AI Terminal

MODULE: AI_ANALYST
Interactive Q&A, Risk Assessment, Summarization
MODULE: DATA_EXTRACT
Excel Export, XBRL Parsing, Table Digitization
MODULE: PEER_COMP
Sector Benchmarking, Sentiment Analysis
SYSTEM ACCESS LOCKED
Authenticate / Register Log In

OKEA ASA

Quarterly Report Oct 28, 2021

3701_10-k_2021-10-28_9e4a2e62-5167-48d6-a295-fd3e727777a5.pdf

Quarterly Report

Open in Viewer

Opens in native device viewer

okea.no

Third quarter 2021 summary

Highlights

  • No serious injuries
  • Production of 16,315 (13,210) boepd
  • Operating income of NOK 1,026 (607) million
  • EBITDA of NOK 797 (311) million
  • Profit / loss (-) before tax of NOK 526 (863) million
  • Net profit / loss (-) of NOK 97 (200) million
  • Cash flow from operations of NOK 470 (643) million
  • APA 2021 applications submitted

Important subsequent events:

  • Announcement of Yme in operation on 25 October
  • Execution of transfer of ownership of Mærsk Inspirer completed in October
  • Decision to halt further development of Vette and Grevling/Storskrymten discoveries

(Amounts in parentheses refer to previous quarter)

Financial and operational summary

Unit Q3 2021 Q2 2021 Q3 2020 Full year
2020
Total operating income MNOK 1,026 607 321 1,730
EBITDA 1) MNOK 797 311 116 867
EBITDAX 1) MNOK 834 420 132 964
Profit/loss (-) before income tax MNOK 526 863 -527 -1,231
Net profit / loss (-) MNOK 97 200 -19 -603
Net cash flow from operations MNOK 470 634 374 3) 621 3)
Net cash flow from investments MNOK -166 -197 -327 3) -1,044 3)
Net cash flow from financing activities MNOK -141 -77 -81 -390
Net interest-bearing debt 1) MNOK 874 1,070 1,805 1,529
Net production Boepd 2) 16,315 13,210 13,303 16,147
Third-party volumes available for sale 4) Boepd 2) 165 0 0 0
Over/underlift/inventory adjustments Boepd 2) 499 -162 929 -276
Net sold volume Boepd 2) 16,979 13,048 14,232 15,871
Production expense per boe 1) NOK/boe 108.2 158.9 112.6 104.8
Realised liquids price USD/boe 67.4 63.8 32.3 36.3
Realised gas price USD/scm 0.57 0.32 0.08 0.11

1) Definitions of alternative performance measures are available on page 29 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

Financial review

Statement of comprehensive income

Total operating income in the third quarter amounted to NOK 1,026 (607) million, whereof NOK 1,017 (594) million related to revenue from oil and gas sales. Total sold volumes of 1,562 thousand boe were 375 thousand boe higher than previous quarter, mainly due to 31 days of planned shutdown at Gjøa in the previous quarter. Market prices have continued to improve, which resulted in an average realised price for liquids of USD 67.4 (63.8) per boe and an average realised gas price of USD 0.57 (0.32) per standard cubic meter (scm).

Other operating income / loss (-) amounted to NOK 9 (12) million consisting of tariff income at Gjøa of NOK 13 (11) million and income from joint utilisation of logistics resources of NOK 1 (2) million, partly offset by unrealised loss from hedging activities of NOK -5 (-1) million.

Production expenses amounted to NOK 181 (213) million, corresponding to NOK 108.2 (158.9) per boe. The reduction in production expenses compared to previous quarter was mainly due to the planned well intervention campaign at Draugen in May. In addition, the lower production expense per boe was also due to an increase in produced volumes to 16,315 (13,210) boepd due to the above mentioned Q2 shutdown.

Changes in over-/underlift positions and production inventory amounted to NOK 9 (38) million. Sold own produced volumes in the quarter exceeded produced volumes by 449 (-162) boepd. Sold volumes from thirdparty compensations received from Duva (tie-in to Gjøa) was 165 (0) boepd.

Exploration and evaluation expenses amounted to NOK 37 (109) million, mainly relating to the APA 2021 application process of NOK 9 million, various field evaluation activities of NOK 16 (17) million and expensed previously exploration and evaluation asset related to Grevling/Vette of NOK 5 million following the decision to halt further development of these projects. Exploration and evaluation expenses in the second quarter include cost for the exploration well Ilder in PL973 of NOK 78 million.

Impairment/reversal of impairment amounted to NOK 0 (730) million in the quarter. Second quarter included a full reversal of previous impairments at Yme.

General and administrative expenses amounted to NOK 21 (12) million and represent OKEA's share of costs after allocation to licence activities. The high activity level on operated licences as well as in the project portfolio continued during the quarter, which resulted in a relatively high allocation to licences. Sole OKEA cost increased the net expensed amount compared to previous quarter partly due to ongoing strategy work and similar activities.

Net financial items amounted to NOK -91 (-34) million and mainly consist of NOK -18 (-18) million in interest expense, premium relating to the buy-back of USD 12 million in nominal amount of OKEA02 of NOK 3 (0) million and net foreign exchange loss of NOK -68 (-12) million, mainly related to the bond loans, due to a somewhat weakened NOK compared to USD in the quarter.

Profit / loss (-) before tax amounted to NOK 526 (863) million for the quarter.

Tax expenses (-) / tax income (+) amounted to NOK -429 (-663) million representing an effective tax rate of 82% (77%). The deviation from the expected 78% was mainly due to lower tax rate on onshore and net financial expenses, partly offset by the positive effect of uplift.

Net profit / loss (-) for the third quarter was NOK 97 (200) million. Earnings per share were NOK 0.94 (1.95).

Statement of financial position

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 4,585 (4,558) million at the end of the quarter. The increase mainly relates to investments in the Yme New Development, Draugen modifications and the Hasselmus project, partly offset by depreciation from producing assets.

Right-of-use assets amounted to NOK 162 (168) million which mainly relates to logistical resources on operated assets and lease of offices.

Other non-current assets amounted to NOK 3,088 (3,069) million which relate to Shell's obligation to cover the decommissioning costs for Draugen and Gjøa.

Total tax refund amounted to NOK 9 (9) million and is the net amount of 2020 tax value of exploration expenditures receivable of NOK 84 million and 2020 residual tax of NOK -75 million.

Cash and cash equivalents amounted to NOK 1,504 (1,346) million. The increase from previous quarter was mainly due to net cash flow from operating activities exceeding cash used in investment activities, interest and bond buy-back payments and payment to Shell as outlined in the section trade and other payables below.

Spare parts, equipment and inventory amounted to NOK 227 (231) million whereof NOK 103 (112) million related to oil inventory at Draugen.

Equity amounted to NOK 1,411 (1,313) million, corresponding to an equity ratio of 13% (12%). The increase from previous quarter was due to net profit in the period.

Provisions for asset retirement obligations amounted to NOK 4,253 (4,232) million. The obligation is partly offset by the 3,088 (3,069) million in asset retirement receivable as described in the section "non-current assets".

Interest-bearing loans and borrowings amounted to NOK 2,379 (2,416) million, consisting of the remaining outstanding amounts on the OKEA02 and OKEA03 bonds. The decrease from previous quarter was mainly due to a partial buy-back of a nominal amount equivalent to NOK 105 million of OKEA02, partly offset by unrealised foreign currency loss of NOK 63 million due to a somewhat weakened NOK compared to USD in the quarter.

The lease liability relating to IFRS 16 is split into a non-current liability of NOK 126 (132) million and a current liability of NOK 36 (36) million and represents the liability of the right-of-use assets as described above.

Trade and other payables amounted to NOK 804 (948) million and mainly relate to working capital from joint venture licences, prepayments, and accrued expenses. NOK 159 million of the decrease relate to settlement of a payable to Shell for the unusually large norm price adjustment for the Draugen lifting in May 2020.

Income tax payable was NOK 418 (28) million whereof NOK 392 million relates to accrued tax payable for 2021. Transfer of ownership of Mærsk Inspirer which was effectuated in October will reduce the 2021 tax payable in the fourth quarter.

Statement of cash flows

Net cash flows from operating activities amounted to NOK 470 (634) million, whereof NOK 18 (194) million was net taxes received. Cash received from sales of oil and gas increased by NOK 271 million compared to previous quarter due to the higher petroleum prices and higher sold volumes. The positive effect of increased cash from sales was partly offset by the Shell payment as outlined in section trade and other payables above.

Net cash flows used in investment activities amounted to NOK -166 (-197) million of which investment in oil and gas properties amounted to NOK -166 (-126) million, mainly relating to the Yme New Development, Draugen modifications, and the Hasselmus project. In previous quarter, cash flows used in investment activities included NOK -66 million relating to drilling campaigns in licence PL973.

Net cash flows used in financing activities amounted to NOK -141 (-77) million, of which interest paid amounted to NOK -23 (-68) million. In addition, NOK -108 (0) million was used for a partial buy-back of the OKEA02 bond loan.

Financial risk management

OKEA uses derivative financial instruments to manage exposures to fluctuations in commodity prices. At the date of this report, OKEA has sold forward 10-20% of the net after tax exposure for natural gas prices from October 2021 to January 2022 at terms indicated in the table below.

Month and
year
Volume
(therms)
Avg. fixed
price (GBp/th)
Share of production
(after tax)
October 2021 300 000 182 10%
November 2022 490 000 215 20%
December 2022 500 000 224 20%
January 2022 230 000 265 10%

Operational review

Net production to OKEA in the third quarter was 16,315 (13,210) boepd. The increase from previous quarter was mainly driven by high reliability at both Draugen and Gjøa without any major planned maintenance work in the current quarter compared to 31 days of planned maintenance at Gjøa in the previous quarter.

Unit Q3 2021 Q2 2021 Q3 2020 Full year
2020
Draugen – production reliability5)1 % 97 99 99 99
Draugen – production availability6)2 % 87 93 76 90
Gjøa – production reliability % 97 100 99 99
Gjøa – production availability % 92 66 75 86
Ivar Aasen – production availability % 98 95 82 94
Draugen – production Boepd 6,735 7,128 6,654 7,774
Gjøa – production Boepd 9,348 5,828 6,390 8,059
Ivar Aasen – production Boepd 233 254 259 314
Total net production Boepd 16,315 13,210 13,303 16,147
Draugen – sold volume Boepd 6,548 7,030 7,450 7,923
Gjøa – sold volume Boepd 10,214 5,984 6,728 7,610
Ivar Aasen – sold volume Boepd 52 34 54 338
Third-party volumes available for sale* Boepd 165 0 0 0
Total net sold volume Boepd 16,979 13,048 14,232 15,871
Total over/underlift/inventory adj. Boepd 499 -162 929 -276

*Compensation volumes from Duva received (tie-in to Gjøa)

Draugen (Operator, 44.56%)

Net production to OKEA from Draugen was 6,735 (7,128) boepd. Production availability was 87% (93%) and production reliability was 97% (99%). The lower production compared to previous quarter was due to installation of the refurbished subsea booster pump, a well maintenance campaign and general field decline. The lower reliability compared to previous quarter was due to challenges with the sea water pump and well integrity challenges related to the A6 platform. Both issues were resolved in the quarter.

A successful well maintenance campaign to change out the X-mas tree on platform well A4 was completed in the beginning of September. Following the well maintenance campaign and the subsea scale squeeze in

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.

September, all wells are back in production, including the subsea well E1 that has been shut-in due to scaling issues since end of March 2021.

Managing the Covid-19 situation remained a high priority also in the third quarter. OKEA had mitigating measures in place to manage the situation, including multiple testing prior to departure for all offshore personnel.

Gjøa (Partner, 12.00%)

Net production to OKEA from Gjøa in the quarter was 9,348 (5,828) boepd and production reliability was 97% (100%). The Gjøa P1 wells, which came onstream in February 2021, have continued to produce more than initially expected. The Gjøa operator continued applying strict offshore and onshore measures to prevent and limit any consequences in case of Covid-19 contamination.

The Duva field has been successfully tied-in to Gjøa and started producing in August. Duva will contribute with additional volumes over the Gjøa topside and will reduce the production expense per boe due to processing tariff revenues. Gjøa is compensated for the deferred production relating to past shutdown for completing tiein of Duva, parts of which was received and sold in the third quarter. The remaining balance due from Duva is expected to be settled in Q4 this year. Development of the Nova tie-in is progressing as planned with production start expected in 2022. Once Nova has commenced production Gjøa will be compensated for the deferred production caused by shutdowns for tie-in scope.

Ivar Aasen (Partner, 0.554%)

Net production to OKEA from Ivar Aasen was 233 (254) boepd and production availability was 98% (95%). Despite high availability, production in third quarter was reduced due to a transformer failure at the processing unit Edvard Grieg and less voidage replacement. The transformer failed in September and will reduce production until it is repaired, expectedly by end of the fourth quarter. The increased oil recovery campaign for 2021 was completed during the quarter and the water injector D-04 was put in operation to increase reservoir pressure.

Development projects

Yme (Partner, 15.00%)

Activities on Yme in the third quarter mainly related to final commissioning and preparation for the production start-up which was announced on 25 October.

Following the successful production startup, the Yme field is expected to produce around 56,000 boepd per day at plateau, with OKEA's share of around 8,400 boepd. Average production over the next 12 months net to OKEA is estimated to 5,600 boepd.

Earlier this year, the Yme licence entered into an agreement to acquire Mærsk Inspirer through a bareboat charter agreement with Havila Sirius AS whereby operator Repsol is taking over the day-to-day operations of the jack-up rig from Maersk Drilling. The transaction was effectuated in October and the re-organisation of operations and ownership of the Mærsk Inspirer is expected to provide significant cost improvement and cash flow benefits in the area of NOK 300 million net after tax to OKEA over the next nine months.

Draugen - 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-up is planned for Q4 2023 with gross plateau gas production of more than 4,400 barrels of oil equivalents per day.

During the quarter, OKEA entered into several key project contracts. Aker Solutions was awarded the topside scope, SIA (OneSubsea and Subsea 7) the overall Subsea scope and Schlumberger the well design and services. Critical long lead procurement items have been secured by these contracts and will enable planned drilling activities 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 to be an important hub in the area.

Draugen - power from shore (Operator, 44.56%)

On behalf of the Draugen licence, OKEA has commenced a project to consider the possibility to provide power from shore to the production platform. The project also includes assessing options to extend the power supply to other nearby fields, and the Draugen and Njord licences have executed a joint study agreement for concept evaluation of a potential common infrastructure project for power from shore.

Concept selection (DG2) was passed in September 2021 in the Draugen licence and in October 2021 in the Njord licence. The concept comprises a 135 km subsea cable from Straum in Trøndelag to the platform.

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 corresponding to a reduction of 95%.

Aurora (Operator, 65.00%)

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.

Exploration licences

Licence applications in the Awards in Predefined Areas 2021 round were submitted in September.

The Equinor-operated Ginny exploration well in PL1060 (WI 40%) is expected to be spudded at the end of 2021. Work continues on other exploration licences towards several drill-or-drop decisions in Q1 2022 for wells in the coming years.

Health, safety, and environment (HSE)

OKEA had no personnel injuries, and no accidental spills to environment in our activities in the third quarter. In August, OKEA experienced one serious potential incident related a loose rail on a topside deck at Draugen. A thorough investigation is ongoing to identify causes and to gain insights and learning to ensure that such incident or potential incident will not recur.

The strict Covid-19 regime has been maintained in all OKEA's activities and operations until the Norwegian society opened back up late September. OKEA has now adapted its policies to the new regulations.

OKEA always strive to achieve continuous improvement in our activities including good HSE solutions with focus on value creation and reduction of environmental footprint. The most important project in that respect is the Draugen power from shore that expected to reduce the annual CO2 emissions from Draugen alone by approximately 200,000 tonnes corresponding to a reduction of 95%. Another example is a project to install a battery package for hybrid energy generation at the multipurpose vessel for the Draugen operations (Siem Pride). The new battery package will reduce climate gas emissions from the vessel by 650 tons CO2 equivalents per year and will also reduce the fuel costs of the vessel by NOK 1.5-2 million per year. Siem Pride, has already been prepared for receiving power when at quay resulting in reduced consumption of fuel, reduced emissions of CO2, as well as improved air quality and less noise at the quay.

Subsequent events

Decision to halt further development of Vette and Grevling/ Storskrymten discoveries

In October, OKEA decided to halt further development of Vette discovery due to insufficient financial robustness in the project. OKEA has also worked to improve the economics of the Grevling/Storskrymten discoveries along with the license partners over the last few years. Although significant reductions in break-even cost have been achieved, it is deemed insufficient to warrant a stand-alone field development. As OKEA was targeting a joint serial development of the Vette discovery together with the Grevling/Storskrymten discoveries, the decision to halt further development of Vette also implies that OKEA is likely to halt further development of Grevling/Storskrymten.

Commencement of production from the Yme field

On 25 October, OKEA announced that the operator Repsol confirmed that production from the Yme field had commenced. Expected recoverable reserves at Yme are estimated to approximately 10 million standard cubic meters of oil - or 63 million barrels - with OKEA's share at 9.4 million barrels of oil. At plateau, the Yme field will produce around 56,000 boepd, with OKEA's share around 8,400 boepd. Average production the next 12 months net to OKEA from the Yme field is estimated to 5,600 boepd.

Earlier this year, the Yme licence entered into an agreement to acquire Mærsk Inspirer through a bareboat charter agreement with Havila Sirius AS and take over the day-to-day operations of the jack-up rig from Maersk Drilling. The transaction was effectuated in October and the re-organisation of operations and ownership of the Mærsk Inspirer is expected to provide significant cost improvement and cash flow benefits in the area of NOK 300 million net after tax to OKEA over the next nine months.

Outlook

Oil prices have continued to strengthen during the third quarter with Brent crude prices trading around USD 85/bbl at the date of this report. This follows the rollout of Covid-vaccines and reopening of economies in North America and Europe, continued strong demand in China, and producer discipline from OPEC+ and US shale which have reduced OECD commercial stock levels below average 2015-2019 levels.

European gas prices have climbed to record high levels and is currently trading above 200 GBp/th. European storage levels are seasonally record low following the cold winter in the Northern Hemisphere 2020/21, high gas demand in Europe and Asia and limited gas supply response from Russia prior to start-up of the Nord Stream 2 pipeline.

Production guiding net to OKEA for 2021 remains unchanged at 15,500-16,500 boepd and is expected to increase to 17,000-18,000 boepd in 2022 following commencement of production from Yme. Capex guiding for 2021 remains unchanged at NOK 600-700 million. The current cash position is strong and the expected increase in volumes combined with higher oil and gas prices and the reorganisation of operations at the Yme field is expected to strengthen OKEA's financial position further.

OKEA has firm plans to participate in drilling of one more exploration well in 2021. The Ginny prospect in PL1060 near Draugen is expected to be drilled at the end of 2021.

In the first half of October, OKEA lifted 632,000 bbl of oil from Draugen. Oil liftings are also expected from Yme in the fourth quarter, but due to uncertainty on timing and volume, further guidance on Yme is not provided for fourth quarter. Quality price differentials to Brent Dated may also be higher for the initial liftings from Yme due to a dated assay, which is expected to narrow as the Yme assay is updated and guide the pricing on future liftings. There are no further liftings from Draugen and have not been informed of any oil liftings from Gjøa or Ivar Aasen in the fourth quarter.

OKEA's strategy will be centred around three growth 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.

OKEA has a clear ambition to deliver competitive shareholder returns driven by solid growth, value creation and capital discipline.

Financial statements with notes Q3 2021

Statement of comprehensive income

01.01-30.09 01.01-31.12
Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Amounts in NOK `000 Note (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)
Revenues from crude oil and gas sales 6 1 016 933 594 468 308 438 2 147 579 1 071 094 1 652 311
Other operating income / loss (-) 6, 24 9 463 12 252 12 648 9 602 75 346 77 911
Total operating income 1 026 396 606 720 321 086 2 157 181 1 146 440 1 730 222
Production expenses 7 -180 677 -212 653 -153 895 -569 665 -506 547 -695 877
Changes in over/underlift positions and production inventory 7 8 650 38 041 -30 995 63 669 90 911 16 690
Exploration and evaluation expenses 8 -36 677 -108 897 -16 050 -254 310 -53 942 -97 036
Depreciation, depletion and amortisation 10 -179 335 -143 870 -146 854 -495 450 -520 509 -699 403
Impairment (-) / reversal of impairment 10, 11, 12 - 730 397 -572 181 730 397 -1 503 870 -1 387 018
General and administrative expenses 13 -20 745 -12 039 -4 195 -48 796 -38 342 -86 713
Total operating expenses -408 784 290 979 -924 171 -574 156 -2 532 300 -2 949 358
Profit / loss (-) from operating activities 617 612 897 698 -603 085 1 583 025 -1 385 860 -1 219 136
Finance income 14 19 751 19 691 26 200 59 136 82 918 105 559
Finance costs 14 -43 348 -41 707 -39 085 -119 933 -221 007 -268 907
Net exchange rate gain/loss (-) 14 -67 754 -12 480 88 769 -69 821 -116 660 151 744
Net financial items -91 350 -34 496 75 884 -130 619 -254 748 -11 604
Profit / loss (-) before income tax 526 262 863 203 -527 201 1 452 406 -1 640 608 -1 230 740
Taxes (-) / tax income (+) 9 -429 214 -662 735 508 415 -1 132 251 855 418 628 014
Net profit / loss (-) 97 048 200 468 -18 786 320 154 -785 190 -602 726

Other comprehensive income, net of tax:

Items that will not be reclassified to profit or loss in subsequent periods:

Remeasurements pensions, actuarial gain/loss (-) - - - - - -509
Total other comprehensive income, net of tax - - - - - -509
Total comprehensive income / loss (-) 97 048 200 468 -18 786 320 154 -785 190 -603 235
Weighted average no. of shares outstanding basic 103 005 350 102 972 205 102 502 650 102 828 576 102 358 584 102 394 798
Weighted average no. of shares outstanding diluted 103 005 350 102 972 205 102 502 650 102 828 576 102 358 584 102 394 798
Earnings per share (NOK per share) - Basic 0.94 1.95 -0.18 3.11 -7.67 -5.89
Earnings per share (NOK per share) - Diluted 0.94 1.95 -0.18 3.11 -7.67 -5.89

Statement of financial position

30.09.2021 30.06.2021 31.12.2020 30.09.2020
Amounts in NOK `000 Note (unaudited) (unaudited) (audited) (unaudited)
ASSETS
Non-current assets
Goodwill 11, 12 768 946 768 946 768 946 768 946
Exploration and evaluation assets 11 19 794 22 037 38 349 22 150
Oil and gas properties 10 4 585 287 4 558 398 3 757 546 3 508 702
Buildings 10 79 782 80 938 83 250 84 407
Furniture, fixtures and office equipment 10 11 831 12 879 10 236 9 953
Right-of-use assets 10 161 824 168 075 179 235 126 200
Tax refund, non-current 9 - - - 39 704
Other non-current assets 15 3 088 440 3 068 749 3 029 367 3 030 764
Total non-current assets 8 715 904 8 680 022 7 866 930 7 590 826
Current assets
Trade and other receivables 17, 24 714 455 533 652 513 601 451 949
Spareparts, equipment and inventory 20 227 327 231 199 228 790 235 555
Tax refund, current 9 9 368 9 368 295 932 573 268
Cash and cash equivalents 18 1 504 336 1 346 099 871 210 883 238
Total current assets 2 455 487 2 120 319 1 909 534 2 144 010
TOTAL ASSETS 11 171 391 10 800 341 9 776 464 9 734 836
EQUITY AND LIABILITIES
Equity
Share capital 16 10 301 10 301 10 250 10 250
Share premium 1 912 462 1 912 462 1 912 462 1 912 462
Other paid in capital 19 249 18 846 11 342 10 939
Accumulated loss -531 174 -628 222 -851 329 -1 033 284
Total equity 1 410 837 1 313 386 1 082 725 900 368
Non-current liabilities
Asset retirement obligations
Pension liabilities 19 4 252 714 4 231 765 4 199 866 4 089 385
34 478 33 648 31 988 29 061
Lease liability 23 125 604 131 855 143 978 99 429
Deferred tax liabilities 9 1 685 649 1 627 947 940 558 741 836
Interest-bearing loans and borrowings 22, 25 2 378 676 2 416 204 2 400 297 2 688 287
Total non-current liabilities 8 477 122 8 441 419 7 716 687 7 647 998
Current liabilities
Trade and other payables 21, 24 803 824 947 903 890 362 988 473
Income tax payable 9 417 971 28 213 14 207 145 704
Lease liabilities - current 23 36 220 36 220 35 257 26 752
Public duties payable 25 417 33 199 37 227 25 541
Total current liabilities 1 283 433 1 045 536 977 052 1 186 470
Total liabilities 9 760 554 9 486 954 8 693 739 8 834 468
TOTAL EQUITY AND LIABILITIES 11 171 391 10 800 341 9 776 464 9 734 836

Statement of changes in equity

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 - - - -785 190 -785 190
Share issues, cash 44 - - - 44
Share based payment - - 4 085 - 4 085
Equity at 30 September 2020 10 250 1 912 462 10 939 -1 033 284 900 368
Equity at 1 October 2020 10 250 1 912 462 10 939 -1 033 284 900 368
Total comprehensive income/loss (-) for the period - - - 181 955 181 955
Share issues, cash - - - - -
Share based payment - - 402 - 402
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 - - - 320 154 320 154
Share issues, cash 50 - - - 50
Share based payment - - 7 907 - 7 907
Equity at 30 September 2021 10 301 1 912 462 19 249 -531 174 1 410 837

Statement of cash flows

01.01-30.09 01.01-31.12
Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)
Amounts in NOK `000 Note
Cash flow from operating activities
Profit / loss (-) before income tax 526 262 863 203 -527 201 1 452 406 -1 640 608 -1 230 740
Income tax paid/received 9 18 247 194 214 153 865 309 568 4 865 169 052
Depreciation, depletion and amortization 10 179 335 143 870 146 854 495 450 520 509 699 403
Impairment / reversal of impairment 10, 11, 12 - -730 397 572 181 -730 397 1 503 870 1 387 018
Expensed exploration expenditures temporary capitalised** 8, 11 1 328 78 495 4 009 168 015 348 335
Accretion asset retirement obligations/receivable 14, 15, 19 1 258 1 258 774 3 775 2 331 3 106
Interest expense 14 17 886 18 493 17 463 47 900 144 377 166 950
Loss on financial assets - - - - 10 615 10 615
Change in trade and other receivables, and inventory -176 931 -15 074 36 479 -199 749 40 189 -15 710
Change in trade and other payables -174 619 71 279 55 188 -123 086 -413 803 -475 024
Change in foreign exchange bond loans and other non-current
items 77 606 8 579 -85 871 88 429 126 794 -93 596
Net cash flow from / used in (-) operating activities 470 373 633 921 373 742 1 512 311 299 487 621 410
Cash flow from investment activities
Investment in exploration and evaluation assets** 915 -66 345 -5 313 -158 867 -6 571 -28 280
Investment in oil and gas properties 10, 14 -166 002 -125 751 -320 536 -466 779 -836 085 -1 000 516
Investment in furniture, fixtures and office machines 10 -1 055 -4 474 -815 -7 217 -2 607 -4 377
Investment in financial assets - - - - -10 615 -10 615
Net cash flow from / used in (-) investment activities -166 142 -196 570 -326 664 -632 863 -855 877 -1 043 788
Cash flow from financing activities
Repayment/buy-back of borrowings, bond loan 22 -108 005 - -52 826 -108 005 -104 516 -120 955
Interest paid
Payments of lease debt
23 -23 442 -67 567 -28 331 -114 827 -151 786 -222 715
Net proceeds from share issues -9 090 -9 090 -52 -27 269 -37 461 -46 380
0 -0 -0 50 44 44
Net cash flow from / used in (-) financing activities -140 536 -76 657 -81 209 -250 051 -293 720 -390 006
Net increase/ decrease (-) in cash and cash equivalents 163 695 360 694 -34 131 629 397 -850 109 -812 383
Cash and cash equivalents at the beginning of the period 1 346 099 977 925 916 958 871 210 1 663 478 1 663 478
Effect of exchange rate fluctuation on cash held* -5 458 7 480 411 3 729 69 870 20 116
Cash and cash equivalents at the end of the period 1 504 336 1 346 099 883 238 1 504 336 883 238 871 210

* 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.

Notes to the interim financial statements

Note 1 General and corporate information

These financial statements are the unaudited interim condensed financial statements of OKEA ASA for the third 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 targets to deliver shareholder value through profitable production growth within the current portfolio combined with mergers and acquisitions targeting mid to late-life assets with potential for unlocking upside value.

Note 2 Basis of preparation

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 27 October 2021.

Note 3 Accounting policies

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.

Note 4 Critical accounting estimates and judgements

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.

Note 5 Business segments

The company's only business segment is development and production of oil and gas on the Norwegian continental shelf.

Note 6 Income

Breakdown of petroleum revenues

01.01-30.09 01.01-31.12
Amounts in NOK `000 Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Sale of liquids 650 511 445 134 261 811 1 484 280 910 470 1 373 994
Sale of gas 366 423 149 334 46 627 663 299 160 624 278 317
Total petroleum revenues 1 016 933 594 468 308 438 2 147 579 1 071 094 1 652 311
Sale of liquids (boe*) 1 100 827 844 835 935 273 2 865 568 2 789 752 4 079 188
Sale of gas (boe*) 461 233 342 549 374 099 1 251 672 1 290 014 1 729 642
Total sale of petroleum in boe* 1 562 060 1 187 384 1 309 372 4 117 240 4 079 766 5 808 830

*Barrels of oil equivalents

Other operating income

01.01-30.09 01.01-31.12
Amounts in NOK `000 Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Gain / loss (-) from put/call options, oil - -1 378 -3 420 -32 766 24 213 9 568
Gain / loss (-) from forward contracts, gas -5 312 - - -5 312 - -
Tariff income Gjøa 13 393 11 217 9 171 37 697 37 667 53 237
Joint utilisation of logistics resources 1 382 2 413 6 897 9 982 13 466 15 107
Total other operating income/loss (-) 9 463 12 252 12 648 9 602 75 346 77 911

Note 7 Production expenses & changes in over/underlift positions and production inventory

Production expenses

01.01-30.09 01.01-31.12
Amounts in NOK `000 Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
From licence billings - producing assets 167 767 184 300 129 606 501 858 433 777 591 305
From licence billings - assets under construction - various
preparations for operation 3 483 7 682 - 16 487 - 7 813
Other production expenses (insurance, transport) 9 426 20 671 24 289 51 320 72 770 96 759
Total production expenses 180 677 212 653 153 895 569 665 506 547 695 877
Changes in over/underlift positions and production inventory
01.01-30.09 01.01-31.12
Amounts in NOK `000 Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Changes in over/underlift positions 17 761 39 554 -1 679 77 707 -22 672 -77 423
Changes in production inventory -9 111 -1 513 -29 316 -14 039 113 582 94 112
Total changes income/loss (-) 8 650 38 041 -30 995 63 669 90 911 16 690

Note 8 Exploration and evaluation expenses

01.01-30.09 01.01-31.12
Amounts in NOK `000 Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Share of exploration and evaluation expenses from
participation in licences excluding dry well impairment, from
billing
26 620 27 210 9 064 74 774 48 391 74 942
Share of exploration expenses from participation in licences,
dry well write off, from billing *
1 328 78 495 4 009 168 015 348 335
Seismic and other exploration and evaluation expenses,
outside billing
8 730 3 192 2 978 11 521 5 203 21 759
Total exploration and evaluation expenses 36 677 108 897 16 050 254 310 53 942 97 036

* 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.

Note 9 Taxes

Income taxes recognised in the income statement

01.01-30.09 01.01-31.12
Amounts in NOK `000 Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Change in deferred taxes current year -57 703 -629 219 259 494 -745 092 88 581 -111 946
Taxes payable current year -371 511 -20 405 - -391 917 - -
Tax payable adjustment previous year - - - - - -12 046
Tax refund current year - -17 867 248 921 - 766 837 752 006
Tax refund adjustment previous year - 4 757 - 4 757 - -
Total taxes (-) / tax income (+) recognised in the income
statement -429 214 -662 735 508 415 -1 132 251 855 418 628 014

Reconciliation of income taxes

01.01-30.09 01.01-31.12
Amounts in NOK `000 Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Profit / loss (-) before income taxes 526 262 863 203 -527 201 1 452 406 -1 640 608 -1 230 740
Expected income tax at nominal tax rate, 22% -115 778 -189 905 115 984 -319 529 360 934 270 763
Expected petroleum tax, 56% -294 707 -483 393 295 232 -813 347 918 741 689 214
Permanent differences, including impairment of goodwill 2 437 -2 259 8 754 -4 136 -502 622 -504 605
Effect of uplift 33 666 28 611 55 413 96 992 157 713 180 613
Financial and onshore items -53 448 -19 045 33 031 -92 008 -79 347 3 429
Change valuation allowance -1 384 -2 637 - -6 116 - -
Adjustments previous year and other - 5 893 - 5 893 - -11 401
Total income taxes recognised in the income statement -429 214 -662 735 508 415 -1 132 251 855 418 628 014
Effective income tax rate 82 % 77 % 96 % 78 % 52 % 51 %

Specification of tax effects on temporary differences, tax losses and uplift carried forward

Amounts in NOK `000 30.09.2021 30.06.2021 31.12.2020 30.09.2020
Tangible and intangible non-current assets -2 865 570 -2 800 591 -2 113 571 -1 754 917
Provisions (net ARO), lease liability, pensions and gain/loss account 1 297 484 1 295 747 1 299 894 1 151 533
Interest-bearing loans and borrowings -4 849 -5 268 -7 240 -6 370
Current items (spareparts and inventory) -113 102 -118 609 -122 180 -137 409
Tax losses carried forward, onshore 22% 6 116 4 732 992 1 190
Uplift, offshore 56% 387 774 1 548 4 136
Valuation allowance (uncapitalised deferred tax asset) -6 116 -4 732 - -
Total deferred tax assets / liabilities (-) recognised -1 685 649 -1 627 947 -940 558 -741 836

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.

Specification of tax refund

Amounts in NOK `000 30.09.2021 30.06.2021 31.12.2020 30.09.2020
Tax value of exploration expenditures 84 267 84 267 85 735 39 704
Residual tax value of tax losses -74 899 -74 899 210 197 573 268
Total tax refund 9 368 9 368 295 932 612 972

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.

Specifiaction of tax payable

Amounts in NOK `000 Total
Tax payable at 1 January 2021 14 207
Taxes payable current year 391 917
Taxes recognised on acquisition of licences -6 399
Tax refunded related to current year 18 247
Tax payable at 30 September 2021 417 971

Note 10 Tangible assets and right-of-use assets

Oil and gas
properties in
Oil and gas
properties
under
Furniture,
fixtures and
office
Right-of-use
Amounts in NOK `000 production development Buildings machines assets Total
Cost at 1 January 2021 3 918 980 2 037 626 92 501 19 434 249 439 6 317 979
Additions 152 337 217 536 - 6 162 1 340 377 375
Reclassification from inventory 358 - - - - 358
Reclassification from exploration 3 008 3 008
Removal and decommissioning asset - - - - - -
Disposals - - - -33 - -33
Cost at 30 June 2021 4 071 675 2 258 170 92 501 25 563 250 779 6 698 688
Accumulated depreciation and impairment
at 1 January 2021
-1 468 663 -730 397 -9 250 -9 198 -70 204 -2 287 711
Depreciation
Impairment (-) / reversal of impairment
-302 785 - -2 313 -3 519 -7 499 -316 115
- 730 397 - - - 730 397
Disposals
Additional depreciation of IFRS 16 Right-of
use assets presented gross related to
leasing contracts entered into as licence
- - - 33 - 33
operator - - - - -5 001 -5 001
Accumulated depreciation and
impairment at
30 June 2021
-1 771 447 - -11 563 -12 684 -82 704 -1 878 398
Carrying amount at 30 June 2021 2 300 228 2 258 170 80 938 12 879 168 075 4 820 290
Cost at 1 July 2021 4 071 675 2 258 170 92 501 25 563 250 779 6 698 688
Additions 84 271 114 944 - 1 055 - 200 270
Reclassification from inventory - - - - - -
Reclassification from exploration - -
Removal and decommissioning asset - - - - - -
Disposals - - - - - -
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 July 2021 -1 771 447 - -11 563 -12 684 -82 704 -1 878 398
Depreciation -172 326 - -1 156 -2 103 -3 750 -179 335
Impairment (-) / reversal of impairment - - - - - -
Disposals - - - - - -
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
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

Note 11 Goodwill, exploration and evaluation assets

Exploration
and evaluation Technical Ordinary Total
Amounts in NOK `000 assets goodwill goodwill goodwill
Cost at 1 January 2021 38 349 1 114 547 416 415 1 530 962
Additions 153 383 - - -
Additions through business combination - - - -
Reclassification to oil and gas properties under development -3 008 - - -
Expensed exploration expenditures temporarily capitalised -166 687 - - -
Cost at 30 June 2021 22 037 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 June 2021 - -508 818 -253 198 -762 016
Carrying amount at 30 June 2021 22 037 605 729 163 217 768 946
Cost at 1 July 2021 22 037 1 114 547 416 415 1 530 962
Additions -915 - - -
Additions through business combination - - - -
Reclassification to oil and gas properties under development - - - -
Expensed exploration expenditures temporarily capitalised -1 328 - - -
Cost at 30 September 2021 19 794 1 114 547 416 415 1 530 962
Accumulated impairment at 1 July 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

Note 12 Impairment / reversal of impairment

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 30 September 2021:

Year Oil
USD/BOE*
Gas
GBP/therm*
Currency
rates
USD/NOK
2021 76.4 2.40 8.8
2022 73.0 1.48 8.8
2023 67.9 0.83 8.4
From 2024 66.3 0.48 8.0

* 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.

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 10.0% post tax, unchanged from 2020.

The long-term inflation rate is assumed to be 2.0%.

Impairment testing of technical goodwill, ordinary goodwill, fixed assets and ROU assets

Based on the company's impairment assessments including calculation of net present value of assets, no impairment of assets, technical and ordinary goodwill or ROU assets was required in the three month period ending on 30 September 2021.

Sensitivity analysis

The table below shows what the impairment pre-tax would have been in the first 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.

Assumptions Alternative calculations of pre
tax impairment/reversal (-) in
Q3 2021 (NOK '000)
Change Increase in
assumption
Decrease in
assumption
Oil and gas price +/- 10% - 296 507
Currency rate USD/NOK +/- 1.0 NOK - 120 897
Discount rate +/- 1% point - -

Note 13 General and administrative expenses

01.01-30.09 01.01-31.12
Amounts in NOK `000 Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Salary and other employee benefits
expenses 111 867 116 133 95 864 348 276 298 848 438 868
Consultants and other operating expenses 50 685 45 361 26 918 133 406 107 176 160 498
Allocated to operated licences -140 853 -148 126 -114 877 -429 927 -360 699 -502 367
Reclassified to oil and gas properties under
development -954 -1 329 -3 710 -2 959 -6 983 -10 286
Total general and administrative expenses 20 745 12 039 4 195 48 796 38 342 86 713

Note 14 Financial items

Amounts in NOK `000 Q2 2021 01.01-30.09 01.01-31.12
Q3 2021 Q3 2020 2021 2020 2020
Interest income 60 - 98 63 2 801 4 036
Unwinding of discount asset retirement receivable
(indemnification asset) 19 691 19 691 19 376 59 073 58 074 77 450
Gain on buy-back bond loan - - 6 726 - 22 044 24 074
Finance income 19 751 19 691 26 200 59 136 82 918 105 559
Interest expense and fees to bondholders -51 100 -49 560 -57 248 -150 209 -240 620 -291 237
Capitalised borrowing cost, development projects 33 214 31 067 39 784 102 309 96 243 124 344
Interest expense shareholder loan - - - - - -57
Other interest expense -42 -331 -160 -615 -945 -4 331
Unwinding of discount asset retirement obligations -20 949 -20 949 -20 150 -62 848 -60 405 -80 555
Loss on buy-back bond loan -2 608 - - -2 608 - -
Other financial expense -1 862 -1 933 -1 311 -5 962 -15 280 -17 071
Finance costs -43 348 -41 707 -39 085 -119 933 -221 007 -268 907
Exchange rate gain/loss (-), bond loans -63 370 -9 890 78 256 -71 040 -216 897 57 171
Net exchange rate gain/loss (-), other -4 383 -2 590 10 513 1 219 100 237 94 573
Net exchange rate gain/loss (-) -67 754 -12 480 88 769 -69 821 -116 660 151 744
Net financial items -91 350 -34 496 75 884 -130 619 -254 748 -11 604

Note 15 Other non-current assets

Amounts in NOK `000
Other non-current assets at 1 January 2021 (Indemnification asset) 3 029 367
Changes in estimates -
Effect of change in the discount rate -
Unwinding of discount 59 073
Total other non-current assets at 30 September 2021 3 088 440

Other non-current assets 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 679 million (2020 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 399 million (2020 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%.

Note 16 Share capital

Ordinary
Number of shares shares
Outstanding shares at 1 January 2021 102 502 650
New shares issued during 2021 502 700
Number of outstanding shares at 30 September 2021 103 005 350
Nominal value NOK per share at 30 September 2021 0.1
Share capital NOK at 30 September 2021 10 300 535

As per 30 September 2021, 945,000 equity-settled warrants are still outstanding. Reference is made to note 10 in the 2020 annual financial statements for further details.

Note 17 Trade and other receivables

Amounts in NOK `000 30.09.2021 30.06.2021 31.12.2020 30.09.2020
Accounts receivable and receivables from operated licences* 81 463 67 966 67 640 48 759
Accrued revenue 201 213 95 831 64 807 28 633
Prepayments 19 310 20 118 30 906 14 993
Working capital and overcall, joint operations/licences 130 316 102 191 161 392 116 577
Underlift of petroleum products 278 126 244 619 184 672 239 423
VAT receivable 3 967 2 928 4 184 1 334
Accrued interest income 60 - - -
Fair value put/call options, oil - 0 - 2 230
Total trade and other receivables 714 455 533 652 513 601 451 949

* There are no accruals for potential losses on receivables.

Note 18 Cash and cash equivalents

Cash and cash equivalents:

Amounts in NOK `000 30.09.2021 30.06.2021 31.12.2020 30.09.2020
Bank deposits, unrestricted 1 093 807 1 330 736 853 903 873 452
Bank deposit, time deposit 400 000 - - -
Bank deposit, employee taxes 10 529 15 363 17 307 9 786
Total cash and cash equivalents 1 504 336 1 346 099 871 210 883 238

Note 19 Asset retirement obligations

Amounts in NOK `000 Total non
current
Provision at 1 January 2021 4 199 866
Additions -
Reclassified to current provision, see note 21 -10 000
Changes in estimates -
Effects of change in the discount rate -
Unwinding of discount 62 848
Total non-current provisions at 30 September 2021 4 252 714

Asset retirement obligations

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.

Note 20 Spareparts, equipment and inventory

Amounts in NOK `000 30.09.2021 30.06.2021 31.12.2020 30.09.2020
Inventory of petroleum products 102 983 112 094 117 022 136 492
Spare parts and equipment 124 344 119 105 111 768 99 063
Total spareparts, equipment and inventory 227 327 231 199 228 790 235 555

Note 21 Trade and other payables

Amounts in NOK `000 30.09.2021 30.06.2021 31.12.2020 30.09.2020
Trade creditors 18 824 12 513 46 509 8 911
Accrued holiday pay and other employee benefits 77 600 66 204 89 595 47 850
Working capital, joint operations/licences 472 605 508 337 451 217 463 073
Overlift of petroleum products 15 747 - - -
Accrued interest bond loans 27 653 4 494 5 008 29 866
Prepayments from customers 111 160 263 682 199 001 284 688
Fair value put/call options, oil - - 7 169 -
Fair value forward contracts, gas 5 312 - - -
Loan from shareholder OKEA Holdings Ltd 1 314 1 314 1 314 1 257
Accrued consideration from acquisitions of interests in licences 10 000 10 000 - -
Other accrued expenses 63 609 81 360 90 550 152 828
Total trade and other payables 803 824 947 903 890 362 988 473

Note 22 Interest-bearing loans and borrowings

Amounts in NOK `000 OKEA02 OKEA03 Total
Bond loans at 1 January 2021 1 395 997 1 004 299 2 400 297
Amortisation of transaction costs 8 225 4 511 12 736
Bond buy-back -105 397 - -105 397
Foreign exchange movement 41 201 29 839 71 040
Bond loans at 30 September 2021 1 340 026 1 038 650 2 378 676
Amounts in NOK `000 OKEA02 OKEA03 Total
Bond loans 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 -108 005 - -108 005
Total cash flows: -108 005 - -108 005
Non-cash changes:
Amortisation of transaction costs 8 225 4 511 12 736
Foreign exchange movement 41 201 29 839 71 040
Loss / gain (-) on buy-back 2 608 - 2 608
Bond loans at 30 September 2021 1 340 026 1 038 650 2 378 676

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 will only result in a default if the company is in breach on two consecutive calculation dates.

The following changes are permanent:

Capital Employment Ratio covenant:

The covenant shall be calculated in USD by converting the cash equity capital using the NOK/USD exchange rate applicable at the time of registering the share capital.

Other terms:

  • Alignment of the definition of permitted hedging in the OKEA02 bond terms with OKEA03 bond terms

  • All call prices are increased by 1%

  • Outstanding bonds shall be redeemed at 101% of the nominal amount at the maturity date

  • All put prices are increased by 1%

  • The company shall not declare or make any dividends or grant any loans or other transfer of value to its shareholders

  • Security in any additional tax refund claims if at any time Norwegian law permits this

  • Extraordinary put option event on 30 June 2021 for up to 15% of outstanding bonds at 100% of the nominal amount. The exercise period for the put options expired on 4 August 2021 and was not exercised.

Note 23 Leasing

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.

Amounts in NOK `000
-- --------------------- -- -- --
Lease liability 1 January 2021 179 235
Additions/disposals lease contracts 1 340
Accretion lease liability 8 518
Payments of lease debt -27 269
Total lease debt at 30 September 2021 161 824
Break down of lease liability
Short-term (within 1 year) 36 220
Long-term 125 604
Total lease liability 161 824

Future minimum lease payments under non-cancellable lease agreements:

Amounts in NOK `000 30.09.2021
Within 1 year 35 804
1 to 5 years 128 413
After 5 years 78 232
Total 242 449

Future lease payments related to leasing contracts entered into as an operator of the Draugen field are presented on a gross basis.

Note 24 Derivatives

Amounts in NOK `000 30.09.2021 30.06.2021 31.12.2020 30.09.2020
Premium commodity contracts - 12 585 6 653 2 825
Unrealised gain/loss (-) commodity contracts included in other operating income / loss(-) -5 312 -12 585 -13 821 -595
Short-term derivatives included in assets/liabilities (-) -5 312 - -7 169 2 230

OKEA uses derivative financial instruments to manage exposures to fluctuations in commodity prices. At the end of third quarter 2021, OKEA had outstanding forward contracts for;

  • 300 000 therms of gas at a fixed price of GBP 1.82 per therm with expiration in October 2021,

  • 270 000 therms of gas at a fixed price of GBP 1.86 per therm with expiration in November 2021, and

  • 250 000 therms of gas at a fixed price of GBP 1.88 per therm with expiration in December 2021.

Additional gas forward contracts have been entered after 30 September 2021. At the date of this report, OKEA has sold forward 10-20% of the net after tax exposure for natural gas prices from October 2021 to January 2022.

Note 25 Fair value of financial instruments

It is assessed that the carrying amounts of financial assets and liabilities, except for interest-bearing loans and borrowings, is approximately equal to its fair values. For interest-bearing loans and borrowings, the fair value is estimated to be NOK 2 503 297 thousand at 30 September 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.

Note 26 Events after the balance sheet date

OKEA has announced that further development of Vette/Grevling is halted. The entire amount from the acquisition of these licences of NOK 5 million previously included in "exploration and evaluation assets" have been expensed in Q3 2021.

On 25 October, an important milestone for OKEA was met as the operator Repsol confirmed having started producing from the Yme field. Expected recoverable reserves in Yme are estimated to approximately 10 million standard cubic meters of oil - or 63 million barrels – with OKEA's share at 9.4 million barrels of oil. Average production the next 12 months net to OKEA from the Yme field is estimated to 5,600 boepd.

Earlier this year, the Yme licence entered into an agreement to acquire Mærsk Inspirer through a bareboat charter agreement with Havila Sirius AS and take over the day-to-day operations of the jack-up rig from Maersk Drilling. The transaction was effectuated in October and the re-organisation of operations and ownership of the Mærsk Inspirer is expected to provide significant cost improvement and cash flow benefits in the area of NOK 300 million net after tax to OKEA over the next nine months.

Alternative performance measures

Reconciliations

EBITDA Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Amounts in NOK `000 3 months 3 months 3 months 9 months 9 months 12 months
Profit / loss (-) from operating activities 617 612 897 698 -603 085 1 583 025 -1 385 860 -1 219 136
Add: depreciation, depletion and amortisation 179 335 143 870 146 854 495 450 520 509 699 403
Add: impairment - -730 397 572 181 -730 397 1 503 870 1 387 018
EBITDA 796 947 311 172 115 951 1 348 078 638 519 867 286
EBITDAX Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Amounts in NOK `000 3 months 3 months 3 months 9 months 9 months 12 months
Profit / loss (-) from operating activities 617 612 897 698 -603 085 1 583 025 -1 385 860 -1 219 136
Add: depreciation, depletion and amortisation 179 335 143 870 146 854 495 450 520 509 699 403
Add: impairment / reversal of impairment - -730 397 572 181 -730 397 1 503 870 1 387 018
Add: exploration and evaluation expenses 36 677 108 897 16 050 254 310 53 942 97 036
EBITDAX 833 625 420 069 132 001 1 602 388 692 461 964 322
Production expense per boe Q3 2021 Q2 2021 Q3 2020 2021 2020 2020
Amounts in NOK `000 3 months 3 months 3 months 9 months 9 months 12 months
Productions expense 180 677 212 653 153 895 569 665 506 547 695 877
Less: processing tariff income -13 393 -11 217 -9 171 -37 697 -37 667 -53 237
Less: joint utilisation of resources -1 382 -2 413 -6 897 -9 982 -13 466 -15 107
Less: preparation for operation asset under construction -3 483 -7 682 - -16 487 - -7 813
Divided by: produced volumes (boe) 1 500 961 1 202 100 1 223 878 4 193 131 4 422 159 5 909 921
Production expense NOK per boe 108.2 158.9 112.6 120.6 103.0 104.9
Net interest-bearing debt 30.09.2021 30.06.2021 31.12.2020 30.09.2020
Amounts in NOK `000
Interest-bearing loans and borrowings 2 378 676 2 416 204 2 400 297 2 688 287
Less: Cash and cash equivalents 1 504 336 1 346 099 871 210 883 238
Net interest-bearing debt 874 340 1 070 105 1 529 086 1 805 048

Definitions

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 debt excluding lease liability (IFRS 16) 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 targets to deliver shareholder value through profitable production growth within the current portfolio combined with mergers and acquisitions targeting mid to late-life assets with potential for unlocking upside value

OKEA ASA

Kongens gate 8 7011 Trondheim

www.okea.no

Talk to a Data Expert

Have a question? We'll get back to you promptly.