions intended to give shareholders or
others an unreasonable advantage at the expense of other shareholders or
the company;
3. the board shall not institute measures with the intention of protecting the
personal interests of its members at the expense of the interests of the
shareholders; and
Corporate governance reportPage 46
4. the board must be aware of the particular duty it has for ensuring that the
values and interests of the shareholders are protected.
In the event of a take-over bid, the board will, in addition to complying with relevant
legislation and regulations, comply with the recommendations in the Norwegian Code of
Practice for Corporate Governance. This includes obtaining a valuation from an
independent expert. On this basis, the board will make a recommendation as to whether or
not the shareholders should accept the bid.
Any transaction that is in effect a disposal of the company’s activities should be decided
by a general meeting.
Deviations from the code: None
15.0.Auditor
The company’s external auditor is PwC.
The board of directors requires the company’s auditor to annually present a review of the
company’s internal control procedures, including identified weaknesses and proposals for
improvement, as well as the main features of the plan for the audit of the company.
Furthermore, the board of directors requires the auditor to participate in meetings of the
board of directors that deal with the annual financial statements. At these meetings the
auditor reports on any material changes in the company’s accounting principles and key
aspects of the audit, comments on estimated accounting figures and reports all material
matters on which there has been disagreement between the auditor and the executive
management of the company. The board of directors will meet with the auditor annually
without representatives of company management being present.
The auditor normally participates in all meetings with the audit committee, except those
parts discussing possible changes of auditor. The auditor meets the audit committee
without the company’s management being present at least once a year.
The auditor’s independence in relation to the company is evaluated at least annually. The
auditor submits a written confirmation that the auditor satisfies established requirements
as to independence and objectivity. The auditor may carry out certain audit related or
non-audit services for the company, providing these are not in conflict with its duties as
auditor. The company has established an audit and non-audit service policy, including
approval limits for the management and the audit committee.
The remuneration of the auditor is approved by the ordinary general meeting. The board
of directors will report to the general meeting details of fees for audit work and any fees
Corporate governance reportPage 47
for other specific assignments. The auditor attends the general meeting if the business
which is to be transacted is of such a nature that attendance is considered necessary.
Deviations from the code: None
Corporate governance reportPage 48
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Annual report 2021
Reporting on payments to
governments
This report is prepared in accordance with the Norwegian Accounting Act Section § 3-3 d
and the Securities Trading Act § 5-5a which stipulates that companies engaged in
activities within the extractive industries shall annually prepare and publish a report
containing information about their payments togovernments at countryand project level.
The Ministry of Finance has issued a regulation (F20.12.2013 no. 1682) stipulating that
the reporting obligation only applies to reporting entities above a certain size and to
payments above certain threshold amounts. In addition, the regulation stipulates that
the report shall include other information than payments to governments, as included in
section 6 of this report, and it provides more detailed rules applicable to definitions,
publication and group reporting.
The reportable payments are defined in the regulation (F20.12.2013 nr 1682) §3.
Management has applied judgment in the interpretation of the regulation regarding the
type of payments to be included in the reporting and on what level it should be reported.
When payments are required to be reported on a project-by-project basis, OKEA reports by
field. Management interprets the regulations as such that only gross amounts on
operated licences are reportable, and only for the period when OKEA formally has been
acting as operator. This is due to payments in each licence generally being cash calls
transferred to the operator. Tax is reported on a corporate basis. All activities in OKEA
within the extractive industries are located on the Norwegian continental shelf and all the
reported payments below have been made to the Norwegian government.
1.0.
Area fee
OKEA, as operator, has paid area fees for the following licences in 2021:
Reporting on payments to governmentsPage 50
2.0.
Income tax
Income taxes are calculated for OKEA ASA. Net tax received in 2021 amounted to NOK
355 003 790 and relate to last three tax instalments for the income year 2020, the three
first tax instalments for the income year 2021 and net residual tax for 2021. This follows
from the temporary changes in the tax regulations.
3.0.
CO
2
tax
The CO2tax paidin 2021amountedtoNOK 79 745 275 and relates to the Draugen field.
4.0.
NOx
OKEA is a member of the NOx fund and all NOx payments are made to this fund rather
than to the government. The total amount paid to the NOx fund in 2021 amounted to
NOK 18 381 281.
5.0.
Petroleum Safety Authority Norway (PSA)
In 2021 the company paid NOK 2 780 071 to the PSA mainly in relation to sector fees and
supervisory activities on operated licenses.
6.0.
Other information
OKEA is also required to report on investments, operating income, production volumes
and purchases of goods and services. All reported information relates to OKEAs activities
within the extractive industries on the Norwegian continental shelf:
Total net investments amounted to NOK 941 million as specified in the statement of
cash flows.
Revenues from crude oil and gas sales amounted to NOK 3,781 million as reported
in the statement of comprehensive income.
OKEA’s net production in 2021 was 5,668,579 barrels of oil equivalents as reported
in note 6 to the financial statements.
Reference is made to the statement of comprehensive income and related disclosures
notes for information about purchases of goods and services.
Reporting on payments to governmentsPage 51
Annual report 2021
F
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Financial statements with notes
Overview of the financial statements with notes
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Note 1Corporate information
Note 2Accounting policies
Note 3Critical accounting judgements and estimates
Note 4Segment reporting
Note 5Operating income
Note 16Goodwill, exploration and evaluation assets
Note 17Lease liability
Note 18Asset retirement reimbursement right
Note 19Trade and other receivables
Note 20Financial investments
Note 21Spare parts, equipment and inventory
Note 22Cash and cash equivalents
Note 23Share capital and shareholder information
Note 24Asset retirement obligations
Note 25Interest bearing loans, bonds
Note 26Other interest bearing liabilities
Note 27Trade and other payables Note
28Financial instruments
Note 29Financial risk management
Note 30Asset acqusitions and sales
Note 31Covid-19
Note 32Commitments and contingencies
Note 33Related party transactions
Note 34Reserves (unaudited)
Note 35Events after the balance date
Confirmation from the board of directors and CEO
Alternative performance measures
Note 6Production expenses and changes in over/underlift position and production inventory
Note 7Exploration and evaluation expenses
Note 8Oil and gas properties, buildings, furniture, fixtures and office machines, right-of-use assets
Note 9Impairment / reversal of impairment
Note 10Employee benefit expenses
Note 11Other operating expenses
Note 12Financial items
Note 13Taxes
Note 14Pensions
Note 15Earnings per share
Financial statementsPage 53
Statement of comprehensive income
Revenues from crude oil and gas sales
4, 53 780 641
1 652 311
Production expenses
-695 877
Changes in over/underlift positions and production inventory
16 690
Exploration and evaluation expenses
6-860 419
623 087
7-342 972
-97 036
Depreciation, depletion and amortization
8-672 450
-699 403
Impairment (-) / reversal of impairment
9363 765
-1 387 018
Finance income
1279 884
105 559
Finance costs
12-197 001
-268 907
Other comprehensive income (OCI), net of tax:
Items that will not be reclassified to profit or loss in subsequent periods:
Earnings per share (NOK per share)
- Basic
- Diluted
155.86-5.89
155.86-5.89
Amounts in NOK `000
Note2021
2020
Other operating income / loss (-)
5101 232
77 911
Total operating income
3 881 873
1 730 222
General and administrative expenses
10, 11-95 024
-86 713
Total operating expenses
-1 584 014
-2 949 358
Profit / loss (-) from operating activities2 297 860-1 219 136
Net exchange rate gain/loss (-)
12-74 761
151 744
Net financial items
-191 877
-11 604
Profit / loss (-) before income tax2 105 982-1 230 740
Taxes (-) / tax income (+)
13-1 502 673
628 014
Net profit / loss (-)
603 309
-602 726
Remeasurements pensions, actuarial gain/loss (-)
14-507
-509
Total other comprehensive income, net of tax
-507
-509
Total comprehensive income / loss (-)602 802-603 235
Financial statementsPage 54
Statement of financial position
ASSETS
Non-current assets
Goodwill
768 946
Exploration and evaluation assets
16768 946
1610 759
38 349
Oil and gas properties
84 684 752
3 757 546
Buildings
8-
83 250
Furniture, fixtures and office equipment
811 143
10 236
17234 199
179 235
Current assets
Trade and other receivables
19, 281 053 338
513 601
Financial investments
20209 961
-
Spareparts, equipment and inventory
21253 318
228 790
Tax refund, current
130
295 932
Asset retirement reimbursement right, current
1883 412
-
Amounts in NOK `000
Note31.12.2021
31.12.2020
Right-of-use assets
Asset retirement reimbursement right
183 024 562
3 029 367
Total non-current assets
8 734 362
7 866 930
Cash and cash equivalents
22, 282 038 745
871 210
Total current assets
3 638 774
1 909 534
TOTAL ASSETS
12 373 136
9 776 464
Financial statementsPage 55
EQUITY AND LIABILITIES
Equity
Share capital
2310 387
10 250
Share premium
1 927 859
1 912 462
Other paid in capital
19 064
11 342
4 199 866
Pension liabilities
31 988
Lease liability
Deferred tax liabilities
Interest bearing loans, bonds
Current liabilities
Trade and other payables
27, 28786 535
890 362
Other interest bearing liabilities, current
26, 2838 593
-
Income tax payable
14 207
Lease liability, current
35 257
Asset retirement obligations, current
13773 020
1743 032
24104 265
-
Chaiwat Kovavisarach
Chairman of the Board
Grethe Moen
Board member
Mike Fischer
Board member
Paul Murray
Board member
Nicola Carol Gordon
Board member
Rune Olav Pedersen
Board member
Finn Haugan
Board member
Saowapap Sumeksri
Board member
Jan Atle Johansen
Board member
Anne Lene Rømuld
Board member
John Kristian Larsen
Board member
Svein Jakob Liknes
CEO
Trondheim, 30 March 2022
Statement of financial position
Amounts in NOK `000
Note31.12.2021
31.12.2020
Accumulated loss
-248 527
-851 329
Total equity
1 708 783
1 082 725
Non-current liabilities
Asset retirement obligations
244 133 177
1437 311
17220 266
143 978
131 735 720
940 558
25, 282 294 873
2 400 297
Other interest bearing liabilities
26, 28454 853
-
Total non-current liabilities
8 876 200
7 716 687
Public dues payable
42 708
37 227
Total current liabilities
1 788 153
977 052
Total liabilities
10 664 353
8 693 739
TOTAL EQUITY AND LIABILITIES
12 373 136
9 776 464
Financial statements
Page 56
Statement of changes in equity
Equity at 1 January 2020
10 2061 912 462
6 855-248 094
1 681 430
Net profit/loss (-) for the year
--
--602 726
-602 726
--
--509
-509
Share issues, cash
2344--
-
44
Equity at 1 January 2021
10 2501 912 46211 342
-851 329
1 082 725
Net profit/loss (-) for the year
---
603 309
603 309
---
-507
-507
Share issues, cash
2313715 397-
-
15 534
Total other comprehensive income/loss (-) for the year
Total other comprehensive income/loss (-) for the year
Share
Amounts in NOK `000Notecapital
Share
premium
Other paid
in capital
Accumulated
lossTotal equity
Share based payment
10--4 487
-
4 487
Equity at 31 December 2020
10 2501 912 46211 342
-851 329
1 082 725
Share based payment
10--7 722
-
7 722
Equity at 31 December 2021
10 3871 927 85919 064
-248 527
1 708 783
Financial statementsPage 57
Statement of cash flows
Cash flow from operating activities
Profit / loss (-) before income tax
2 105 982
-1 230 740
Net income tax paid/received
13
355 429
169 052
Depreciation, depletion and amortization
8
672 450
699 403
Impairment / reversal of impairment
9
-363 765
1 387 018
Expensed exploration expenditures temporary capitalised**
7, 16
184 855
335
Accretion asset retirement obligations/reimbursement right
18, 24
5 034
3 106
Asset retirement costs from billing (net after reimbursement)
18, 24
-3 770
-
Interest expense
12
94 256
166 950
Loss on financial investments
39
10 615
Change in trade and other receivables, and inventory
-564 623
-15 710
Change in trade and other payables
-94 307
-475 024
Cash flow from investing activities
Investment in exploration and evaluation assets**
16
-166 671
-28 280
Investment in oil and gas properties
8, 12
-664 129
-1 000 516
Investment in furniture, fixtures and office machines
8
-8 705
-4 377
Cash used on (-)/received from financial investments
20
-210 000
-10 615
Cash flow from financing activities
-216 948
-120 955
-195 788
-222 715
Repayment/buy-back of borrowings, bonds
25
Interest paid
Payments of lease debt
17
-25 001
-46 380
Cash and cash equivalents at the beginning of the period
871 210
1 663 478
** Expenditure relating to drilling of dry/non-commercial wells was classified under operating activities in the financial report for 2020. In
2021, the company has classified such expenditure under investment activities, and the applicable spendings in the cash flow for 2020
have been reclassified accordingly.
Amounts in NOK `000Note
2021
2020
Change in foreign exchange interest bearing debt and other non-current items
123 823
-93 596
Net cash flow from / used in (-) operating activities
2 515 403
621 410
Proceeds from sales of buildings
8, 17
109 000
-
Net cash flow from / used in (-) investing activities
-940 504
-1 043 788
Net proceeds from share issues
23
15 534
44
Net cash flow from / used in (-) financing activities
-422 203
-390 006
Net increase/ decrease (-) in cash and cash equivalents
1 152 696
-812 383
Effect of exchange rate fluctuation on cash held*
14 839
20 116
Cash and cash equivalents at the end of the period22
2 038 745
871 210
* The effect of exchange rate fluctuation on cash held was in 2020 classified under operating activities. This has been reclassified to
conform presentation to the current years classification.
Financial statementsPage 58
Notes to the financial statements
Note 1. Corporate information
OKEA ASA (“OKEA” or “the company”) is a public limited liability company incorporated and domiciled
in Norway. The company’s registered business address is Kongens gate 8, 7011 Trondheim, Norway.
OKEA’s shares are listed on the Oslo Stock Exchange under the ticker “OKEA”.
OKEA is a leading mid to late-life operator on the Norwegian continental shelf (NCS). The company
has a strong asset portfolio including the Draugen field, which is operated by OKEA, as well as non-
operated positions in Gjøa, Ivar Aasen and Yme. In 2021, the portfolio produced 15,530 boepd and
current target production for 2022 is 18,500-20,000 boepd. Furthermore, OKEA has activities in
projects under development, including the Hasselmus gas discovery and the Draugen power from
shore, as well as discoveries being evaluated for development and exploration licences with planned
and possible wells.
The financial statements of OKEA for the year ended 31 December 2021 were authorised for issue in
accordance with a resolution of the board of directors on 30 March 2022.
Note 2. Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU) and in accordance with the additional
requirements following the Norwegian Accounting Act.
The financial statements have been prepared under the assumption of going concern and on a
historical cost basis, with some exceptions as detailed in the accounting policies set out below.
Balance sheet classification
Current assets and current liabilities include items due less than a year from the balance sheet date,
and items related to the operating cycle, if longer. Other assets and liabilities are classified as non-
current.
Interest in oil and gas licences
The company accounts for its interest in oil and gas licenses based on its ownership interest in the
licence. The company recognises its share of each licence’s income, expenses, assets, liabilities and
cash flows, on a line-by-line basis in the company’s financial statements.
Acquisitions of interests in oil and gas licences
Acquisitions of interests in oil and gas licences or similar joint operations where the joint operation
constitutes a business, are accounted for in accordance with the principles in IFRS 3 Business
Combinations (acquisition method).
Identifiable assets acquired and liabilities and contingent liabilities assumed are measured initially at
their fair values at the acquisition date. Acquisition-related costs are expensed as incurred.
Financial statementsPage 59
The excess of the consideration transferred over the fair value of the net identifiable assets acquired is
recorded as goodwill. If, following careful consideration, the consideration transferred is less than the
fair value of the net identifiable assets of the joint operation acquired, such difference is recognised
directly in profit or loss.
Acquisitions of interests in oil and gas licences or similar joint operations where the joint operation is not
considered to be a business, are accounted for as acquisitions of assets. The consideration for the
interest is allocated to individual assets and liabilities acquired.
Foreign currency translation and transactions
The functional currency and the reporting currency of the company is NOK.
Foreign currency transactions are translated into NOK using the exchange rates prevailing at
transaction date. Monetary assets and liabilities in foreign currencies are translated at prevailing
exchange rates on each balance sheet date. Non-monetary items in foreign currencies are translated at
the historical exchange rate on the transaction date. Non-monetary items that are measured at fair
value are translated at the exchange rate on the date when the fair value was determined. Foreign
exchange gains and losses resulting from the settlement of foreign currency transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies are recognised in the
income statement.
Revenue recognition
Revenue from the sale of petroleum products is recognised when the company’s contractual
performance obligation has been fulfilled and control is transferred to the customer, which will ordinarily
be at the point of delivery when the titile passes (sales method). The lifting schedule and allocation of
lifts to OKEA will vary with the production profiles and commercial arrangements for the various
petroleum products and assets. Dry gas from all assets is lifted on a daily basis. Crude oil from Draugen
is lifted approximately once every quarter, crude oil from Gjøa is lifted more frequently, and for Ivar
Aasen liftings are infrequent due to our relatively low working interest. Sale of petroleum products is
mostly to large international oil companies with investment grade credit rating. The pricing of the sales
of petroleum products is determined based on market pricing for each product.
Revenues from sales of services are recorded when the service has been performed.
There is no significant judgement related to applying IFRS 15 to the company’s contracts.
Overlift and underlift of petroleum products
Over/underlift balances are measured at the lower of production cost including depreciation and net
realisable value. Changes in over/underlift balances are presented as an adjustment to cost in the
statement of income.
Overlift and underlift is calculated as the difference between the company’s share of production and its
actual sales and are classified as current assets and current liabilities respectively. If accumulated
production exceeds accumulated sales, there is an underlift (asset) and if accumulated sales exceeds
accumulated production there is an overlift (liability).
Spare parts, equipment and inventory
Inventories of petroleum products are stated at the lower of cost and net realisable value. Cost is
determined by the first-in first-out method and comprises direct purchase costs, cost of production,
transportation and processing expenses. Inventories of spare parts and consumables are valued at the
lower of cost price (based on weighted average cost) and net realisable value. Capital spare parts are
accounted for under the same principles as property, plant and equipment.
Financial statementsPage 60
Property, plant and equipment, including oil and gas properties
General
Property, plant and equipment acquired by the company are stated at historical cost, less accumulated
depreciation and impairment charges. Depreciation of other assets than oil and gas properties are
calculated on a straight-line basis and adjusted for residual values and impairment charges.
Ordinary repairs and maintenance costs, defined as day-to-day servicing costs, are charged to the
income statement during the financial period in which they are incurred. The cost of major overhauls is
included in the asset’s carrying amount when it is probable that the company will derive future economic
benefits in excess of the originally assessed standard of performance of the existing asset.
Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying
amount and are included in operating profit.
Right-of-use assets represent the right to use the underlying leased asset during the lease term
according to IFRS 16. Reference is made to section “Leases” below for further details.
Depreciation of oil and gas properties
Capitalised costs for oil and gas fields in production are depreciated individually for each field using the
unit-of-production method. The depreciation is calculated based on proved and probable reserves. The
rate of depreciation is equal to the ratio of oil and gas production for the period over the estimated
remaining proved and probable reserves expected to be recovered at the beginning of the period. The
rate of depreciation is multiplied with the carrying value plus estimated future capital expenditure
necessary to develop any undeveloped reserves included in the reserve basis. Any changes in the
reserves estimate that affect unit-of-production calculations, are accounted for prospectively over the
revised remaining reserves.
Development costs for oil and gas properties
For accounting purposes, a project is considered to enter the development phase when the technical
feasibility and commercial viability of extracting hydrocarbons from the field are demonstrable,
normally at the time of concept selection (ecision gate 2). Costs of developing commercial oil and/or
gas fields are capitalised together with borrowing costs incurred in the period of development.
Capitalised development costs and acquisition cost of fields in development are classified as tangible
assets (oil and gas properties). Pre-operational costs are expensed when incurred.
Intangible assets
Goodwill
Goodwill arising from acquisitions of interests in oil and gas licences accounted for in accordance with
the principles in IFRS 3 Business Combinations is classified as intangible assets. Goodwill is not
amortised, but it is tested for impairment at each balance date, or more frequently if an impairment
indicator exists, for example by events or changes in circumstances. Goodwill is carried at cost less
accumulated impairment losses.
Goodwill is allocated to the Cash Generating Units (CGU) that are expected to benefit from synergy
effects of the acquisition. The allocation of goodwill may vary depending on the basis for its initial
recognition. The main part of the company’s goodwill relates to the requirement to recognise deferred
tax for the difference between the assigned fair values and the related tax base ("technical goodwill").
The fair value of the company’s licences, all of which are located on the Norwegian continental shelf,
are based on cash flows after tax. This is because these licences are only sold in an after-tax market
as stipulated in the Petroleum Taxation Act Section 10. The purchaser is therefore not entitled to a tax
deduction for the consideration paid over and above the seller’s tax values. In accordance with IAS 12
paragraphs 15 and 24, a provision is made for deferred tax corresponding to the difference between
the acquisition cost and the transferred tax depreciation basis. The offsetting entry is goodwill. Hence,
goodwill arises as a technical effect of deferred tax. Technical goodwill is tested for impairment
Financial statementsPage 61
separately for each CGU which give rise to the technical goodwill. A CGU may be individual oil fields,
or a group of oil fields that are connected to the same infrastructure/production facilities.
Exploration costs for oil and gas properties
The company uses the ‘successful efforts’ method to account for exploration costs. All exploration
costs with the exception of acquisition costs of licences and drilling costs of exploration wells are
expensed as incurred.
Drilling costs of exploration wells are temporarily capitalised pending the determination of oil and gas
reserves. If reserves are not found, or if discoveries are assessed not to be technically and
commercially recoverable, the drilling costs of exploration wells are expensed.
Costs of acquiring licences are capitalised and assessed for impairment at each reporting date.
Licence acquisition costs and capitalised exploration costs are classified as intangible assets
(Exploration and evaluation assets) during the exploration phase.
Exploration and evaluation assets
Exploration and evaluation assets are assessed for impairment when circumstances suggest that the
carrying amount of an exploration and evaluation asset may exceed its recoverable amount, and
before reclassification as described below.
Intangible assets relating to expenditure on the exploration for, and evaluation of, oil and gas resources
are reclassified from intangible assets (Exploration and evaluation assets) to tangible assets (Oil and
gas properties under development) when technical feasibility and commercial viability of the assets are
demonstrable, and the decision to develop a particular area is made. The assets are assessed for
impairment, and any impairment loss recognised, before such reclassification.
Exploration and evaluation assets are subject to unit-of-production depreciations if and when
production from the field commences.
Financial assets
The company’s financial assets comprise derivatives, trade receivables and cash and cash
equivalents. The classification of financial assets at initial recognition depends on the financial asset’s
contractual cash flow characteristics and the company’s business model for managing them.
The company classifies its financial assets in two categories:
•Financial assets at amortised cost
•Financial assets at fair value through profit and loss
The company does not have any financial assets at fair value through OCI or designated at fair
value through OCI.
Financial assets at amortised cost
The company measures financial assets at amortised cost if both of the following conditions are met:
• The financial asset is held within a business model with the objective to hold financial assets
in order to collect contractual cash flows and,
• The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured using the effective interest (EIR)
method and are subject to impairment. Gains and losses are recognised in profit or loss when the
Financial statementsPage 62
asset is derecognised, modified or impaired. The company’s financial assets at amortised cost
includes trade receivables and other short-term deposits.
Trade receivables are initially recognised at transaction price less impairment losses.
Financial assets at fair value through profit and loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial
assets designated upon initial recognition at fair value through profit or loss, or financial assets
mandatorily required to be measured at fair value. Financial assets are classified as held for trading if
they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including
separated embedded derivatives, are also classified as held for trading unless they are designated as
effective hedging instruments. Financial assets at fair value through profit or loss are carried in the
statement of financial position at fair value with net changes in fair value recognised in the statement of
profit or loss.
Impairment of assets
Property, plant and equipment and other non-current assets are subject to impairment testing when
there is an indication that the assets may be impaired. The company makes such assessment on each
reporting date. If an indication exist, an impairment test where the company estimates the recoverable
amount of the asset is performed.
The recoverable amount is the higher of fair value less expected cost to sell and value in use. If the
carrying amount of an asset is higher than the recoverable amount, an impairment loss is recognised in
the income statement. The impairment loss is the amount by which the carrying amount of the asset
exceeds the recoverable amount.
The value in use is determined as the discounted future net cash flows expected to be generated by
the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows. For oil and gas properties, the field or license is
typically considered as one cash generating unit. All other assets are assessed separately.
An impairment loss on assets will be reversed when the recoverable amount exceeds the carrying
amount.
Provisions
General
A provision is recognised when the company has a present obligation (legal or constructive) as a
result of a past event, and it is probable (i.e. more likely than not) that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation. Provisions are reviewed at each balance sheet date.
The amount of the provision is the present value of the risk adjusted cost expected to be required to
settle the obligation, and is discounted by the estimated risk-free interest rate. Where discounting is
used, the carrying amount of provision increases in each period to reflect the unwinding of the
discounting by the passage of time. This increase in the provision amount is recognised as finance
cost.
Asset retirement obligations
The company recognises an asset retirement obligation when the oil and gas installations are installed
or at the later date when the obligation is incurred. The obligation is measured at the present value of
the estimated future expenditures determined in accordance with current technology, local conditions
and requirements for the dismantlement or removal of oil and gas installations.
Financial statementsPage 63
Applicable asset retirement costs are capitalised as part of the carrying value of the tangible fixed asset
and are depreciated over the useful life of the asset (i.e. unit-of-production method). The liability is
accreted for the change in its present value on each balance sheet date. The accretion effect is
classified as financial expense.
The asset retirement provision and the discount rate are reviewed at each balance sheet date.
Contingent liabilities
Contingent liabilities are not recognised in the financial statements unless it is assessed to be
probable. Significant contingent liabilities are disclosed, except for contingent liabilities where the
probability of the liability occurring is considered to be remote
.
Interest-bearing loans and liabilities
All loans and borrowings are initially recognised at cost as represented by the fair value of the
consideration received net of issue costs and transaction costs associated with the borrowing.
Following initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortised cost using the effective interest method with the difference between net proceeds received
and the redemption value being recognised in the income statement over the term of the loan.
Amortised cost is calculated by taking into account any issue costs and any discount or premium on
settlement.
Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalised during the period of time that is required to complete and prepare the
asset for its intended use or sale. Qualifying assets are assets that take a substantial period of time to
get ready for their intended use or sale. Any investment income earned on the temporary investment of
specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing
costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they incur.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or
expired. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amount is recognised in the profit and loss statement.
Derivative financial instruments
The company may use derivative financial instruments to manage certain exposures to fluctuations in
oil and gas prices and foreign currency exchange rates. Such derivative financial instruments are
initially recognised at fair value on the date of which a derivative contract is entered into and are
subsequently re-measured at fair value through profit and loss. Hedge accounting is not applied. For
derivative financial instruments where the underlying is a commodity, changes in fair value are
recognised as part of operating activities. Changes in fair values for other derivative financial
instruments are classified as part of financial activities.
Income taxes
The taxes/tax income consists of current income tax (taxes payable/receivable) and changes in
deferred income taxes.
Current income taxes
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantially enacted by the balance sheet date.
Financial statementsPage 64
Companies operating on the Norwegian continental shelf under the offshore tax regime can claim 78%
tax refund on exploration costs, limited to taxable losses for the year. The refund is receivable in
November the following year and is classified as a current tax asset. Refer also to section “temporary
change to tax regime for oil and gas companies”.
Current income tax relating to items recognised directly in equity is recognised directly in equity.
Deferred income taxes
Deferred tax/tax benefits are calculated on the basis of the differences between book value and tax
basis values of assets and liabilities.
Deferred income tax assets are recognised for all deductible temporary differences (with the exception
of temporary differences on acquisition of licences that is defined as an asset purchase), carry forward
of unused tax credits and unused tax losses, to the extent that it is probable that the taxable profit will
be available against which the deductible temporary differences, and the carry forward of unused tax
credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets are
reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be
utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are
recognised to the extent that it has become probable that future taxable profit will allow the deferred tax
asset to be recovered (onshore activity).
Companies operating on the Norwegian continental shelf under the offshore tax regime can claim the
tax value of any unused tax losses or other tax credits related to its offshore activities to be paid
(including interest) from the tax authorities when operations cease. There is no time limit on the right to
carry tax losses forward in Norway. Deferred tax assets that are based on offshore tax losses carry
forward are therefore normally recognised in full.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the balance sheet date.
Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right
exists to set off current tax assets against income tax liabilities and the deferred income taxes relate to
the same taxable entity and the same taxation authority/tax regime. Timing differences are considered.
Deferred tax assets and liabilities are recognised for the future tax consequences attributable to
differences between the carrying amounts of existing assets and liabilities and their respective tax
bases, subject to the initial recognition exemption for acquisition of assets. Deferred income tax
relating to items recognised directly in equity is recognised in equity and not in the income statement.
Uplift
Uplift is a special income deduction in the basis for calculation of the special tax relief. The uplift is
calculated on the basis of the original capitalised cost of offshore production installations and generally
amounts to 5.2% of the investment per year. The uplift may be deducted from taxable income for a
period of four years (i.e. in total 20.8% over four years), starting in the year in which the capital
expenditures incur. The tax effect on uplift is recognised when the deduction is included in the current
year tax return and impacts taxes payable. Unused uplift may be carried forward indefinitely.
Temporary change to the tax regime for oil and gas companies
In June 2020, the Norwegian Parliament enacted a temporary change to the tax regime for oil and gas
companies for the income years 2020 and 2021. The cost of offshore production installations can be
deducted in the 56% special tax base in the investment year. Further, uplift of 24% on these
investments can be deducted in the 56% special tax base in the investment year. The same treatment
is applicable until planned production start for projects where a plan for development and operation
Financial statementsPage 65
(PDO) is filed by the end of 2022 and approved prior to the end of 2023. The tax value of tax losses in
2020 and 2021, deducted for tax refund from exploration expenses, is received in six instalments, of
which three in received in the tax year and three is received the following year.
Proposed changes to the tax regime
A new tax regime has been proposed by the government and presented through a public consultation
announced in September 2021. The closing date for submitting responses to the public consultation
was early December 2021 and responses are currently under consideration by the Ministry of Finance.
The proposed changes have not been reflected upon preparation of the annual report for 2021.
Employee benefits
Pensions
According to Norwegian law, all employees are members of the company’s mandatory pension
scheme (“obligatorisk tjenestepensjon”). The company’s pension scheme is a defined contribution
plan where contributions are paid to the pension insurer and charged to the income statement in the
period to which the contributions relate. Once the contributions have been paid, there are no further
obligations to fund the scheme (as the case may be under a defined benefit plan).
To accommodate for employees working offshore at Draugen retiring at the age of 65 as required by
Norwegian law for offshore personnel, the company has established an unfunded defined benefit
scheme to cover pension for the 2 years between 65 and 67 which is recognised as pension liability in
the balance sheet.
Defined benefit plans are valued at the present value of accrued future pension benefits at each
balance sheet date.
The current service cost and interest costs are recognised immediately and is presented as part of the
salary and personnel cost in the income statement. Interest cost is calculated by using the discount rate
of the liability at the beginning of the period on the net liability. Changes in net pension liability as a
result of pension payments have been taken into consideration. The pension costs are recognised as
part of chargeable costs to operated joint ventures and as such reflected in the income statement
across several line items such as production expenses, exploration expenses, general and
administrative expenses and as oil and gas properties in the balance sheet. Actuarial gains and losses
are recognised through other comprehensive income and are not reclassified over profit and loss.
Share-based payment
Warrants and other equity instruments granted to employees are measured by reference to the fair
value of the warrants or other equity instruments at the date on which they are granted. The fair value
of the warrants or other equity instruments is estimated on the grant date and expensed over the
vesting period with a corresponding increase in equity. The vesting period is the period in which the
performance conditions are fulfilled, ending on the date on which they become entitled to the award
(‘vesting date’).
Cash and cash equivalents
Cash and cash equivalents comprise of cash on hand, deposits held at call with banks and other
short-term highly liquid investments with original maturities of three months or less. Time deposits
available on demand are classified as cash and cash equivalents.
Cash flow statement
The cash flow statement is prepared using the indirect method. Interest paid is presented under
financing activities.
Financial statementsPage 66
Leases (as lessee)
The company adopted IFRS 16 - Leases from 1 January 2019. IFRS 16 defines a lease as a contract
that conveys the right to control the use of an identified asset for a period of time in exchange for a
consideration. For each contract that meets this definition, except for short-term leases and leases of
low value assets, IFRS 16 requires lessees to recognise a right-of-use asset and a lease liability in the
balance sheet with certain exemptions for short term and low value leases. Lease payments are
recognised as interest expense and a reduction of lease liabilities, while the right-of-use assets are
depreciated over the shorter of the lease term and the assets’ useful life. Lease liabilities are measured
at the present value of remaining lease payments, discounted using the interest rate implicit in the lease
contract, or if this is not available, the company’s calculated borrowing rate per lease object. Right-of-
use assets are measured at an amount equal to the lease liability at initial recognition. Leasing
contracts entered into as an operator of a licence are presented on a gross basis when the contract is
signed by the company on behalf of the licence.
Cost of equity transactions
Transaction costs directly attributable to an equity transaction are recognised directly in equity, net of
taxes.
Related parties
Parties are considered to be related if one party has the ability to, directly or indirectly, control the other
party or exercise significant influence over the party in making financial or operational decisions.
Parties are also considered to be related if they are subject to joint or common control.
Transactions between related parties comprise transfers of resources, services or obligations,
regardless of whether a price is charged. All transactions between related parties are made based on
the principle of ‘arm’s length’, which is the estimated market price.
Events after the balance sheet date
The financial statements are adjusted to reflect events after the balance sheet date that provide
evidence of conditions that existed at the balance sheet date (adjusting events). The financial
statements are not adjusted to reflect events after the balance sheet date that are indicative of
conditions that arose after the balance sheet date (non-adjusting events). Non-adjusting events are
disclosed if significant.
New and amended standards and interpretations adopted by the company
New
standards and amendments to standards and interpretations effective from 1 January 2021 did not
have any significant impact on the financial statements.
New and amended standards and interpretations issued but not adopted
A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning on or after 1 January 2022 and have not been applied in preparing these financial
statements. None of these new standards and amendments to standards and interpretations are
expected to have any significant impact on the company’s financial statements.
Note 3. Critical accounting judgements and estimates
The preparation of financial statements requires management to make judgments, use estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, revenues
and expenses.
Although these estimates are based on management’s best knowledge of historical experience and
current events, actual future results may differ from these estimates. The estimates and the underlying
assumptions are reviewed on an ongoing basis.
Financial statementsPage 67
Currently, the company’s most important accounting estimates relate to the following items:
Impairment
The company reviews whether its non-financial assets have suffered any impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An asset is
written down to its recoverable amount when the recoverable amount is lower than the carrying value of
the asset. The recoverable amount is the higher of fair value less expected cost to sell and value in use
(present value based on the future use of the asset).
All impairment assessments require a high degree of estimation, including assessments of expected
future cash flows from the cash generating unit and the estimation of applicable discount rates.
Impairment testing requires long-term assumptions to be made concerning a number of economic
factors such as future production levels, market conditions, production expense, discount rates and
political risk among others, in order to establish relevant future cash flow estimates. There is a high
degree of reasoned judgement involved in establishing these assumptions and in determining other
relevant factors.
Goodwill is tested for impairment at each balance sheet date. The term “technical goodwill” is used to
describe a category of goodwill arising as an offsetting account to deferred tax recognised in business
combinations. There are no specific IFRS guidelines pertaining the allocation of technical goodwill, and
management has therefore applied the general guidelines for allocating goodwill for the purpose of
impairment testing. The appropriate allocation of goodwill requires management’s judgment and may
impact the subsequent impairment charge significantly. In general, technical goodwill is allocated to
CGU level for impairment testing purposes, while residual goodwill may be allocated across all CGUs
based on facts and circumstances in the business combination. When performing the impairment test
for technical goodwill, deferred tax recognised in relation to the acquired licences reduces the net
carrying value prior to the impairment charges in order to avoid an immediate impairment of all
technical goodwill. When deferred tax from the initial recognition decreases, more goodwill is as such
exposed for impairment. Going forward, depreciation of values calculated in the purchase price
allocation will result in decreased deferred tax liability.
Fair value measurement
At balance sheet date the fair values of non-financial assets and liabilities are required to be
determined. This may include situations when the entity acquires a business, determines allocation of
purchase price in an asset deal or where an entity measures the recoverable amount of an asset or
CGU at fair value less cost to sell. Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. The
fair value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability. A fair value measurement of a non-financial asset takes into
account a market participant’s ability to generate economic benefits by using the asset in its highest and
best use or by selling it to another market participant that would use the asset in its highest and best
use. The company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value in order to maximise the use of relevant observable
inputs and minimise the use of unobservable inputs. The fair value of oil fields in production and
development phase is normally based on discounted cash flow models, where the determination of the
different input in the model requires significant judgment from management (ref. chapter regarding
impairment above).
Asset retirement obligations
Production of oil and gas is subject to statutory requirements relating to decommissioning and removal.
Provisions to cover such future asset retirement obligations is recognised at the time the statutory
requirement arises, which is defined as when the equipment has been installed or a well has been
drilled. The estimates are uncertain and may vary in response to many factors including changes to
relevant legal requirements, the emergence of new restoration techniques or experience at other
production sites. The expected timing and amount of expenditure can also change, for example in
response the changes in reserves or changes in laws and regulations or their interpretation. A premise
Financial statementsPage 68
in the estimation for the future obligations is current technology and market conditions. As such, there
is also inherent risk related to future developments in technology and market prices. Furthermore,
future price levels, market conditions and development in technology can impact the timing of the
closing of production and thus the timing of abandonment. The company is reviewing the estimates
and assumptions related to asset retirement obligations to ensure the financial statements reflect the
company’s best estimate at any reporting date.
Financial statementsPage 69
Note 4. Segment reporting
Note 5. Operating income
Revenues from crude oil and gas sales:
2 198 055
1 373 994
3 935 445
4 079 188
3 939 638
4 136 945
The company has identified its reportable segment based on the nature of the risk and return within its business. The company’s only
business segment is development and production of oil and gas on the Norwegian continental shelf.
Amounts in NOK `000
2021
2020
Sale of liquids
Sale of gas
1 582 586
278 317
Total revenues from crude oil and gas sales
3 780 641
1 652 311
Sales volumes in boe*
2021
2020
Sale of liquids
Sale of gas
1 847 140
1 729 642
Total sale of petroleum
5 782 585
5 808 830
Production volumes in boe*
2021
2020
Production of liquids
Production of gas
1 728 941
1 772 976
Total production
5 668 579
5 909 921
*Barrels of oil equivalents
Financial statementsPage 70
** Relates to joint utilisation of the offshore supply ship "Siem Pride" and supply base "Vestbase".
Note 6. Production expenses and changes in over/underlift position and
production inventory
Production expenses:
753 181
17 884
-15 107
15 852
Amounts in NOK `000
2021
2020
From licence billings - producing assets
591 305
From licence billings - assets under development - various preparations for operation
7 813
Other production expenses (insurance, transport)
89 354
96 759
Production expenses
860 419
695 877
Production expenses
860 419
695 877
Less: processing tariff income
-61 960
-53 237
Less: joint utilisation of logistics resources
-23 036
Less: preparation for operation asset under development
-17 884
-7 813
Net production expenses
757 539
619 721
Produced volumes (boe)
5 668 579
5 909 921
Production expense NOK per boe*
133.6
104.9
* Barrels of oil equivalents
Changes in over/underlift positions and production inventory:
Amounts in NOK `000
2021
2020
Changes in over/underlift positions
-77 423
Changes in production inventory
7 236
94 112
Total changes income/loss (-)
23 087
16 690
Volumes in boe
2021
2020
Produced volumes
5 668 579
5 909 921
Third-party volumes available for sale*
-53 795
0
Sold volumes
-5 728 790
-5 808 830
Total changes in boe
-114 006
101 091
* Compensation volumes received from Duva (tie-in to Gjøa)
Financial statementsPage 71
* The drilling of exploration well Jerv in licence PL973 was completed in Q1 2021 and concluded non-commercial discovery. The drilling of
exploration well Ilder in licence PL973 was completed in Q2 2021 and the well was dry. The drilling of exploration well Ginny in licence
PL1060 was completed in February 2022. The well was dry and cost incurred as of 31 December 2021 was charged as expense in the
financial statements for 2021.
Note 7. Exploration and evaluation expenses
Specification of exploration and evaluation expenses
Amounts in NOK `00020212020
Share of exploration and evaluation expenses from participation in licences excluding dry
well impairment, from billing
95 27874 942
Share of exploration expenses from participation in licences, dry well write off, from
billing*
184 855335
Seismic and other exploration and evaluation expenses, outside billing
62 83921 759
Total exploration and evaluation expenses342 97297 036
Financial statementsPage 72
3 008
-44 638
-
-92 501
-7 626
-
-44 638
-100 127
Accumulated depreciation and
impairment at 1 January 2021
Depreciation for the year
-1 468 663
-645 029
-730 397
-
-9 250
-4 625
-9 198
-7 798
-70 204
-14 999
-2 287 711
-672 450
-10 003
-10 003
Additional depreciation of IFRS
16 Right-of-use assets*
Impairment (-) / reversal of
impairment
-366 632
730 397
Note 8. Oil and gas properties, buildings, furniture, fixtures and office
machines, right-of-use assets
Amounts in NOK `000
Oil and gas
properties in
production
Oil and gas
properties under
development
Buildings
Furniture,
fixtures and
office
machines
Right-of-use
assets
Total
2021
2 037 626
365 785
92 501
-
19 434
8 705
249 439
79 966
3 918 980
883 957
358
6 317 979
1 338 412
358
3 008
Cost at 1 January 2021
Additions
Reclassification from inventory
Reclassification from exploration
Removal and decommissioning
asset
Disposals
Transfer from development to
production
2 406 419
-2 406 419
-
Cost at 31 December 2021
7 165 077
-
-
20 512
329 404
7 514 993
13 875
7 626
-
363 765
21 501
Disposals
Accumulated depreciation
and impairment at
31 December 2021
-2 480 324
-
-
-9 370
-95 205
-2 584 899
Carrying amount at
31 December 2021
4 684 752
-
-
11 143
234 199
4 930 094
Financial statementsPage 73
2020
Cost at 1 January 2020
Additions
3 176 835
586 539
1 505 91392 501
538 321 -
15 056 199 051
4 377 59 133
4 989 357
1 188 370
37 522
37 522
118 084
-6 608
-8 746
111 476
-8 746
Accumulated depreciation and
impairment at 1 January 2020
Depreciation for the year
-796 860
-671 803
- -4 625
- -4 625
-3 806 -35 653
-5 392 -17 584
-840 944
-699 403
Additional depreciation of IFRS
16 Right-of-use assets*
-18 949
-730 397
Estimated useful life (years)
Reclassification from inventory
Removal and decommissioning
asset
Disposals
Transfer from development to
production
-
Cost at 31 December 2020
3 918 980
2 037 62692 501
19 434249 439
6 317 979
1 982
-18 949
-730 397
1 982
Impairment
Disposals
Accumulated depreciation
and impairment at
31 December 2020
-1 468 663
-730 397-9 250
-9 198-70 204
-2 287 711
Carrying amount at
31 December 2020
2 450 318
1 307 22983 250
10 236179 235
4 030 268
Depreciation plan
Unit of Production
**)Linear
LinearLinear
N/A
20
3 - 52 - 20
See note 17 for information about the sale and leaseback transaction for the property Råket 2 completed in December 2021.
*) Depreciation of IFRS 16 right-of-use assets are presented gross related to leasing contracts entered into as licence operator
**) Depreciation starts when the asset is in production.
2022
202320242025
1 050 000
508 000106 00035 000
Amounts in NOK `000
Planned capital expenditure for existing licences
(work program and budget)
Financial statementsPage 74
Note 9. Impairment / reversal of impairment
Below is an overview of the key assumptions applied in the impairment test as of 31 December 2021:
Key assumptions applied in the impairment test as of 31 December 2020:
The long-term inflation rate is assumed to be 2.0% (2020: 2.0%).
Tangible and intangible assets are tested for impairment / reversal of impairment whenever indicators are identified and at least on an
annual basis. Impairment is recognised when the book value of an asset or cash generating unit exceeds the recoverable amount. The
recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. The recoverable amount is estimated based on
discounted future after tax cash flows. The expected future cash flows are discounted to net present value by applying a discount rate after
tax that reflects the weighted average cost of capital (WACC).
Technical goodwill arises as an offsetting account to the deferred tax recognised in business combinations and is allocated to each Cash
Generating Unit (CGU). When deferred tax from the initial recognition decreases, more goodwill is as such exposed for impairments.
Fair value assessment of the company’s right-of-use (ROU) assets portfolio are included in the impairment test.
Future capex, opex and abandonment cost are calculated based on the expected production profiles and the best estimate of the related
cost. For fair value testing the discount rate applied is 9.0% nominal post tax (2020: 10.0% nominal post tax). The main driver for the
reduced WACC was lower cost of debt.
The valuation of oil and gas properties and goodwill are inherently uncertain due to the judgemental nature of the underlying estimates.
This risk has increased due to the current market conditions with rapid fluctuation in supply and demand of oil and gas causing more
volatility in prices.
Total cost for CO2 comprises Norwegian CO2 tax and cost of the EU Emission Trading System and is estimated to gradually increase from
NOK 1 150 per tonne in 2022 towards a long term price of NOK 2 000 per tonne from 2030 in line with price estimates presented by the
Norwegian authorities in late 2021. NOx prices are estimated to increase from approximately NOK 17 per kg in 2022 to a level of
approximately 28 NOK per kg from 2030. A future change in how the world will react in light of the goals set in the Paris Agreement could
have adverse effects on the value of OKEA’s oil and gas assets. Sensitivities on changes to environmental cost is reflected in the table
below.
Oil
Gas
Currency rates
Year
USD/boe*
GBP/therm*
NOK/USD
2022
2023
From 2024
74.7
69.1
66.3
1.61
1.05
0.48
8.8
8.4
8.0
Currency rates
Year
Oil
USD/boe*
Gas
GBP/therm*
NOK/USD
2021
2022
2023
2024
From 2025
50.9
48.7
52.8
60.3
65.0
0.46
0.42
0.42
0.42
0.43
8.55
8.57
8.42
8.16
8.00
* Prices in real terms
Other assumptions
For oil and gas reserves future cash flows are calculated on the basis of expected production profiles and estimated proven and
probable remaining reserves.
Financial statementsPage 75
Increase / decrease (-) of pre-tax
impairment 2021 (NOK ’000)
Increase in
assumption
Decrease in
assumption
Increase in
assumption
Decrease in
assumption
Assumptions
Oil and gas price
Currency rate NOK/USD
Discount rate
Inflation rate
-366 632
-366 632
88 350
-40 661
Environmental opex
Change
+/- 10%
+/- 1.0 NOK
+/- 1% point
+/- 1% point
+/- 20% point
-730 397
-730 397
-275 415
-404 425
-285 900
173 509
278 979
-455 873
-322 381
-441 629
77 864
537 274
642 743
-92 108
41 383
-77 864
IEA scenario
Prices 2030 &
2050
Alternative
calculations of pre-
tax impairment/
reversal (-) in 2021
(NOK ’000)
Increase/ decrease
(-) of pre-tax
impairment 2021
(NOK ’000)
533 199
42 077
-206 784
Net zero emissions by 2050
Sustainable development
Announced pledges
Stated policies
Oil 36 - 24 $/bbl, Gas 29 - 27 pence/therm
Oil 56 - 50 $/bbl, Gas 32 - 34 pence/therm
Oil 67 - 64 $/bbl, Gas 49 - 49 pence/therm
Oil 77 - 88 $/bbl, Gas 57 - 62 pence/therm
169 434
-321 688
-570 548
-730 397
-366 632
Impairment testing of technical goodwill, ordinary goodwill, fixed assets and right-of-use assets as of 31 December 2021
Based on impairment testing, NOK 364 million in impairment reversal of previous impairment of the Yme asset was recognised in 2021
with an offset to changes in deferred taxes of NOK 284 million. The key driver for the reversal of impairment was the production start of the
Yme asset in October 2021 combined with significant increased forward prices of oil during 2021 as well as the transfer of ownership and
operatorship of the Inspirer rig. There was no impairment or reversal of impairment for any of the other fixed assets or right-of-use assets in
2021. There was no impairment of ordinary or technical goodwill in 2021.
Impairment testing of technical goodwill, ordinary goodwill, fixed assets and right-of-use assets as of 31 December 2020
Based on impairment testing, NOK 1 387 million in impairment charges were recognised in 2020. The impairment loss was recognised to
reduce the carrying amount of oil and gas properties at Yme of NOK 730 million with an offsetting change in deferred tax of NOK 570
million, "technical" goodwill of the Draugen, Gjøa and Ivar Aasen CGUs of NOK 403 million, and ordinary goodwill of NOK 253 million. The
key driver for the impairment of technical goodwill and ordinary goodwill was the significant adverse development in oil and gas prices
during 2020. Note that impairment of goodwill may not be reversed even if the market situation subsequently improves. Impairment of oil
and gas properties at Yme was additionally driven by increased capital expenditures as well as a revised estimate for start of production.
Sensitivity analysis 2021
The table below shows what the impairment (pre-tax) would have been in 2021 under various alternative assumptions for key variables in
the calculation (assuming all other assumptions remaining constant). The amounts represent the combined impairment for CGUs Gjøa,
Draugen, Ivar Aasen and Yme, and ordinary goodwill.
Alternative calculations of pre-
tax impairment/reversal (-) in
2021 (NOK ’000)
The Net zero scenario is the only scenario that will result in significant worse result than the current base case for OKEA’s portfolio. The
impairment figure in the Net zero case is mainly related to fixed asset values at Yme CGU which is partly offset in changes to deferred tax,
and impairment of technical goodwill at the Draugen CGU. The reversal indicated in the Stated policies is capped at previous impaired
fixed asset value of the Yme CGU. The analysis performed indicates the risk of any stranded assets in OKEA’s portfolio is quite limited
under the current IEA scenarios.
In addition, scenarios from the International Energy Agency (IEA) have been tested for impairment. Descriptions of these four scenarios
can be found in OKEA’s ESG report for 2021. The prices in these scenarios are provided in real 2020 terms for 2030 and 2050. Forward
prices are applied for 2022 and linearly interpolated from average 2022 forward price to IEA scenario price 2030 and linearly interpolated
from IEA scenario price 2030 to IEA scenario prices 2050. The numbers to the left are alternative calculations of impairment or impairment
reversal (-) and the numbers to the right are changes from what is reflected in the income statement of a reversal of NOK 363 765
thousand.
Financial statementsPage 76
Sensitivity analysis 2020
Increase in
assumption
Decrease in
assumption
Increase in
assumption
Decrease in
assumption
590 944
52 461
-244 384
Assumptions
Oil and gas price
Currency rate NOK/USD
Discount rate
Inflation rate
Change
+/- 10%
+/- 1.0 NOK
+/- 1% point
+/- 1% point
800 634
1 265 500
1 466 409
1 159 071
1 977 962
1 439 479
1 142 634
1 452 144
-586 385
-121 518
79 391
-227 948
65 126
The table below shows what the impairment (pre-tax) would have been in 2020 under various alternative assumptions for key variables in
the calculation (assuming all other assumptions remaining constant). The amounts represent the combined impairment for CGUs Gjøa,
Draugen, Ivar Aasen and Yme, and ordinary goodwill.
Increase / decrease (-) of pre-tax
impairment 2020 (NOK ’000)
Alternative calculations of pre-
tax impairment/reversal (-) in
2020 (NOK ’000)
Financial statementsPage 77
Note 10. Employee benefit expenses
Specification of employee benefits expenses included in general and administrative expenses
Number of man-years during the year
215
209
Pensions:
The company has a defined contribution pension scheme for all employees which satisfies the statutory requirements in the Norwegian law
on required occupational pension (“lov om obligatorisk tjenestepensjon”). In addition, the company has a defined benefit pension plan to
cover for the age 65-67 for offshore employees. Reference is made to note 14 for further details.
The company is part of the AFP ("avtalefestet pensjon") scheme and contributes to the AFP pension for all eligible employees in
accordance with the AFP regulations.
Amounts in NOK `000
2021
2020
Salary expenses
Employer’s payroll tax expenses
Pensions
Share based payment
Other personnel expenses
370 101
59 411
37 472
7 722
10 053
343 400
51 161
34 314
4 487
5 506
Gross employee benefits expenses
484 758
438 868
Gross other general and administrative expenses, see note 11
196 276
160 498
Gross general and administrative expenses
681 034
599 366
Allocated to operated licences
Reclassified to oil and gas properties under development
-581 578
-4 432
-502 367
-10 286
Total general and administrative expenses
95 024
86 713
Financial statementsPage 78
Compensation to management in 2021: *
Variable
Salaryremuneration**
Other
benefits***
Amounts in NOK `000
Erik Haugane (former CEO)
1)
Svein J. Liknes (CEO)
2)
1 6051 292
2 3412 402
2 6401 021
3 3031 096
2 4931 081
2 6351 158
3 0051 301
3 1381 455
1 681 873
Pension
181
125
181
181
181
181
181
181
181
10 350
99
12
12
357
12
313
564
12
Dag Eggan (SVP business performance)
Tor Bjerkestrand (SVP operations)
Espen Myhra (SVP business development)
Andrew McCann (SVP subsurface & wells)
Birte Norheim (CFO)
Knut Gjertsen (SVP projects & technology)
Marit Moen Vik-Langlie (VP legal)
Total compensation to management
22 84011 677
1 572
11 731
Former employee Knut Evensen is entitled to two years severance pay from the termination of the employment agreement in July 2020.
There are no other agreements regarding severance pay on termination of employment for the management or to members of the board
of directors.
OKEA has a share bonus scheme for all employees, also including the senior management. The criteria for the share bonus are
determined by the board of directors on a yearly basis. The board conducts an annual assessment of the arrangement, determines the
achievement of the criteria and sets bonus criteria for the coming year.
OKEA has a long-term incentive scheme for senior management and key employees. In 2021 OKEA issued 502 700 incentive-shares
with subscription price of NOK 0.1 per share. The shares are subject to a lock-up period of 12 months.
No loans have been granted and no guarantees have been issued to the management or any member of the board of directors.
2)
Svein J. Liknes, CEO and member of the senior management team from 01.06.21. Mr. Liknes is entitled to 6 – 18 months severance
pay, depending on the circumstances.
1)
Erik Haugane, CEO and member of the senior management team until 31.05.21. Mr. Haugane is entitled to receive base salary, bonus
and pension/insurance/other benefits until end of February 2023. The estimated amount he is entitled to in this period is included in "other
benefits".
* Compensation in form of salaries is included in the year paid. From 2021 variable and other compensations are included in year earned.
** Variable remuneration includes remuneration related to employee share insentive program and long-term incentive scheme.
*** Other benefits include fringe benefits, value of warrants triggered and other benefits to the former CEO, see footnote 1).
Financial statementsPage 79
Compensation to management in 2020: **
Amounts in NOK `000
Other
benefits
Erik Haugane (CEO)
Anton Tronstad (SVP projects & technology)
1)
Dag Eggan (SVP business performance)
Tor Bjerkestrand (SVP operations)
3)
Kjersti Hovdal (SVP controlling & accounting)
2)
Espen Myhra (SVP business development)
Andrew McCann (SVP subsurface & wells)
Birte Norheim (CFO)
4)
Knut Gjertsen (SVP projects & technology)
5)
Marit Moen Vik-Langlie (VP legal)
6)
SalaryBonus
3 916 863
665200
2 624426
2 940 1 360
516426
2 421184
2 519495
2 151340
2 260424
1 619407
Pension
160
40
160
160
33
160
160
127
120
160
20
5
20
14
4
21
20
209
1 624
20
Total compensation to management
21 6315 125
1 280
1 958
** Compensation in form of salaries and bonus is included in year paid. Other compensation is included as incurred.
1)
Anton Tronstad, SVP projects & technology and member of the senior management team until 31.03.20.
2)
Kjersti Hovdal, SVP controlling & accounting and member of the senior management team until 15.03.20.
3)
Tor Bjerkestrand, the amount in bonus includes NOK 700 000 related to an individual bonus settled by shares.
4)
Birte Norheim, CFO from 16.03.20. Amount on other benefits include housing expenses.
5)
Knut Gjertsen, SVP projects & technology from 01.04.20. Amount on other benefits include pension compensation and compensation
related to expenses due to change of employer to OKEA.
6)
Marit Moen Vik-Langlie, VP legal, entered the senior management team 01.01.20.
Compensation to Board of Directors in 2021: ***
Amounts in NOK `000
Sub-committee
feesTotal fees
Chaiwat Kovavisarach (chairman)
Paul Anthony Murray (board member)
Michael William Fischer (board member)
Saowapap Sumeksri (board member)
1)
Prisana Praharnkhasuk (board member)
3)
Finn Haugan (board member)
Liv Monica Stubholt (board member)
2)
Rune Olav Pedersen (board member)
Nicola Gordon (board member)
Grethe Moen (board member)
1)
John Kristian Larsen (board member)
1)
Ida Ianssen Lundh (board member)
2)
Anne Lene Rømuld (board member)
Jan Atle Johansen (board member)
Frank Stensland (deputy board member)
2)
Bengt Morten Sangolt (deputy board member)
2)
Bjørn Ingar Pettersen (deputy board member)
2)
Ragnhild Aas (deputy board member)
Gro Anita Markussen (deputy board member)
1)
Jens Arne Megaard (deputy board member)
1)
Board fees
630
435
435
-
123
455
127
435
435
258
147
152
275
275
-
-
-
25
-
-
- 630
75 510
138 572
0 0
25 148
143 597
25 152
88 522
140 575
63 320
23 170
34 186
55 330
70 345
--
--
--
-25
- -
--
Total compensation to board of directors
4 206
8765 082
*** The table shows the compensation paid out to the board of directors in 2021.
1)
Board member from 03.05.2021.
2)
Board member until 03.05.2021.
3)
Board member until 28.04.2021.
Financial statementsPage 80
Compensation to board of directors in 2020: ****
Amounts in NOK `000
Sub-committee
feesTotal fees
Board fees
578
125
259
384
748
384
377
384
377
145
384
384
-
-
-
239
- 578
- 125
- 259
75 459
215 963
140 524
75 452
105 489
105 482
25 170
100 484
100 484
--
--
--
75314
Chaiwat Kovavisarach (chairman)
Henrik Schröder (board member) 1)
Paul Anthony Murray (board member) 2)
Michael William Fischer (board member)
Prisana Praharnkhasuk (board member)
Finn Haugan (board member)
Liv Monica Stubholt (board member)
Rune Olav Pedersen (board member)
Nicola Gordon (board member)
Ida Ianssen Lundh (board member)
Anne Lene Rømuld (board member)
Jan Atle Johansen (board member)
Frank Stensland (deputy board member)
Bengt Morten Sangolt (deputy board member)
Bjørn Ingar Pettersen (deputy board member)
Ragnhild Aas (deputy board member)
Total compensation to board of directors
4 766
1 0155 781
**** The table shows the compensation paid out to the board of directors in 2020.
2)
Board member from 24.04.2020.
1) Board member until 24.04.2020.
Financial statementsPage 81
Share based payment
Anton Tronstad (former SVP projects & technology)
Dag Eggan (SVP business performance)
Tor Bjerkestrand (SVP operations)
Overview of outstanding warrants in connection with share based payment:
Guideline and report on remuneration for leading persons
A guideline on remuneration for leading persons was endorsed by the annual general meeting on 3 May 2021. A revision of these
guidelines and a separate report on remuneration for leading persons in 2021 will be presented at the annual general meeting scheduled
for 28 April 2022.
Warrants to employees:
In February 2018, OKEA granted 1 250 000 equity-settled warrants to employees, each warrant with an exercise price of NOK 17.9.
Expiry date for the warrants is 1 October 2022. It is a requirement that the employees are still employed by OKEA when exercising the
warrants. The assessed fair value at grant date of warrants granted was NOK 5.88 per warrant. The fair value at grant date was
determined using a Black Scholes Model. The most significant inputs and assumptions in determining fair value at grant date was:
- Exercise price NOK 17.9
- Share price at grant date NOK 17.9 -
Expected volatility 34.7%
- Risk free interest rate 1.5% -
Term of options 4.5 years
Amounts in NOK `000
20212020
Warrants to employees
Incentive-shares to management
1 010 1 601
6 712 2 886
Total share based payment expense
7 7224 487
Warrants granted in connection with share based payment owned by management:
Number of
warrants
1)
Expense
recognised
Erik Haugane (former CEO)
572
572
52
52
-238
250 000
250 000
40 000
40 000
670 000
1 250 000
1 010
Other employees and former management
Total
1)
Warrants owned directly or indirectly by employee.
20212020
Outstanding warrants at 1 January
Warrants granted
Warrants forfeited
Warrants exercised
Warrants expired
985 000
-
-40 000
-865 000
-
1 235 000
-
-250 000
-
-
Outstanding warrants at 31 December
80 000
985 000
Of which exercisable
80 000
985 000
Financial statementsPage 82
Note 11. Other operating expenses
Specification of other operating expenses included in general and administrative expenses
Note 12. Financial items
*Interest expense and fees to bondholders in 2020 includes waiver fees and costs relating to reaching agreement with the bondholders
in OKEA02 and OKEA03 to amend the bond terms in June of NOK 53.5 million. Reference is made to note 25 for further details.
Amounts in NOK `000
2021
2020
Technical and IT consultants
Administrative consultants
Travel expenses
Office rentals and other office expenses
IT software, hardware and other expenses
104 412
11 992
7 977
11 851
60 045
89 943
13 109
9 021
11 236
37 189
Gross other general and administrative expenses
196 276
160 498
Gross employee benefits expenses, see note 10
484 758
438 868
Gross general and administrative expenses
681 034
599 366
Allocated to operated licences
Reclassified to oil and gas properties under development
-581 578
-4 432
-502 367
-10 286
Total general and administrative expenses
95 024
86 713
Auditor’s fees (ex. VAT)
Amounts in NOK `000
20212020
Auditor’s fee
Other attestation services
Tax advisory
Other services
Total auditor’s fees
1 093 1 200
632 721
0 0
38 23
1 7631 944
Amounts in NOK `000
2021
2020
Interest income
Unwinding of discount asset retirement reimbursement right (indemnification asset)
Gain on buy-back bond loan
Total finance income
1 120
78 764
-
79 884
4 036
77 450
24 074
105 559
Interest expense and fees from loans and borrowings*
Capitalised borrowing cost on development projects
Interest expense shareholder loan
Other interest expense
Unwinding of discount asset retirement obligations
Loss on buy-back bond loan
Loss on financial investments
Other financial expense
Total finance costs
-210 907
116 709
-57
-3 986
-83 797
-6 364
-39
-8 558
-197 001
-291 237
124 344
-57
-4 331
-80 555
-
-
-17 071
-268 907
Exchange rate gain/loss (-), interest-bearing loans and borrowings
Net exchange rate gain/loss (-), other
Net exchange rate gain/loss (-)
-107 918
33 158
-74 761
57 171
94 573
151 744
Net financial items
-191 877
-11 604
Financial statementsPage 83
Note 13. Taxes
Income taxes recognised in the income statement
-796 958
-711 980
1 508
-
Amounts in NOK `000
2021
2020
Change in deferred taxes current year
Taxes payable current year
Tax payable adjustment previous year
Tax refund current year
Tax refund adjustment previous year
4 757
-111 946
-
-12 046
752 006
-
Total taxes (-) / tax income (+) recognised in the income statement
-1 502 673
628 014
Reconciliation of income taxes
Amounts in NOK `000
2021
2020
Profit / loss (-) before income taxes
2 105 982
-1 230 740
Expected income tax at nominal tax rate, 22%
Expected petroleum tax, 56%
Permanent differences, including impairment of goodwill
Effect of sale and leaseback transaction
Effect of uplift
Financial and onshore items
Change valuation allowance
Adjustments previous year and other
270 763
689 214
-504 605
-
180 613
3 429
-
-11 401
Total income taxes recognised in the income statement
-463 316
-1 179 350
-2 419
39 839
196 977
-94 459
-4 887
4 941
-1 502 673
628 014
Effective income tax rate
71 %
51 %
Specification of tax effects on temporary differences, tax losses and uplift carried forward
Amounts in NOK `000
31.12.2021
31.12.2020
Tangible and intangible non-current assets
-2 939 348
1 352 475
-3 429
-145 419
4 887
-
-1 730 833
-4 887
-2 113 571
1 299 894
-7 240
-122 180
992
1 548
-940 558
-
Provisions (net ARO), lease liability, pensions and gain/loss account (deferred capital gain)
Interest-bearing loans and borrowings
Current items (spareparts and inventory)
Tax losses carried forward, onshore 22%
Uplift, offshore 56%
Total deferred tax assets / liabilities (-)
Valuation allowance for deferred tax assets
Total deferred tax assets / liabilities (-) recognised
-1 735 720
-940 558
Financial statementsPage 84
Change in deferred taxes
Amounts in NOK `000
2021
2020
Deferred tax income / expense (-)
Deferred taxes charged to equity
-796 958
1 796
-111 946
1 805
Total change in deferred tax assets
-795 162
-110 141
Specification of tax refund
Amounts in NOK `000
20212020
Tax refund recognised in the income statement
Tax refund recognised on acquisitions of licences
Tax refund received
Total tax refund
-752 006
- 5 522
- -461 596
-295 932
Deferred tax is calculated based on tax rates applicable on the balance sheet date. Ordinary income tax is 22%, to which is added a
special tax for oil and gas companies at the rate of 56%, providing a total tax rate of 78%.
Companies operating on the Norwegian continental shelf under the offshore tax regime can claim the tax value of any unused tax losses or
other tax credits related to its offshore activities to be paid in cash (including interest) from the tax authorities when operations cease.
Deferred tax assets that are based on offshore tax losses carried forward are therefore normally recognised in full.
There is no time limitation on the right to carry tax losses forward in Norway.
Amounts in NOK `000
20212020
Tax value of exploration expenditures
Residual tax value of tax losses
Total tax refund
- 85 735
- 210 197
-295 932
Specification of income tax payable
The tax value of exploration expenditures is paid in November the following year.
The residual tax value of tax losses in 2020 and 2021, deducted for tax refund from exploration expenses, is received in six instalments
occuring every two months, and is a part of the temporary change to the tax regime for oil and gas companies for the income years 2020
and 2021, as enacted by the Norwegian Parliament in June 2020.
Estimated taxes payable/refundable are due in six instalments occuring every two months. Any difference between actual tax
payable/refund according to the tax return and the instalments are settled annually in fourth quarter following year.
Amounts in NOK `000
20212020
-711 980 -
6 399 -
-12 698-14 207
-54 740 -
Tax payable (-) / credit recognised in the income statement
Tax payable recognised on acquisitions of licences
Tax payable from previous years not settled
Tax refund received, to be repaid
Total income tax payable (-)
-773 020-14 207
Amounts in NOK `000
20212020
Tax payable years 2016-2019
Tax payable year 2021
Tax refund received for year 2021, to be repaid
-12 698-14 207
-705 582 -
-54 740
Total income tax payable (-)
-773 020-14 207
For 2021 total net taxes received was NOK 355.4 million which was the sum of tax refund as of 31.12.2020 of NOK 295.9 million, tax
refunded related to estimated tax year 2021 of NOK 54.7 million and tax refund adjustments previous years of NOK 4.8 million.
Financial statementsPage 85
Note 14. Pensions
Pension cost:
Service cost - employee benefit
Service cost - interest expense
Remeasurements pensions, actuarial loss/gain (-), net after tax to OCI
Movement in pension obligations during the year:
31.12.2021
31.12.2020
Pension obligations January 1
31 988
26 857
Service cost - employee benefit
Service cost - interest expense
Remeasurements pensions, actuarial loss/gain (-)
2 777
541
2 303
2 322
616
2 314
31.12.2021
31.12.2020
1.90 %
1.70 %
2.75 %
2.25 %
Annual projected G- regulation
Annual projected regulation of pension
Number of employees included in the defined benefit scheme
2.50 %
2.50 %
92
2.00 %
2.00 %
89
The company has a defined contribution and a defined benefit pension plans for its employees which satisfies the statutory
requirements in the Norwegian law on required occupational pension ("lov om obligatorisk tjenestepensjon").
The defined contribution plan covers all employees. The defined benefit plan covers offshore employees and has 92 active members at
year end 2021. The defined benefit plan is to cover for the age 65-67 for offshore employees, as they are required by Norwegian law to
retire at the age of 65 offshore. There are no defined funds to meet the liability related to the defined benefit plan.
The details in the tables below pertain to the defined benefit plan.
Amounts in NOK `000
20212020
Total pension related costs
2 777 2 322
541 616
3 3182 938
Remeasurements pensions, actuarial loss/gain (-) recorded to OCI
Taxes, 78%
2 303 2 314
-1 796 -1 805
507509
Amounts in NOK `000
Pensions paid
-298
-120
Total current provisions
37 311
31 988
Assumptions:
Discount interest rate
Annual projected increase in salary
Financial statementsPage 86
Note 15. Earnings per share
Net profit / loss (-) attributable to ordinary shares, in NOK `000
-602 726
Weighted average number of ordinary shares outstanding basic
102 921 489
102 394 798
Earnings per share (NOK per share)
- Basic
- Diluted
5.86
-5.89
5.86
-5.89
Note 16. Goodwill, exploration and evaluation assets
Cost at 1 January 2020
Additions
Disposals
The dilution effect of potentially shares from warrants is not presented in the income statement for 2021, as the average market price of
the shares during the period does not exceed the exercise price of the warrants (i.e. they are not in the money). The dilution effect of
potentially shares from warrants is not presented in the income statement for 2020, as the potentially shares would have reduced loss per
share.
2020
2021
603 309
Exploration and
evaluation
Amounts in NOK `000assets
Technical
goodwill
Ordinary
goodwillTotal goodwill
2021
38 349
160 272
-3 008
-
Cost at 1 January 2021
Additions
Reclassification to oil and gas properties under development
Disposals
Expensed exploration expenditures previously capitalised
-184 855
1 114 547
-
-
-
-
416 415
-
-
-
-
1 530 962
-
-
-
-
Cost at 31 December 2021
10 759
1 114 547
416 415
1 530 962
-
-
-
-
-508 818
-
-
-
-253 198
-
-
-
-762 016
-
-
-
-
-508 818
-253 198
-762 016
Accumulated amortisation and impairment at 1 January 2021
Amortisation for the year
Impairment
Disposals
Accumulated amortisation and impairment at
31 December 2021
Carrying amount at 31 December 2021
10 759
605 729
163 217
768 946
2020
Expensed exploration expenditures previously capitalised
15 9271 114 547
22 422 -
- -
- -
416 415
-
-
-
1 530 962
-
-
-
Cost at 31 December 2020
38 3491 114 547
416 415
1 530 962
-105 394
--105 394
- -
--403 423
- -
-253 198
-
-656 621
-
--508 818
-253 198
-762 016
Accumulated amortisation and impairment at 1 January 2020
Amortisation for the year
Impairment
Disposals
Accumulated amortisation and impairment at
31 December 2020
Carrying amount at 31 December 2020
38 349605 729
163 217
768 946
Financial statementsPage 87
Note 17. Lease liability
Sale and leaseback of the property Råket 2
Undiscounted lease liabilities and maturity of cash outflows
The company has entered into operating leases for office facilities. In addition, as operator of the Draugen field, the company has on
behalf of the licence entered into operating leases for logistic resources such as supply vessel with associated remote operated vehicle
(ROV), base and warehouse for spare parts and hence gross basis of these lease debts are recognised.
Future lease payments relating to leasing contracts entered into as an operator of the Draugen field are presented on a gross basis.
In December 2021, OKEA completed a sale and leaseback (SLB) transaction for OKEA’s regional headquarter Råket 2 in Kristiansund.
The SLB agreement is based on OKEA leasing the property for 20 years with additional extension options for OKEA for up to 10 years.
The sale price amounted to NOK 109 million. The buyer is Råket 2 AS, a fully owned subsidiary of Asset Buyout Partners AS (ABP). No
gain from the transaction has been recognised, OKEA has recognised a lease liability equal to the net sales proceeds of NOK 107.7
million, and the book value of the sold property of NOK 78.6 million is recognied as right-of-use asset. This is based on the assessment
that OKEA will be utilising the property over the entire remaining economic lifetime.
Amounts in NOK `000
20212020
Lease debt 1 January
Additions lease contracts
Accretion lease liability
Payments of lease debt and interest
179 235 163 540
109 065 52 370
11 357 9 706
-36 359 -46 380
Total lease debt at 31 December
263 298179 235
Breakdown of lease debt
Short-term (within 1 year)
Long-term
43 032 35 257
220 266 143 978
Total lease debt
263 298179 235
Amounts in NOK `000
31.12.2021
31.12.2020
Within 1 year
1 to 5 years
After 5 years
43 032
154 750
184 755
35 257
138 727
94 316
Total
382 537
268 300
Financial statementsPage 88
Note 18. Asset retirement reimbursement right
Of this:
Asset retirement reimbursement right, non-current
3 024 562
3 029 367
Asset retirement reimbursement right consists of a receivable from the seller Shell from OKEA’s acquisition of Draugen and Gjøa assets in
2018. The parties agreed that the seller Shell will cover 80% of the actual abandonment expenses for the Draugen and Gjøa fields up to a
predefined after-tax cap amount of NOK 716 million (2021 value) subject to consumer price index (CPI) adjustment. The present value of
the expected payments is recognised as a pre-tax receivable from the seller.
In addition, the seller has agreed to pay OKEA an amount of NOK 421 million (2021 value) subject to a CPI adjustment according to a
schedule based on the percentage of completion of the decommissioning of the Draugen and Gjøa fields.
The net present value of the receivable is calculated using a discount rate of 2.6%, unchanged from year end 2020.
Amounts in NOK `000
31.12.2021
31.12.2020
Asset retirement reimbursement right at 1 January (indemnification asset)
Changes in estimates
Effect of change in the discount rate
3 029 367
2 860
-
Asset retirement costs from billing, reimbursement from Shell
Unwinding of discount
-3 016
78 764
2 968 502
-16 585
0
0
77 450
Asset retirement reimbursement right at 31 December
3 107 974
3 029 367
Asset retirement reimbursement right, current
83 412
-
Asset retirement reimbursement right at 31 December
3 107 974
3 029 367
Financial statementsPage 89
Note 19. Trade and other receivables
Accounts receivable and receivables from operated licences*
Accrued revenue
Prepayments
Working capital and overcall, joint operations/licences
Underlift of petroleum products**
VAT receivable
Accrued interest income
Note 20. Financial investments
Investments in money-market funds and combination funds
210 000
-
Note 21. Spare parts, equipment and inventory
Note 22. Cash and cash equivalents
** The balance at 31.12.2021 consists of Draugen (MNOK 207), Gjøa (MNOK 20) and Ivar Aasen (MNOK -2).
* There is no provision for bad debt on receivables. The receivables mature within 12 months. Approximately 99% of the company’s
sales revenue recognised in 2021 is from sale to oil companies which are subsidiaries of an international oil company with Standard &
Poor’s long-term credit rating A+.
* The balance at 31.12.2021 consists of Draugen MNOK 118 (117) and Yme MNOK 6 (0).
*** Reference is made to note 28 for more information about the company’s financial risk management.
Reference is made to note 20 for information about liquid assets not categorised as cash and cash equivalents.
Amounts in NOK `000
31.12.2021
31.12.2020
Fair value forward contracts, gas***
68 275
487 424
48 300
164 226
225 079
7 317
830
51 885
67 640
64 807
30 906
161 392
184 672
4 184
-
-
Total trade and other receivables
1 053 338
513 601
Amounts in NOK `000
31.12.2021
31.12.2020
Unrealised gain/loss (-)
-39
Total financial investments
209 961
-
Amounts in NOK `000
31.12.2021
31.12.2020
Inventory of petroleum products*
Spare parts and equipment
124 258
129 061
117 022
111 768
Total spare parts, equipment and inventory
253 318
228 790
31.12.2021
1 035 711
980 000
18 033
5 001
31.12.2020
853 903
-
17 307
-
Amounts in NOK `000
Bank deposits, unrestricted
Bank deposit, time deposit
Bank deposit, restricted, employee taxes
Bank deposit, restricted, other
Total cash and cash equivalents
2 038 745
871 210
Financial statementsPage 90
Note 23. Share capital and shareholder information
Outstanding shares at 1.1.2020
Nominal value NOK per share at 31 December 2021
Share capital NOK at 31 December 2021
0.10
10 387 035
At 31 December 2020, 985 000 equity-settled warrants were still outstanding. Reference is made to note 10 for further details.
2020:
In 2020 OKEA issued 438 600 incentive-shares to certain members of management at a subscription price of NOK 0.1 per share. The
shares are subject to a lock-up period of 12 months. Reference is made to note 10 for further details.
2021:
In 2021 OKEA issued 502 700 incentive-shares to certain members of management and other key employees at a subscription price of
NOK 0.1 per share. The shares are subject to a 12-month lock-up period, with an exemption for sales necessary to cover any directly
related tax liabilities limited up to 50% of the shares allocated. Reference is made to note 10 for further details.
In addition, OKEA issued 865 000 shares in connection with exercise of warrants in 2021. At 31 December 2021, 80 000 equity-settled
warrants were still outstanding. Reference is made to note 10 for further details.
Number of shares
Ordinary shares
New shares issued in exchange for cash
102 064 050
438 600
102 502 650
Number of outstanding shares at
31 December 2020
New shares issued in exchange for cash
1 367 700
103 870 350
Number of outstanding shares at
31 December 2021
Shareholders at 31 December 2021:
Ordinary
shares
Shareholder
BCPR PTE. LTD.
OKEA HOLDINGS LTD.
CHURCH BAY TRUST CO. LTD
SALT VALUE AS
VERDIPAPIRFONDET DNB SMB
SJÆKERHATTEN AS
KØRVEN AS
SPAREBANK 1 SMN INVEST AS
JENSSEN & CO AS
GH HOLDING AS
SKJEFSTAD VESTRE AS
VERDIPAPIRFONDET DNB NORGE PENSJON
ESPEDAL & CO AS
BNP PARIBAS SECURITIES SERVICES
LIGNA AS
MUST INVEST AS
THE BANK OF NEW YORK MELLOM SA/NV
MORGAN STANLEY & CO. INTERNATIONAL
SPAREBANK 1 MARKETS AS
JOHAN VINJE AS
OTHER SHAREHOLDERS
47 477 563
16 072 993
6 075 079
2 112 823
1 734 811
1 662 537
1 281 896
1 071 388
1 030 860
839 371
832 730
598 611
503 053
485 000
445 640
366 296
349 263
344 630
330 971
323 625
19 931 210
% Share
45.71 %
15.47 %
5.85 %
2.03 %
1.67 %
1.60 %
1.23 %
1.03 %
0.99 %
0.81 %
0.80 %
0.58 %
0.48 %
0.47 %
0.43 %
0.35 %
0.34 %
0.33 %
0.32 %
0.31 %
19.19 %
Total
103 870 350
100.00 %
Financial statementsPage 91
Warrants:
Overview of outstanding warrants:
Reference is made to note 10 for information about warrants granted to employees in connection with share based payment.
Shares owned directly or indirectly by senior management and board of directors:
Shareholder
Ordinary
Ordinary
Espen Myhra (SVP business development)
Dag Eggan (SVP business performance)
Andrew McCann (SVP subsurface & wells)
Tor Bjerkestrand (SVP operations)
Knut Gjertsen (SVP projects & technology
Birte Norheim (CFO)
Marit Moen Vik-Langlie (VP legal)
Svein J. Liknes (CEO)
Chaiwat Kovavisarach (chairman of the board)
Ragnhild Aas (deputy board member)
John Kristian Larsen (board member)
Anne Lene Rømuld (board member)
Finn Haugan (board member)
Jan Atle Johansen (board member)
Michael William Fischer (board member)
Nicola Carol Gordon (board member)
Rune Olav Pedersen (board member)
Jens Arne Megaard (deputy board member)
Gro Anita Markussen (deputy board member)
shares% Share
211 186 0.20 %
176 843 0.17 %
148 446 0.14 %
138 604 0.13 %
132 000 0.13 %
113 650 0.11 %
100 334 0.10 %
100 000 0.10 %
31 9520.03 %
90 9950.09 %
65 5500.06 %
45 3230.04 %
43 5350.04 %
40 8100.04 %
20 0000.02 %
20 0000.02 %
20 0000.02 %
13 5420.01 %
11 3940.01 %
shares% Share
120 124 0.12 %
134 226 0.13 %
94 595 0.09 %
92 662 0.09 %
64 500 0.06 %
58 600 0.06 %
55 884 0.05 %
- 0.00 %
30 000 0.03 %
70 752 0.07 %
66 882 0.07 %
35 323 0.03 %
43 535 0.04 %
36 229 0.04 %
20 000 0.02 %
20 000 0.02 %
20 000 0.02 %
4 787 0.00 %
5 974 0.01 %
Total
1 524 1641.47 %
974 0730.95 %
At 31 December 2021
At 31 December 2020
20212020
Outstanding warrants at 1 January
Warrants exercised (ref. note 10)
Warrants forfeited (ref. note 10)
985 000
-865 000
-40 000
1 235 000
-
-250 000
Outstanding warrants at 31 December
80 000
985 000
Financial statementsPage 92
Note 24. Asset retirement obligations
94 891
-
-
Asset retirement obligations
Provisions for asset retirement obligations represent the future expected costs for close-down and removal of equipment and production
facilities. The provision is based on the company’s best estimate. The net present value of the estimated obligation is calculated using a
discount rate of 2%, unchanged from year end 2020. The assumptions are based on the economic environment at balance sheet date.
Actual asset retirement costs will ultimately depend upon future market prices for the necessary works which will reflect market conditions at
the relevant time. Furthermore, the timing of the close-down is likely to depend on when the field ceases to produce at economically viable
rates. This in turn will depend upon future oil and gas prices, which are inherently uncertain.
For recovery of costs of decommissioning related to assets acquired from Shell, reference is made to note 18.
Amounts in NOK `000
2021
2020
4 024 420
-
-
4 199 866
9 327
-10 000
-41 778
-
Provision at 1 January
Additions
Reclassified to other current provision, see note 27
Changes in estimates
Effects of change in the discount rate
Asset retirement costs from billing
Unwinding of discount
-3 770
83 797
80 555
4 237 442
4 199 866
Asset retirement obligations at 31 December
Of this:
Asset retirement obligations, non-current
Asset retirement obligations, current
Accrued consideration from acquisitions of interests in licences
4 133 177
104 265
-
4 189 866
-
10 000
Asset retirement obligations at 31 December
4 237 442
4 199 866
Financial statementsPage 93
Note 25. Interest bearing loans, bonds
Changes in interest bearing loans, bonds:
1 004 299
6 557
Interest bearing loans, bonds at 1 January 2021
Amortisation of transaction costs
Bond buy-back
2 400 297
2 556 570
-216 948
-120 955
21 784
83 377
-
Bond loan OKEA02:
In June 2018, the company issued a USD 180 million secured bond loan OKEA02 which matures in full in June 2023. The loan carries an
interest rate of 3 month LIBOR plus 650 bps p.a. which is payable quarterly. The net proceeds from the bond issue was used to finance the
acquisition of interests in the Draugen and Gjøa fields from A/S Norske Shell.
During 2021, the company executed partial buy-back of OKEA02 amounting to a nominal value of USD 23.8 million. The buy back was
executed at a weighted average premium of 3%.
During 2020, the company executed partial buy-back of OKEA02 amounting to a nominal value of USD 14.6 million, of which USD 6.3
million has been cancelled. The buy back was executed at a weighted average discount of 16%.
Bond loan OKEA03:
The USD 120 million secured bond loan OKEA03 was issued in December 2019 and matures in full in December 2024. The loan was
issued at a price of 99% of the nominal value and carries a fixed interest rate of 8.75% p.a. with semi-annual interest payments. OKEA01
was settled at a price of 103% of the nominal value. The bond loan may become unsecured if OKEA02 is repaid or refinanced.
Amounts in NOK `000
31.12.2021
31.12.2020
Bond loan OKEA02
Bond loan OKEA03
Capitalised transaction costs bond loan OKEA02
Capitalised transaction costs bond loan OKEA03
1 264 146
1 068 911
-14 889
-23 295
1 426 113
1 034 151
-30 116
-29 852
Total interest bearing loans, bonds
2 294 873
2 400 297
Amounts in NOK `000
OKEA02
OKEA03
Total
Increased redemption price at maturity to 101%
Foreign exchange movement
Capitalised transaction costs, adjustment previous year
1 395 997
15 227
-210 584
-
48 617
-
0
34 760
-
2 400 297
21 784
-210 584
0
83 377
-
Interest bearing loans, bonds at 31 December 2021
1 249 257
1 045 616
2 294 873
Amounts in NOK `000
2021
2020
Interest bearing loans, bonds at 1 January 2021
Cash flows:
Repayment/buy-back of borrowings
-216 948
-120 955
Total cash flows:
Non-cash changes:
Amortisation of transaction costs
Foreign exchange movement
Increased redemption price at maturity to 101%
Loss / gain (-) on buy-back
Capitalised transaction costs, adjustment previous year
6 364
-
16 127
-57 171
28 374
-24 074
1 425
Interest bearing loans, bonds at 31 December 2021
2 294 873
2 400 297
Financial statementsPage 94
Security granted
The obligations under OKEA02 and OKEA03 are secured with the following security granted in favour of the Nordic Trustee AS acting on
behalf of the bondholders on OKEA02 and OKEA03:
(i) Pledge in the escrow accounts under the bonds and certain other bank accounts of the company;
(ii) Pledge in production licences;
(iii) Pledge in insurances;
(iv) Assignment of claims under the share and purchase agreement for participating interests in the Yme field; and
(v) Pledge in factoring charge.
Financial covenants OKEA02 and OKEA03
During 2021 and 2020, and at 31 December 2021 and 2020, the company was in compliance with the covenants under the bond
agreements.
Revised bond terms affecting the covenants in the waiver period effective from 30 June 2020 to and including 31 December 2021
comprise OKEA02 and OKEA03 and can be summarised as follows:
Leverage Ratio covenant:
Shall not exceed:
(i) 3:1 to and including 30 June 2020;
(ii) 5:1 from 1 July 2020 to and including 30 September 2020;
(iii) 7:1 from 1 October 2020 to and including 30 June 2021;
(iv) 6:1 from 1 July 2021 to and including 30 September 2021; and
(v) 3:1 from 1 October 2021 to and including 31 December 2021.
During the waiver period, a breach of the Leverage Ratio covenant would only result in a default if the company was in breach on two
consecutive calculation dates.
From 01.01.2022 the covenants comprise of:
(i) Leverage ratio shall not exceed 2:1
(ii) Capital employment ratio above 35%
(iii) Minimum fee liquidity of USD 10 million
Financial statementsPage 95
Note 26. Other interest bearing liabilities
Of this:
Other interest bearing liabilities, non-current
454 853
-
Changes in other interest bearing liabilities:
Other interest bearing liabilities at 1 January 2021
--
Financing Yme rig
Of this:
Other interest bearing liabilities, non-current
454 853454 853
--
--
Total cash flows:
Non-cash changes:
Financing Yme rig
In October 2021 the Yme licence completed acquisition of the Inspirer jack-up rig through a bareboat charter (BBC) agreement with Havila
Sirius AS (Havila). The part of the lease payments to Havila corresponding to the purchase price paid by Havila to Maersk is considered as
an investment in a rig with a corresponding liability, while the remaining amount of the total payments is treated as interest expenses. This
treatment is based on the underlying assessment that the reality of the transaction is that it is an investment in a rig financed with a interest
bearing liability, rather than a lease. OKEA’s proportionate share of the investment and corresponding liability is USD 55.95 million.
The Yme licence has the right and the obligation to purchase the rig at the end of the lease period for NOK 1. In addition the Yme licence
has the unconditional obligation to purchase the rig from Havila in case of any termination event during the lease period. The purchase
price will then be the remaining amount paid by Havila to Maersk plus interest and other costs. The Yme licence also has the option to
purchase the rig at any time during the lease period for the same price.
The liability carries a implicit interest rate of 5.21% p.a., and will be repaid with the lease payments to Havila with the last lease payment in
October 2031. Repsol S.A. (RSA) is the parent company of the Yme licence operator Repsol Norge AS. On behalf of Yme, RSA has
issued a parent company guarantee for the future lease payments to Havila.
Amounts in NOK `000
31.12.2021
31.12.2020
Liability Yme rig
493 445
-
Total other interest bearing liabilities
493 445
-
Other interest bearing liabilities, current
38 593
-
Total other interest bearing liabilities
493 445
-
Amounts in NOK `000
Liability Yme rigTotal
Foreign exchange movement
468 904 468 904
24 541 24 541
Other interest bearing liabilities at 31 December 2021
493 445493 445
Other interest bearing liabilities, current
38 59338 593
Other interest bearing liabilities at 31 December 2021
493 445493 445
Amounts in NOK `000
20212020
Other interest bearing liabilities at 1 January
Cash flows:
Gross proceeds from borrowings
Repayment of borrowings
- -
- -
Foreign exchange movement
468 904 -
24 541 -
Other interest bearing liabilities at 31 December
493 445-
Financial statementsPage 96
Note 27. Trade and other payables
Trade creditors
46 509
89 595
451 217
-
Accrued holiday pay and other employee benefits
Working capital, joint operations/licences
Overlift of petroleum products
Accrued interest bond loans
Prepayments from customers
Fair value put/call options, oil*
Loan from shareholder OKEA Holdings Ltd
All payables mature within 12 months.
* Reference is made to note 29 for more information about the company’s financial risk management.
Amounts in NOK `000
31.12.2021
31.12.2020
117 721
110 947
430 608
24 555
5 096
17
-
1 371
10 000
86 220
5 008
199 001
7 169
1 314
-
90 550
Accrued consideration from acquisitions of interests in licences
Other accrued expenses
Total trade and other payables
786 535
890 362
Financial statementsPage 97
Note 28. Financial instruments
Financial instruments by category
Year ended 31 December 2021
Fair value of financial instruments
It is management’s assessement that the carrying amounts of financial assets and liabilities, except for interest bearing bond loans, is
approximately equal to its fair values. For interest bearing bond loans, the fair value is estimated to be NOK 2,410 million at 31 December
2021 (2020: NOK 2,271 million). The OKEA02 and OKEA03 bond loans are listed on the Oslo Stock Exchange and the fair value is based
on the latest quoted market prices (level 1 in the fair value hierarchy according to IFRS 13) as per balance sheet date.
Fair values of forward contracts gas and put/call options oil are based on quoted market prices at the balance sheet date (level 2 in the
fair value hierarchy). The fair values of forward contracts gas and put/call options are equal to their carrying amounts.
For other interest bearing liabilities it is assesed that the fair value is approximately equal to the carrying amount at 31 December 2021. This
assesment is based on the transaction completed in October 2021 as described in note 26, and assuming no significant change in interest
rate level and credit spread since the completion of the transaction (level 2 in the fair value hierarchy).
Financial assets
Amounts in NOK `000
Fair value through
Amortised costprofit or loss
Total carrying
amount
Trade and other receivables *
Financial investments
Cash and cash equivalents
180 006
-
2 038 745
51 885
231 891
209 961
209 961
-
2
038 745
Total
2 218 751
261 8462 480 597
Financial liabilities
Amounts in NOK `000
Fair value through
Amortised costprofit or loss
Total carrying
amount
Trade and other payables *
Interest bearing loans, bonds
Other interest bearing liabilities
336 930
2 294 873
493 445
- 336 930
- 2 294 873
493 445
Total
3 125 249
-3 125 249
Year ended 31 December 2020
* Prepaid expenses, VAT receivable, accrued receivables and accrued expenses are not included. Forward contracts are included at fair
value through profit or loss.
Financial assets
Amounts in NOK `000
Fair value through
Amortised costprofit or loss
Total carrying
amount
212 423
871 210
- 212 423
- 871 210
Trade and other receivables *
Cash and cash equivalents
Total
1 083 633
-1 083 633
Financial liabilities
Amounts in NOK `000
Fair value through
Amortised costprofit or loss
Total carrying
amount
Trade and other payables *
Interest bearing loans, bonds
461 132
2 400 297
7 169
468 301
-
2
400 297
Total
2 861 429
7 1692 868 598
* Prepaid expenses, VAT receivable, accrued receivables and accrued expenses are not included. Option derivatives are included (at fair
value through profit or loss).
Financial statementsPage 98
Note 29. Financial risk management
The table below shows a maturity analysis for financial liabilities:
The cash flow forecast below assumes repayment on the latest date available, even if expected repayment may be earlier.
336 930
2 294 873
-
336 930
2 333 058
404 810
336 930
-
-
-
2
333 058 -
177 270227 540-
The table below shows a maturity analysis for financial assets:
Overview
The company is exposed to a variety of risks, including credit risk, liquidity risk, interest rate risk, oil and gas price risk and currency risk.
This note presents information about the company’s exposure to each of the above mentioned risks, and the company’s objectives,
policies and processes for managing such risks. The note also presents the company’s objectives, policies and processes for managing
capital.
Credit risk
The company has no significant credit risk. The company’s exposure to credit risk for counterparties to default on their payment obligations
is considered limited, as sales agreements are only entered into with solid customers and derivative contracts are entered into with
reputable counterparties. Cash and cash equivalents at year end are deposits with DNB Bank ASA.
Liquidity risk
Liquidity risk is the risk of being unable to settle financial liabilities as they fall due. The company’s has taken mitigating actions to ensure
that sufficient liquidity is secured under normal as well as extraordinary circumstances. The company conducts detailed cash flow
forecasting, including sensitivity analyses on key variables, to assure ability to meet financial liabilities as they fall due without incurring
unacceptable losses or risking damage to the company’s reputation.
31.12.2021
Amounts in NOK `000
Carrying amount
Cash Flow
< 1 year1-5 year> 5 year
Trade and other payables
Interest bearing loans, bonds
Interest bearing loans, bonds, interest
Other interest bearing liabilities
Other interest bearing liabilities, interest
493 445
-
493 445
142 876
38 635 176 319 278 491
24 962 78 244 39 669
Total financial liabilities
3 125 249
3 711 119
577 7972 815 161318 161
31.12.2020
Amounts in NOK `000
Carrying amount
Cash Flow< 1 year
1-5 year> 5 year
Trade and other payables
Interest bearing loans, bonds
Interest bearing loans, bonds, interest
468 301
2 400 297
-
468 301
468 301
2 460 264 -
613 399
191 604
-
-
2 460 264-
421 795-
Total financial liabilities
2 868 598
3 541 965659 906
2 882 059-
31.12.2021
Amounts in NOK `000
Carrying amount
Cash Flow
< 1 year
1-5 year> 5 year
Trade and other receivables
Financial investments
Cash and cash equivalents
231 891
209 961
2 038 745
231 891
209 961
2 038 745
231 891
209 961
2 038 745
--
--
--
Total financial assets
2 480 597
2 480 597
2 480 597
--
Financial statementsPage 99
Sensitivity analysis at 31 December 2021:
Interest rate risk
The company’s exposure to interest rate risk relates to the bond loan OKEA02 which carries a floating interest rate of 3 month LIBOR
plus 650 bps p.a. The company has no other interest-bearing borrowings with floating interest rate conditions. The bond loan OKEA03
carries a fixed interest rate of 8.75% p.a, and the Yme rig liability carries a implicit interest rate of 5.21% p.a.
Currency risk
The company is exposed to foreign exchange rate risk relating to the value of NOK relative to other currencies, mainly due to product
sales in USD and GBP, operational costs in USD, development costs in USD and interest-bearing loans and borrowings in USD.
Sensitivity analysis:
Interest rate sensitivity is calculated based on the exposure to interest-bearing debt with floating interest rate conditions at balance sheet
date.
2021: If 3 month LIBOR had been 50 basis points higher/lower, the company’s profit after tax would have been NOK 4.9 million
lower/higher.
At 31 December 2021, the company’s exposure to exchange rate risk mainly relate to bank deposits and interest-bearing loans and
borrowings in USD.
Sensitivity analysis at 31 December 2020:
If NOK was 5% stronger against the USD on 31 December 2021, the company’s profit after tax would have been NOK 106.5 million
higher.
If NOK was 5% weaker against the USD on 31 December 2021, the company’s profit after tax would have been NOK 106.5 million lower.
If NOK was 5% stronger against the USD on 31 December 2020, the company’s profit after tax would have been NOK 81.8 million higher. If
NOK was 5% weaker against the USD on 31 December 2020, the company’s profit after tax would have been NOK 81.8 million lower.
31.12.2020
Amounts in NOK `000
Carrying amount
Cash Flow
< 1 year
1-5 year> 5 year
Trade and other receivables
Cash and cash equivalents
212 423
871 210
212 423
871 210
212 423
871 210
- -
- -
Total financial assets
1 083 633
1 083 633
1 083 633
--
Financial statementsPage 100
845 000
2022-01-28
760 000
2022-02-25
480 000
2022-03-30
390 000
2022-04-29
550 000
2022-05-30
520 000
2022-06-29
525 000
2022-07-29
580 000
2022-08-30
555 000
2022-09-29
Oil and gas price risk
The company’s revenue comes from oil and gas sales, which are exposed to fluctuations in the oil and gas price level.
The company uses derivative financial instruments to manage exposures to fluctuations in commodity prices.
Capital management
The overall objective of capital management is to ensure that the company maintains a strong financial position and healthy capital ratios in
order to support its business and maximise shareholder value.
The company manages its capital structure, and makes adjustments to it, in light of changes in economic conditions.
Surplus liquidity is managed according to the company’s liquidity management policy.
Put and call options, oil:
Put options are purchased to establish a price floor for a portion of future production of petroleum products. On some occasions, a price
ceiling is established by selling call options, which reduces the net premium paid for hedging. At year-end 2021, OKEA had no outstanding
option contracts. At year-end 2020, OKEA had outstanding put option contracts creating a price floor for a total of 350 000 bbls of oil at 40
USD/bbl and outstanding call option contracts for a price ceiling of 300 000 bbls at 50 USD/bbl. These contracts expired in January and
April 2021.
Quantity - therms of gas
Fixed price
GBP per
therm
Expiration
2.84
3.30
2.99
2.44
2.14
2.13
2.14
2.13
2.13
Forward contracts, gas:
At year-end 2021, OKEA had outstanding forward contracts for;
Financial statementsPage 101
Note 30. Asset acqusitions and sales
2021PL 972
2020PL195, PL195B
2020PL938
40 %
40 %
30 %
Repsol Norge AS
Equinor Energy AS
Neptune Energy Norge AS
01.01.2021
01.01.2020
01.01.2020
28.02.2021
31.10.2020
30.11.2020
Sales:
There were no sales of interests in licences in 2021 or 2020.
Note 31. Covid-19
Acquisitions:
During 2021 and 2020, the company completed the following acquisitions and sales of interests in licences on the Norwegian continental
shelf, accounted for as acquisitions and sales of assets:
In 2021 OKEA signed a sale and purchase agreement with Neptune Energy AS increasing OKEA’s working interest in the Ivar Aasen
licence with 2.223%. Effective date for the transaction is 1.1.2022 with expected completion first half 2022.
The global Covid-19 pandemic has continued to impact the operations of OKEA and a series of strict measures designed to protect
employees and ensure full continuity on OKEA operated assets have been in place in large parts of 2020 as well as in 2021, particularly at
the Draugen field. The company has managed the situation by keeping most of these measures in place throughout the year, and
production at Draugen as well as at the non-operated assets have to a large extent been uninterrupted by the pandemic. There were no
Covid-19 infection cases in OKEA’s operations in 2020 or 2021 and the organisation is well prepared to manage the situation if such
cases should occur. Direct cost impact from Covid-19 in OKEA’s operation has been minimal and is estimated to be in the range of NOK
3-5 million for 2021 and NOK 5-10 million for 2020.
At the date of this report, the general outlook appears optimistic.
YearLicence
Interest
Seller
Effective date
Completion
Financial statementsPage 102
Trade and other payables, related parties:
Reference is made note 10 for information about compensation to senior management and board of directors.
Note 32. Commitments and contingencies
Note 33. Related party transactions
During the normal course of its business, the company may be involved in disputes, including tax disputes. The company makes accruals
for probable liabilities related to litigation and claims based on management’s best judgment and in line with IAS 37 and IAS 12. As per end
of 2020 and 2021, estimated exposures are not significant and no material provision were recognised.
Minimum work programs
The company is required to participate in the approved work programmes for the licences. Reference is made to note 8 for a specification of
future committed capital expenditure.
Liability for damages/insurance
The company’s operations involves risk for damages to property, equipment and the environment, including pollution. Installations and
operations are covered by an operations insurance policy, including loss of production income insurance, and construction all risk
insurance covering assets under development.
Insurance for board members and chief executive officer
The company has an insurance policy for the board members and the chief executive officer for potential liability to the company and
third parties. The board considers the coverage to be reasonable.
Transactions with related parties:
Amounts in NOK `000
20212020
BCPR Pte Ltd *
2341 020
Interest on loan from shareholder OKEA Holdings Ltd **
5757
** OKEA Holding Ltd is the second largest shareholder of OKEA and related party to board member Paul Murray.
* BCPR Pte Ltd (Bangchak) is the majority shareholder of OKEA.
Amounts in NOK `000
31.12.2021
31.12.2020
BCPR Pte Ltd
-
-
Loan from shareholder OKEA Holdings Ltd
1 371
1 314
Financial statementsPage 103
Note 34. Reserves (unaudited)
Proven and probable reserves
Note 35. Events after the balance date
The Equinor operated Ginny exploration well was announced as a dry well on 2 February 2022. Cost incurred as of 31 December 2021
amounted to NOK 18 million and were expensed in the financial statements for 2021.
Expected reserves represent the company’s share of reserves according to the SPE/ WPC/ AAPG/ SPEE Petroleum Resources
Management system (SPE - PRMS) published in 2007 and with Oslo Stock Exchange’s requirements for the disclosure of hydrocarbon
reserves and contingent resources; circular 9/ 2009. The figures represent the best estimate of proven and probable reserves (2P/P50
Base estimate).
Referece is made to the annual statement of reserves (ASR) report per 31 December 2021 available at www.okea.no/investor/reports/.
In January 2022, OKEA was offered interests in four new production licences on the Norwegian continental shelf, three of which as
operator, through the Awards in Pre-Defined Areas (APA) for 2021.
The Russia-Ukraine armed conflict, which remains ongoing at the date of this report, has increased petroleum prices. The conflict has
resulted in a rapidly evolving geo-political situation and introduced a new set of challenges with respect to maintaining business
continuity. In order to mitigate the potential impact on the company’s operation particularly in respect of potential interruptions of supply
chains and cyber risk, OKEA is monitoring international sanctions and trade control legislation closely and has enforced control
mechanisms to manage the elevated security threats imposed to the industry.
The Neptune-operated Hamlet exploration well in the Gjøa licence (PL153) was spudded in late February 2022. OKEA announced on 21
March that hydrocarbons have been observed from logs on entering the reservoir in the well (35/9-16 S) and coring is initiated according to
plan. The reservoir operations are at an early stage and final results will be announced when available.
In the first quarter of 2022, OKEA has bought back additional parts of the OKEA02 bond for a nominal amount of USD 31.5 million at an
average price of 103.6 to par. At the date of this report, OKEA had bought back OKEA02 bonds for a nominal value of USD 69.2 million at
an average price of 99.2 to par, of which USD 6.3 million have been cancelled.
OKEA has entered into additional contracts for forward sale of gas in 2022 for a total of 2 390 000 therms at fixed prices between 397 and
412 p/th with expiration during 2022. At the date of this report, OKEA had sold forward 30% of the net after tax exposure for natural gas for
Q1-22 at an average price of 304 GBp/th, 30% for Q2-22 at an average price of 278 British pence per therm (GBp/th), 30% of Q3-22 at an
average price of 275 GBp/th and 10% of Q4-22 at an average price of 408 GBp/th.
Mill barrels oil equivalents (mmboe)
20212020
Balance at 1 January
Production
Acquisition of reserves
New developments
Revisions of previous estimates and other changes
Total reserves at 31 December
41.6 49.5
-5.9 -5.7
- -
4.6 -
6.3 -2.2
46.641.6
Financial statementsPage 104
Confirmation from the board of directors and CEO
Trondheim, 30 March 2022
_____________________________
Chaiwat Kovavisarach
Chairman of the board
_____________________________
Grethe Moen
Board member
_____________________________
Mike Fischer
Board member
_____________________________
Paul Murray
Board member
_____________________________
Nicola Carol Gordon
Board member
_____________________________
Rune Olav Pedersen
Board member
_____________________________
Finn Haugan
Board member
_____________________________
Anne Lene Rømuld
Board member
_____________________________
Jan Atle Johansen
Board member
_____________________________
Saowapap Sumeksri
Board member
_____________________________
John Kristian Larsen
Board member
_____________________________
Svein Jakob Liknes
CEO
Pursuant to the Norwegian Securities Trading Act section 5-5 with pertaining regulations, we confirm that, to the best of our
knowledge, the financial statements for the period from 1 January to 31 December 2021 have been prepared in accordance
with IFRS as adopted by EU, with such additional information as required by the Norwegian Accounting Act, and give a true
and fair view of the company’s assets, liabilities, financial position and results of operations.
We confirm that the board of directors’ report provides a true and fair view of the development and performance of the
business and the position of the company, together with a description of the key risks and uncertainty factors that the
company is facing.
Financial statements
Page 105
Reconciliations of alternative performance measures
EBITDA
2020
Amounts in NOK `000
12 months
Profit / loss (-) from operating activities
Add: depreciation, depletion and amortisation
Add: impairment
EBITDA
2021
12 months
2 297 860
672 450
-363 765
2 606 545
-1 219 136
699 403
1 387 018
867 286
EBITDAX
2020
Amounts in NOK `000
12 months
Profit / loss (-) from operating activities
Add: depreciation, depletion and amortisation
Add: impairment
Add: exploration expenses
EBITDAX
2021
12 months
2 297 860
672 450
-363 765
342 972
2 949 517
-1 219 136
699 403
1 387 018
97 036
964 322
2020
12 months
Production expense per boe
Amounts in NOK `000
Production expenses
Less: processing tariff income
Less: joint utilisation of logistics resources
Less: preparation for operation asset under construction
Net production expenses
Divided by: produced volumes (boe)
Production expense NOK per boe
2021
12 months
860 419
-61 960
-23 036
-17 884
757 539
5 668 579
133.6
695 877
-53 237
-15 107
-7 813
619 721
5 909 921
104.9
2020
12 months
Net interest-bearing debt
Amounts in NOK `000
Interest bearing loans, bonds
Other interest bearing liabilities
2 400 297
-
-
Other interest bearing liabilities, current
Less: Cash and cash equivalents
Net interest-bearing debt
2021
12 months
2 294 873
454 853
38 593
-2 038 745
749 574
-871 210
1 529 086
2020
12 months
Net interest-bearing debt excl. other interest bearing liabilities
Amounts in NOK `000
Interest bearing loans, bonds
Less: Cash and cash equivalents
Net interest-bearing debt excl. other interest bearing liabilities
2021
12 months
2 294 873
-2 038 745
256 128
2 400 297
-871 210
1 529 086
OKEA discloses alternative performance measures as part of its financial reporting as a supplement to the financial statements prepared in
accordance with international accounting standards (IFRS). OKEA believes that the alternative performance measures provide useful
supplement information to management, investors, bondholders and other stakeholders and are meant to provide an enhanced insight and
better understanding into the financial development of OKEA and improve comparability between periods.
Financial statementsPage 106
Definitions of alternative performance measures
Production expense per boe is defined as production expense less processing tariff income and joint utilisation of resources income for
assets in production divided by produced volumes. Expenses classified as production expenses related to various preparation for
operations on assets under development are excluded.
EBITDA is defined as earnings before interest and other financial items, taxes, depreciation, depletion, amortisation and impairments.
EBITDAX is defined as earnings before interest and other financial items, taxes, depreciation, depletion, amortisation, impairments and
exploration and evaluation expenses.
Net interest-bearing debt is book value of current and non-current interest-bearing loans, bonds and other interest-bearing liabilities
excluding lease liability (IFRS 16) less cash and cash equivalents.
Net interest-bearing debt excl. other interest bearing liabilities is book value of interest-bearing loans, bonds less cash and cash
equivalents.
Financial statementsPage 107
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 OKEA ASA
Independent Auditor’s Report
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of OKEA ASA (the Company), which comprise the statement
of financial position as at 31 December 2021, the statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies.
In our opinion
·
the financial statements comply with applicable statutory requirements, and
·
the financial statements give a true and fair view of the financial position of the Company as at
31 December 2021, and its financial performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards as adopted by EU.
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 Company 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 Company for 7 years from the election by the general meeting of the
shareholders on 25 September 2015 for the accounting year 2015 with a renewed election on the 24
April 2020.
Independent Auditor’s Report - OKEA ASA
(2)
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
The Company’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. As a result of
continued price volatility in the hydrocarbon commodity markets during 2021 our audit has focused on
the critical estimates assessment of Impairment of Goodwill and Oil & Gas Properties and Estimation of
Asset Retirement Obligations.
Impairment of Goodwill and Oil & Gas
properties
OKEA ASA has oil and gas properties with a
carrying amount of NOK 4 685 million at 31
December 2021. In addition, the carrying value
of goodwill (including technical goodwill) was
NOK 769 million at 31 December 2021.
In line with OKEA’s accounting policies for
impairment of non-financial assets, management
has assessed whether there are impairment or
reversal indicators. Based on identified reversal
indicators, a calculation of recoverable amount
by each CGU was prepared.
Management’s assessment of recoverable
amounts of goodwill and oil & gas properties
requires estimates and assumptions relating to
operational and market factors and involves a
significant amount of judgement.
In addition, the calculation of recoverable
amounts requires financial modeling of the
cash flows related to the cash generating units,
which can be inherently complex, and may
require use of additional judgement.
We assessed management’s identification of
impairment and reversal indicators and agreed
that indicators were present. We obtained
management’s recoverable amount calculation as
of 31 December 2021. Management’s
identification of cash generating units were in line
with our expectations. For each cash generating
unit, including allocated technical goodwill, we
assessed the key inputs into the calculation of
recoverable amount by:
·
comparison of management´s short-term
price assumptions against external price
forward curves,
·
comparison of long-term oil price
assumptions against long-term price
assumptions communicated by peers and
other publicly available sources,
·
comparison of hydrocarbon production
profiles, proved and probable reserves to
updated reserve reports prepared by the
external reserves appraiser, AGR Petroleum
Services AS (AGR) for 2021,
·
comparison of estimated future operating
costs and capital expenditures towards
information reported by the field operator in
the 2022 RNB (reporting to Revised National
Budget) numbers,
Key Audit Matter
How our audit addressed the Key Audit
Matter
Based on the results of the assessment of
impairment and reversal indicators and the
corresponding calculation of recoverable
amounts, a total net reversal of NOK 364 million
of prior period impairment charges was
Independent Auditor’s Report - OKEA ASA
(3)
We focused on this area because goodwill and oil
& gas properties constitute a significant share of
total assets in the balance sheet, and because the
assessment of recoverable amounts is complex
and involves significant management judgement
which may have a direct impact on net profit.
Please refer to note 9 for a description of
management’s assessment of impairment and
reversal of impairment
·
benchmarking of inflation and discount rates
applied against external market data.
The valuation of Oil & Gas properties and
goodwill are inherently uncertain due to the
judgmental nature of the underlying estimates.
This risk is still prevalent due to the current
market conditions.
We also assessed the mathematical and
methodological integrity of management’s
impairment models.
For ordinary goodwill, management determined
that ordinary goodwill on 31 December 2021 was
not impaired. We obtained and considered
management’s assessment supporting the carrying
value of goodwill at 31 December 2021. We also
calculated the market capitalization at 31
December 2021 based on the quoted share price at
year-end. We found support for the carrying value
of oil and properties and ordinary goodwill at 31
December 2021.
Estimation of asset retirement obligations
Asset retirement obligations as of 31 December
2021 was calculated for the operated asset
Draugen, and the non-operated assets Gjøa,
Yme and Ivar Aasen.
As of 31 December 2021, asset retirement
obligations represent NOK 4 133 million as a
non-current provision and NOK 104 million as
a current provision in the balance sheet.
We obtained management’s assessment and
model for calculation of asset retirement
obligations at 31 December 2021 and held
meetings with management to understand the
nature and details of the calculation. We found
the methodology to be in line with requirements
in IFRS.
The decommissioning cost estimates for the non-
operated assets are based on the respective
Operators cost estimate. We obtained the cost
estimate prepared by the external Operators of the
non-operated fields from management. We
checked that the external cost estimates were
included as input in the calculation of the asset
retirement obligation for the non-operated fields
and challenged assumptions applied.
recognized in 2021. The main impairment
reversal relat
es
to the Yme asset.
We evaluated the appropriateness of the related
note disclosures and found that they satisfied
IFRS requirements.
The estimation and measurement of asset
retirement obligations requires a number of
estimates and judgments to be applied. This
includes timing of actual cash flows, amount of
abandonment costs and discount rate. The
timing of removal is also dependent on the
reserves estimation and is impacted by the
commodity price outlook. The calculation of the
asset retirement obligation requires financial
modeling of cash flows related to the removal
and decommissioning cost. Such modeling can
For the Draugen field, the cost estimate is based
on OKEA’s internal calculation and assessment.
OKEA has involved a multi-discipline project
Independent Auditor’s Report - OKEA ASA
(4)
We focused on this area due to the significant
value the provision for asset retirement
obligations represents in the balance sheet, and
the level of management judgement used in
determining the provision for asset retirement
obligations.
Please refer to note 24 for a description of how
management has accounted for the asset
retirement obligations.
The calculation of the Draugen cost estimate is
based on several cost inputs. We assessed the
Draugen cost estimate assumptions applied for
reasonableness. This included, but were not
limited to, number of wells to be plugged, rig rates
per day, contingency level and level of
management cost. We also tested the cash flows
model used for calculating the asset retirement
obligation and found that the model makes
calculations as expected. We received
management’s assessment of the timing of
decommissioning and removal activities for each
field. We compared this to the operator’s estimate
as included in the government filing to the Revised
National budget for 2021. We benchmarked the
inflation rate and the discount rate used in
calculation of the asset retirement obligation. Our
testing substantiated that management
assumptions were fair.
be complex and may require use of additional
judgement.
team with professionals from various technical
areas. We obtained the internal report “Draugen
Annual ARO Estimate Report 2021” from
management, which documents OKEA’s
assessment of the cost estimate for Draugen. We
tested whether the report had been internally
reviewed, and quality checked.
We evaluated and found that the related note
disclosures in note 24 to the financial statements
were reasonable.
Other Information
The Board of Directors and the Managing Director (management) are responsible for the information in
the Board of Directors’ report and the other information accompanying the financial statements. The
other information comprises information in the annual report, but does not include the financial
statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the
information in the Board of Directors’ report nor the other information accompanying the financial
statements.
In connection with our audit of the financial statements, our responsibility is to read the Board of
Directors’ report and the other information accompanying the financial statements. The purpose is to
consider if there is material inconsistency between the Board of Directors’ report and the other
information accompanying the financial statements and the financial statements or our knowledge
obtained in the audit, or whether the Board of Directors’ report and the other information
accompanying the financial statements otherwise appears to be materially misstated. We are required
Independent Auditor’s Report - OKEA ASA
(5)
to report if there is a material misstatement in the Board of Directors’ report or the other information
accompanying the financial statements. 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 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, and to the report on payments to governments.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in
accordance with International Financial Reporting Standards as adopted by the EU, 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 financial statements, management is responsible for assessing the Company’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 Company or to
cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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 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 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 Company’s internal control.
Independent Auditor’s Report - OKEA ASA
(6)
·
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 Company’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 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 Company to cease to continue as a going concern.
·
evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves a true and fair view.
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
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 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 (ESEF)
Opinion
We have performed an assurance engagement to obtain reasonable assurance that the financial
statements with file name OKEA ASA annual report 2021 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 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 financial statements in the single
electronic reporting format required in ESEF. This responsibility comprises an adequate process and
Independent Auditor’s Report - OKEA ASA
(7)
the internal control procedures which management determines is necessary for the preparation and
publication of the financial statements.
Auditor’s Responsibilities
For a description of the auditor’s responsibilities when performing an assurance engagement of the
ESEF reporting, see:
Stavanger, 30 March 2022
PricewaterhouseCoopers AS
Gunnar Slettebø
State Authorised Public Accountant
OKEA ASA
Kongens gate 8
7011 Trondheim
OKEA ASA is a leading mid- to
late-life operator on the
Norwegian continental shelf
(NCS).
OKEA finds value where others
divest and has an ambitious
strategy built on growth, value
creation and capital disipline.
