Quarterly Report • Feb 11, 2022
Quarterly Report
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(Amounts in parentheses refer to previous quarter)
| Unit | Q4 2021 | Q3 2021 | Q4 2020 | Full year 2021 |
Full year 2020 |
|
|---|---|---|---|---|---|---|
| Total operating income | MNOK | 1,725 | 1,026 | 584 | 3,882 | 1,730 |
| EBITDA 1) | MNOK | 1,258 | 797 | 229 | 2,607 | 867 |
| EBITDAX 1) | MNOK | 1,347 | 834 | 272 | 2,950 | 964 |
| Profit/loss (-) before income tax | MNOK | 654 | 526 | 410 | 2,106 | -1,231 |
| Net profit / loss (-) | MNOK | 283 | 97 | 182 | 603 | -603 |
| Net cash flow from operations | MNOK | 1,003 | 470 | 322 3) | 2,515 | 621 3) |
| Net cash flow from investments | MNOK | -308 | -166 | -188 3) | -941 | -1,044 3) |
| Net cash flow from financing activities | MNOK | -172 | -141 | -96 | -422 | -390 |
| Net interest-bearing debt 1) | MNOK | 750 | 874 | 1,529 | 750 | 1,529 |
| Net IBD ex. other int.bearing liabilities1) | MNOK | 256 | 874 | 1,529 | 256 | 1,529 |
| Net production | Boepd 2) | 16,038 | 16,315 | 16,171 | 15,530 | 16,147 |
| Third-party volumes available for sale 4) | Boepd 2) | 419 | 165 | 0 | 147 | 0 |
| Over/underlift/inventory adjustments | Boepd 2) | 1,645 | 499 | 2,623 | 166 | -276 |
| Net sold volume | Boepd 2) | 18,102 | 16,979 | 18,794 | 15,843 | 15,871 |
| Production expense per boe 1) | NOK/boe | 170.8 | 108.2 | 110.4 | 133.5 | 104.8 |
| Realised liquids price | USD/boe | 78.0 | 67.4 | 39.0 | 65.3 | 36.3 |
| Realised gas price | USD/scm | 1.11 | 0.57 | 0.19 | 0.62 | 0.11 |
1) Definitions of alternative performance measures are available on page 30 of this report
2) Boepd is defined as barrels of oil equivalents per day
3) Reclassified – reference is made to statement of cash flow for further details
4) Compensation volumes received from Duva (tie-in to Gjøa) included in Net sold volumes
Total operating income in the fourth quarter was NOK 1,725 (1,026) million, whereof NOK 1,633 (1,017) million related to revenue from oil and gas sales. Market prices continued to improve during the quarter, which resulted in an average realised price for liquids of USD 78.0 (67.4) per boe and a record-high realised gas price averaging at USD 1.11 (0.57) per standard cubic meter (scm). Total sold volumes were 1,665 (1,562) thousand boe.
Other operating income / loss (-) amounted to NOK 92 (9) million consisting of tariff income at Gjøa of NOK 24 (13) million, income from joint utilisation of logistic resources of NOK 13 (1) million and a net gain from gas forward contracts of NOK 54 (-5) million.
Production expenses amounted to NOK 291 (181) million, corresponding to NOK 170.8 (108.2) per boe. The increase compared to previous quarter was mainly due to increased cost for imported fuel gas and CO2 quotas in addition to planned maintenance work at Draugen. In addition, fourth quarter was the first quarter with production expenses from the Yme licence following start of production in October. As the volume contribution from Yme is relatively limited in this first quarter of operation, this drives the average cost per boe upwards. In addition, the higher production expense per boe was also due to reduced produced volumes at Gjøa compared to previous quarter.
Changes in over-/underlift positions and production inventory amounted to NOK -41 (9) million. Sold volumes in the quarter exceeded produced volumes by 1,645 (449) boepd. In addition, sold volumes from third-party compensations received from Duva (tie-in to Gjøa) was 419 (165) boepd.
Exploration and evaluation expenses amounted to NOK 89 (37) million and mainly relates to seismic purchase of NOK 46 (5) million, cost incurred on the Ginny dry exploration well of NOK 18 (0) million and various field evaluation activities of NOK 19 (16) million.
NOK 367 (0) million was recognised as impairment in the quarter. The transfer of ownership of the Inspirer rig to the Yme licence was completed in October. For accounting purposes, the transaction results in recognition of a pre-tax impairment charge, largerly offset under income taxes for change in deferred taxes following the impairment and reduction in taxes payable from uplift. The impairment charge primarily results from lower net asset present value from the Yme field as uplift becomes deductible. Total tax income recognised in the quarter relating to this effect amounted to NOK 286 (0) million.
General and administrative expenses amounted to NOK 46 (21) million and represent OKEA's share of costs after allocation to licence activities. The increase from previous quarter was mainly due to an annual recalculation of activities distributable to licences including the employee incentive program and increased costs related to various corporate activities.
Net financial items amounted to NOK -61 (-91) million, whereof NOK -50 (-18) million was expensed interest. For further details on financial items, reference is made to note 14.
Profit / loss (-) before tax amounted to NOK 654 (526) million.
Tax expenses (-) / tax income (+) amounted to NOK -370 (-429) million and represents an effective tax rate of 57% (82%). The deviation from the expected 78% was mainly due to positive effects on uplift from ownership of the Inspirer rig of NOK 63 million and the sale and leaseback transaction of the regional headquarter in Kristiansund being taxed with 22% of NOK 40 million.
Net profit / loss (-) for the fourth quarter was NOK 283 (97) million. Earnings per share were NOK 2.74 (0.94).
Goodwill amounted to NOK 769 (769) million consisting of NOK 606 (606) million in technical goodwill and NOK 163 (163) million in ordinary goodwill.
Oil and gas properties amounted to NOK 4,685 (4,585) million at the end of the quarter. The increase mainly relates to the transfer of ownership of Inspirer rig at the Yme licence of NOK 469 million, investments in the Yme New Development, Draugen modifications, Power from shore, and the Hasselmus project of a total of NOK 211 million, partly offset by impairment of Yme asset of NOK 367 million and depreciation from producing assets of NOK 170 million.
Right-of-use assets amounted to NOK 234 (162). In the fourth quarter, OKEA completed a sale and leaseback transaction for OKEA's regional headquarter in Kristiansund. The gross sale price amounted to NOK 109 million. As OKEA will be utilising the property over the remaining economic lifetime, no gain has been recognised from the transaction. OKEA recognised a lease liability equal to the net sales proceeds of NOK 108 million, and the book value of the sold property of NOK 79 million was recognised as right-of-use asset. Other right-of-use assets include logistical resources on operated assets and lease of other offices.
Total asset retirement reimbursement right amounted to NOK 3,108 (3,088) million which relate to Shell's obligation to cover the decommissioning costs for Draugen and Gjøa, whereof NOK 3,024 (3,088) million was classified as non-current assets and NOK 83 (0) million was classified as current.
Cash and cash equivalents amounted to NOK 2,039 (1,504) million. The increase from previous quarter was mainly due to net cash flow from operating activities exceeding cash used in investment activities, interest and buy-back of bonds.
Financial investments amounted to NOK 210 (0) million and relates to liquid investments in low-risk moneymarket funds and combination funds as an alternative to bank deposits.
Spare parts, equipment and inventory amounted to NOK 253 (227) million whereof NOK 124 (103) million related to oil inventory at Draugen.
Equity amounted to NOK 1,709 (1,411) million, corresponding to an equity ratio of 14% (13%). The increase from previous quarter was due to net profit in the period.
Total provisions for asset retirement obligations amounted to NOK 4,237 (4,253) million, whereof the noncurrent portion amounted to NOK 4,113 (4,253) million and the current portion amounted to NOK 104 (0) million. The current portion relates to activities planned for 2022 at Draugen including permanent plugging of the B1 well, cessation scope topside Draugen to prepare for power from shore and removal of the Christmas tree at the D1 well. The obligation is partly offset by the total asset retirement reimbursement right.
Interest bearing loans, bonds amounted to NOK 2,295 (2,379) million, consisting of the two bond loans on issue, OKEA02 and OKEA03. In the fourth quarter a nominal amount equivalent to NOK 105 million of OKEA02 was bought back, partly offset by unrealised foreign currency loss of NOK 37 million due to a somewhat weakened NOK compared to USD in the quarter. By end of 2021, OKEA had bought back OKEA02 bonds for nominal value of USD 38.4 million.
Total other interest-bearing liabilities was NOK 493 (0) million, whereof the non-current share was NOK 455 million and the current share was NOK 39 (0) million. The amount represents OKEA's share of the net present value of the future obligations under the bareboat charter (BBC) agreement between the Yme licence and Havila Sirius AS for the Inspirer rig. Reference is made to note 23 for further details.
The lease liability relating to IFRS 16 is split into a non-current liability of NOK 220 (126) million and a current liability of NOK 43 (36) million and represents the liability of the right-of-use assets as described above.
Trade and other payables amounted to NOK 787 (804) million and mainly relate to working capital from joint venture licences, prepayments, and accrued expenses.
Income tax payable was NOK 773 (418) million and mainly consists of accrued tax payable for 2021.
Net cash flows from operating activities amounted to NOK 1,003 (470) million, whereof NOK 46 (18) million was net taxes received. Cash received from sales of oil and gas increased by NOK 514 million compared to previous quarter due to the significantly higher realised petroleum prices, particularly for gas.
Net cash flows used in investment activities amounted to NOK -308 (-166) million of which investment in oil and gas properties amounted to NOK -197 (-166) million, mainly relating to the Yme New Development, Draugen modifications, and the Hasselmus project. In addition, NOK -210 (0) million was invested in low-risk placements like money-market funds and combination funds as an alternative to bank deposits, partly offset by proceeds from sale and leaseback agreement for OKEA's regional headquarter in Kristiansund of NOK 109 (0) million.
Net cash flows used in financing activities amounted to NOK -172 (-141) million, of which interest paid amounted to NOK -69 (-23) million and NOK -109 (-108) million was used for a partial buy-back of the OKEA02 bond loan.
OKEA uses derivative financial instruments to manage exposures to fluctuations in commodity prices. At 31 December 2021, 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, 20% for Q2-22 at an average price of 216 GBp/th and 20% of Q3-22 at an average price of 213 GBp/th.
Unrealised gains from these positions were NOK 52 million per 31 December 2021.
Net production to OKEA in the quarter was 16,038 (16,315) boepd. The decrease from previous quarter was mainly driven by lower production from Gjøa partly offset by increased production from Draugen. Further details on each asset are provided in respective sections below.
| Unit | Q4 2021 | Q3 2021 | Q4 2020 | Full year 2021 |
Full year 2020 |
|
|---|---|---|---|---|---|---|
| Draugen – production reliability5)1 | % | 99 | 97 | 99 | 98 | 99 |
| Draugen – production availability6)2 | % | 95 | 87 | 98 | 93 | 90 |
| Gjøa – production reliability | % | 100 | 97 | 99 | 99 | 99 |
| Gjøa – production availability | % | 93 | 92 | 95 | 85 | 86 |
| Ivar Aasen – production availability | % | 99 | 98 | 95 | 97 | 94 |
| Draugen – production | Boepd | 7,231 | 6,735 | 7,592 | 7,084 | 7,774 |
| Gjøa – production | Boepd | 8,367 | 9,348 | 8,293 | 8,137 | 8,059 |
| Yme – production | Boepd | 217 | - | - | 54 | - |
| Ivar Aasen – production | Boepd | 223 | 233 | 286 | 255 | 314 |
| Total net production | Boepd | 16,038 | 16,315 | 16,171 | 15,530 | 16,147 |
| Draugen – sold volume | Boepd | 6,870 | 6,548 | 9,272 | 6,874 | 7,923 |
| Gjøa – sold volume | Boepd | 8,221 | 10,214 | 8,360 | 8,130 | 7,610 |
| Yme – sold volume | Boepd | 139 | - | - | 35 | - |
| Ivar Aasen – sold volume | Boepd | 2,453 | 52 | 1,162 | 656 | 338 |
| Third-party volumes available for sale* | Boepd | 419 | 165 | - | 147 | - |
| Total net sold volume | Boepd | 18,102 | 16,979 | 18,794 | 15,843 | 15,871 |
| Total over/underlift/inventory adj. | Boepd | 1,645 | 499 | 2,623 | 313 | -276 |
*Compensation volumes from Duva received (tie-in to Gjøa)
Net production to OKEA from Draugen was 7,231 (6,735) boepd in the quarter. Production availability was 95% (87%) and production reliability was 99% (97%).
The higher production, reliability and availability compared to previous quarter were mainly due to the planned well maintenance campaigns being executed in the third quarter.
5) Production reliability = Actual Production / (Actual production + Unscheduled deferment)
6) 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.
An emergency shutdown system (ESD) test and safety stop for maintenance was successfully completed during the quarter, in addition to well wash on platform wells A1 and A2 according to plan which contributes to stabilising future production.
Managing the Covid-19 situation remains a high priority. OKEA has mitigating measures in place and has maintained a strict Covid-19 regime during the quarter as the infection pressure in society in general has increased.
Net production to OKEA from Gjøa was 8,367 (9,348) boepd in the quarter and production reliability was 100% (97%). The main cause for the lower production was some of the old Gjøa wells being shut-in due to Duva coming onstream in line with production plans. The Gjøa operator continued applying strict offshore and onshore measures to prevent and limit any consequences in case of Covid-19 contamination at the platform.
The Duva field, which is tied-in to Gjøa, has contributed with additional volumes over the Gjøa topside in the quarter which reduced production expense per boe due to processing tariff revenues. In the quarter, Gjøa was also compensated for the deferred production relating to past shutdown for completing tie-in of Duva. Delivered and sold volumes from Duva in the quarter was 419 boepd. Development of the Nova tie-in is progressing as planned with production start expected in 2022. Once Nova commences production, Gjøa will be compensated for the deferred production caused by shutdowns for the tie-in scope.
The exploration well Hamlet in the Gjøa license was sanctioned during the quarter and is planned to spud in the first quarter of 2022. The risked pre-drill volume of a discovery is about 22 mmboe.
Net production to OKEA from Yme in the quarter was 217 (0) boepd.
Activities on Yme in the fourth quarter mainly related to start up activities including hot commissioning, well clean up and successful reperforation of injector wells. Issues related to operation of subsea storage tank with heavy emulsions and high oil in water content halted the production for a period but has now been sorted out and the storage tank is now fully operational.
Following production start in October, the previously announced transfer of ownership and operatorship of the Inspirer rig was completed. The transaction is expected to provide significant cost improvement and cash flow benefits of around NOK 300 million net after tax to OKEA over the next six months.
Activities to complete hot commissioning and clean-up of remaining wells to bring the asset to full production is currently ongoing.
Net production to OKEA from Ivar Aasen was 223 (233) boepd and production availability was 99% (98%). A transformer at Edvard Grieg was replaced during the quarter and production at the end of the year was back to normal.
As announced in the press release on 12 November, OKEA has entered into an agreement with Neptune Energy AS to purchase additional 2.223% working interest in the Ivar Aasen field. Total compensation is up to USD 12.7 million dependent on the oil price in 2022. Effective date for the transaction is 1 January 2022 and completion of the transaction is contingent upon customary government approvals which is expected in H1 2022.
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 Q4 2023 with gross plateau gas production of more than 4,400 barrels boepd.
During the quarter, the project has progressed according to the overall project schedule. Aker Solutions is working on the detail design of the topside scope and SIA (OneSubsea and Subsea 7) for the corresponding subsea scope. Critical long-lead procurement items have been secured and will enable planned drilling activities by COSL in 2022 and offshore installation activities in 2023.
The Hasselmus project is the first field development project for OKEA as 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 an important hub in the area.
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 CO2 emissions from Draugen alone by approximately 200,000 tonnes which corresponds to a reduction of 95% (reference year: 2019).
An appraisal well is currently considered for 2022 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 2023 with production start in 2025.
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. A decision to drill the Hamlet exploration well in the Gjøa (PL153) licence was made in the fourth quarter with spud expected in the first quarter of 2022.
During the quarter, OKEA acquired 3D seismic data to further support exploration activities in the Norwegian Sea and the Gjøa area.
Work continues to mature drilling opportunities in other exploration licences.
There were no serious incidents, no recordable injures, and no accidental spills to external environment in OKEA's activities and operations in the quarter. OKEA has maintained a strict Covid-19 regime and have not experienced any cases of infection on our operated asset Draugen. Due to increased infection pressure in society in general, stricter requirements were introduced in December.
OKEA's senior management team carried out an annual management review during the quarter, evaluating the company's quality & HSE status and results, including identification of activities for further continuous improvement in 2022. The ESG strategy and ESG targets were addressed as part of the review.
The Governance Group evaluates and ranks the largest companies on Oslo Børs on sustainability and ESG reporting. OKEA received an A- grade on the 2020 ESG report, which according to The Governance Group represents "very good reporting in line with best practice".
OKEA has a strategic priority to actively work to reduce emissions through cost-effective measures across energy efficiency and technology. The goal is to minimise emissions from our activities by choosing energyefficient solutions and operations. The joint electrification project with the Draugen and Njord licences will reduce annual CO2 emissions by 200,000 tonnes per year, corresponding to a 95% reduction (reference year: 2019). As part of OKEA's work for continuous improvement in our activities, a battery package for hybrid energy generation was installed on the supply vessel for the Draugen operations in the quarter. This will reduce the climate gas emissions to air from the vessel by an estimated 650 tonnes of CO2 equivalents per year.
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 was expensed in the fourth quarter.
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.
OKEA's production guiding for 2022 is 18,500 - 20,000 boepd including the increased ownership in the Ivar Aasen field, an increase from the previous outlook of 18,000 - 19,000 boepd. The increase is in particular driven by continued solid performance at Draugen and Gjøa. Capex guiding, excluding capitalised interests, for 2022 is NOK 950 - 1,150. Production outlook for 2023 is 17,000 - 19,000 boepd including the increased ownership in the Ivar Aasen field.
The Hamlet appraisal well near Gjøa is planned drilled by the operator Neptune in the first quarter of 2022.
Liftings already completed in the first quarter of 2022 includes 155 kbbl net to OKEA from Gjøa, 22 kbbl net to OKEA from Yme and 593 kbbl net to OKEA Draugen. There are no further liftings planned at Draugen, Gjøa or Ivar Aasen in the first quarter. Due to Yme still being in the startup phase, no further guidance on timing or volumes from Yme is provided for the first quarter.
OKEA has a clear ambition to deliver competitive shareholder returns driven by solid growth, value creation and capital discipline and the strategy will be centred around three growth levers:
The current cash position is strong, and the company considers the near-term outlook as a good and solid basis for executing on the growth strategy.
As at the date of this report, OKEA has bought back OKEA02 bonds for a total nominal value of USD 41.7 million at an average price of 96.3 to par.
| 01.01-31.12 | ||||||
|---|---|---|---|---|---|---|
| Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 | ||
| Amounts in NOK `000 | Note | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (audited) |
| Revenues from crude oil and gas sales | 6 | 1 633 062 | 1 016 933 | 581 217 | 3 780 641 | 1 652 311 |
| Other operating income / loss (-) | 6, 25 | 91 630 | 9 463 | 2 566 | 101 232 | 77 911 |
| Total operating income | 1 724 692 | 1 026 396 | 583 782 | 3 881 873 | 1 730 222 | |
| Production expenses | 7 | -290 754 | -180 677 | -189 330 | -860 419 | -695 877 |
| Changes in over/underlift positions and production inventory | 7 | -40 581 | 8 650 | -74 221 | 23 087 | 16 690 |
| Exploration and evaluation expenses | 8 | -88 662 | -36 677 | -43 094 | -342 972 | -97 036 |
| Depreciation, depletion and amortisation | 10 | -177 000 | -179 335 | -178 894 | -672 450 | -699 403 |
| Impairment (-) / reversal of impairment | 10, 11, 12 | -366 632 | - | 116 851 | 363 765 | -1 387 018 |
| General and administrative expenses | 13 | -46 228 | -20 745 | -48 371 | -95 024 | -86 713 |
| Total operating expenses | -1 009 857 | -408 784 | -417 058 | -1 584 014 | -2 949 358 | |
| Profit / loss (-) from operating activities | 714 835 | 617 612 | 166 724 | 2 297 860 | -1 219 136 | |
| Finance income | 14 | |||||
| 20 748 | 19 751 | 22 641 | 79 884 | 105 559 | ||
| Finance costs | 14 | -77 067 | -43 348 | -47 901 | -197 001 | -268 907 |
| Net exchange rate gain/loss (-) | 14 | -4 939 | -67 754 | 268 403 | -74 761 | 151 744 |
| Net financial items | -61 259 | -91 350 | 243 144 | -191 877 | -11 604 | |
| Profit / loss (-) before income tax | 653 576 | 526 262 | 409 868 | 2 105 982 | -1 230 740 | |
| Taxes (-) / tax income (+) | 9 | -370 422 | -429 214 | -227 404 | -1 502 673 | 628 014 |
| Net profit / loss (-) | 283 154 | 97 048 | 182 464 | 603 309 | -602 726 | |
Items that will not be reclassified to profit or loss in subsequent periods:
| Remeasurements pensions, actuarial gain/loss (-) | -507 | - | -509 | -507 | -509 |
|---|---|---|---|---|---|
| Total other comprehensive income, net of tax | -507 | - | -509 | -507 | -509 |
| Total comprehensive income / loss (-) | 282 648 | 97 048 | 181 955 | 602 802 | -603 235 |
| Weighted average no. of shares outstanding basic | 103 197 198 | 103 005 350 | 102 502 650 | 102 921 489 | 102 394 798 |
| Weighted average no. of shares outstanding diluted | 103 950 350 | 103 005 350 | 102 502 650 | 102 921 489 | 102 394 798 |
| Earnings per share (NOK per share) - Basic | 2.74 | 0.94 | 1.78 | 5.86 | -5.89 |
| Earnings per share (NOK per share) - Diluted | 2.72 | 0.94 | 1.78 | 5.86 | -5.89 |
| 31.12.2021 | 30.09.2021 | 31.12.2020 | ||
|---|---|---|---|---|
| Amounts in NOK `000 | Note | (unaudited) | (unaudited) | (audited) |
| ASSETS | ||||
| Non-current assets Goodwill |
||||
| 11, 12 | 768 946 | 768 946 | 768 946 | |
| Exploration and evaluation assets | 11 | 10 759 | 19 794 | 38 349 |
| Oil and gas properties | 10 | 4 684 752 | 4 585 287 | 3 757 546 |
| Buildings Furniture, fixtures and office equipment |
10 | - | 79 782 | 83 250 |
| Right-of-use assets | 10 | 11 143 | 11 831 | 10 236 |
| 10 | 234 199 | 161 824 | 179 235 | |
| Asset retirement reimbursement right | 15 | 3 024 562 | 3 088 440 | 3 029 367 |
| Total non-current assets | 8 734 362 | 8 715 904 | 7 866 930 | |
| Current assets | ||||
| Trade and other receivables | 17, 25 | 1 053 338 | 714 455 | 513 601 |
| Financial investments | 26 | 209 961 | - | - |
| Spare parts, equipment and inventory | 20 | 253 318 | 227 327 | 228 790 |
| Tax refund, current | 9 | 0 | 9 368 | 295 932 |
| Asset retirement reimbursement right, current | 15 | 83 412 | - | - |
| Cash and cash equivalents | 18 | 2 038 745 | 1 504 336 | 871 210 |
| Total current assets | 3 638 774 | 2 455 487 | 1 909 534 | |
| TOTAL ASSETS | 12 373 136 | 11 171 391 | 9 776 464 | |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | 16 | 10 387 | 10 301 | 10 250 |
| Share premium | 1 927 859 | 1 912 462 | 1 912 462 | |
| Other paid in capital | 19 064 | 19 249 | 11 342 | |
| Accumulated loss | -248 527 | -531 174 | -851 329 | |
| Total equity | 1 708 783 | 1 410 837 | 1 082 725 | |
| Non-current liabilities | ||||
| Asset retirement obligations | 19 | 4 133 177 | 4 252 714 | 4 199 866 |
| Pension liabilities | 37 311 | 34 478 | 31 988 | |
| Lease liability | 23 | 220 266 | 125 604 | 143 978 |
| Deferred tax liabilities | 9 | 1 735 720 | 1 685 649 | 940 558 |
| Interest bearing loans, bonds | 22, 27 | 2 294 873 | 2 378 676 | 2 400 297 |
| Other interest bearing liabilities | 23 | 454 853 | - | - |
| Total non-current liabilities | 8 876 200 | 8 477 122 | 7 716 687 | |
| Current liabilities | ||||
| Trade and other payables | 21, 25 | 786 535 | 803 824 | 890 362 |
| Other interest bearing liabilities, current | 23 | 38 593 | - | - |
| Income tax payable | 9 | 773 020 | 417 971 | 14 207 |
| Lease liability, current | 24 | 43 032 | 36 220 | 35 257 |
| Asset retirement obligations, current | 19 | 104 265 | - | - |
| Public dues payable | 42 708 | 25 417 | 37 227 | |
| Total current liabilities | 1 788 153 | 1 283 433 | 977 052 | |
| Total liabilities | 10 664 353 | 9 760 554 | 8 693 739 | |
| TOTAL EQUITY AND LIABILITIES | 12 373 136 | 11 171 391 | 9 776 464 |
| Amounts in NOK `000 | Share capital | Share premium |
Other paid in capital |
Accumulated loss |
Total equity |
|---|---|---|---|---|---|
| Equity at 1 January 2020 | 10 206 | 1 912 462 | 6 855 | -248 094 | 1 681 430 |
| Total comprehensive income/loss (-) for the period | - | - | - | -603 235 | -603 235 |
| Share issues, cash | 44 | - | - | - | 44 |
| Share based payment | - | - | 4 487 | - | 4 487 |
| Equity at 31 December 2020 | 10 250 | 1 912 462 | 11 342 | -851 329 | 1 082 725 |
| Equity at 1 January 2021 | 10 250 | 1 912 462 | 11 342 | -851 329 | 1 082 725 |
| Total comprehensive income/loss (-) for the period | - | - | - | 602 802 | 602 802 |
| Share issues, cash | 137 | 15 397 | - | - | 15 534 |
| Share based payment | - | - | 7 722 | - | 7 722 |
| Equity at 31 December 2021 | 10 387 | 1 927 859 | 19 064 | -248 527 | 1 708 783 |
| 01.01-31.12 | ||||||
|---|---|---|---|---|---|---|
| Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 | ||
| Amounts in NOK `000 | Note | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (audited) |
| Cash flow from operating activities | ||||||
| Profit / loss (-) before income tax | 653 576 | 526 262 | 409 868 | 2 105 982 | -1 230 740 | |
| Income tax paid/received | 9 | 45 862 | 18 247 | 164 187 | 355 429 | 169 052 |
| Depreciation, depletion and amortization | 10 | 177 000 | 179 335 | 178 894 | 672 450 | 699 403 |
| Impairment / reversal of impairment | 10, 11, 12 | 366 632 | - | -116 851 | -363 765 | 1 387 018 |
| Expensed exploration expenditures temporary capitalised** | 8, 11 | 16 839 | 1 328 | -12 | 184 855 | 335 |
| Accretion asset retirement obligations/reimbursement right | 14, 15, 19 | 1 258 | 1 258 | 774 | 5 034 | 3 106 |
| Asset retirement costs from billing (net after reimbursement) | 15, 19 | -3 770 | - | - | -3 770 | - |
| Interest expense | 14 | 46 356 | 17 886 | 22 573 | 94 256 | 166 950 |
| Loss on financial investments | 39 | - | - | 39 | 10 615 | |
| Change in trade and other receivables, and inventory | -364 874 | -176 931 | -55 899 | -564 623 | -15 710 | |
| Change in trade and other payables | 28 779 | -174 619 | -61 221 | -94 307 | -475 024 | |
| Change in foreign exchange interest bearing debt and other non-current items | 35 394 | 77 606 | -220 390 | 123 823 | -93 596 | |
| Net cash flow from / used in (-) operating activities | 1 003 092 | 470 373 | 321 923 | 2 515 403 | 621 410 | |
| Cash flow from investment activities | ||||||
| Investment in exploration and evaluation assets** | -7 804 | 915 | -21 709 | -166 671 | -28 280 | |
| Investment in oil and gas properties | 10, 14 | -197 349 | -166 002 | -164 431 | -664 129 | -1 000 516 |
| Investment in furniture, fixtures and office machines | 10 | -1 488 | -1 055 | -1 770 | -8 705 | -4 377 |
| Cash used on (-)/received from financial investments | 26 | -210 000 | - | - | -210 000 | -10 615 |
| Proceeds from sales of buildings | 10, 24 | 109 000 | - | - | 109 000 | - |
| Net cash flow from / used in (-) investment activities | -307 641 | -166 142 | -187 911 | -940 504 | -1 043 788 | |
| Cash flow from financing activities | ||||||
| Repayment/buy-back of borrowings, bonds | 22 | -108 943 | -108 005 | -16 439 | -216 948 | -120 955 |
| Interest paid | -69 603 | -23 442 | -70 929 | -184 430 | -222 715 | |
| Payments of lease debt | 24 | -9 090 | -9 090 | -8 919 | -36 359 | -46 380 |
| Net proceeds from share issues | 15 483 | 0 | 0 | 15 534 | 44 | |
| Net cash flow from / used in (-) financing activities | -172 152 | -140 536 | -96 286 | -422 203 | -390 006 | |
| Net increase/ decrease (-) in cash and cash equivalents | 523 298 | 163 695 | 37 726 | 1 152 696 | -812 383 | |
| Cash and cash equivalents at the beginning of the period | 1 504 336 | 1 346 099 | 883 238 | 871 210 | 1 663 478 | |
| Effect of exchange rate fluctuation on cash held* | 11 111 | -5 458 | -49 754 | 14 839 | 20 116 | |
| Cash and cash equivalents at the end of the period | 2 038 745 | 1 504 336 | 871 210 | 2 038 745 | 871 210 |
* Effect of exchange rate fluctuation on cash held has in previous periods before Q2-21 been classified under operating activities. From Q2-21 onwards, this has been reclassified to conform presentation to the current quarters classification.
** Expenditure relating to drilling of dry/non-commercial wells has in previous periods before Q2-21 been classified under operating activities. From Q2-21 onwards, the company has classified such expenditure under investment activities. Cash flow from previous periods are reclassified accordingly.
These financial statements are the unaudited interim condensed financial statements of OKEA ASA for the fourth quarter of 2021. OKEA ASA ("OKEA" or the "company") is a public limited liability company incorporated and domiciled in Norway, with its main office located in Trondheim. The company'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). OKEA finds value where others divest and has an ambitious growth strategy built on accretive M&A activities, value creation and capital discipline.
The interim accounts have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim accounts do not include all the information required in the annual accounts and should therefore be read in conjunction with the annual accounts for 2020. The annual accounts for 2020 were prepared in accordance with EU`s approved International Financial Reporting Standards (IFRS).
The interim financial statements were authorised for issue by the company's board of directors on 10 February 2022.
The accounting policies adopted in the preparation of the interim accounts are consistent with those followed in the preparation of the annual accounts for 2020. New standards, amendments and interpretations to existing standards effective from 1 January 2021 did not have any significant impact on the financial statements.
The preparation of the interim accounts entails the use of judgements, estimates and assumptions that affect the application of accounting policies and the amounts recognised as assets and liabilities, income and expenses. The estimates, and associated assumptions, are based on historical experience and other factors that are considered as reasonable under the circumstances. The actual results may deviate from these estimates. The material assessments underlying the application of the company's accounting policies, and the main sources of uncertainty, are the same for the interim accounts as for the annual accounts for 2020.
The company's only business segment is development and production of oil and gas on the Norwegian continental shelf.
| 01.01-31.12 | |||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| Sale of liquids | 713 775 | 650 511 | 463 524 | 2 198 055 | 1 373 994 |
| Sale of gas | 919 287 | 366 423 | 117 693 | 1 582 586 | 278 317 |
| Total petroleum revenues | 1 633 062 | 1 016 933 | 581 217 | 3 780 641 | 1 652 311 |
| Sale of liquids (boe*) | 1 069 877 | 1 100 827 | 1 289 436 | 3 935 445 | 4 079 188 |
| Sale of gas (boe*) | 595 467 | 461 233 | 439 628 | 1 847 140 | 1 729 642 |
| Total sale of petroleum in boe* | 1 665 344 | 1 562 060 | 1 729 064 | 5 782 585 | 5 808 830 |
*Barrels of oil equivalents
| 01.01-31.12 | |||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| Gain / loss (-) from put/call options, oil | - | - | -14 645 | -32 766 | 9 568 |
| Gain / loss (-) from forward contracts, gas | 54 314 | -5 312 | - | 49 002 | - |
| Tariff income Gjøa | 24 263 | 13 393 | 15 570 | 61 960 | 53 237 |
| Joint utilisation of logistics resources | 13 054 | 1 382 | 1 641 | 23 036 | 15 107 |
| Total other operating income/loss (-) | 91 630 | 9 463 | 2 566 | 101 232 | 77 911 |
| 01.01-31.12 | |||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| From licence billings - producing assets | 251 323 | 167 767 | 157 528 | 753 181 | 591 305 |
| From licence billings - assets under construction - various | |||||
| preparations for operation | 1 397 | 3 483 | 7 813 | 17 884 | 7 813 |
| Other production expenses (insurance, transport) | 38 034 | 9 426 | 23 989 | 89 354 | 96 759 |
| Total production expenses | 290 754 | 180 677 | 189 330 | 860 419 | 695 877 |
| 01.01-31.12 | |||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| Changes in over/underlift positions | -61 856 | 17 761 | -54 751 | 15 852 | -77 423 |
| Changes in production inventory | 21 275 | -9 111 | -19 470 | 7 236 | 94 112 |
| Total changes income/loss (-) | -40 581 | 8 650 | -74 221 | 23 087 | 16 690 |
| 01.01-31.12 | |||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| Share of exploration and evaluation expenses from participation in licences excluding dry well impairment, from billing |
20 505 | 26 620 | 26 550 | 95 278 | 74 942 |
| Share of exploration expenses from participation in licences, | |||||
| dry well write off, from billing * | 16 839 | 1 328 | -12 | 184 855 | 335 |
| Seismic and other exploration and evaluation expenses, | |||||
| outside billing | 51 317 | 8 730 | 16 555 | 62 839 | 21 759 |
| Total exploration and evaluation expenses | 88 662 | 36 677 | 43 094 | 342 972 | 97 036 |
* The drilling of exploration well Jerv in licence PL973 was completed in Q1 2021 and concluded as a non-commercial discovery. The drilling of exploration well Ilder in licence PL973 was completed in Q2 2021 and the well was dry. In Q1 2022 the drilling of exploration well Ginny on licence PL1060 was completed and concluded dry.
| 01.01-31.12 | |||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| Change in deferred taxes current year | -51 867 | -57 703 | -200 527 | -796 958 | -111 946 |
| Taxes payable current year | -320 064 | -371 511 | - | -711 980 | - |
| Tax payable adjustment previous year | 1 508 | - | -12 046 | 1 508 | -12 046 |
| Tax refund current year | - | - | -14 832 | - | 752 006 |
| Tax refund adjustment previous year | - | - | - | 4 757 | - |
| Total taxes (-) / tax income (+) recognised in the income statement | -370 422 | -429 214 | -227 404 | -1 502 673 | 628 014 |
| 01.01-31.12 | |||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| Profit / loss (-) before income taxes | 653 576 | 526 262 | 409 868 | 2 105 982 | -1 230 740 |
| Expected income tax at nominal tax rate, 22% | -143 787 | -115 778 | -90 171 | -463 316 | 270 763 |
| Expected petroleum tax, 56% | -366 003 | -294 707 | -229 526 | -1 179 350 | 689 214 |
| Permanent differences, including impairment of goodwill | 1 716 | 2 437 | -1 983 | -2 419 | -504 605 |
| Effect of sale and leaseback transaction | 39 839 | - | - | 39 839 | - |
| Effect of uplift | 99 985 | 33 666 | 22 901 | 196 977 | 180 613 |
| Financial and onshore items | -2 451 | -53 448 | 82 775 | -94 459 | 3 429 |
| Change valuation allowance | 1 230 | -1 384 | - | -4 887 | - |
| Adjustments previous year and other | -952 | - | -11 401 | 4 941 | -11 401 |
| Total income taxes recognised in the income statement | -370 422 | -429 214 | -227 404 | -1 502 673 | 628 014 |
| Effective income tax rate | 57 % | 82 % | 55 % | 71 % | 51 % |
| Amounts in NOK `000 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
|---|---|---|---|
| Tangible and intangible non-current assets | -2 939 348 | -2 865 570 | -2 113 571 |
| Provisions (net ARO), lease liability, pensions and gain/loss account | 1 352 475 | 1 297 484 | 1 299 894 |
| Interest bearing loans | -3 429 | -4 849 | -7 240 |
| Current items (spareparts and inventory) | -145 419 | -113 102 | -122 180 |
| Tax losses carried forward, onshore 22% | 4 887 | 6 116 | 992 |
| Tax losses carried forward, offshore 22% | - | - | - |
| Tax losses carried forward, offshore 56% | - | - | - |
| Uplift, offshore 56% | - | 387 | 1 548 |
| Valuation allowance (uncapitalised deferred tax asset) | -4 887 | -6 116 | - |
| recognised | -1 735 720 | -1 685 649 | -940 558 |
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%, giving 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 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
|---|---|---|---|
| Tax value of exploration expenditures | - | 84 267 | 85 735 |
| Residual tax value of tax losses | - | -74 899 | 210 197 |
| Total tax refund | - | 9 368 | 295 932 |
Tax value of exploration expenditures is paid in November the following year.
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 | Total |
|---|---|
| Tax payable at 1 January 2021 | 14 207 |
| Tax payable adjustment previous year | -1 508 |
| Taxes payable current year | 711 980 |
| Taxes recognised on acquisition of licences | -6 399 |
| Tax refunded related to current year, to be repaid | 54 740 |
| Tax payable at 31 December 2021 | 773 020 |
In the fourth quarter net taxes received was NOK 45.9 million consisting of two tax instalments of NOK 18.2 million and net amount of NOK 9.4 million from 2020 exploration refund received and 2020 residual tax paid.
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.
| 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 |
|---|---|---|---|---|---|---|
| Cost at 1 January 2021 | 3 918 980 | 2 037 626 | 92 501 | 19 434 | 249 439 | 6 317 979 |
| Additions Reclassification from inventory |
236 608 | 332 481 | - | 7 217 | 1 340 | 577 646 |
| Reclassification from exploration | 358 | - | - | - | - | 358 |
| Removal and decommissioning asset | - | 3 008 | - | - | - | 3 008 |
| Disposals | - - |
- - |
- - |
- -33 |
- - |
- -33 |
| Cost at 30 September 2021 | 4 155 946 | 2 373 115 | 92 501 | 26 618 | 250 779 | 6 898 958 |
| Accumulated depreciation and impairment | ||||||
| at 1 January 2021 | -1 468 663 | -730 397 | -9 250 | -9 198 | -70 204 | -2 287 711 |
| Depreciation | -475 111 | - | -3 469 | -5 622 | -11 249 | -495 450 |
| Impairment (-) / reversal of impairment | - | 730 397 | - | - | - | 730 397 |
| Disposals | - | - | - | 33 | - | 33 |
| Additional depreciation of IFRS 16 Right-of use assets presented gross related to |
||||||
| leasing contracts entered into as licence | ||||||
| operator | - | - | - | - | -7 502 | -7 502 |
| Accumulated depreciation and impairment at |
||||||
| 30 September 2021 | -1 943 774 | - | -12 719 | -14 787 | -88 955 | -2 060 234 |
| Carrying amount at 30 September 2021 | 2 212 173 | 2 373 115 | 79 782 | 11 831 | 161 824 | 4 838 724 |
| Cost at 1 October 2021 | 4 155 946 | 2 373 115 | 92 501 | 26 618 | 250 779 | 6 898 958 |
| Additions | 647 349 | 33 304 | - | 1 488 | 78 625 | 760 767 |
| Reclassification from inventory | - | - | - | - | - | - |
| Reclassification from exploration | - | - | ||||
| Removal and decommissioning asset | -44 638 | - | - | - | - | -44 638 |
| Transfer from development to production | 2 406 419 | -2 406 419 | - | |||
| Disposals | - | - | -92 501 | -7 593 | - | -100 094 |
| Cost at 31 December 2021 | 7 165 077 | - | - | 20 512 | 329 404 | 7 514 993 |
| Accumulated depreciation and impairment | ||||||
| at 1 October 2021 | -1 943 774 | - | -12 719 | -14 787 | -88 955 | -2 060 234 |
| Depreciation | -169 918 | - | -1 156 | -2 176 | -3 750 | -177 000 |
| Impairment (-) / reversal of impairment | -366 632 | - | - | - | - | -366 632 |
| Disposals | - | - | 13 875 | 7 593 | - | 21 469 |
| Additional depreciation of IFRS 16 Right-of | ||||||
| use assets presented gross related to leasing contracts entered into as licence |
||||||
| operator | - | - | - | - | -2 501 | -2 501 |
| 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 |
See note 24 for information about the sale and leaseback transaction for the property Råket 2 completed in December 2021.
| Exploration and evaluation |
Technical | Ordinary | ||
|---|---|---|---|---|
| Amounts in NOK `000 | assets | goodwill | goodwill | Total goodwill |
| Cost at 1 January 2021 | 38 349 | 1 114 547 | 416 415 | 1 530 962 |
| Additions | 152 468 | - | - | - |
| Reclassification to oil and gas properties under development | -3 008 | - | - | - |
| Expensed exploration expenditures temporarily capitalised | -168 015 | - | - | - |
| Cost at 30 September 2021 | 19 794 | 1 114 547 | 416 415 | 1 530 962 |
| Accumulated impairment at 1 January 2021 | - | -508 818 | -253 198 | -762 016 |
| Impairment | - | - | - | - |
| Accumulated impairment at 30 September 2021 | - | -508 818 | -253 198 | -762 016 |
| Carrying amount at 30 September 2021 | 19 794 | 605 729 | 163 217 | 768 946 |
| Cost at 1 October 2021 | 19 794 | 1 114 547 | 416 415 | 1 530 962 |
| Additions | 7 804 | - | - | - |
| Reclassification to oil and gas properties under development | - | - | - | - |
| Expensed exploration expenditures temporarily capitalised | -16 839 | - | - | - |
| Cost at 31 December 2021 | 10 759 | 1 114 547 | 416 415 | 1 530 962 |
| Accumulated impairment at 1 October 2021 | - | -508 818 | -253 198 | -762 016 |
| Impairment | - | - | - | - |
| Accumulated impairment at 31 December 2021 | - | -508 818 | -253 198 | -762 016 |
| Carrying amount at 31 December 2021 | 10 759 | 605 729 | 163 217 | 768 946 |
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.
Below is an overview of the key assumptions applied in the impairment test as of 31 December 2021:
| Year | Oil USD/BOE* |
Gas GBP/therm* |
Currency rates USD/NOK |
|---|---|---|---|
| 2022 | 74.7 | 1.61 | 8.8 |
| 2023 | 69.1 | 1.05 | 8.4 |
| From 2024 | 66.3 | 0.48 | 8.0 |
* Prices in real terms
For oil and gas reserves future cash flows are calculated on the basis of expected production profiles and estimated proven and probable remaining reserves.
Future capex, opex and abandonment cost are calculated based on the expected production profiles and the best estimate of related cost. For fair value testing the discount rate applied is 9.0% post tax, reduced from 10.0% in Q3 2021. The main driver for reduced WACC is lower cost of debt.
The long-term inflation rate is assumed to be 2.0%.
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, depending on the characteristics of the change, have a negative effect on the value of OKEA's oil and gas assets. Sensitivities on changes to environmental cost is reflected in the table below.
Based on the company's impairment assessments NOK 367 million was recognised as impairment in the fourth quarter. The transfer of ownership of the Inspirer rig to the Yme licence was completed during Q4. For accounting purposes, the transaction results in recognition of a pre-tax impairment charge, materially offset under income taxes for change in deferred taxes following the impairment and reduction in taxes payable from uplift. The impairment charge primarily results from lower net asset value from the Yme field as uplift reduces tax payable.
No impairment of technical and ordinary goodwill or ROU assets was required in the three month period ending on 31 December 2021.
The table below shows what the impairment pre-tax would have been in the fourth quarter under various alternative assumptions, assuming all other assumptions remaining constant. The total figures shown are combined impairment for CGUs Gjøa, Draugen, Ivar Aasen and Yme.
| Alternative calculations of pre-tax impairment/reversal (-) in Q4 2021 (NOK '000) |
Increase / decrease (-) of pre tax impairment Q4 2021 (NOK '000) |
|||
|---|---|---|---|---|
| Assumptions Change |
Increase in assumption |
Decrease in assumption |
Increase in assumption |
Decrease in assumption |
| Oil and gas price +/- 10% |
- | 903 906 | -366 632 | 537 274 |
| Currency rate USD/NOK | +/- 1.0 NOK - |
1 009 376 | -366 632 | 642 743 |
| Discount rate | +/- 1% point 454 982 |
274 524 | 88 350 | -92 108 |
| +/- 20% Environmental cost (CO2 and NOx) |
444 497 | 288 768 | 77 864 | -77 864 |
| 01.01-31.12 | |||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| Salary and other employee benefits expenses | 136 482 | 111 867 | 140 020 | 484 758 | 438 868 |
| Consultants and other operating expenses | 62 871 | 50 685 | 53 321 | 196 276 | 160 498 |
| Allocated to operated licences | -151 651 | -140 853 | -141 668 | -581 578 | -502 367 |
| Reclassified to oil and gas properties under development | -1 473 | -954 | -3 302 | -4 432 | -10 286 |
| Total general and administrative expenses | 46 228 | 20 745 | 48 371 | 95 024 | 86 713 |
| 01.01-31.12 | |||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| Interest income | 1 057 | 60 | 1 235 | 1 120 | 4 036 |
| Unwinding of discount asset retirement reimbursement right (indemnification asset) |
19 691 | 19 691 | 19 376 | 78 764 | 77 450 |
| Gain on buy-back bond loan | - | - | 2 031 | - | 24 074 |
| Finance income | 20 748 | 19 751 | 22 641 | 79 884 | 105 559 |
| Interest expense and fees from loans and borrowings | -60 699 | -51 100 | -50 617 | -210 907 | -291 237 |
| Capitalised borrowing cost, development projects | 14 400 | 33 214 | 28 100 | 116 709 | 124 344 |
| Interest expense shareholder loan | -57 | - | -57 | -57 | -57 |
| Other interest expense | -3 371 | -42 | -3 386 | -3 986 | -4 331 |
| Unwinding of discount asset retirement obligations | -20 949 | -20 949 | -20 150 | -83 797 | -80 555 |
| Loss on buy-back bond loan | -3 756 | -2 608 | - | -6 364 | - |
| Loss on financial investments | -39 | - | - | -39 | - |
| Other financial expense | -2 596 | -1 862 | -1 791 | -8 558 | -17 071 |
| Finance costs | -77 067 | -43 348 | -47 901 | -197 001 | -268 907 |
| Exchange rate gain/loss (-), interest-bearing loans and borrowings | -36 878 | -63 370 | 274 068 | -107 918 | 57 171 |
| Net exchange rate gain/loss (-), other | 31 939 | -4 383 | -5 664 | 33 158 | 94 573 |
| Net exchange rate gain/loss (-) | -4 939 | -67 754 | 268 403 | -74 761 | 151 744 |
| Net financial items | -61 259 | -91 350 | 243 144 | -191 877 | -11 604 |
| Amounts in NOK `000 | |
|---|---|
| Asset retirement reimbursement right at 1 January 2021 (indemnification asset) | 3 029 367 |
| Changes in estimates | 2 860 |
| Effect of change in the discount rate | - |
| Asset retirement costs from billing, reimbursement from Shell | -3 016 |
| Unwinding of discount | 78 764 |
| Asset retirement reimbursement right at 31 December 2021 (indemnification asset) | 3 107 974 |
| Of this: | |
| Asset retirement reimbursement right, non-current | 3 024 562 |
| Asset retirement reimbursement right, current | 83 412 |
| Asset retirement reimbursement right at 31 December 2021 (indemnification asset) | 3 107 974 |
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.
| Ordinary | |
|---|---|
| Number of shares | shares |
| Outstanding shares at 1 January 2021 | 102 502 650 |
| New shares issued during 2021 | 1 367 700 |
| Number of outstanding shares at 31 December 2021 | 103 870 350 |
| Nominal value NOK per share at 31 December 2021 | 0.1 |
| Share capital NOK at 31 December 2021 | 10 387 035 |
As per 31 December 2021, 80,000 equity-settled warrants are still outstanding. Reference is made to note 10 in the 2020 annual financial statements for further details.
| Amounts in NOK `000 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
|---|---|---|---|
| Accounts receivable and receivables from operated licences* | 68 275 | 81 463 | 67 640 |
| Accrued revenue | 487 424 | 201 213 | 64 807 |
| Prepayments | 48 300 | 19 310 | 30 906 |
| Working capital and overcall, joint operations/licences | 164 226 | 130 316 | 161 392 |
| Underlift of petroleum products | 225 079 | 278 126 | 184 672 |
| VAT receivable | 7 317 | 3 967 | 4 184 |
| Accrued interest income | 830 | 60 | - |
| Fair value forward contracts, gas | 51 885 | - | - |
| Total trade and other receivables | 1 053 338 | 714 455 | 513 601 |
* There is no provision for bad debt on receivables.
| Amounts in NOK `000 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
|---|---|---|---|
| Bank deposits, unrestricted | 1 035 711 | 1 093 807 | 853 903 |
| Bank deposit, time deposit | 980 000 | 400 000 | - |
| Bank deposit, restricted | 5 001 | - | - |
| Bank deposit, restricted, employee taxes | 18 033 | 10 529 | 17 307 |
| Total cash and cash equivalents | 2 038 745 | 1 504 336 | 871 210 |
See note 26 for information about investments of part of excess liquidity.
| Amounts in NOK `000 | |
|---|---|
| Provision at 1 January 2021 | 4 199 866 |
| Additions | 9 327 |
| Reclassified to other current provision, see note 21 | -10 000 |
| Changes in estimates | -41 778 |
| Effects of change in the discount rate | - |
| Asset retirement costs from billing | -3 770 |
| Unwinding of discount | 83 797 |
| Asset retirement obligations at 31 December 2021 | 4 237 442 |
| Of this: | |
| Asset retirement obligations, non-current | 4 133 177 |
| Asset retirement obligations, current | 104 265 |
| Asset retirement obligations at 31 December 2021 | 4 237 442 |
Provisions for asset retirement obligations represent the future expected costs for close-down and removal of oil 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 15.
| Amounts in NOK `000 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
|---|---|---|---|
| Inventory of petroleum products | 124 258 | 102 983 | 117 022 |
| Spare parts and equipment | 129 061 | 124 344 | 111 768 |
| Total spare parts, equipment and inventory | 253 318 | 227 327 | 228 790 |
| Amounts in NOK `000 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
|---|---|---|---|
| Trade creditors | 117 721 | 18 824 | 46 509 |
| Accrued holiday pay and other employee benefits | 110 947 | 77 600 | 89 595 |
| Working capital, joint operations/licences | 430 608 | 472 605 | 451 217 |
| Overlift of petroleum products | 24 555 | 15 747 | - |
| Accrued interest bond loans | 5 096 | 27 653 | 5 008 |
| Prepayments from customers | 17 | 111 160 | 199 001 |
| Fair value put/call options, oil | - | - | 7 169 |
| Fair value forward contracts, gas | - | 5 312 | - |
| Loan from shareholder OKEA Holdings Ltd | 1 371 | 1 314 | 1 314 |
| Accrued consideration from acquisitions of interests in licences | 10 000 | 10 000 | - |
| Other accrued expenses | 86 220 | 63 609 | 90 550 |
| Total trade and other payables | 786 535 | 803 824 | 890 362 |
| Amounts in NOK `000 | Bond loan OKEA02 |
Bond loan OKEA03 |
Total |
|---|---|---|---|
| Interest bearing loans, bonds at 1 January 2021 | 1 395 997 | 1 004 299 | 2 400 297 |
| Amortisation of transaction costs | 15 227 | 6 557 | 21 784 |
| Bond buy-back | -210 584 | - | -210 584 |
| Foreign exchange movement | 48 617 | 34 760 | 83 377 |
| Interest bearing loans, bonds at 31 December 2021 | 1 249 257 | 1 045 616 | 2 294 873 |
| Amounts in NOK `000 | Bond loan OKEA02 |
Bond loan OKEA03 |
Total |
|---|---|---|---|
| Interest bearing loans, bonds at 1 January 2021 | 1 395 997 | 1 004 299 | 2 400 297 |
| Cash flows: | |||
| Gross proceeds from borrowings | - | - | - |
| Transaction costs | - | - | - |
| Repayment/buy-back of borrowings | -216 948 | - | -216 948 |
| Total cash flows: | -216 948 | - | -216 948 |
| Non-cash changes: | |||
| Amortisation of transaction costs | 15 227 | 6 557 | 21 784 |
| Foreign exchange movement | 48 617 | 34 760 | 83 377 |
| Loss / gain (-) on buy-back | 6 364 | - | 6 364 |
| Interest bearing loans, bonds at 31 December 2021 | 1 249 257 | 1 045 616 | 2 294 873 |
During 2021 the company has been in full compliance with the covenants under the bond agreements.
Revised bond terms affecting the covenants in the waiver period effective from 30 June 2020 to an 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 is in breach on two consecutive calculation dates.
From 01.01.2022 the covenant leverage ratio shall not exceed 2:1 in accordance to the original bond agreements.
In October 2021 the Yme licence completed the 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 liability carries a fixed 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.
| Liability | ||
|---|---|---|
| Amounts in NOK `000 | Yme rig | Total |
| Other interest bearing liabilities at 1 January 2021 | - | - |
| Financing Yme Rig | 468 904 | 468 904 |
| Foreign exchange movement | 24 541 | 24 541 |
| Other interest bearing liabilities at 31 December 2021 | 493 445 | 493 445 |
| Of this: | ||
| Other interest bearing liabilities, non-current | 454 853 | 454 853 |
| Other interest bearing liabilities, current | 38 593 | 38 593 |
| Other interest bearing liabilities at 31 December 2021 | 493 445 | 493 445 |
| Liability | ||
| Amounts in NOK `000 | Yme rig | Total |
| Other interest bearing liabilities at 1 January 2021 | - | - |
| Cash flows: | ||
| Gross proceeds from borrowings | - | - |
| Repayment of borrowings | - | - |
| Total cash flows: | - | - |
| Non-cash changes: | ||
| Financing Yme Rig | 468 904 | 468 904 |
| Foreign exchange movement | 24 541 | 24 541 |
| Other interest bearing liabilities at 31 December 2021 | 493 445 | 493 445 |
The company has entered into operating leases for office facilities. In addition, the company has entered into operating leases as an operator of the Draugen field for logistic resources such as platform supply vessel with associated remote operated vehicle (ROV), base and warehouse for spare parts.
In December 2021 OKEA completed a sale and leaseback (SLB) transaction for OKEA's regonal headquarter 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 recognsied as right-of-use asset. This is based on the assessment that OKEA will be utilising the property over the remaining economic lifetime.
| Amounts in NOK `000 | |
|---|---|
| Lease liability 1 January 2021 | 179 235 |
| Additions lease contracts | 109 065 |
| Accretion lease liability | 11 357 |
| Payments of lease debt | -36 359 |
| Total lease debt at 31 December 2021 | 263 298 |
| Break down of lease liability | |
|---|---|
| Short-term (within 1 year) | 43 032 |
| Long-term | 220 266 |
| Total lease liability | 263 298 |
Future minimum undiscounted lease payments under non-cancellable lease agreements:
| Amounts in NOK `000 | 31.12.2021 |
|---|---|
| Within 1 year | 43 032 |
| 1 to 5 years | 154 750 |
| After 5 years | 184 755 |
| Total | 382 537 |
Future lease payments related to leasing contracts entered into as an operator of the Draugen field are presented on a gross basis.
| Amounts in NOK `000 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
|---|---|---|---|
| Premium commodity contracts | - | - | 6 653 |
| Unrealised gain/loss (-) commodity contracts included in other operating income / loss(-) | 51 885 | -5 312 | -13 821 |
| Short-term derivatives included in assets/liabilities (-) | 51 885 | -5 312 | -7 169 |
OKEA uses derivative financial instruments to manage exposures to fluctuations in commodity prices. At 31 December 2021, OKEA had outstanding forward contracts for;
| Quantity - therms of gas | Fixed price GBP per therm |
Expiration |
|---|---|---|
| 845 000 | 2.84 | 2022-01-28 |
| 760 000 | 3.30 | 2022-02-25 |
| 480 000 | 2.99 | 2022-03-30 |
| 390 000 | 2.44 | 2022-04-29 |
| 550 000 | 2.14 | 2022-05-30 |
| 520 000 | 2.13 | 2022-06-29 |
| 525 000 | 2.14 | 2022-07-29 |
| 580 000 | 2.13 | 2022-08-30 |
| 555 000 | 2.13 | 2022-09-29 |
| Amounts in NOK `000 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
|---|---|---|---|
| Investments in money-market funds and combination funds | 209 961 | - | - |
| Total financial investments | 209 961 | - | - |
It is assessed 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 2 410 448 thousand at 31 December 2021. 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.
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 23, 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).
Fair value of forward contracts gas is based on quoted market prices at the balance sheet date (level 2 in the fair value hierarchy). The fair value of forward contracts gas is equal to its carrying amount.
OKEA ASA has been 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 Equinor operated Ginny exploration well was announced as a dry well on 2 February 2022. Cost incurred as of 31 December 2021 amounts to NOK 18 million and was expensed in the fourth quarter.
| EBITDA | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
|---|---|---|---|---|---|
| Amounts in NOK `000 | 3 months | 3 months | 3 months | 12 months | 12 months |
| Profit / loss (-) from operating activities | 714 835 | 617 612 | 166 724 | 2 297 860 | -1 219 136 |
| Add: depreciation, depletion and amortisation | 177 000 | 179 335 | 178 894 | 672 450 | 699 403 |
| Add: impairment | 366 632 | - | -116 851 | -363 765 | 1 387 018 |
| EBITDA | 1 258 467 | 796 947 | 228 767 | 2 606 545 | 867 286 |
| EBITDAX | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
| Amounts in NOK `000 | 3 months | 3 months | 3 months | 12 months | 12 months |
| Profit / loss (-) from operating activities | 714 835 | 617 612 | 166 724 | 2 297 860 | -1 219 136 |
| Add: depreciation, depletion and amortisation | 177 000 | 179 335 | 178 894 | 672 450 | 699 403 |
| Add: impairment / reversal of impairment | 366 632 | - | -116 851 | -363 765 | 1 387 018 |
| Add: exploration and evaluation expenses | 88 662 | 36 677 | 43 094 | 342 972 | 97 036 |
| EBITDAX | 1 347 129 | 833 625 | 271 860 | 2 949 517 | 964 322 |
| Production expense per boe | Q4 2021 | Q3 2021 | Q4 2020 | 2021 | 2020 |
|---|---|---|---|---|---|
| Amounts in NOK `000 | 3 months | 3 months | 3 months | 12 months | 12 months |
| Productions expense | 290 754 | 180 677 | 189 330 | 860 419 | 695 877 |
| Less: processing tariff income | -24 263 | -13 393 | -15 570 | -61 960 | -53 237 |
| Less: joint utilisation of resources | -13 054 | -1 382 | -1 641 | -23 036 | -15 107 |
| Less: preparation for operation asset under construction | -1 397 | -3 483 | -7 813 | -17 884 | -7 813 |
| Divided by: produced volumes (boe) | 1 475 448 | 1 500 961 | 1 487 762 | 5 668 579 | 5 909 921 |
| Production expense NOK per boe | 170.8 | 108.2 | 110.4 | 133.6 | 104.9 |
| Net interest-bearing debt | |||
|---|---|---|---|
| Amounts in NOK `000 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
| Interest bearing loans, bonds | 2 294 873 | 2 378 676 | 2 400 297 |
| Other interest bearing liabilities | 454 853 | - | - |
| Other interest bearing liabilities, current | 38 593 | - | - |
| Less: Cash and cash equivalents | -2 038 745 | -1 504 336 | -871 210 |
| Net interest-bearing debt | 749 574 | 874 340 | 1 529 086 |
| Net interest-bearing debt excl. other interest bearing liabilities |
|||
|---|---|---|---|
| Amounts in NOK `000 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
| Interest bearing loans, bonds | 2 294 873 | 2 378 676 | 2 400 297 |
| Less: Cash and cash equivalents | -2 038 745 | -1 504 336 | -871 210 |
| Net interest-bearing debt excl. other interest bearing | |||
| liabilities | 256 128 | 874 340 | 1 529 086 |
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.
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.
OKEA is a leading mid to late-life operator on the Norwegian continental shelf (NCS). OKEA finds value where others divest and has an ambitious growth strategy built on accretive M&A activities, value creation and capital discipline.
Kongens gate 8 7011 Trondheim
www.okea.no
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