Annual Report • Apr 28, 2021
Annual Report
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31 December 2020
Sigurd Thorvildsen Henrik Fougner Daniel Gold John Simpson Synne Syrrist
Burness Paull LLP, 50 Lothian Road Festival Square Edinburgh EH3 9WJ
Ernst & Young LLP 4 th Floor 2 Marischal Square Broad Street Aberdeen AB10 1BL
DNB Bank ASA 8 th Floor The Walbrook Building 25 Walbrook London EC4N 8AF
3 rd Floor 11- London SW1Y 4LB
Awilco Drilling PLC ( the Company ) create value through the provision of a quality, reliable and customer focused service to the mobile drilling rig market. The management team shall safely, efficiently and effectively deliver a high-quality service to customers, with a view to securing the most lucrative day rate contracts in conjunction with the highest achievable rig utilisation. The Company shall evaluate growth opportunities which best complement its financial and operational aspirations.
The Company owns and operates two semi-submersible drilling rigs, the WilPhoenix and WilHunter, both standardised rigs used in the drilling of oil and gas wells and P&A work in the UK sector of the North Sea, although they can be used in other geographical locations.
the drilling rigs as noted above. During the year, the WilPhoenix was in drilling operations for its clients, Petrofac Facilities Management and Serica Energy. The WilHunter is cold stacked and moored in Invergordon.
The performance of the UK Drilling contracts were largely unaffected by the impact of Covid-19.
During the year, the vessel construction contracts for two semi-submersible drilling rigs, Nordic Winter and Nordic Spring being built in Keppel FELS shipyard in Singapore were terminated. As a consequence, the Group s subsidiary companies have entered into an arbitration process. Cost reduction measures regarding the Norwegian shorebase were implemented which resulted in closure of the office.
Conventional UK drilling rig demand in 2021 remains somewhat limited but the ongoing attrition of previously marketed units is clearly supportive for the overall supply/demand balance. UK Plug & Abandonment demand continues to mature and rig contract awards for 2021 and 2022 commencement are anticipated in Q1 and Q2 of 2021. The longer-term UK Plug & Abandonment market continues to firm up as operators clarify the timing of future rig demand from 2022, 2023 and beyond.
The G year was as follows:
| 2020 | 2019 |
|---|---|
| US\$000 | US\$000 |
| 25,602 | 38,136 |
| (167,916) | (30,382) |
| (167,857) | (30,592) |
| (656%) | (80%) |
| 137 | 141 |
The total revenue for the year relates to contract income received from drilling operations. The decrease is due to lower utilisation for the WilPhoenix compared with the prior year. The Group had rig operating expenses of US\$ 23.3 million (2019: US\$24.8 million) relating to rig operating costs included in cost of sales, and general and administration expenses of US\$ 14.9 million (2019: US\$9.2 million). There was an impairment expense of US\$ 145.2 million (2019: US\$ 23 million). US\$ 111.3 million was the impairment of assets under construction, US\$ 0.5 million was the impairment of a right of use asset and US\$ 33.4 million rig impairment due to the continued cold stack status of the WilHunter and lack of visibility of contracting opportunities for the WilPhoenix.
The key performance indicators (KPIs) set out below are reviewed on a regular basis by management and performance against them subsequently reported to the Board of Directors. Targets for the KPIs are set and, if performance falls short, the appropriate corrective action is implemented by management.
main financial KPIs are:
Revenue efficiency is actual revenue for the period compared with the maximum contract revenue multiplied by the number of available days in the contracted period. For the year ended 31 December 2020, the revenue efficiency was 80.6% (2019: 89.7%).
Operating margin is total revenue less operating costs. For the year ended 31 December 2020, operating margin was 656% loss. (2019: 80% loss). The deterioration in margin is due to the decrease in revenue during the year, increase in general and administration expenses and impairment of the new build assets, partially offset by the reduction in operating costs.
The Company also has a number of operational KPIs that are used to manage the business on a day to day basis, some of which are detailed below:
Quality, Health, Safety and Environment (QHSE)
| Total recordable incident rate (TRIR) |
Number of incidents (lost time incident, restricted work case, medical treatment only) x 200,000 / Total number of man hours in the review period. Measured on a rolling 12-month basis. |
|---|---|
| Unplanned discharges | Items that have been discharged to sea not covered under PON 15 which relate to allowable items. Some examples are Blow out Preventor (BOP) control fluid and hydraulic oil that are reportable under PON 1. |
| (PON - Petroleum Operations Notices) | |
| Operations | |
| Uptime | Total hours the rigs are working i.e. not on unplanned downtime / on contract time for the period. |
| Human Resources (HR) | |
| Personnel turnover | Employee initiated leavers in the period as a percentage of total headcount (onshore and offshore) on a rolling 12-month basis. |
The primary risks are those that impact utilisation rates for each of the rigs, QHSE issues associated with operations and exposure to liquidity, credit and legal risk.
The Company has a small fleet of two rigs, one currently in operation and the other cold stacked, implying that downtime, failure or idle periods will have a relatively higher impact than if the Company had a larger and more diverse fleet. The risk to utilisation rates may arise through deferred commencement of drilling contracts either through delays incurred on shipyard project work or delays encountered by operators not able to commence drilling in accordance with plan. There is also the possibility of gaps and idle periods during the year due to the unpredictable nature of contract drilling operations and prevailing market conditions. This could also be impacted by the effects of Covid-19 and the current low oil price, however there is no indication of any effect on the current contracts and that future contracting opportunities would not go ahead as planned. Additionally, there is a utilisation risk associated with the possibility of mechanical and weather down time. The Group mitigates this risk through its operating, marketing and pricing strategies.
To mitigate any risk with regards to QHSE, the Group has in place a QHSE management plan which seeks to ensure that all operations are conducted within normal industry standards and procedures. The Group also seeks to ensure safe and efficient operations, with no accidents, injuries, environmental incidents or damage to assets. During the current Covid-19 outbreak, the Group is following industry guidelines to ensure the safety of the workforce.
The Group achieved a high level of safety with no injuries or fatalities. There has been continued low frequency of dropped object and high potential incidents. The Corporate Annual QHSE objectives are implemented in departmental action plans. The total recordable incident rate (TRIR) has decreased from 1.07 in 2019 to zero at the end of 2020. There were no LTI incidents in 2020 and only a single first aid case. Our commitment to safe and reliable operations has seen this improvement and we continue to learn and improve.
As described in Note 26 to the financial statements, the G in order to support the needs of the business and meet liabilities as they fall due. See Note 2 for consideration of liquidity of the Group in the going concern period. The Group currently has no debt obligations and has an appropriate level of cash.
Management assess the credit rating of new and existing clients and determines if any action is required to secure payment in respect of work to be performed.
The Company is committed to operating in a manner consistent with good industry practice and in accordance with all legislative requirements that are applicable in the different areas of jurisdiction in which it conducts business.
The Company has subsidiaries in other countries. Tax laws and regulations are highly complex and subject to interpretation. Consequently, the Company is subject to changing tax laws, treaties and regulations in and between countries in which it the tax laws in effect in these countries at the time that the expense was incurred. A change in these tax laws, treaties or regulations or in the interpretation thereof, which is be
As described in Note 23, a tax position taken by a subsidiary company in 2015 has been disagreed with by HMRC and HMRC have issued a notice of amendment indicating additional tax and interest of about £7.7m is due for payment. The subsidiary company continues to maintain its position and an appeal has been submitted and a tribunal hearing is expected to be heard in June 2021. The subsidiary company has engaged with specialist legal advisors in the area of taxation in order to mitigate any risk of cash outflow.
For 2020, the ETR for the Company was negative 0.1% (2019: 1.4% negative). The current and prior year are negative figure due to the loss before tax. There was a tax charge in the year as a result of the current year movement in unrecognised deferred tax asset, reversal of a prior deferred tax asset and also an adjustment in respect of the prior period. In future years, it is expected that the ETR may continue to diverge from the statutory UK rate of corporation tax due to significant unrecognised deferred tax assets.
The Group values its reputation and aims to carry out business in a fair and open manner. Despite this the Group may become subject to claims during the course of its business. During the year the vessel construction contracts for two semi-submersible drilling rigs being built in Singapore, have been terminated, see Note 23 company. The rig construction contracts were entered into on a non-recourse basis to the parent company or wider group. In order to mitigate any possible risk of cash outflow, the Group has established a dedicated team and has engaged specialist legal advisors to defend the actions taken.
in operating results, adverse business developments, interest rates, changes in financial estimates by securities analysts, matters announced in respect of major customers or competitors, changes to the regulatory environment in which the Company operates, or a variety of other factors outside the control of the Company.
The offshore contract drilling industry is cyclical level of activity of oil exploration, development, oil prices and production in the North Sea and internationally. The availability of quality drilling prospects, exploration success, relative production costs, by declines in exploration, development and production activity associated with depressed oil prices.
Additionally, the perceived risk of depressed oil prices and changes in the UK North Sea tax regime often causes exploration and production companies to reduce their spending.
fluctuate. Oil and gas prices are affected by economic and political conditions, levels of supply and demand, the policies of the Organization of Petroleum Exporting Countries (OPEC), the level of production in non-OPEC countries, the cost of exploring for, developing, producing and delivering oil and gas, currency exchange rates and the availability of alternate energy sources and political and military conflicts in oil-producing and other countries.
If the price of oil and gas products should drop significantly, this could have a material adverse effect on the Company.
Following the end of the transitional period on 31 December 2020, there remains continued uncertainty surrounding the future relationship of the UK with the EU. The Company has considered what impact this could potentially have on the business and after careful consideration, has concluded that any potential impact is low risk, however it continues to monitor the situation closely.
The Company recognises its duty to stakeholders to operate the business in an ethical and responsible manner. It is committed to developing its Corporate Social Responsibility (CSR) agenda, recognising that it can play a major part in its operations. This report does not contain information about any policies of the Company in relation to social community and human rights issues since it is not considered necessary for an understanding of the development, performance or position of the Co
Simple is Best Our systems and procedures shall be clear, concise and effective, ensuring we deliver on our promises.
Engagement We will be a company of choice, valuing our work force, listening and responding to employees, clients and partners.
Efficiency We will consistently meet our clients expectations by providing competent people, reliable equipment and smart systems.
Flexibility We will encourage challenge and creativity in order to deliver optimised performance and continuous improvement.
Performance We will get it right first time; consistently delivering success.
The Company requires its employees to observe the highest standards of business and personal ethics in the conduct of their duties and responsibilities. The Company has a specific Anti-Bribery and Corruption policy to ensure compliance with all applicable anti-bribery and corruption regulations and to ensure the socially responsible manner. A risk assessment is undertaken by the senior members of the Company as part of the quarterly ter.
the Staff Handbook, which is available to all employees via the Business Management System (BMS) Code of Conduct Values and Ethics document sets out the basic principles to guide all employees and officers of the Company on how they must conduct themselves to seek to avoid even the appearance of improper behaviour. To help ensure compliance, the Company requires that employees, officers and directors review the policy and acknowledge their understanding and adherence in writing on an annual basis.
The Company is committed to equal opportunities and treats all employees with respect and dignity and ensures that decisions are taken without reference to irrelevant or discriminatory criteria. The Company does not tolerate any form of unlawful discrimination and is committed to promoting equality of opportunity and diversity for all personnel and will address any unlawful discrimination in every aspect of its operations.
As at 31 December 2020, the number of directors and employees was as follows:
| Male | Female | |
|---|---|---|
| Directors | 4 | 1 |
| Senior Managers | 3 | - |
| Other staff onshore |
20 | 9 |
| Other staff offshore |
100 | - |
It is important to the Company that it supports its employees in their health and wellbeing. The Company operates a flexible benefit scheme that is available to all members of staff and includes benefits such as leisure club membership, private medical and dental insurance, a health screening service and an Employee Assistance Programme. The Company has also achieved the Silver Healthy Working Lives Award. During the Covid-19 pandemic, where possible, all onshore employees were required to work from home
in accordance with government guidance. Employees were encouraged to ensure they had adequate resources available, and support offered where necessary.
The Group has an established absence management procedure, to support employees during periods of sickness absence whilst ensuring the efficient and effective running of the organisation.
| 2020 | 2019 | |
|---|---|---|
| Group sick leave | 1.7% | 4.3% |
as a percentage of total hours worked
The Company recognises that it is has a corporate responsibility to carry out its operations in an ethical and responsible manner whilst minimising its impact on the environment. The Company upholds the relevant standards and retains its ISO14001 certification. ISO14001 is an internationally recognised environmental management system (EMS) standard, providing a model for companies to follow to create and achieve their policy. Focusing on the issues that really matter, it is designed to help companies achieve consistent environmental regulatory compliance whilst embedding the concept of continuous improvements in environmental performance. ISO14001 is a widespread benchmark for thousands of organisations around the world that want to communicate to the public and stakeholders that they are environmentally responsible. Additionally, the Company has achieved ISO 45001 certification following on from its previous BS OHSAS 18001 certification. This is an internationally applied Standard for occupational health and safety management systems. It exists to help organisations put in place demonstrably sound best practices by providing a framework for procedures and controls needed by the Company to achieve the best possible working conditions and workplace health and safety by eliminating hazards and minimize health and safety risks.
The Board of directors have taken account of stakeholder views when making key decisions that impact the company and its stakeholders. The following matrix provides some examples of how consideration has been given to key stakeholders, being employees, investors, customers, suppliers, regulators and society in general.
| Stakeholder | Strategic Issue | Engagement | Outcome | Key Decision |
|---|---|---|---|---|
| Employees | Fair compensation and benefits package for employees |
Market analysis is performed to ensure compensation levels are competitive in prevailing market. See also commitment expressed by the Board in respect employees on page 6. |
Pay levels for existing and new employees were considered to be fair and competitive within the industry. |
Changes in compensation levels are proposed by the Remuneration Committee to the Board. |
| Stakeholder | Strategic Issue | Engagement | Outcome | Key Decision |
|---|---|---|---|---|
| Investors | Continue to seek growth opportunities that offer attractive returns to investors |
Information is shared with investors in the form of quarterly and annual financial reports and press release disclosures are required. Additionally, quarterly presentations held and available on the Company website. Regular one to one investor meetings are also held. |
No new outcomes in respect of investment opportunities at this time. |
Quarterly and annual financial reports are reviewed and approved by the Board. Termination of new build programme and cost savings initiated in respect of Norwegian shorebase. |
| Customers | Customer Satisfaction |
As part of the procedures to ensure customers are satisfied with performance and delivery of services contracted, the customers are requested to provide feedback on a variety of areas to ensure the company is performing in accordance with, or better than, customer expectations. |
Customer surveys feedback is part of the company KPIs and scoring in this area has been more than satisfactory during the course of the year. |
Directors agree key performance indicators with Management and monitor performance against KPIs during the course of the year. Results impact employee bonus awards at year end. |
| Stakeholder | Strategic Issue | Engagement | Outcome | Key Decision |
|---|---|---|---|---|
| Suppliers | Selection of key suppliers and high-level purchases. Ensure that vendors are paid on a timely manner. |
Suppliers invited to tender and purchasing procedures require fair and transparent selection of vendors. Refer also paragraph on Investment Appraisal" on page 20 of the annual report. |
Policies, procedures and scrutiny by the Board ensures vendor selection criteria is a robust process. |
Board involved in selection of key vendors and Board approve the approval matrix on a regular basis. Any approvals above the matrix levels require Board approval. A Board member and chair of the Audit Committee approves the published payment practices report filed every six months. |
| Regulators | Accreditation and compliance with regulatory standards. |
Details of standards achieved are detailed under "Health, Safety and Environment" on page 7 of the annual report. |
Achievement and continued certification of compliance through external HSE audits ensures company operates at, or above, the standards required by the regulatory bodies that govern the industry. |
The Board approves the direction followed by the CEO and management in pursuit of necessary accreditation and standards. |
| Society | Minimising harm to the environment in operational performance of the fleet. |
KPIs are established to measure if any adverse consequence to the environment within the control of the company. |
Achievement and compliance with environmental sustainability. |
Operational KPIs are also reviewed on a regular basis by the Board. |
The Directors present their report and financial statements for the year ended 31 December 2020. These financial statements have been prepared under International Financial Reporting Standards in compliance with the Companies Act 2006.
The loss after taxation for the year amounted to US\$ 167.9 million (2019: US\$ 30.6 million loss). There were no dividends paid during the year. (2019: nil)
See Strategic Report pages 2-9.
The directors who served the Company during the year were as follows:
Sigurd Thorvildsen Henrik Fougner Daniel Gold John Simpson Synne Syrrist
are discussed further in Note 26 on pages 74-77 of the financial statements.
The Company insures its directors and officers against liability in respect of proceedings brought by third parties, subject to the conditions set out in the UK Companies Act 2006.
None of the directors listed above had any interest in shares.
The Company has been notified of the following interests representing 3% or more of the issued ordinary share capital of the Company as at 28 April 2021.
| No of shares | Percentage holding | |
|---|---|---|
| Awilhelmsen Offshore AS | 20,240,814 | 37.1% |
| Pershing LLC | 10,874,509 | 19.9% |
| Akastor AS | 3,049,673 | 5.6% |
| Euroclear Bank S.A./N.V. | 2,140,309 | 3.9% |
| Citibank, N.A. | 2,022,533 | 3.7% |
| Skandinaviska Enskilda Banken | 2,000,000 | 3.7% |
QVT Financial LP with affiliated and related parties owned 4,860,781 shares at 28 April 2021, a total of 8.9
FVP Master Fund LP with affiliated and related parties owned 10,817,527 shares at 28 April 2021 a total of 19.8% has not notified the Company of any changes of ownership up to the date of signing the report and financial statements.
The information given in the corporate governance statement is set out on pages 15-21.
At 31 December 2020 the Group had cash on hand of US\$ 14.7 million and no debt. Management has prepared cash flow forecasts covering a period until 30 June 2022 in order to assess whether the Group and Company are a going concern. There are several materia ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. The following material uncertainties have been identified:
Based on their assessment of risks and financing options, the Directors believe there is a reasonable prospect of the Company and the Group continuing as a going concern for the period to 30 June 2022, However, the above listed material uncertainties may continue as a going concern. The financial statements do not contain adjustments that would result if the Group and Company were unable to continue as a going concern.
Management has performed an impairment test which resulted in an impairment of US\$ 33.4 million at year end due to the continued cold stack status of the WilHunter rig and lack of visibility of contracting opportunities for the WilPhoenix rig. The impairment test was based on forecast industry conditions and operations, expected utilisation, contract rates, operating expenses and capital requirements of the rigs. A pre-tax discount rate of 21.7% and post-tax discount rate of 17.8% has been applied.
greenhouse gas emissions are categorised between two categories: direct emissions (from rig power generation and loss of refrigerants) and indirect emissions (from purchased electricity for onshore offices).
All emissions from the facilities over which the Company has direct operational control were included. The Companies Act 2006 requires reporting on the following greenhouse gases:
PFCs and SF6 are not emitted, and therefore not considered in this report.
Greenhouse gas emissions are reported in tonnes (t) carbon dioxide equivalents ("CO2e"). Calculations are performed using the emission factors and global warming potential for each chemical compound, which are in accordance with the current guidance from the UK Government GHG Conversion Factors for Company Reporting 2020. The 2020 annual CO2e emitted from operations was 5912.5 t.
For the year ended 31 December 2020, the were 5651 tonnes as compared to 6543 tonnes for the year ended 31 December 2019. When expressed as an intensity measure of tonnes of CO2e gas emissions per days of contract from operations, the intensity measure for 31 December 2020 and 31 December 2019 was 15.6 tonnes and 11.7 tonnes, respectively. This decrease is mainly due to the WilPhoenix undertaking plug and abandon and well workover from late spring in 2020 as opposed to plug and abandon over the entire year 2019.
There were 80kg of accumulated refrigerant losses during 2020 equivalent to 230.5 tonnes of CO2e.
| Greenhouse Gas Emissions | 2020 | 2019 |
|---|---|---|
| Direct emissions (owned rigs) | 5,651 | 6,543 |
| Indirect emissions (onshore offices) | 31 | 36 |
| Refrigerant emissions (offshore only) | 230.5 | 0 |
| Total emissions (CO2c) | 5,912.5 | 6,579 |
| Direct CH4 emissions (owned rigs) | 1.4 | 1.9 |
| Direct N2O emissions (owned rigs) | 76.1 | 101 |
eliminating waste, recycling and using alternative energy sources where possible. As the Company holds an ISO 14001 accredited Environmental Managements System (EMS) this has already identified the risks to significant risk to biodiversity. During 2020, zero drill cuttings were disposed to the environment from operations.
The Directors recognise that business relationships with all stakeholders is beneficial to the well-being of the organisation. Feedback in terms of relationships with suppliers, customers, investors is discussed with management at board meetings. A summary of the key decisions can be found in the table on pages 7-9.
The directors are responsible for preparing statements in accordance with applicable United Kingdom law and regulations.
Company Law requires the directors to prepare financial statements for each financial year. Under that law, they have elected to prepare the group and the parent company financial statements in accordance with
Under Company Law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group and the company for that period.
In preparing the group and the company financial statements, the directors are required to:
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain position of the group and the company and enable them to ensure that its financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the group and parent company and group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a strategic report, law and those regulations. The directors are responsible for the maintenance and integrity of the corporate
Awilco Drilling PLC is committed to maintaining high standards of corporate governance.
The Company was previously listed on the Oslo Axess stock exchange, but transferred over to the Oslo Bors stock exchange on 4 September 2018. The Company has adopted the Norwegian Code of Practice for Corporate Governance of 17 October 2018 ( the Code ). A copy of the code can be found at www.nues.no
eby companies are expected to comply with the recommendations or explain why they have chosen an alternative approach. Below is a summary of the departures from the Code with an explanation of how the Company contribute to good corporate governance.
The Company is required to state how it has applied the principles set out in Section 1 of the Code and which relate to its directors, remuneration, accountability and audit and relations with shareholders.
As of the date of this report, the Company is in compliance with the Code, except in relation to the following matters:
The Company operations, and to provide drilling services for oil and gas companies using these rigs. This is an intricate business which involves complex assets and high value equipment, and which requires specialised and trained personnel to operate them efficiently and safely.
The Company customers.
Further information about the Company in the Strategic Report.
Full details of the shares issued are detailed in Note 24. The Company considers its equity to be at a level appropriate to the Company
s in support of its main objective to maximise returns to shareholders. maintaining a robust cash buffer to support operational working capital requirements and planned capital expenditure. Consideration is also given to future market prospects. Dividend payments will resume when the Company again reaches an appropriate free cash flow situation.
All issued shares of the Company are vested with equal shareholder rights in all respects. There is only one class of shares. The Articles of Association place no restrictions on voting rights. Each share represents one vote at the Company .
The Company is committed to ensuring that all employees are treated with respect and dignity and to ensure that decisions are taken without reference to irrelevant or discriminatory criteria. The Company will not tolerate any form of unlawful discrimination and is committed to promoting equality of opportunity and address unlawful discrimination in every aspect of its operations. The Company takes every possible step to ensure that decisions on recruitment, selection, training, conditions of work, pay and benefits, promotion, career, management, and every other aspect of employment are justifiable and based solely on objective criteria. During the year, there have been no incidents of non-compliance with this policy.
The Company has entered into the agreements listed below with the following parties:
Awilhelmsen Offshore AS owns 37.1% of the ordinary shares in Awilco Drilling PLC.
The shares of the Company are freely negotiable.
financial projections to ensure resources are available to meet operational requirements and takes appropriate action if judged necessary.
All shareholders of the Company are entitled to attend the general meetings of the Company. The Annual General Meeting (AGM) is to be held no later than 30 June each year. Notification for meetings are sent out at least 21 days in advance. The notice includes a reference to the Company for the General Meeting and other supporting documents required to allow shareholders to form a view on all matters to be considered at the meeting are made available. The deadline for registration is normally set two working days before the General Meeting, to ensure shareholders have as much time as possible to register. If a shareholder cannot attend a meeting in person it is possible to vote through proxy.
The minutes from the General Meetings are published on the Company www.awilcodrilling.com
The next AGM is scheduled for 9 June 2021.
The Board considers that it is vital to ensure that there is an appropriate range of skills, knowledge and experience among its members, and that the objectivity and integrity of members should be exemplary. The Board currently consists of five non-executive Directors including the Chairman. The Board believes that the structure and size of the Board is appropriate and that no single individual or group dominates the decision making process. The names, skills, experience and expertise of each Director are shown in the Board of Directors section of the Company www.awilcodrilling.com
The main responsibilities of the Board include but are not limited to:
Management is delegated the task of the detailed planning and implementation of the Company
Directors receive timely, regular and appropriate management information to enable them to fulfil their duties and have access to the advice of the Company Secretary. The Board has agreed guidelines for Directors to obtain independent professional advice, if they seek it, at the Company
The Company has in place and liability insurance.
The Board includes two independent non-executive directors (John Simpson and Synne Syrrist) and three non-independent non-executive directors (Sigurd Thorvildsen, Henrik Fougner and Daniel Gold). All the non-executive Board members are viewed as being free from any relationship with the executive management which could result in any conflict or affect their judgement. None of the non-executive directors participates in the share option schemes or long-term incentive plan operated by the Company and none are dependent on the fees received from the Company as their primary source of income.
The Board completes an annual process to evaluate the effectiveness of Board Committees and individual directors and has confirmed that it is satisfied that it and its Committees are operating effectively.
The performance of the CEO is reviewed annually by the Remuneration Committee in conjunction with his annual pay review and the payment of bonuses.
Directors are elected by shareholders at the first annual general meeting after their appointment and, after that, offer themselves for re-election by a vote of shareholders at least once every two years.
Board meetings are scheduled to be held at least five times a year, linked to key events in the Company corporate reporting calendar. Additional ad-hoc meetings may be held.
It is expected that all directors attend Board and relevant committee meetings, unless they are prevented from doing so by prior commitments or travel restrictions. If directors are unable to attend meetings, they are given the opportunity to be consulted and comment in advance of the meeting.
The Board has established an Audit Committee, Remuneration Committee and a Nomination Committee. The Audit Committee and Nomination Committee have formal terms of reference governing their method of operation which reflect the provisions of the Code and which have been approved by the Board.
The Audit Committee was chaired during the year by John Simpson and the other member of the Committee is Henrik Fougner. Only John Simpson is considered to be independent by the Board, which is acknowledged in the terms of reference of the Audit Committee. The Board is satisfied that John Simpson has recent and relevant financial experience, as the former CEO of Den norske Bank (now DNB Bank) in -Pacific operations. Mr. Simpson is also classed as an approved person by the UK FCA and has chaired audit committees of UK listed companies and public bodies since 1996.
The role of the Audit Committee is to ensure the integrity of the financial statements of the Company, announcements relating to its financial performance. It is responsible for reviewing the Company financial control and risk management systems, advising the Board on the appointment of external auditors, overseeing the relationship with external auditors, reviewing the Company considering the need for an internal audit function.
The Audit Committee monitors the relationship with the Company provision of non-audit services to ensure auditor objectivity and independence is safeguarded. The Company will award non-audit work to the firm which provides the best commercial solution for the work in question taking into account the skills and experience of the firm involved and the fees payable for the work. In considering whether to award such work to the external auditors, attention is paid to the level of fees for non-audit services relative to the amounts of the audit fee and whether there are safeguards in place to mitigate to an acceptable level any threat to objectivity and independence in the conduct of the audit resulting from the provision of such services.
There is an opportunity at each meeting for the Audit Committee to discuss matters privately with the external auditors without any members of the executive management team present. In addition, the Chairman of the Committee is in regular contact with the external audit partner to discuss matters relevant to the Company.
The Audit Committee have also been extensively involved in ensuring the appropriate disclosures regarding Covid-19 have been included in the financial statements.
The Remuneration Committee was chaired during the year by Sigurd Thorvildsen and the other members of the Committee are Daniel Gold and Henrik Fougner.
The role of the Remuneration Committee is to establish and develop the remuneration policy for the Company tives and key management and to determine a specific remuneration package for the CEO. No director or employee is involved in deciding their own remuneration. The Committee also approves all employee pay review proposals.
Details of the Company in the remuneration report.
The members of the Nomination Committee are Henrik Christensen and Tom Furulund.
The role of the Nomination Committee is to present a recommendation to the general meetings concerning directors to be elected by shareholders and the level of directors fees. The Nomination Committee shall also present recommendations to the general meetings regarding nomination of members to the Nomination Committee and concerning fees for the members of the Nomination Committee.
The table below shows the frequency and attendance of directors and other members at Board and Committee meetings during 2020.
| Board Meetings |
Remuneration Committee |
Audit Committee |
Nomination Committee |
|
|---|---|---|---|---|
| No of meetings in year | ||||
| Sigurd Thorvildsen | 17 | 3 | - | - |
| Henrik Fougner | 17 | 3 | 5 | - |
| Daniel Gold | 17 | 3 | - | - |
| John Simpson | 17 | - | 5 | - |
| Synne Syrrist | 17 | - | - | - |
| Henrik Christensen (1) | - | - | - | 1 |
| Tom Furulund (1) | - | - | - | 1 |
(1) Not members of the Board but members of the Nomination Committee only
The Board acknowledges its responsibility for establishing and maintaining adequate internal controls and risk management systems to safeguard shareholders investments and the Company assets and performs an annual review of these areas. Such systems can only be designed to manage, and not to eliminate, the risk of failure to achieve business objectives. They can provide reasonable, but not absolute, assurance that the Company reporting is reliable.
The Company and use of its Business Management System (BMS). The Company controlled by the implementation and use of its Safety and Environmental Management System which is incorporated in the BMS.
The Company al reporting procedures include annual detailed operational budgets which are reviewed and approved by the Board. Performance against budget is monitored throughout the year, through monthly reporting of management accounts and key performance indicators. The Board receives updated cash flow statements on a monthly basis and at each Board meeting and has close follow-up discussions with the management between meetings as required.
With a centralised financial reporting system, transactions and balances are recognised and measured in accordance with prescribed accounting policies, and all relevant information is appropriately reviewed and reconciled as part of the reporting process.
There are clearly defined evaluation and approval processes for acquisitions and disposals, capital items and major expenditure. These include escalating levels of authority and post-completion reviews of all major projects to compare the actual outcome with the original plan. Certain transactions are reserved for approval by the Board and limits of delegated responsibility and areas of authority have been identified for employees.
The Audit Committee reports to the Board on matters discussed with the auditors during the course of the statutory audit.
The Company has adopted guidelines in relation to takeover bids. The guiding principles of the Board in a take-over situation will be to seek the best value for and the equal treatment of all shareholders. The Board recognises that the decision whether to accept or reject an offer lies with the shareholders and will refrain from any actions which may deny shareholders this choice. The Board will seek to provide shareholders with a recommendation as to whether shareholders should or should not accept an offer. This includes seeking external advice on valuation when appropriate. Any transaction that is in effect a disposal of the Company itted to a General Meeting for its approval. As the Company is incorporated in England and Wales and listed in Norway, any takeover bid for the Company would be governed by aspects of both English law and Norwegian law and regulations in accordance with the EU Takeover Directive.
The Company is committed to maintain the highest of standards of disclosure ensuring that all investors and potential investors have the same access to high quality, relevant information in an accessible and timely manner to assist them in making informed decisions. The Investor Relations Department manages the flow of information to all investors and potential investors and regular presentations take place at the time of the quarterly results as well as during the rest of the year.
Any concerns raised by a shareholder in relation to the Company and its affairs are communicated to the Board.
The Company maintains a website which provides up-to-date, detailed information on the Company operations, which includes a dedicated investor relations section. All Company announcements are available on the website, as are copies of slides used for presentations to investment analysts.
Shareholders will have the opportunity at the forthcoming AGM to put questions to the Board, including the Chairmen of the various Committees.
The Company operates in a highly competitive market and must attract, motivate and retain high quality directors capable of achieving the Company
The non-executive Board members receive annual remuneration, expertise, time invested and the complexity of the business. Their remuneration is not linked to the Company
The remuneration of the Board is disclosed in the 22-35 of this report. None of the Board members have had any additional assignments for the Company and none of the non-executives participate in any incentive or share option programme.
under UK company law, there is a requirement for quoted companies to treat the Chief Executive Officer, for the purposes of certain remuneration-related requirements, as if that person were a director of that quoted company. As a result, the following sets out the policy in respect of the components of remuneration which the CEO currently receives.
framework outlined below. The Committee is briefed on and considers prevailing market conditions, the competitive environments and the positioning and relativities of pay and employment conditions across the wider Company workforce.
Following each meeting of the Committee, the Chair provides an update to the Board.
Although the Committee does not consult directly with employees on CEO or director remuneration, the Company conducts periodic employee engagement surveys that give employees an opportunity to provide feedback on a wide range of employee matters.
As part when setting the remuneration policy. Feedback from shareholders and investors is shared with, and used as input into decision-making by, the Board and Committee in respect of the remuneration policy and its application. The Committee considers that this approach provides a robust mechanism to ensure its members are aware of matters raised, have a good understanding of current shareholders views, and can determ
The remuneration policy is designed to avoid conflicts of interests between the Company and the interests of shareholders. In setting the remuneration policy, Committee members are subject to provisions designed to avoid or manage conflicts of interest, which are documented policies. None of the directors or CEO makes a decision relating to their own remuneration. Individual directors leave the meeting when their own remuneration is being discussed.
The Company operates in a highly competitive market and must attract, motivate and retain high quality directors and senior executives capable of achieving the Company shareholder value.
A significant proportion of the potential remuneration of the CEO and senior executives is performancerelated with appropriately stretching targets, thus aligning their interests with those of shareholders and encouraging performance at the highest levels.
The Committee has considered whether there are any aspects of the remuneration policy which could inadvertently encourage the executives to take inappropriate risk and has concluded that the policy remains appropriate in this regard.
As referred to above, the Company, in line with market practice, does not actively consult with employees on executive remuneration. The Committee is made aware of overall pay and employment conditions in the wider work force when it sets the executive remuneration policy.
As referred to above, the Committee takes into account the view of the shareholders through open and transparent communication with shareholders. If there are significant changes proposed to the remuneration policy, the Committee will consult with major shareholders.
The table below summarises the remuneration policy for any Executive Directors and the CEO.
| Element | Purpose | Operation | Opportunity | Performance Measure |
|---|---|---|---|---|
| Annual Salary | To attract and retain key individuals and reflect their responsibilities, market value and expected performance level |
Reviewed annually or when a change in responsibility occurs |
There is no maximum salary opportunity |
Not applicable |
| Benefits | To provide a market competitive reward package to the employee |
Benefits to be provided to Executive Directors or the CEO will be determined by the Committee taking into account such factors as it determines to be necessary, with the aim of creating a competitive overall package. The provision of benefits would not be expected to be performance related. |
Car allowance is a fixed annual amount. There is no maximum for health/dental insurance as it will depend on the value of premiums paid in the year |
Not applicable |
| Benefits may include, but are not limited to: |
||||
| Car allowance Private health care Travel and housing allowance Benefits may also be provided to reflect the jurisdiction in which an Executive Director or the CEO is recruited or to which an Executive Director or CEO is relocated for business reasons, including relocation costs, tax equalisation arrangements and arrangements to take into account exchange rates. Benefits may also include participation in any broad-based incentive plan operated by the Company from time to time, up to the relevant limit for participation as applies to such arrangement |
| (continued) | |||
|---|---|---|---|
| -- | -- | -- | ------------- |
| Element | Purpose | Operation | Opportunity | Performance Measure |
|---|---|---|---|---|
| Performance related bonus |
To provide an incentive for superior work and to motivate executives toward even higher achievement and business results, to tie their goals and interests to those of the Company and its shareholders and to enable the Company to attract and retain highly qualified executives |
Bonus payments are determined by the Remuneration Committee and awarded where justified by performance |
The amount of bonus increases with the level of performance achieved, up to a maximum of 100% of salary |
Annual bonuses will be determined by reference to performance, in the normal course measured over one financial year. The performance measures, weightings and targets for the annual bonus will be set by the Committee on an annual basis The Committee shall have discretion to determine the terms and level at which annual bonuses may be granted, including the minimum performance required for an annual bonus to be payable In respect of an Executive Directors' or CEO's participation in annual bonus arrangements in any year, the Committee will have power to amend performance measures and targets after they have been set if events happen that mean they are no longer a fair test of |
| performance |
| Element | Purpose | Operation | Opportunity | Performance Measure |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pension | To provide a market competitive long-term retirement benefit |
Eligibility to participate in a Defined Contribution scheme which has a maximum employer contribution of 12% |
Up to 12% of salary | Not applicable | ||||||||||||
| Long Term Incentive Plan (LTIP) |
To motivate and The Company has Award of up to incentivise executives operated a historic LTIP 100% of salary to achieve key long arrangement for the each calendar year term incentives former CEO with all awards being synthetic share options which are cash-settled In the event that the |
The awards are made at the discretion of the Board of Directors and are not guaranteed to be awarded each year |
||||||||||||||
| Company adopts a new long-term incentive plan (which may involve synthetic share options, cash or actual shares), Executive Directors and the CEO would be eligible to participate in such plan, subject to the terms of, and the maximum levels of participation provided in, the rules of such plan. |
||||||||||||||||
| In respect of any performance-related long-term awards granted to Executive Directors or the CEO, performance measures, weightings and targets would be set by the Committee |
||||||||||||||||
| Following grant of an award, the Committee would have power to amend performance measures and targets if events happen that mean they are no longer a fair test of performance |
||||||||||||||||
| The 2020 25% tranches linked to rig contract dates and expires after five years. |
In considering the appropriate measures to apply to any performance-based awards, the Committee will seek to incentivise and reinforce delivery of the Company's strategic objectives achieving a balance between delivering annual returns to shareholders and ensuring long-term profitability and growth.
The performance targets set would be stretching and achievable, taking into account the Company's strategic priorities and the economic environment in which the Company operates.
policies and practices are founded on a high degree of alignment and consistency across the organisation. Accordingly, remuneration for senior management is determined taking into account the remuneration principles that apply to the CEO, and similar principles also form the basis of the remuneration arrangements for the wider workforce.
The approach to salary reviews is consistent across the Company, with consideration given to the scope of the role, responsibility, individual performance and pay levels in the selected peer group. Retirement benefits, typically in the form of a pension, are provided based on local market practice. Other benefits provided to the wider employee population reflect local market practice and legislative requirements.
A high proportion of the wider employee population are eligible to participate in annual bonus arrangements. Opportunities and metrics which apply to these arrangements may vary by organisational level with functional performance indicators incorporated where appropriate.
Senior managers are eligible to participate in the LTIP, with opportunities varying across levels with the most senior managers having a bigger portion of their pay delivered under the LTIP.
The key difference between remuneration for the CEO and any executive director and the wider employee population is the increased emphasis on long-term performance in respect of the CEO and executive directors, with a greater percentage of their total remuneration being performance-related.
The Committee is regularly updated on the pay principles and practices in operation across the Company, in order to take these into account in setting the remuneration policy.
In addition to the above, the Company is obliged to honour any contractual entitlement to compensation or benefits, and any incentive awards, which are held by: (i) any current or former Executive Director or CEO on the effective date of this policy; or (ii) an employee or officer of the Group on the date they are promoted to the role of Executive Director or CEO. Appropriate disclosure will be made of any compensation paid (or similar) to an Executive Director or CEO pursuant to any such arrangements.
The Company may reimburse all reasonable expenses incurred by an Executive Director or CEO in connection with their role. This will include expenses in attending Board or Board-committee meetings, or the Company may alternatively provide a travel allowance for such purpose. This may also include items which, for tax purposes, are treated as a taxable benefit, and in which case the Company may also pay any such tax on behalf of the Executive Director or CEO.
In recruiting an Executive Director or CEO, including on promotion of an employee or officer from within the Group to the role of Executive Director or CEO, the Committee will offer the recruit a remuneration package that it believes is appropriate, taking into account the skills and experience of the individual and the need to recruit, retain and motivate individuals of the appropriate calibre. The remuneration package offered may include the components of remuneration described above in the Remuneration Policy Table.
For external hires, the Committee may determine that it would be appropriate to buy-out any existing incentive awards held by the individual that are forfeited as a result of the individual leaving their former employer. The Committee may also determine that it would be appropriate to grant recruitment-related awards. In the case of any buy-out of an equity based award, or the grant of any recruitment-related award, the award would normally be subject to such vesting and/or performance conditions as the Committee determines to be appropriate, either under a oneincentive arrangements. In determining the terms of such awards, the Committee will take account of the vesting schedule and conditions attached to the forfeited awards (in the case of buy-out awards), but also other factors that it determines to be relevant, including the need to incentivise suitably and retain the individual during the initial years of their office.
The maximum level of variable remuneration (excluding any buy-out awards) that may be granted to any new Executive Director or CEO is 250% per annum of their salary.
The employment contract of the CEO is not of a fixed duration and therefore has no unexpired terms.
The notice period of the CEO's contract of employment is six months with the same notice period for the Company. The CEO's employment can be terminated in the six-month probationary period without notice in the case of wilful misconduct or gross negligence.
In the event of termination by the Company, where there is no basis for dismissal as a result of gross breach of duty or other material breach of the employment contract by the CEO, or as a result of mutual agreement, the CEO shall be entitled to twelve months' severance pay.
In the event of a change of control of the Company, the CEO can terminate the employment contract and would be entitled to twelve months' severance pay.
red office during normal hours of business.
The non-executive directors do not have service contracts but instead have letters of appointment.
benefits will be determined in accordance with his service contract.
ation in any annual bonus or long-term incentive plans will be governed by the terms of such arrangements.
The treatment of incentive awards in the event of a corporate action affecting the Company will be determined in accordance with the terms of such awards.
The Company may agree to pay reasonable legal fees on behalf of an Executive Director or CEO in respect of the effect of any corporate action on their personal position.
The Company may enter into new contractual arrangements with a departing Executive Director or CEO in connection with the cessation of office or employment, including (but not limited to) in respect of settlement of claims, confidentiality, restrictive covenants and/or consultancy arrangements, where the Committee determines it necessary or appropriate to do so. The Company may pay reasonable legal fees on behalf of an Executive Director or CEO in connection with their cessation of office and employment. The Company may agree to provide other ancillary or non-material benefits, payments or similar to a departing Executive Director or CEO.
The graph below shows how the total pay opportunities for the CEO vary under four performance scenarios. These have been prepared on the assumptions detailed below.
Below target = fixed pay only (base salary, benefits and pension) On target = 50% payable of annual bonus, 0% LTIP award Maximum = 100% payable of annual bonus, 100% LTIP award Maximum 2 = 100% payable of annual bonus, 100% LTIP award and 50% share price increase over the performance period
The chart illustrates the potential rewards available under the remuneration policy on an annualised basis for the financial year 2020. The values (other than the Maximum 2 illustration) assume a constant share price and do not take into account dividend adjustments that may be received on the share awards. The potential awards available for "on-target" performance under the annual bonus and LTIP are provided for illustration only and do not reflect formal policy decisions that these amounts will be received. Maximum 2 illustration assumes a share price increase of 50% over the performance period but in all other respects is the same as the Maximum illustration. The figures used in the chart are provided for illustration only based on a theoretical grant over 100% of salary, being the maximum permitted under the policy table.
The salary level (on which the bonus and LTIP elements of the package are calculated) are based on current salary level of GBP 325,000 based on the GBP/NOK year end exchange rate.
The remuneration policy for non-executive directors is set out in the table below. No non-executive
| Component | Purpose | Operation |
|---|---|---|
| Fees | The basic fee is a fixed annual fee agreed after taking external advice and making market comparisons, and relate to the service of the business. The additional fees payable to the Chairman and members of the Board Committees reflects the additional time commitment in preparing and attending additional meetings. |
The fees for non-executive directors (including the Chairman) are reviewed annually and approved in aggregate at the annual general meeting. The current level of fees is detailed below. |
The same principles as described above will be applied in setting the remuneration of a new non-executive director. Remuneration will comprise fees only and be paid in accordance with the prevailing rate at the time of the appointment. No variable remuneration will be paid and there will be no compensation for any loss of remuneration in a previous employment.
The Non-executive Directors registered office during normal hours of business.
In addition to the above, the Company is entitled to honour any contractual entitlement to compensation or benefits, and any incentive awards, which are held by any current or former Non-Executive Director on the effective date of this policy. Appropriate disclosure will be made of any compensation paid (or similar) to a Non-Executive Director pursuant to any such arrangements.
The Company may reimburse all reasonable expenses incurred by a Non-Executive Director in connection with their role. This will include expenses in attending Board or Board-committee meetings, or the Company may alternatively provide a travel allowance for such purpose. This may also include items which, for tax purposes, are treated as a taxable benefit, and in which case the Company may also pay any such tax on behalf of the Non-Executive Director.
The current level of fees paid for 2019 and those proposed for 2020 are as follows:
| 2020 | 2019 | |
|---|---|---|
| GBP | GBP | |
| Chairman | 46,375 | 46,375 |
| Basic Fee | 33,125 | 33,125 |
| Chair of Audit Committee | 5,000 | 5,000 |
| Member of Audit, Remuneration or Nomination Committee | 3,000 | 3,000 |
Fees to be paid in respect of 2020 will be decided at the next AGM which is scheduled for 9 June 2021.
All directors were required, under the Articles of Association of the Company, to retire at the first AGM. At each subsequent AGM, any directors who have been appointed by ordinary resolution or by the directors since the last AGM or who were not appointed or reappointed at one of the preceding two AGMs must retire from office and may offer themselves for reappointment by the members. After recommendation by the Nomination Committee, all directors were re-appointed at the AGM on 13th June 2019.
Single total figure of remuneration table
| 2020 | Basic Salary and Fees |
Benefits (2) |
Pension related benefits (3) |
Total Fixed Remuneration |
Performance Related bonus |
Other (4) | Total Variable Remuneration |
|---|---|---|---|---|---|---|---|
| GBP | GBP | GBP | GBP | GBP | GBP | GBP | |
| Chief Executive Officer: |
|||||||
| J E O Berge (6) | 325,000 | 15,789 | 39,552 | 380,341 | - | - | |
| 325,000 | 15,789 | 39,552 | 380,341 | - | - | ||
| Non-executive Directors: |
|||||||
| S E Thorvildsen | 49,375 | - | - | 49,375 | - | - | - |
| H Fougner | 39,125 | - | - | 39,125 | - | - | - |
| D A Gold | 36,125 | - | - | 36,125 | - | - | - |
| J N Simpson | 38,125 | - | - | 38,125 | - | - | - |
| S Syrrist | 33,125 | - | - | 33,125 | - | - | - |
| 195,875 | - | - | 195,875 | - | - | - |
| 2019 | Basic Salary and Fees |
Benefits (2) |
Pension related benefits (3) |
Total Fixed Remuneration |
Performance Related bonus |
Other (4) | Total Variable Remuneration |
|---|---|---|---|---|---|---|---|
| GBP | GBP | GBP | GBP | GBP | GBP | GBP | |
| Executive Director: |
|||||||
| J O S Bryce (1) | 66,250 | 2,845 | 5,963 | 75,058 | - | 644,150 | 644,150 |
| Non-executive Directors: |
|||||||
| S E Thorvildsen | 49,375 | - | - | 49,375 | - | - | - |
| H Fougner | 39,125 | - | - | 39,125 | - | - | - |
| D A Gold | 36,125 | - | - | 36,125 | - | - | - |
| J N Simpson | 38,125 | - | - | 38,125 | - | - | - |
| S Syrrist | 33,125 | - | - | 33,125 | - | - | - |
| 262,125 | 2,845 | 5,963 | 270,933 | - | 644,150 | 644,150 | |
| Officer: | |||||||
|---|---|---|---|---|---|---|---|
| J E O Berge (5) | 218,150 | 10,387 | 26,554 | 255,091 | 162,500 | - | 162,500 |
| 218,150 | 10,387 | 26,554 | 255,091 | 162,500 | -- | 162,500 | |
(1) Resigned 18 March 2019
(2) Includes non-cash benefits comprising car allowance and private health and dental care
(3) Contributions made during the year to the defined contribution scheme
(4) Cash-settled value of synthetic share options exercised during the year
(5) Appointed 1 May 2019, does not hold position of Executive Director
(6) Resigned 1 February 2021
The Chief Executive Officer Executive Director received the following taxable benefits:
| 2020 | 2019 | |
|---|---|---|
| GBP | GBP | |
| J O S Bryce | ||
| Car allowance | - | 2,500 |
| Private health insurance | - | 345 |
| Total | - | 2,845 |
The Chief Executive Officer received the following taxable benefits:
| 2020 | 2019 |
|---|---|
| GBP | GBP |
| 15,789 | 10,387 |
| 15,789 | 10,387 |
For the year under review, there was no bonus awarded to the Chief Executive Officer.
The criteria for the 2021 bonus has yet to be finalised by the Remuneration Committee but is expected to follow a similar format to the current year metrics, subject to challenging strategic targets. The precise weightings are considered by the Company to be commercially sensitive so are not specified in detail. The areas that have been considered were company performance and also performance improvement from the the current market conditions.
A long term incentive plan for the CEO and other key management personnel, with a total limit of up to 4% awards for the years 2010, 2012, 2014 and 2015 are now fully exercised. There are still outstanding amounts under the 2016 plans. A further award was issued in 2020, with a total limit of up to 4,000,000 shares at the general meeting on 11 November 2019.
The 2016 four years and the exercise period is five years subject to the employee remaining employed by the Company
| Market | Market | |||||||
|---|---|---|---|---|---|---|---|---|
| Shares | Shares | Shares | price | price | ||||
| At 1 | Granted | Shares | At 31 | on | Interest | on | ||
| January | in the | Exercised/Adjusted | December | Expiry | date of | vested | vesting | |
| 2020 | year | in the year | 2020 | date | award | in 2020 | date | |
| No. | No. | No. | No. | NOK | No. | NOK | ||
| J E O | - | 1,200,000 | (600,000) | 600,000 | 31 Dec | 14.30 | - | - |
| Berge | 2025 |
There are no other directors who have any interests in shares.
The graph below shows the relative importance of the spend on pay (for all employees) compared with the returns distributed to shareholders (Note no dividends paid in 2019 or 2020).
The graph below shows the total shareholder return in terms of change in value of an initial investment of £100 on 10 June 2011 (and assuming dividends are rethe corresponding total shareholder return in a hypothetical holding of shares in the OBX (an index on the Oslo Bors stock exchange). This was selected as it represents a broad equity market index in which the Company is a constituent member. The graph is a reporting requirement, however, the LTIP awards that are made to the Executive Director are not based on share performance.
Five-year comparison
The table below summarises the Chief Executive Officer single total figure of remuneration, annual and long-term variable performance-related remuneration (and the percentage of the maximum opportunity that these represent) in relation to the past five years.
| Year | Chief Executive Officer |
Single total figure of remuneration |
Annual variable element (actual award versus opportunity) |
|
|---|---|---|---|---|
| GBP | GBP | % | ||
| 2020 | J E O Berge | 380,341 | - | - |
| 2019 | J E O Berge (1) (3) | 417,591 | 162,500 | 50% |
| 2019 | J O S Bryce (2) | 719,207 | - | 0% |
| 2018 | J O S Bryce | 383,030 | 82,800 | 31% |
| 2017 | J O S Bryce | 350,062 | 50,000 | 19% |
| 2016 | J O S Bryce | 647,750 | 78,440 | 30% |
(1) Appointed 1 May 2019
(2) Resigned 18 March 2019
(3) Resigned 1 February 2021
| 2020 | 2019 | Change % |
Employee remuneration change |
|
|---|---|---|---|---|
| GBP | GBP | |||
| Salary and fees | 325,000 | 325,000 | - | - |
| Taxable benefits | 15,789 | 15,475 | 2% | 2% |
| Annual variable performance related | - | 162,500 | (100)% | (20)% |
| remuneration | ||||
| Total Annual figure | 380,341 | 502,975 | ||
| Single total figure of remuneration | 380,341 | 417,591 |
The above table shows the movement in remuneration for the Chief Executive Officer between the current and previous financial year compared with movement of the average remuneration (per head) for all Company employees.
| 2020 | 2019 | 2018 | 2017 | 2016 | |
|---|---|---|---|---|---|
| Change | Change | Change | Change | Change | |
| % | % | % | % | % | |
| S E Thorvildsen | 0% | 0% | 0% | 0% | 0% |
| H Fougner | 0% | 0% | 0% | 0% | 0% |
| D A Gold | 0% | 0% | 0% | 0% | 0% |
| J N Simpson | 0% | 0% | 0% | 0% | 0% |
| S Syrrist | 0% | 0% | 0% | 0% | 0% |
| Employees | 0% | 2% | 0% | 0% | 0% |
The above table shows the movement in remuneration for the Directors for the past five years compared with the average movement in remuneration (per head) for all Company employees.
| Total number of votes | % of votes cast | |
|---|---|---|
| 'or | 25, 267, 887 | 100.0% |
| otal votes cast | 25, 267, 887 | 100.0% |
| Group | Parent company |
|---|---|
| Consolidated balance sheet as at 31 December 2020 | Balance sheet as at 31 December 2020 |
| Consolidated income statement for the year then ended 31 | Statement of changes in equity for the year |
| December 2020 | then ended 31 December 2020 |
| Consolidated statement of comprehensive income for the | Statement of cash flows for the year then |
| year then ended 31 December 2020 | ended 31 December 2020 |
| Consolidated statement of changes in equity for the year then ended 31 December 2020 |
Related notes 1 to 29 to the financial statements including a summary of |
| significant accounting policies | |
| Consolidated statement of cash flows for the year then ended | |
| 31 December 2020 | |
| Related notes 1 to 29 to the financial statements, including a | |
| summary of significant accounting policies |
The financial reporting framework that has been applied in their preparation is applicable law and International Accounting Standards in conformity with the requirements of the Companies Act 2006 and, as regards to the parent company financial statements, as applied in accordance with section 408 of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements
ulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We draw attention to note 2 in the financial statements, which indicates that the conditions identified
As stated in note 2, these events or conditions, indicate that material uncertainties exist that may cast modified in respect of this matter.
In auditing the financial stat dopt the going concern basis of accounting included:
accounting. To challenge the completeness of this assessment, we have independently identified ability to continue as a going concern. Events or conditions were identified and we have designed our aud continue as a going concern.
(continued)
We reviewed industry reports and market data for indicators of contradictory evidence to challenge the going concern assessment.
We performed reverse stress testing on the forecasts to understand how severe the downside scenarios would have to be to result in the elimination of liquidity headroom;
statements, sufficiently and appropriately capture the impacts of Covid-19 on the going concern assessment and through consideration of relevant disclosure standards.
| Audit scope | We performed an audit of the complete financial information of four components and audit procedures on specific balances for a further two components. |
|---|---|
| The components where we performed full or specific audit procedures accounted for 100% of Loss before tax, 100% of Revenue and 100% of Total assets. |
|
| Key audit matters |
Impairment of the drilling rigs |
| Materiality | Overall group materiality of \$950k which represents 1% of Equity. |
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the business environment and other factors when assessing the level of work to be performed at each entity.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the six reporting components of the Group, we selected six components covering entities within Norway. Singapore and the United Kingdom, which represent the principal business units within the Group.
Of the six components selected, we performed an audit of the complete financial information of four s accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 100% (2019: 92%) of the
| Full scope components | Specific scope components | |||
|---|---|---|---|---|
| Financial year | 2020 | 2019 | 2020 | 2019 |
| 29% | 92% | 71% | 0% | |
| 100% | 100% | 0% | 0% | |
| 95% | 85% | 5% | 15% |
We have classified four entities as full scope and two as specific scope in the current year, compared to three entities as full scope in the prior year. This is due to additional costs within the group as a result of the down manning of the Norwegian office.
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the material uncertainties related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.
| Under IAS 36, the group is required to assess annually whether any impairment indicators exist at the year-end and if such conditions exist, an impairment assessment is required. Lack of future work for the operational rig, coupled with the fact one semi-submersible drilling rig (WilHunter) remains un-utilised (no change to the with the cancellation of the construction contracts for the rigs previously under construction are considered indicators of a likely impairment. Given the estimates and judgements involved in the impairment assessment, there is a risk of improper valuation of the semi-submersible drilling rigs. |
impairment assessment by verifying the methodology and assumptions, along with the value in use and suitability of sensitivities considered by management within, specifically: We have confirmed the mathematical accuracy of the impairment model; Future contract day rates - we have compared forecasted day rates to historic day rates and industry trends, reviewing industry reports for potential contradictory evidence; Rig Utilisation we have compared forecast rig utilisations to historic performance of the group and current market trends, reviewing industry reports for potential contradictory evidence to confirm reasonableness of assumptions; Long term growth rate we compared the forecast contracted daily rates applied by management to available external rates; We challenged the assumptions forming the basis of the cashflow. This included reviewing industry reports on forecast rates; We have performed sensitivities over the assumptions used by management; Discount rates we involved our valuations |
The assessment is impacted by several factors and is sensitive to both future operating activities and discount rates. In our view the day rates used by management are within reasonable ranges. Following the \$10m impairment charge (to WilHunter), we consider the carrying value of nil of the semi-submersible drilling rig to be reasonable and that appropriate disclosures are made in the financial statements. Following the \$23m impairment charge (to WilPhoenix), we consider the carrying value of the semi-submersible drilling rig to be reasonable and that appropriate disclosures are made in the financial statements. |
|---|---|---|
| specialists in our | |
|---|---|
| evaluation of the | |
| discount rate to consider | |
| the appropriateness of | |
| the rates used. Our | |
| specialists performed a | |
| review of the | |
| methodology along with | |
| testing the inputs to the | |
| weighted average cost | |
| of capital to external | |
| sources including peer | |
| data. We assessed the | |
| discount rate used in the | |
| impairments model | |
| resulting in an increased | |
| rate being used in the | |
| final calculations; | |
| Operating costs the |
|
| forecast operating costs | |
| are in line with audited | |
| current and prior year | |
| expenditure; | |
| For the assets | |
| previously held under | |
| construction we have | |
| obtained copies of | |
| cancellation letters to | |
| the construction | |
| company; | |
| We have tested the | |
| calculation provided by | |
| management and agree | |
| it has been recorded | |
| correctly; and | |
| We have confirmed that | |
| the appropriate | |
| disclosures have been | |
| made in the | |
| consolidated financial | |
| statements. | |
| All procedures were | |
| performed by the Group | |
| team. | |
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be \$950k (2019: \$2.0m), which was 1% of Equity (2019: 1% of Assets). During 2020 and 2019 there was a significant reduction in profitability due to reduced activity levels, resulting in losses for both years. Equity was considered a more appropriate materiality basis given the challenges faced by the group.
We determined materiality for the Parent Company to be \$3.3m (2019: \$4.4m), which is 3% of Equity (2019: 2%).
During the course of our audit, we reassessed initial materiality and reduced it due to the challenges faced by the group.
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
environment, our judgement was that performance materiality was 75% (2019: 75%) of our planning materiality, namely \$710k (2019: \$1.5m). We have set performance materiality at this percentage based on the history of past misstatements and lack thereof, our ability to access the likelihood of misstatements and the effectiveness of the internal control environment.
The performance materiality set for each component is based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to components was \$98k to \$700k (2019: \$30k to \$991k).
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of \$40k (2019: \$100k), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.
The other information comprises the information included in the annual report set out on pages 2 to 35, other than the financial statements a information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
page 14, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent tters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
A further description of our responsibilities for the audit of the financial statements is located on the forms part of our auditor
members those matters we are required to state to the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the opinions we have formed.
Jamie Dixon (Senior Statutory Auditor) For and on behalf of Ernst & Young LLP (Statutory Auditor) Aberdeen 28 April 2021
Notes:
for the year ended 31 December 2020
| 2020 | 2019 | ||
|---|---|---|---|
| Notes | US\$000 | US\$000 | |
| Revenue | 5 | 25,602 | 38,136 |
| Cost of sales | (33,460) | (36,365) | |
| Impairment | 15, 22 | (145,171) | (23,000) |
| Gross Loss | (153,029) | (21,229) | |
| General and administrative expenses | (14,887) | (9,153) | |
| Operating Loss | 6 | (167,916) | (30,382) |
| Finance income | 9 | 386 | 948 |
| Finance expense | 10 | (35) | (14) |
| Other expense | - | (152) | |
| Net (loss)/gain on foreign exchange transactions | 11 | (131) | (385) |
| Loss on forward contracts at fair value through profit and loss | 28 | - | (180) |
| Loss before taxation | (167,696) | (30,165) | |
| Income tax expense | 12 | (161) | (427) |
| Loss for the year attributable to equity shareholders | (167,857) | (30,592) | |
| There is no comprehensive income other than the results for the year. | |||
| Basic and diluted loss per share (US\$ per share) | 13 | (3.08) | (0.57) |
Total comprehensive income for the year is attributable to the owners of the Company, as there is no minority interest.
| 2020 | 2019 | ||
|---|---|---|---|
| Notes | US\$000 | US\$000 | |
| Non-current assets | |||
| Property, plant and equipment | 15 | 66,800 | 201,918 |
| Right-of-use asset | 22 | 1,096 | 1,417 |
| Deferred tax asset | 12 | 16 | 108 |
| 67,912 | 203,443 | ||
| Current assets | |||
| Inventory | 3,026 | 4,946 | |
| Trade and other receivables | 18 | 6,411 | 9,724 |
| Cash and cash equivalents | 19 | 14,738 | 41,249 |
| 24,175 | 55,919 | ||
| Total assets | 92,087 | 259,362 | |
| Current liabilities | |||
| Trade and other payables | 20 | 6,294 | 7,240 |
| Provisions | 21 | 1,573 | |
| Current tax payable | 66 | 71 | |
| 7,933 | 7,311 | ||
| Non-current liabilities | |||
| Trade and other payables | 20 | 1,026 | 1,066 |
| 1,026 | 1,066 | ||
| Total liabilities | 8,959 | 8,377 | |
| Net Assets | 83,128 | 250,985 | |
| Shareholders' Equity | |||
| Called up share capital | 24 | 525 | 525 |
| Share premium account | 24 | 218,381 | 218,381 |
| Retained (deficit) / earnings | (135, 778) | 32,079 | |
| Total Shareholders' equity | 83,128 | 250,985 | |
| 2020 | 2019 | ||
|---|---|---|---|
| Notes | US\$000 | US\$000 | |
| Non-current assets | |||
| Property, plant and equipment | 15 | 489 | 560 |
| Right of use assets | 22 | 1,096 | 1,417 |
| Investment in subsidiaries | 17 | 279 | 279 |
| Amount due from subsidiary undertakings | 25 | 92,728 | 174,101 |
| Deferred tax | 16 | 108 | |
| 94,608 | 176,465 | ||
| Current assets | |||
| Trade and other receivables | 18 | 3,830 | 9,313 |
| Cash and cash equivalents | 19 | 13,961 | 41,203 |
| 17,791 | 50,516 | ||
| Total assets | 112,399 | 226,981 | |
| Current liabilities | |||
| Trade and other payables | 20 | 3,414 | 3,642 |
| Non-current liabilities | |||
| Trade and other payables | 20 | 748 | 1,066 |
| Total liabilities | 4,162 | 4,708 | |
| Net assets | 108,237 | 222,273 | |
| Shareholders' Equity | |||
| Called up share capital | 24 | 525 | 525 |
| Share premium account | 24 | 218,381 | 218,381 |
| Retained (deficit) / earnings | (110, 669) | 3,367 | |
| Total Shareholders' equity | 108,237 | 222,273 |
| Called Up Share Capital US\$000 |
Share Premium account US\$000 |
Retained Earnings/(deficit) US\$000 |
Total shareholders equity US\$000 |
|
|---|---|---|---|---|
| At 1 January 2019 | 477 | 198,242 | 62,671 | 261,390 |
| Equity issue as at 13 March 2019 | 48 | 20,547 | - | 20,595 |
| Equity issue costs as at 13 March 2019 | - | (408) | - | (408) |
| Total comprehensive loss for the year | - | - | (30,592) | (30,592) |
| At 31 December 2019 | 525 | 218,381 | 32,079 | 250,985 |
| Total comprehensive loss for the year | - | - | (167,857) | (167,857) |
| At 31 December 2020 | 525 | 218,381 | (135,778) | 83,128 |
| Called Up Share capital US\$000 |
Share Premium account US\$000 |
Retained Earnings/(deficit) US\$000 |
Total shareholders equity US\$000 |
|
|---|---|---|---|---|
| At 1 January 2019 | 477 | 198,242 | (5,445) | 193,274 |
| Equity issue as at 13 March 2019 | 48 | 20,547 | - | 20,595 |
| Equity issue costs as at 13 March 2019 | - | (408) | - | (408) |
| Total comprehensive profit for the year | 8,812 | 8,812 | ||
| At 31 December 2019 | 525 | 218,381 | 3,367 | 222,273 |
| Total comprehensive loss for the year | - | - | (114,037) | (114,037) |
| At 31 December 2020 | 525 | 218,381 | (110,669) | 108,237 |
| 2020 | 2019 | ||
|---|---|---|---|
| Notes | US\$000 | US\$000 | |
| Operating activities | |||
| Loss before taxation | (167,696) | (30,165) | |
| Adjustments to reconcile profit before tax to net cash flows: | |||
| Depreciation | 10,302 | 11,586 | |
| Impairment | 16 | 145,171 | 23,000 |
| Net finance (income)/expense | (351) | (934) | |
| Share-based payment | (532) | (2,112) | |
| Working capital adjustments: | |||
| Decrease in trade receivables | 5,385 | 167 | |
| Decrease / (increase) in inventory | 1,920 | (138) | |
| (Increase) / decrease in prepayments and other receivables | (2,058) | 2,046 | |
| Increase/(decrease) in trade and other payables | 878 | 2,295 | |
| Interest paid | 10 | (35) | (14) |
| Interest received | 9 | 386 | 949 |
| Taxation paid | (74) | (70) | |
| Taxation refunded | - | 340 | |
| Net cash flows (used in)/generated from operating activities |
(6,704) | 6,950 | |
| Investing activities | |||
| Purchase of property, plant and equipment | 15 | (19,316) | (49,421) |
| Disposal of property, plant and equipment | 29 | - | |
| Net cash flow used in investing activities | (19,287) | (49,421) | |
| Financing activities | |||
| Proceeds from issue of share capital | - | 20,595 | |
| Equity issue costs | - | (408) | |
| Payment of principal portion of lease liabilities | 22 | (520) | (332) |
| Net cash flows generated (used in)/from financing activities |
(520) | 19,855 | |
| Net decrease in cash and cash equivalents | (26,380) | (22,231) | |
| Net foreign exchange difference | 11 | (131) | (385) |
| Cash and cash equivalents at beginning of year | 41,249 | 63,865 | |
| Cash and cash equivalents at end of year | 19 | 14,738 | 41,249 |
| 2020 | 2019 | ||
|---|---|---|---|
| Notes | US\$000 | US\$000 | |
| Operating activities | |||
| (Loss)/profit before taxation | (113,945) | 9,166 | |
| Adjustments to reconcile (loss)/profit before tax to net cash flows: | |||
| Depreciation | 384 | 381 | |
| Net finance (income)/expense | (357) | (934) | |
| Share based payment | (532) | (2,112) | |
| Working capital adjustments: | |||
| Decrease in prepayments | 110 | 52 | |
| Decrease / (increase) in trade and subsidiary receivables | 86,760 | (50,016) | |
| Increase/(decrease) in trade and other payables | 312 | 346 | |
| Interest paid | (27) | (14) | |
| Interest received | 385 | 948 | |
| Taxation refunded | - | 340 | |
| Net cash flows used in operating activities | (26,910) | (41,843) | |
| Investing activities | |||
| Purchase of property, plant and equipment | (21) | (116) | |
| Disposal of property, plant and equipment | 29 | - | |
| Net cash flows generated from /(used in) investing activities | 8 | (116) | |
| Financing activities | |||
| Proceeds from issue of share capital | - | 20,595 | |
| Equity issue costs | - | (408) | |
| Payment of principal portion of lease liabilities | (340) | (332) | |
| Net cash flows generated from/(used in) financing activities | (340) | 19,855 | |
| Net increase/(decrease) in cash and cash equivalents | (27,242) | (22,104) | |
| Cash and cash equivalents at beginning of year | 41,203 | 63,307 | |
| Cash and cash equivalents at end of year | 13,961 | 41,203 |
At 31 December 2020
The Group and Company financial statements of Awilco Drilling PLC for the year ended 31 December 2020 were authorised for issue by the Board of Directors on 28 April 2021. The Company is incorporated in the United Kingdom under the Companies Act 2006 and listed on the Oslo Bors stock exchange. The address of the registered office is given on page 1. The principal place of the business is 2 Kingshill Park, Westhill, Aberdeenshire, AB32 6FL. The nature of the G activities are set out in the Strategic report.
The financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board in conformity with the requirements of the Companies Act as they apply to the financial statements of the Group and Company for the year ended 31 December 2020 and prepared in accordance with the provisions of the Companies Act 2006.
The Group financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies and prepared on a historical cost basis. The Group has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Company income statement. The loss recorded by the Company for the year was US\$ 114.0 million (2019: US\$8.8 million profit).
At 31 December 2020 the Group had cash on hand of US\$ 14.7 million and no debt. Management has prepared cash flow forecasts covering a period until 30 June 2022 in order to assess whether the Group and ability to continue as a going concern and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business. The following material uncertainties have been identified:
At 31 December 2020
There is uncertainty in relation to the possible crystallisation of a contingent taxation liability relating to a subsidiary company (Note 23). In the event that this contingency were to crystallise, and become payable, additional financing would be required in order to settle the liability. The initial tax appeal tribunal is scheduled for June 2021 and should the subsidiary company be unsuccessful in the initial appeal, the right of further appeal would remain available.
Based on their assessment of risks and financing options, the Directors believe there is a reasonable prospect of the Company and the Group continuing as a going concern for the period to 30 June 2022. However, the above listed material uncertainties may continue as a going concern. The financial statements do not contain adjustments that would result if the Group and Company were unable to continue as a going concern.
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year, are discussed below.
is any indication of impairment, or more frequently if events or changes in circumstances indicate they might and operations, expected utilisation, contract rates, operating expenses and capital requirements of the rigs. See note 15 and 16 for further information on carrying amounts and sensitivity analysis.
As detailed in Note 23, there are two items that are considered as contingent liabilities. The first is in connection with an ongoing tax tribunal with HMRC and the second in connection with claims that have been submitted by Keppel FELS shipyard in respect of amounts it considers recoverable due to termination provisions in the contracts for Nordic Winter and Nordic Spring. The Group has applied judgement in evaluating them as contingent liabilities only and no provision for either has been made.
There were various standards effective for annual periods beginning on or after 1 January 2020 however none had any impact on these financial statements. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
The following standards and amendments and interpretations to existing standards have been published and 21 or later periods, but the Group has not early adopted them:
It is not anticipated that the application of these standards and amendments will have any material impact on t .
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the statement of cash flows, cash and cash equivalents are as defined above and net of outstanding bank overdrafts.
Rigs and equipment are stated at cost less depreciation and impairment losses. The cost of an asset comprises its purchase price and directly attributable cost of bringing the asset to its working condition. When it can be clearly demonstrated that subsequent expenditures have resulted in an increase in future economic benefits expected to be obtained from the use of the assets beyond their originally assessed standard of performance, the expenditure is capitalised as an additional cost of the asset. A component of an asset with a cost that is significant in relation to the total cost of the asset is depreciated separately. Components with a similar depreciation method and useful life are grouped together.
Depreciation is calculated using the straight-line method for each asset, after taking into account the estimated residual value, over its expected useful lives as follows:
| Semi-submersible drilling rigs | 20 years |
|---|---|
| Special purpose surveys | 5 years |
| Other fixtures and equipment | 3-5 years |
Special purpose surveys are a five-yearly thorough inspection and recertification of the hull and main machinery components of the rig, which also include class and flag state renewal and verification. The carrying values of plant and equipment are reviewed for impairment if carrying value may not be recoverable, and are written down immediately to their recoverable amount.
Useful lives and residual values are reviewed annually and where adjustments are required, these are made prospectively. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset is included in the statement of comprehensive income in the period of derecognition.
Assets under construction are costs directly associated with constructing an asset. While the asset is being constructed, no depreciation is applied. Once an asset is ready for use, all associated costs are transferred to the relevant asset category and depreciated accordingly.
Inventories of drilling equipment and spares for future integrated drilling service wells are stated at the lower of cost incurred and net realisable value. These inventory items include spare parts and supplies relating to the operation of the semi-submersible drilling rigs.
Revenue derived from charter-hire contracts or other service contracts is recognised in the period that services are rendered at rates established in the relevant contracts. Certain contracts include mobilisation fees payable at the start of the contract. In cases where the fee covers a general upgrade of a rig or equipment which increases the value of the rig or equipment beyond the contract period, the fee is recognised as revenue over the firm contract period whereas the investment is depreciated over the remaining lifetime of the asset.
In cases where the fee covers specific upgrades or equipment specific to the contract, the mobilisation fees are recognised as revenue over the firm contract period.
Cost of sales includes rig operating costs and the depreciation cost for the two rigs.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the statement of comprehensive income.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Items included in the financial statements of each of the G Group financial statements are presented in US\$, which is the and all values are rounded to the nearest thousand dollars (US\$000) except when otherwise indicated.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in the statement of comprehensive income. The principal foreign currencies used by the Group are Pounds Sterling (£ or GBP (NOK).
Basic earnings/(loss) per share amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings/(loss) per share amounts are calculated by dividing the net profit by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
Effective 1 January 2019, the Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets.
For all other leases, the Group recognises lease liabilities representing lease payments and right-of-use assets representing the right to use the underlying assets.
The Group recognises right-of-use assets at the commencement date of the lease and are measured at cost, less any accumulated depreciation and impairment losses, adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct cost incurred, and lease payments made at or before the commencement date less any incentives received. Right of use assets are depreciated on a straight-line basis over the remaining lease term.
At the commencement date of the lease, the Group recognises lease liabilities at the present value of lease payments to be made over the lease term, using the interest rate implicit to the lease, and if not readily determinable, at the incremental borrowing rate.
The lease liabilities are included in trade and other payables in Note 20.
Financial assets are recognised when the Group becomes party to the contracts that give rise to them and are classified as financial assets at fair value through profit or loss, amortised cost, or fair value through other comprehensive income as appropriate. The Group determines the classification of its financial assets at initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. When financial assets are recognised initially, they are measured at fair value, being the transaction price plus, in the case of financial asset not at fair value through profit or loss, directly attributable transaction costs.
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:
When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred of the asset, the asset is recognised to the extent of the Company continuing involvement in the asset. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Further disclosures relating to impairment of financial assets are also provided in Note 18.
The Group recognises an allowance for expected credit loss (ECL) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.
Trade receivables and amounts due from subsidiary undertakings, which generally have 60-day terms, are recognised and subsequently carried at the original invoiced value net of expected credit loss. Where the time value of money is material, receivables are carried at amortised cost.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.
The Group uses derivative financial instruments, such as forward currency contracts, to hedge certain foreign currency risks. The derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value at the reporting date. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The Group does not designate any derivative financial instruments as hedges nor apply hedge accounting. Any gains or losses arising from changes in the fair value of derivatives are taken to the statement of comprehensive income.
The cost of cash-settled transactions is measured initially at fair value at the grant date using a Black-Scholes model, further details are given in Note 26. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognised in statement of comprehensive income for the period.
The pension plan in place is a defined contribution plan. Pension contributions are charged to the statement of comprehensive income as an expense in the period to which the contributions relate. Once the contributions have been paid, there are no further payment obligations.
Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as a deduction in reporting of the related expense, on a systematic basis over the periods that the related costs for which it is intended to compensate are expensed.
Revenue represents the invoiced amount of services provided after the deduction of rebates and retrospective discounts. All items are stated net of value added tax.
The Group only has one segment providing drilling services in the UK. As a result, no further segmental information has been provided.
Annual revenue from two major customer amounted to US\$ 14 million and US\$ 11 million arising from the provision of drilling services (2019: US\$ 38 million from one major customer).
This is stated after charging
| 2020 | 2019 | ||
|---|---|---|---|
| US\$000 | US\$000 | ||
| Depreciation (Note 15, 22) | 10,307 | 11,586 | |
| Inventory recognised as an expense during the year | 507 | 779 | |
| Write off of inventory | 1,620 | - |
The Group paid the following amounts to its auditors in respect of the audit of the financial statements and for other services provided to the Group.
| 2020 | 2019 | |
|---|---|---|
| US\$000 | US\$000 | |
| Audit of the financial statements | 124 | 128 |
| Local statutory audits of subsidiaries | 52 | 52 |
| Tax services - compliance | 33 | 32 |
| Tax services - advisory | 43 | 55 |
| 252 | 267 |
| 2020 | 2020 | 2019 | 2019 | |
|---|---|---|---|---|
| Group US\$000 |
Company US\$000 |
Group US\$000 |
Company US\$000 |
|
| Wages and salaries | 15,825 | 2,455 | 16,659 | 3,766 |
| Directors Fees | 282 | 282 | 255 | 255 |
| Pension costs | 921 | 110 | 974 | 241 |
| Social security costs | 2,121 | 341 | 1,947 | 453 |
| Long term incentive plan | (407) | (407) | (422) | (329) |
| 18,742 | 2,781 | 19,413 | 4,386 |
The Company makes contributions to a defined contribution scheme for all eligible employees up to a maximum of 12% of salary. Contributions are charged to the income statement as incurred.
The average monthly number of employees during the year was made up as follows:
| 2020 | 2019 | ||
|---|---|---|---|
| No. | No. | ||
| Onshore, including management (Company) | 20 | 28 | |
| Offshore | 104 | 115 | |
| 124 | 143 | ||
| 9. | Finance income | ||
| 2020 | 2019 | ||
| US\$000 | US\$000 | ||
| Bank interest | 386 | 948 | |
| 10. Finance expense | |||
| 2020 | 2019 | ||
| US\$000 | US\$000 | ||
| Interest on lease liabilities | 35 | 14 |
At 31 December 2020
| 2020 | 2019 | ||
|---|---|---|---|
| US\$000 | US\$000 | ||
| Gain on foreign exchange transactions | 214 | 168 | |
| (Loss) on foreign exchange transactions | (345) | (553) | |
| Net loss on foreign exchange transactions | (131) | (385) | |
| 12. | Income tax | ||
| Income tax on profit on ordinary activities | |||
| 2020 | 2019 | ||
| US\$000 | US\$000 | ||
| Foreign tax on the profit for the year | 66 | 71 | |
| Total current income tax | 66 | 71 | |
| Amounts under provided in previous years | 3 | 4 | |
| Tax credit available to the UK | - | - | |
| Total current income tax | 69 | 75 | |
| Deferred income tax: Origination and reversal of temporary differences |
92 | 352 | |
| Impact of changes in tax rates | - | - | |
| Total deferred income tax | 92 | 352 | |
| Income tax charge in the Group statement of comprehensive income | 161 | 427 | |
| Reconciliation of the total income tax charge | |||
| 2020 | 2019 | ||
| US\$000 | US\$000 | ||
| Loss from continuing operations | (167,696) | (30,165) | |
| Tax calculated at UK standard rate of corporation tax of 19% (2019:19%) | (31,862) | (5,733) | |
| Expenses not deductible/(income not taxable) for tax purposes | 18,995 | (43) | |
| Effect of (lower)/higher taxes on overseas earnings | 2,292 | 71 | |
| Unrecognised deferred tax asset | 10,742 | 6,128 | |
| Tax (over)/under provided in previous years | 3 | 4 | |
| Effect of tax rate differences | (9) | - | |
| Income tax charge in the Group statement of comprehensive income | 161 | 427 |
The income tax expense above is computed at loss before taxation multiplied by the effective rate of corporation tax in the UK of 19% (2019: 19%).
The corporate tax measures announced in the March 2021 Budget set out that corporation tax will increase from 19% to 25% from April 2023 for firms with annual profits greater than £250,000.
Deferred income tax
The deferred income tax included in the statement of financial position is as follows:
| 2020 | 2019 | |
|---|---|---|
| US\$000 | US\$000 | |
| Deferred tax asset | ||
| As at 1 January | 108 | 461 |
| Temporary differences relating to property plant and equipment | - | - |
| Share-based payment | (92) | (353) |
| As at 31 December | 16 | 108 |
The main categories of deferred tax assets and liabilities recognised in the statement of financial position are as follows:
| Net recognised | |||
|---|---|---|---|
| Deferred tax | Deferred tax | deferred tax | |
| asset | liability | asset/(liability) | |
| US\$000 | US\$000 | US\$000 | |
| Share-based payments | 16 | - | 16 |
The Group has total tax losses of US\$ 69.3 million which arose in the UK (2019: US\$ 56.2 million) that are available for offset against future taxable profits that are not part of the bareboat charter ring-fence arrangements. There are further taxable temporary differences relating to fixed assets of US\$ 24.6 million and US\$ 18.4 million of unutilised capital allowances. Deferred tax assets have not been recognised in respect of these losses or differences due to the uncertainty of future profits being at this level. The Group has identified future taxable profits at an appropriate level in support of the deferred tax asset of US\$16k as detailed in the above table.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
| 2020 | 2019 | |
|---|---|---|
| US\$000 | US\$000 | |
| Loss for the year attributable to equity share holders | (167,857) | (30,592) |
| 2020 | 2019 | |
| No.000 | No.000 | |
| Weighted average number of ordinary shares for basic and diluted earnings | ||
| per share | 54,582 | 54,582 |
Total earnings and weighted average number of shares outstanding during the year is the same as for diluted earnings per share.
| 2020 | 2019 | |
|---|---|---|
| US\$000 | US\$000 | |
| At 1 January | - | - |
| Received during the year | 310 | - |
| Released to the statement of profit or loss | (310) | - |
| At 31 December | - | - |
The above Government grants received were in respect of the Coronavirus Job Retention Scheme.
| Semi | Assets under | Special | Other | ||
|---|---|---|---|---|---|
| Group | submersible drilling rigs |
construction | purpose surveys |
fixtures and equipment |
Total |
| US\$000 | US\$000 | US\$000 | US\$000 | US\$000 | |
| Cost: | |||||
| At 1 January 2019 | 336,526 | 44,384 | 16,159 | 1,909 | 398,978 |
| Additions | 1,081 | 48,224 | - | 116 | 49,421 |
| Disposals | (578) | - | - | - | (578) |
| At 31 December 2019 | 337,029 | 92,608 | 16,159 | 2,025 | 447,821 |
| Additions | 623 | 18,672 | - | 21 | 19,316 |
| Disposals | - | - | (29) | (29) | |
| At 31 December 2020 | 337,652 | 111,280 | 16,159 | 2,017 | 467,108 |
| Depreciation and impairment: | |||||
| At 1 January 2019 | (202,442) | - | (8,369) | (1,405) | (212,216) |
| Provided | (8,088) | - | (3,117) | (60) | (11,265) |
| Impairment | (23,000) | - | - | - | (23,000) |
| Disposals | 578 | - | - | - | 578 |
| At 31 December 2019 | (232,952) | - | (11,486) | (1,465) | (245,903) |
| Provided | (6,566) | - | (3,117) | (63) | (9,746) |
| Impairment | (33,379) | (111,280) | - | - | (144,659) |
| At 31 December 2020 | (272,897) | (111,280) | (14,603) | (1,528) | (400,308) |
| Net book value: | |||||
| At 31 December 2020 | 64,755 | - | 1,556 | 489 | 66,800 |
| At 31 December 2019 | 104,077 | 92,608 | 4,673 | 560 | 201,918 |
At 31 December 2020
| Other | |
|---|---|
| fixtures and | |
| Company | equipment |
| US\$000 | |
| Cost: | |
| At 1 January 2019 | 1,909 |
| Additions | 116 |
| At 31 December 2019 | 2,025 |
| Additions | 21 |
| Disposals | (29) |
| At 31 December 2020 | 2,017 |
| Depreciation: | |
| At 1 January 2019 | (1,405) |
| Provided | (60) |
| At 31 December 2019 | (1,465) |
| Provided | (63) |
| At 31 December 2020 | (1,528) |
| Net book value: | |
| At 31 December 2020 | 489 |
| At 31 December 2019 | 560 |
The Group has recognised US\$ 33.4 million (2019: US\$ 23 million) as an impairment loss relating to the WilPhoenix and WilHunter rigs. The recoverable amount for the WilPhoenix is estimated at US\$ 65.7 million and for WilHunter nil. This amount for the WilPhoenix does not include capital spares and other capital costs which are included in fixed assets (Note 15).
An additional impairment of US\$111.3 million in respect of assets under construction (Nordic Winter and Nordic Spring) was also recognised following the termination of the rig construction contracts. See Note 23.
A value in use assessment of the rigs has been performed which resulted in an impairment of US\$ 33.4 million. This was primarily due to the short term nature of the contract backlog and the continued uncertainty of future work prospects.
The analysis has been prepared on both rigs separately, as due to the cold stack status of the WilHunter, the cash inflows are forecast as being generated independently of each other. A pre-tax discount rate of 21.7% and post-tax discount rate of 17.8% has been applied. (2019: 13.7% and 10.1%)
The key assumptions used in the calculation are long-standing knowledge of the industry along with their best estimate of forecast industry conditions and operations, expected utilisation, contract rates, opex and capital requirements of the rigs. The assumptions used are subject to significant judgement and there is a certain amount of uncertainty to the outcome of these assumptions. Due to this uncertainty, the Group has performed a sensitivity analysis of the main assumptions for the WilPhoenix rig. The below table shows the resulting impairment values as a result of the changes.
At 31 December 2020
| Impairment | ||
|---|---|---|
| Category | Sensitivity | US\$000 |
| Post tax discount rate: | Increase by 3% | (7,029) |
| Revenue: | Decrease by 5% | (9,980) |
| Utilisation: | Decrease by 5% | (8,437) |
| Opex costs: | Increase by 10% | (10,447) |
| Company | Company | |
|---|---|---|
| 2020 | 2019 | |
| US\$000 | US\$000 | |
| Company shares in subsidiary undertakings | ||
| At 1 January | 279 | 277 |
| Investment in year | - | 23,080 |
| Impairment of investment in year | - | (23,076) |
| Disposal in year | - | (2) |
| At 31 December | 279 | 279 |
Details of the holdings are as follows, all 100% shareholdings:
| Country of | ||
|---|---|---|
| Name | Incorporation | Registered Address |
| 11- | ||
| Awilco Drilling Offshore (UK) Ltd) | United Kingdom | London |
| 11- | ||
| WilHunter (UK) Ltd | United Kingdom | London |
| Awilco Drilling Pte. Ltd. | Singapore | 8 Wilkie Road, Singapore |
| Awilco Rig 1 Pte. Ltd | Singapore | 8 Wilkie Road, Singapore |
| Awilco Rig 2 Pte. Ltd | Singapore | 8 Wilkie Road, Singapore |
| Awilco Rig 3 Pte. Ltd | Singapore | 8 Wilkie Road, Singapore |
| Awilco Rig 4 Pte. Ltd | Singapore | 8 Wilkie Road, Singapore |
| Awilco Drilling Norge AS | Norway Verksgata IA, 4013 Stavanger |
At 31 December 2020
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2019 | |
| US\$000 | US\$000 | US\$000 | US\$000 | |
| Trade receivables | 3,522 | 3,522 | 8,908 | 8,908 |
| Prepayments and other receivables | 768 | 308 | 578 | 245 |
| Accrued revenue | 2,121 | - | 7 | - |
| VAT receivable | - | - | 231 | 160 |
| 6,411 | 3,830 | 9,724 | 9,313 |
As at 31 December, the analysis of ageing of trade receivables is as follows:
Group
| Neither past due nor impaired |
Past due but not impaired | |||
|---|---|---|---|---|
| Total | <60 days | 60-90 days | 90+ days | |
| US\$000 | US\$000 | US\$000 | US\$000 | |
| 2020 | 3,522 | 3,522 | - | - |
| Neither past due nor impaired |
Past due but not impaired | |||
| Total | <60 days | 60-90 days | 90+ days | |
| US\$000 | US\$000 | US\$000 | US\$000 | |
| 2019 | 8,908 | 8,896 | - | 12 |
| Company | ||||
|---|---|---|---|---|
| Neither past due nor impaired |
Past due but not impaired | |||
| Total | <60 days | 60-90 days | 90+ days | |
| US\$000 | US\$000 | US\$000 | US\$000 | |
| 2020 | 3,522 | 3,522 | - | - |
| Neither past due nor |
||||
| impaired | Past due but not impaired | |||
| Total | <60 days | 60-90 days | 90+ days | |
| US\$000 | US\$000 | US\$000 | US\$000 | |
| 2019 | 8,908 | 8,896 | - | 12 |
| Group | Company | Group | Company | |
|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2019 | |
| US\$000 | US\$000 | US\$000 | US\$000 | |
| Cash at bank | 14,738 | 13,961 | 41,249 | 41,203 |
Cash at bank earns interest at floating rates based on daily bank deposit rates. The Company has no restricted cash. (2019: US\$ 1.0 million)
| Group 2020 |
Company 2020 |
Group 2019 |
Company 2019 |
|
|---|---|---|---|---|
| US\$000 | US\$000 | US\$000 | US\$000 | |
| Trade and other payables: | ||||
| Lease Liabilities | 616 | 327 | 340 | 340 |
| Trade payables | 1,257 | 1,744 | 1,284 | 843 |
| Accruals and other liabilities | 4,421 | 1,343 | 5,616 | 2,459 |
| 6,294 | 3,414 | 7,240 | 3,642 | |
| Non-current: | ||||
| Lease Liabilities | 1,017 | 739 | 1,066 | 1,066 |
| Other liabilities | 9 | 9 | - | - |
| Total | 1,026 | 748 | 1,066 | 1,066 |
| Onerous | |||
|---|---|---|---|
| Redundancy | Contract | Total | |
| US\$000 | US\$000 | US\$000 | |
| At 1 January 2020 | - | - | - |
| Arising during the year | 640 | 933 | 1,573 |
| At 31 December 2020 | 640 | 933 | 1,573 |
The redundancy provision is in relation to Norway shorebase personnel and the onerous contract is in relation to a commitment for an ERP system. Both items were subsequently settled post year end.
The Group has a lease contract in place for the office building at 2 Kingshill Park, Westhill, Aberdeenshire, AB32 6FL and for the office building at 103 Løkkeveien, 4007 Stavanger, Norway. Set out below is the carrying amount of the right-of-use assets recognised and the movements during the period:
| Office Building | Office Building | |||
|---|---|---|---|---|
| Group | Company | Group/Company | ||
| 2020 | 2020 | 2019 | ||
| US\$000 | US\$000 | US\$000 | ||
| As at 1 January | 1,417 | 1,417 | 1,738 | |
| Additions | 747 | - | - | |
| Depreciation Expense | (556) | (321) | (321) | |
| Impairment | (512) | - | - | |
| As at 31 December | 1,096 | 1,096 | 1,417 |
The impairment is in relation to the lease for the office building in Norway.
Set out below are the carrying amounts of lease liabilities (included under trade and other payables) and the movements during the period:
| 2020 | 2020 | 2019 | |
|---|---|---|---|
| Group | Company | Group/Company | |
| US\$000 | US\$000 | US\$000 | |
| As at 1 January | 1,406 | 1,406 | 1,738 |
| Additions | 747 | - | - |
| Accretion of interest | 35 | 28 | 14 |
| Payments | (555) | (368) | (346) |
| As at 31 December | 1,633 | 1,066 | 1,406 |
| Current | 616 | 327 | 340 |
| Non-current | 1,017 | 739 | 1,066 |
The maturity analysis of lease liabilities is disclosed in Note 26.
The following are the amounts recognised in profit or loss:
| 2020 | 2020 | 2019 | |
|---|---|---|---|
| Group | Company | Group/Company | |
| US\$000 | US\$000 | US\$000 | |
| Depreciation expense of right-of-use assets | 556 | 321 | 321 |
| Interest expense on lease liabilities | 35 | 28 | 14 |
| Expense relating to leases of low-value assets (included in | |||
| administrative expenses) | 6 | 6 | 14 |
| Total amount recognised in profit or loss | 597 | 355 | 349 |
The Group has total cash outflows for leases of US\$0.6 million (2019: US\$ 0.4 million).
There were capital commitments of US\$ 0.1 million at 31 December 2020 (2019: US\$ 769.9 million).
| 2020 US\$000 |
2019 US\$000 |
|
|---|---|---|
| Amounts due within one year | 80 | 44,687 |
| Amounts due greater than one year | - | 725,216 |
| 80 | 769,903 |
The ompany, WilHunter (UK) Ltd, has been in regular contact with HMRC over the classification of an element of income booked in 2015. This company has maintained its position that the income was such that accumulated losses could be utilised against the income resulting in a reduction in its tax liability for the year. HMRC have disagreed with this position and issued a notice of amendment indicating additional tax and interest due of about GBP 7.7 million. WilHunter (UK) Ltd are of the opinion that HMRC are incorrect in their assessment of the facts and an appeal has been submitted and a tribunal hearing is expected to be held in June 2021. This is considered as a contingent liability only of the subsidiary and not the parent company. No provision has been made.
It is recognised that Keppel FELS has submitted claims in respect of amounts it considers recoverable due to termination provisions in the contracts for both Nordic Winter and Nordic Spring. Statement of claims have been received from Keppel FELS in the amount of Singapore Dollars 562.75 million (US\$ 424.9 million) for Awilco Rig 1 Pte. Ltd. and Singapore Dollars 356.18 million (US\$ 268.9 million) for Awilco Rig 2 Pte. Ltd. but these claims are strongly denied. Due to the non-recourse nature of the contracts, this is considered as a contingent liability only of the subsidiaries and not the parent company. No provision has been made. It is expected that the final arbitration outcome for Awilco Rig 1 Pte Ltd, including any appeal process, will be no earlier than Q4 2022. The arbitration process for Awilco Rig 2 Pte Ltd, was started six months later and also expected no earlier than Q4 2022.
Following the termination of Nordic Winter and Nordic Spring, the subsidiary companies, Awilco Rig 1 Pte. Ltd and Awilco Rig 2 Pte. Ltd. have entered arbitration with KFELS in respect of deposit and variation order payments. A total amount of USD 97.7 million is considered to be recoverable and is therefore disclosed as a contingent asset.
| Group and Company | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Authorised | No.000 | No.000 | ||
| Ordinary shares of £0.0065 each | 54,582 | 54,582 | ||
| Group and Company | ||||
| 2020 | 2020 | 2019 | 2019 | |
| Allotted called up and fully paid | No.000 | US\$000 | No.000 | US\$000 |
| At 1 January | 54,582 | 525 | 49,032 | 477 |
| Issued on 14 March 2019 | - | - | 5,550 | 48 |
| At 31 December | 54,582 | 525 | 54,582 | 525 |
| 2020 | 2019 | |
|---|---|---|
| Share | Share | |
| premium | premium | |
| account | account | |
| US\$000 | US\$000 | |
| At 1 January | 218,381 | 198,242 |
| Share premium on shares issued on 14 March 2019 | - | 20,139 |
| At 31 December | 218,381 | 218,381 |
The financial statements include the financial statements of the Group and the subsidiaries listed below:
| Country of | |||
|---|---|---|---|
| Name | Incorporation | % Interest | |
| Awilco Drilling Offshore (UK) Ltd | United Kingdom | 100 | |
| WilHunter (UK) Ltd | United Kingdom | 100 | |
| Awilco Drilling Pte. Ltd. | Singapore | 100 | |
| Awilco Rig 1 Pte. Ltd | Singapore | 100 | |
| Awilco Rig 2 Pte. Ltd | Singapore | 100 | |
| Awilco Rig 3 Pte. Ltd | Singapore | 100 | |
| Awilco Rig 4 Pte. Ltd | Singapore | 100 | |
| Awilco Drilling Norge AS | Norway | 100 |
During the year the Group entered into transactions, in the ordinary course of business, with Awilhelmsen Offshore AS, which is a major shareholder through its subsidiaries.
Transactions entered into and trading balances outstanding at 31 December 2020 with Awilhelmsen AS and its subsidiaries are as follows:
| 2020 | 2019 | |
|---|---|---|
| US\$000 | US\$000 | |
| Purchase of management services | 2,195 | 1,746 |
| Share based payment | - | (72) |
| Amounts owed to Awilhelmsen AS and its subsidiaries | (236) | (212) |
Sales and purchases between related parties are made at normal market prices. Outstanding balances are unsecured, interest-free and cash settlement terms vary between 30 and 90 days. The Company has not provided or benefitted from any guarantees for any related party receivables or payables.
The remuneration of directors and other key management personnel of the Group is as follows
| 2020 | 2019 | |
|---|---|---|
| US\$000 | US\$000 | |
| Short-term employee benefits | 1,759 | 1,774 |
| Share-based payments | (534) | (845) |
| Other long-term benefits | 126 | 105 |
Included in the short-term employee benefits a GBP 195,000 (2019: GBP 262,000). Five directors received remuneration in respect of their services to the Company during the year (2019: five). The highest paid director was Sigurd Thorvildsen report on page 32 for further details.
The Company entered into the following transactions and had the following balances with its wholly owned subsidiaries
| 2020 | 2019 | |
|---|---|---|
| US\$000 | US\$000 | |
| Transactions: | ||
| Amounts invoiced to Awilco Drilling Offshore (UK) Ltd in respect of | ||
| services provided to the company | 28,299 | 32,015 |
| Amounts invoiced on behalf of Awilco Drilling Offshore (UK) Ltd | (24,247) | (40,754) |
| Settlement of balance with WilHunter (Malta) Ltd | 2 | |
| Invoiced to Awilco Drilling Pte. Ltd. | 125 | 143 |
| Transfer of funds to Awilco Drilling Pte. Ltd. | 5,470 | 2,992 |
| Amounts invoiced to Awilco Rig 1 Pte. Ltd. in respect of services provided | ||
| to the company | 12,335 | 1,752 |
| Amounts invoiced to Awilco Rig 2 Pte. Ltd. in respect of services provided | ||
| to the company | 2,066 | 42,232 |
| Amounts invoiced to Awilco Drilling Norge AS in respect of services | ||
| provided to the company | 8,030 | 1,933 |
| Taxation paid on behalf of subsidiaries | 74 | 71 |
| Dividends received from WilPhoenix (UK) Ltd | - | 33,070 |
| Increase in investment in WilHunter (UK) Ltd | - | (23,076) |
| 32,152 | 50,380 | |
| 2020 | 2019 | |
| Balances: | US\$000 | US\$000 |
| Amounts receivable from Awilco Drilling Offshore (UK) Ltd | 90,254 | 109,278 |
| Amounts payable to WilHunter (UK) Ltd | (100) | (23,176) |
| Amounts receivable from Awilco Drilling Pte. Ltd. | 5,979 | 310 |
| Amounts receivable from Awilco Rig 1 Pte. Ltd | 57,343 | 45,008 |
| Amounts receivable from Awilco Rig 2 Pte. Ltd | 44,298 | 42,232 |
| Amounts receivable from Awilco Drilling Norge AS | 9,964 | 1,933 |
| 207,738 | 175,585 | |
| Allowance for expected credit loss | (115,010) | (1,484) |
| 92,728 | 174,101 |
The balances receivable from the subsidiary companies are considered long term. There are long term loan agreements in place with Awilco Rig 1 Pte. Ltd. and Awilco Rig 2 Pte. Ltd.
Set out below is the movement in the allowance for expected credit losses of intercompany receivables:
| 2020 | 2019 | |
|---|---|---|
| US\$000 | US\$000 | |
| As at 1 January | (1,484) | (1,279) |
| Provision for expected credit loss | (113,526) | (205) |
| As at 31 December | (115,010) | (1,484) |
Expected credit loss triggered due to lower contract rates and an idle period in the year for the WilPhoenix. Also due to expected non recoverability of amounts due from Awilco Drilling Norge AS and provision for amounts due from Awilco Rig 1 Pte. Ltd. and Awilco Rig 2 Pte. Ltd.
Awilhelmsen Offshore AS, owns 37.1% of the ordinary shares in Awilco Drilling PLC.
The G Company pal financial liabilities comprise trade and other payables. The main purpose of these financial Group has trade and other receivables, and cash and cash equivalents that arrive directly from its operations.
Management has assessed the fair values of the financial instruments are generally approximate to the carrying values except foreign exchange contracts which are carried at fair value.
The Group and the Company are exposed to market risk, credit risk and liquidity risk.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. The level applicable to the Group is Level 2 : other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises foreign currency risk. Financial instruments affected by market risk are trade and other payables and accruals.
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes Company in foreign exchange rates relates primarily to and Company expenses are denominated in a different currency from the Company
The Group manages its foreign currency risk by holding cash in the foreign currency required to settle foreign current liabilities, unless the Group has insufficient cash resources available, in which case, it enters into hedging transactions for significant foreign currency commitments.
At the balance sheet date, the Group held GBP 1.3 million in trade and other payables (2019: GBP 1.5 million). A 5% strengthening or weakening of US\$ to GBP would have an effect of US\$ 0.1 million on the Group 2020 result (2019: US\$0.1 million). The Group has no other material currency exposures.
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables). The Company has credit risk due to its trade and other receivables from subsidiary undertakings and from external clients.
Management assess the credit rating of new and existing clients and determine if any action is required to secure the financial security in respect of work performed.
The G meet the repayments of the debt and commitments as they fall due. In order to achieve this, the Group also has the prospect of issuing new equity or entering into new borrowing arrangements.
The table below summarises the maturity profile of the G undiscounted payments.
| Group | Less than 3 months |
3 to 12 months |
1-5 years |
Total |
|---|---|---|---|---|
| Trade and other payables | 4,853 | 825 | 9 | 5,687 |
| Lease liabilities | - | 616 | 1,017 | 1,633 |
| 31 December 2020 | 4,853 | 1,441 | 1,026 | 7,320 |
| Trade and other payables | 4,771 | 2,130 | - | 6,901 |
| Lease liabilities | - | 368 | 1,258 | 1,626 |
| 31 December 2019 | 4,771 | 2,498 | 1,258 | 8,527 |
The table below summarises the maturity profile of the financial liabilities based on contractual undiscounted payments.
| Less than | 3 to 12 | 1-5 | ||
|---|---|---|---|---|
| Company | 3 months | months | years | Total |
| Trade and other payables | 3,087 | - | 9 | 3,096 |
| Lease liabilities | - | 327 | 739 | 1,066 |
| 31 December 2020 | 3,087 | 327 | 748 | 4,162 |
| Trade and other payables | 3,039 | 263 | - | 3,302 |
| Lease liabilities | - | 368 | 1,258 | 1,626 |
| 31 December 2019 | 3,039 | 631 | 1,258 | 4,928 |
At 31 December 2020
liabilities.
| Group | 2020 | 2019 | 2020 | 2019 |
|---|---|---|---|---|
| US\$000 | US\$000 | US\$000 | US\$000 | |
| Book Value | Book Value | Fair Value | Fair Value | |
| Financial assets | ||||
| Amortised Cost | ||||
| Trade receivables | 3,522 | 8,908 | 3,522 | 8,908 |
| Other receivables | 195 | 578 | 195 | 578 |
| Accrued revenue | 2,120 | 7 | 2,120 | 7 |
| VAT receivable | - | 231 | - | 231 |
| Current tax receivable | - | - | - | - |
| Cash and cash equivalents | 14,738 | 41,249 | 14,738 | 41,249 |
| Total financial assets | 20,575 | 50,973 | 20,575 | 50,973 |
| 2020 | 2019 | 2020 | 2019 | |
| US\$000 | US\$000 | US\$000 | US\$000 | |
| Book Value | Book Value | Fair Value | Fair Value | |
| Financial liabilities | ||||
| Amortised Cost | ||||
| Trade and other payables | 8,879 | 8,306 | 8,879 | 8,306 |
| VAT payable | 14 | - | 14 | - |
| Current tax payable | 66 | 71 | 66 | 71 |
| Fair value through profit and loss | ||||
| Foreign exchange contracts | - | 180 | - | 180 |
| Total financial liabilities | 8,959 | 8,557 | 8,959 | 8,557 |
The table below summaries the carrying amounts and fair values of the s financial assets and liabilities.
| Company | 2020 | 2019 | 2020 | 2019 |
|---|---|---|---|---|
| US\$000 | US\$000 | US\$000 | US\$000 | |
| Book Value | Book Value | Fair Value | Fair Value | |
| Financial assets | ||||
| Amortised Cost | ||||
| Trade receivables | 3,522 | 8,908 | 3,522 | 8,908 |
| VAT receivable | - | 160 | - | 160 |
| Cash and cash equivalents | 13,961 | 41,203 | 13,961 | 41,203 |
| Amounts due from subsidiary | ||||
| undertakings | 92,728 | 174,101 | 92,728 | 174,101 |
| Total financial assets | 110,211 | 224,372 | 110,211 | 224,372 |
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The calculation reflects the probability weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.
At 31 December 2020
Fair value of financial assets and financial liabilities (continued)
| 2020 | 2019 | 2020 | 2019 | |
|---|---|---|---|---|
| US\$000 | US\$000 | US\$000 | US\$000 | |
| Book Value | Book Value | Fair Value | Fair Value | |
| Financial liabilities | ||||
| Trade and other payables | 4,148 | 4,708 | 4,148 | 4,708 |
| VAT payable | 14 | - | 14 | - |
| Fair value through profit and loss | ||||
| Foreign exchange contracts | - | 180 | - | 180 |
| Total financial liabilities | 4,162 | 4,888 | 4,162 | 4,888 |
Capital includes called up share capital, share premium and retained earnings / (deficit).
s in support of its main objective to maximise returns to robust cash buffer to support operational working capital requirements and planned capital expenditure. Consideration is also given to future market prospects. Dividend payments are currently
suspended and will resume when the Company again reaches an appropriate free cash flow situation.
The Company roup monitors capital using a gearing ratio, which is net debt divided by total plus net debt. The Group includes within net debt, bonds and loans less cash and cash equivalents.
| Group | Group | |
|---|---|---|
| 2020 | 2019 | |
| US\$000 | US\$000 | |
| Cash and cash equivalents (note 19) | (14,738) | (41,249) |
| Net debt / (funds) | (14,738) | (41,249) |
| Capital | 83,128 | 250,985 |
| Capital and net debt | 68,390 | 209,736 |
| Gearing ratio | n/a | n/a |
issued share capital was approved at the Annual General Meeting on 26 June 2013. The awards for the years 2010, 2012, 2014 and 2015 are now fully exercised. There are still outstanding amounts under the 2016 plan. A further award was issued in 2020, with a total limit of up to 4,000,000 shares approved at the general meeting on 11 November 2019.
The 2016 four years and the exercise period is five years subject to the employee remaining employed by the Company and expires after five years.
All share options and share awards are cash settled.
At 31 December 2020
The following table list the inputs to the model used for these valuations (share prices are in NOK).
| Group and Company |
2020 | 2019 | ||
|---|---|---|---|---|
| 2016 Plans | 2020 Plans | 2015 Plans | 2016 Plans | |
| Exercise price | - | 30.0 | - | - |
| Share price | 4.65 | 4.65 | 15.5 | 15.5 |
| Expected life | - | 3.25 years | - | 0.88 years |
| Volatility | - | 0.67 | - | - |
| Risk free interest rate |
- | 0.42% | - | 1.20% |
| Model used | Black Scholes |
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options and awards during the year.
| Group | 2020 | 2020 | 2019 | 2019 |
|---|---|---|---|---|
| No. | WAEP (NOK) | No. | WAEP (NOK) | |
| Outstanding as at 1 January | 364,425 | - | 879,017 | - |
| Granted during the year | 2,150,000 | 30.0 | - | - |
| Exercised during the year | (192,141) | - | (514,592) | - |
| Forfeited during the year | - | - | - | |
| Adjusted during the year | (1,075,000) | 30.0 | - | - |
| Outstanding at 31 December | 1,247,284 | - | 364,425 | - |
| Exercisable at 31 December | 172,284 | - | 192,141 | - |
| Company | 2020 No. |
2020 WAEP (NOK) |
2019 No. |
2019 WAEP (NOK) |
|---|---|---|---|---|
| Outstanding as at 1 January | 364,425 | - | 825,306 | - |
| Granted during the year | 2,150,000 | 30.0 | - | - |
| Exercised during the year | (192,141) | - | (460,881) | - |
| Forfeited during the year | - | - | - | |
| Adjusted during the year | (1,075,000) | 30.0 | - | - |
| Outstanding at 31 December | 1,247,284 | - | 364,425 | - |
| Exercisable at 31 December | 172,284 | - | 192,141 | - |
The estimated fair value of the granted share options and awards are is applied utilising a risk-free discount rate and also taking into account the terms and conditions upon which the options and awards are granted as well as the performance conditions that are required to be satisfied before vesting. The weighted average remaining contractual life at 31 December 2020 is 3.25 years. The Group total share option and award credit amounted to US\$0.5 million (2019: US\$ 2.1 million credit). The carrying amount of the liability relating to the cash-settled options at 31 December 2020 is US\$ 0.1 million (2019: US\$ 0.6 million).
The table below summaries the carrying amount of the liability at 31 December 2020
| Group and Company | Less than 3 months |
3 to 12 months | 1 5 years |
Total |
|---|---|---|---|---|
| US\$000 | US\$000 | US\$000 | US\$000 | |
| Share options and awards 2020 | 106 | - | 9 | 115 |
| The table below summaries the carrying amount of the liability at 31 December 2019 | ||||
| Less than 3 | ||||
| Group and Company | months | 3 to 12 months | 1 5 years |
Total |
| Share options and awards | 385 | 263 | - | 648 |
| At 31 December 2019 | 385 | 263 | - | 648 |
| 2020 | 2019 | |
|---|---|---|
| US\$000 | US\$000 | |
| Foreign exchange contracts | - | (180) |
The foreign currency forwards resulting from fluctuations in foreign currency exchange rates. The fair value of the forward exchange contracts, as shown above, is recorded as other payables in the statement of financial position. The changes in the fair value are then recorded in the statement of comprehensive income. Forward currency exchange contracts fair value was determined using quoted forward exchange rates matching the maturities of the contracts. There were no outstanding currency forwards at 31 December 2020.
All are Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
During January 2021, Jens Berge, Chief Executive Officer decided to leave the Company with effect from 1 February 2021 to pursue other opportunities. Eric Jacobs, General Counsel in the Awilhelmsen Group, will act as interim Chief Executive Officer until the Board of Directors appoints a permanent replacement.
During April 2021, the Company signed a contract with Ithaca Oil and Gas Limited for the provision of WilPhoenix for a single exploration well at Fotla in Block 22/1b. The well will commence no earlier than 31st May 2021.
These subsequent events identified are non-adjusting events.
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