Quarterly Report • Jul 14, 2020
Quarterly Report
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(Amounts in parentheses refer to corresponding period the prior year)
| Unit | Q2 2020 | Q1 2020 | Q2 2019 | Full year 2019 |
|
|---|---|---|---|---|---|
| Total operating income | NOKm | 275 | 551 | 1,039 | 3,020 |
| EBITDA 1) | NOKm | 210 | 312 | 594 | 1,636 |
| EBITDAX 1) | NOKm | 221 | 340 | 628 | 1,936 |
| Profit/loss (-) before income tax | NOKm | -187 | -926 | 311 | 419 |
| Profit/loss (-) before tax per share | NOK/share | -1.83 | -9.07 | 3.65 | 4.52 |
| Net profit / loss (-) | NOKm | 18 | -785 | 18 | -71 |
| Cash flow from operations | NOKm | -3 | 21 | 616 | 2,111 |
| Cash flow from investments | NOKm | -256 | -333 | -81 | -847 |
| Cash flow from financing activities | NOKm | -83 | -92 | 208 | 5 |
| Net interest-bearing debt 1) | NOKm | 1,904 | 1,752 | 1,158 | 893 |
| Draugen | Boepd 2) | 7,944 | 8,922 | 9,241 | 9,092 |
| Gjøa | Boepd 2) | 7,758 | 9,812 | 10,496 | 9,230 |
| Ivar Aasen | Boepd 2) | 345 | 365 | 308 | 341 |
| Total net production | Boepd 2) | 16,047 | 19,099 | 20,045 | 18,663 |
| Over/underlift/inventory adjustments | Boepd 2) | -1,413 | -3,289 | 5,865 | 818 |
| Net Sold volume | Boepd 2) | 14,634 | 15,810 | 25,910 | 19,481 |
| Production expense per boe 1) | NOK/boe | 118.1 | 87.3 | 102.4 | 95.7 |
| Realised liquids price | USD/boe | 24.9 | 48.4 | 60.7 | 56.6 |
| Realised gas price | USD/scm | 0.05 | 0.10 | 0.15 | 0.16 |
1) Definitions of Alternative Performance Measures are available on page 29 of this report
2) Boepd is defined as barrels of oil equivalents per day
The first half of 2020 has been challenging for the entire oil industry due to the combination of the Covid-19 pandemic coupled with a dramatic fall in petroleum prices. OKEA reacted swiftly to manage through the turmoil and implemented a series of mitigating measures including safety measures in offices and operations, costcutting initiatives and managing the projected breach of covenant under the OKEA02 and OKEA03 bond loans. OKEA has been able to continue operations without disturbances to production and rescheduled the planned maintenance shutdown at Draugen to re-optimise the operation for the production restriction measures implemented by the Norwegian Government. By the end of June, OKEA had reached agreement with the bondholders to amend the terms under the bond loans to better suit the current outlook and the government had implemented temporary changes to the petroleum tax regulations which have a material positive liquidity effect for OKEA.
The company's proposed amendments to the bond agreements for OKEA02 and OKEA03 were adopted in bondholder meetings on 29 June 2020. The amendments secure financing terms for OKEA which is better tailored for the current outlook. In return, the bondholders were granted a waiver fee of 50 basis points (bps), increased redemption/call prices of 100 bps and a put option of 15% of the outstanding bonds at par which is exercisable in June 2021.
The temporary changes to the petroleum tax regulations which were resolved by the Norwegian Parliament in June 2020, comprise direct expensing of capital expenditure with effect for the 56% special tax basis, an increase in the uplift-rate to 24%, and refund of tax value of losses for the tax years 2020 and 2021 settled through negative tax instalments. The temporary changes affect investments made in 2020 and 2021 and until planned production start for projects where a Plan for Development and Operation (PDO) is filed by the end of 2022 and approved prior to the end of 2023.
The changes to the tax regulation is a key enabler for the company to reassess plans for the profitable projects which were put on hold earlier this year as further described in the "outlook" section of this report. Current estimates indicate that the effect of negative tax instalments for 2020 may be somewhat higher than the initial indication provided of USD 60 million.
Total operating income in the second quarter amounted to NOK 275 (1,039) million. The decrease from prior year was mainly due to significantly lower realised oil and gas prices following global market turmoil. In addition, income was lower due only one lifting at Draugen during the quarter compared to two liftings with larger cargos prior year. Income from Gjøa was lower compared to prior year due to lower sold volumes relating to general field decline as well as a planned shutdown due to tie-in projects.
Other operating income / loss (-) amounted to NOK 16 (-3) million. Net income during the quarter mainly related to tariff income from Gjøa of NOK 13 million and income from joint utilisation of logistics resources of NOK 5 million, partly offset by net loss from realisation of oil put option of NOK -3 million as the oil price increased during the quarter until realisation date in May. The net loss prior year mainly related to costs and value adjustments of put options for oil.
Production expenses amounted to NOK 186 (186) million, corresponding to NOK 118.1 (102.4) per boe. Produced volumes net to OKEA were 16,047 (20,045) boepd. The reduction in produced volumes was due to general field decline, shut-in of the D2 well and maintenance turnaround at Draugen as well as planned shutdown due to tie-in projects at Gjøa. These effects were partly offset by the high regularity at Draugen.
Changes in over-/underlift positions and production inventory amounted to NOK 155 (-191) million. The increase in oil price during the quarter had a favourable impact on the valuation of over-/underlift and inventory positions as they are recognised at the lower of production cost and market value at balance sheet date. At the end of first quarter this year, inventory was recognised at market value due to the low oil price at balance sheet date. At the end of the current quarter, inventory was recognised at cost. In addition, produced volumes exceeded sold volumes by 1,413 boepd in the quarter while sold volumes exceeded produced volumes by 5,865 boepd in the same quarter prior year.
Exploration expenses amounted to NOK 10 (34) million for the quarter which mainly related to field evaluation activities at Hasselmus in the Draugen licence. Exploration expenses prior year related to seismic costs and other exploration activities.
Total impairments amounted to NOK 298 (43) million and relate to the Yme asset under development of NOK 244 million (pre-tax amount with an offsetting change in deferred tax of NOK 190 million) and technical goodwill on Draugen and Gjøa for a total of NOK 54 million. Impairments recognised in the quarter were primarily driven by the strengthening of NOK against USD, increased capital expenditures estimates for the Yme project and reduced reserve estimates for the P1 project on Gjøa, partly offset by increased forward prices for oil and the favourable impact of the new tax regulations. Impairments prior year related to Gjøa. Reference is made to note 10 for further details.
General and administrative expenses amounted to NOK 23 (35) million and represent OKEA's share of costs after allocation to licence activities. The decrease from prior year was mainly due to cost cutting measures. In addition, second quarter prior year included costs incurred in relation to the Initial Public Offering (IPO).
Net financial items amounted to NOK 92 (-56) million. The financial gain in the quarter was mainly due to strengthening of NOK against USD which led to unrealised currency gain on bond loans of approximately NOK 238 million, partly offset by unrealised currency losses on bank accounts, one-off costs relating to the bond amendment process and interest expenses. Reference is made to note 11 for further information.
Profit / loss (-) before income tax amounted to NOK -187 (310) million for the quarter.
Tax expenses (-) / tax income (+) for the quarter amounted to NOK 205 (-293) million representing an effective tax income rate of 110% (94%). The deviation from the expected 78% was mainly caused by impairments that are not tax deductible and financial items which are tax deductible by approximately 23%. These effects were partly offset by the effect of uplift.
Net profit / loss (-) for the period was NOK 18 (18) million and earnings per share were NOK 0.18 (0.21).
Goodwill amounted to NOK 772 (1,430) million. The reduction compared to prior year was due to impairments as further described in note 10.
Right-of-use assets amounted to NOK 131 (181) million at the end of the quarter and mainly related to logistical resources on operated assets. The reduction compared to prior year was due to shorter remaining lifetime of lease contracts. Right-of-use assets are offset by the lease liability (IFRS16).
Total tax refund amounted to NOK 518 (0) million, split into non-current refund from exploration costs of NOK 29 (0) million and refund from current year tax loss of NOK 489 (0) million following the new tax regulations.
Cash and cash equivalents amounted to NOK 917 (1,329) million. The reduction compared to prior year was mainly due to investments made in addition to the final payment of the pro & contra settlement for Draugen and Gjøa in January 2020. These effects were partly offset by proceeds from the share issue in relation to the Initial Public Offering (IPO).
Spare parts, equipment and inventory amounted to NOK 258 (159) million, whereof NOK 166 (38) million related to oil inventory at Draugen.
Equity amounted to NOK 919 (1,755) million at the end of second quarter. The reduction was due to net losses partly offset by the share issue in relation to the IPO.
Provisions for asset retirement obligations amounted to NOK 4,069 (3,917) million. The increase was caused by accretion effects and general updates in assumptions.
Interest-bearing loans and borrowings amounted to NOK 2,821 (2,487) million. The increase mainly related to foreign currency effects as NOK has weakened against USD during the year (NOK 281 million) as well as an increase in the bond redemption price (NOK 28 million) following the amendment of terms executed in June. These effects were partly offset by a partial buy-back of OKEA02 during the first quarter for a nominal amount of NOK 67 million.
The lease liability relating to IFRS 16 is split into a non-current liability of NOK 104 (136) million and a current liability of NOK 27 (46) million and mainly related to logistic resources on operated assets.
Trade and other payables amounted to NOK 900 (945) million and mainly related to working capital from joint licences, trade creditors and prepayments from customers.
Net cash flows from operating activities in the quarter amounted to NOK -3 (616) million. The reduction compared to prior year was mainly due to the lower revenues, payment of the final tax instalment for 2019 and changes in working capital.
Net cash flows from investment activities in the quarter amounted to NOK -256 (-81) million, of which investments in oil & gas properties amounted to NOK -251 (-215) million, mainly relating to the Yme New Development project and the P1 project at Gjøa. Net cash flows from investments prior year included a release of restricted cash of NOK 139 million.
Net cash flows from financing activities in the quarter amounted to NOK -83 (208) million, of which interest paid amounted to NOK -83 (-75) million. During second quarter prior year the company issued shares with net proceeds of NOK 283 million in relation to the IPO.
OKEA produced 16,047 (20,045) boepd in the second quarter. The average realised liquid price was USD 24.9 (60.7) per barrel and gas was realised at an average price of USD 0.05 (0.15) per standard cubic metre (scm). The significantly adverse price development relates to the market impact from Covid-19 and the unbalanced supply-demand situation for petroleum products.
In an effort to contribute to a faster stabilisation of the oil and gas industry following the demand disruptions caused by Covid-19, the Norwegian Government announced in April its decision to implement production restriction measures for oil production for 2020. For OKEA's portfolio, the main impact relates to the Draugen field, as the Gjøa field (12.00%) is exempted from the production limitations.
Permitted production volumes for Draugen (44.56%) for June and H2-20 have been reduced from a total of 3.63 million bbls to a total of 3.43 million bbls. In order to re-optimise the operation and production at Draugen, the license decided to move the planned maintenance shutdown from September to late June. On this basis, OKEA maintains the production guidance for 2020 of 14,000 – 15,000 boepd on average for the year.
Net production to OKEA from Draugen was 7,944 (9,241) boepd for the quarter and production regularity was 91 % (86%). Measures have been implemented to manage the risk of Covid-19 infection on the installation by reducing activity level and reprioritising maintenance work and project activities. The production level was stable and above plan during the quarter despite the reduced manning. The reduction in volumes compared to prior year was due to general field decline and start of the planned maintenance turnaround on 23 June. The maintenance turnaround is scheduled to be completed at the end of July.
The D2 well is still shut-in due to a failed downhole safety valve. During the quarter, an attempt to repair the valve failed. OKEA is currently planning for a well intervention campaign to attempt to achieve continued production from the D2 well.
Net production to OKEA from Gjøa in the quarter was 7,758 (10,496) boepd and production regularity was as high as 99% (95%). As a risk-reducing measure from Covid-19, the Gjøa operator has reviewed the maintenance turnaround plan with a target to defer non-critical work.
Gjøa was shut-in for two weeks in May due to tie-in work for the Nova project. Gjøa will be compensated for the deferred production when Nova is onstream in 2021. In addition, one of the producing wells at Gjøa was shut-in for the full month of May due to security pre-cautions relating to nearby drilling activities.
The P1 geo-pilot well was completed during the quarter. The drilling required more time than planned due to weather conditions and an additional side-track was required to obtain the required quality of reservoir data for placement of the planned producer wells. The results from the geo-pilot triggered a revision of the development concept for the P1 project which is now targeting one oil producing well and one gas producing well to be drilled. First production from the new wells is scheduled for Q4 2020.
Net production to OKEA from Ivar Aasen during the second quarter was 345 (308) boepd. As part of the Covid-19 management, the number of people on board was minimised during the quarter and all non-critical activities were removed or postponed. Planning work for the increased oil recovery campaign for 2020 was completed during the quarter and the associated offshore work is scheduled to commence in September 2020.
Studies for Carbon Capture and Storage (CCS) has been initiated for the Grevling field development project. 50% of the total study-cost of NOK 4 million will be funded by Gassnova and the study is scheduled for completion in Q4 2020.
Further development of the Grevling / Storskrymten project is subject to results from the drilling of the two exploration wells in PL973 currently planned for the first half of 2021.
Work to upgrade the jack-up rig Maersk Inspirer at Aker Solutions Yard in Egersund is ongoing. Mechanical completion and commissioning activities are near complete and onshore completion is expected in Q4 2020.
The wellhead module has been installed offshore at the Yme field, and a majority of the hook-up and carryover scope has been completed. Subsea systems including storage tank, flowlines and subsea loading system have been tested and are ready for operation.
Lack of availability of personnel at the yard due to Covid-19 restrictions has adversely impacted the progress of upgrading the rig. However, the restrictions are being reduced and availability of manning is gradually improving. Due to delayed yard progress, expected start of production has been postponed to the first half of 2021. The delay has resulted in increased capital expenditures partly due to operational expenses classified as capital expenditure during construction.
Yme is expected to add production of 7,500 boepd net to OKEA at plateau.
The two exploration wells in PL973 (Chrysaor operator, OKEA 30%) are scheduled for the first half of 2021. Well planning has intensified, and conclusion of the rig tender process is scheduled for the third quarter of 2020.
The plans for a Hamlet exploration well in the Gjøa licence (PL153) has been cancelled.
Work programmes for the new licences awarded through the Awards in Predefined Areas ("APA") 2019 round were initiated during the second quarter including planning of an exploration well for the Equinor-operated PL1060 licence scheduled for 2021.
The APA licensing round for 2020 has been announced by the Ministry of Petroleum and Energy with an application deadline in late September 2020. OKEA intends to participate in the licensing round with the target to continue to build the company's portfolio.
PL1003B lapsed and PL910 was surrendered during the quarter.
OKEA continuously works to maintain good HSE results and to improve within HSE. During the second quarter there was no serious incidents nor any recordable injuries in OKEA's operations.
Activities in the second quarter remained influenced by the worldwide Covid-19 pandemic outbreak, which require additional awareness and measures to prevent infection onboard offshore and to ensure that the organisation is prepared in case infection should occur. Safeguarding the health of personnel and securing continuity of operations and activities remain highly prioritised. Measures implemented are in accordance with the recommendations from the Norwegian health authorities and from the Norwegian Oil and Gas Association. The Covid-19 situation has been managed without significant impact on the Draugen operations.
| Unit | H1 2020 | H1 2019 | |
|---|---|---|---|
| Total operating income | NOKm | 825 | 1,804 |
| EBITDA | NOKm | 523 | 1,007 |
| Net profit / loss (-) | NOKm | -766 | 8 |
| Cash flow from operations | NOKm | 18 | 1,110 |
| Cash flow from investments | NOKm | -589 | -347 |
| Cash flow from financing activities | NOKm | -175 | 172 |
Total operating income amounted to NOK 825 (1,804) million for the first six months of the year. The reduction from prior year was the result of a combination of one less lifting on Draugen and substantially lower oil and gas prices.
Production expenses amounted to NOK 353 (330) million, equivalent to NOK 101.4 (92.2) per barrel of oil equivalent. Production expenses prior year included a deduction of NOK 29 million related to tariff income from Gjøa, which in 2020 were classified as "other operating income". The increase in production expenses per barrel was mainly due to lower produced volumes resulting from the planned shut-down at Gjøa due to tie-in projects and the maintenance turnaround at Draugen which commenced in late June.
EBITDA amounted to NOK 523 (1,007) million and net profit/loss (-) after tax was NOK -766 (8). The reduction in EBITDA was mainly due to significantly lower realised oil and gas prices and lower sold volumes. The net loss after tax was additionally impacted by impairments driven by substantially lower oil and gas price forecasts compared to same period prior year.
Cash flow from operations for the period was NOK 18 (1,110) million. The reduction was mainly due to the lower income, to the final payment of the pro & contra settlement for Draugen and Gjøa in January 2020 and changes in working capital.
Cash flow from investments amounted to NOK -589 (-347) million for the period, mainly related to the Yme new development and the P1 project at Gjøa.
Cash flow from financing activities was NOK -175 (172) million relating to interest paid and buy-back of OKEA02 bonds of NOK 52 million. Interest paid prior year was offset by net proceeds from share issue in relation to the IPO.
In January 2020, OKEA was awarded five new licences on the Norwegian Continental Shelf in the 2019 APA (Award in Pre-Defined Areas), whereof two as operator. Work programmes for the new licences were initiated during the second quarter including planning of an exploration well for the Equinor-operated PL1060 licence scheduled for drilling in 2021.
Reference is made to the sections "Managing the extraordinary circumstances", "Agreement to amend terms in OKEA02 and OKEA03 reached", and "Temporary changes in tax regulations" which are relevant also for the first half of 2020.
Investment in OKEA involves risks and uncertainties as described in the company's annual report for 2019. The company's revenues, cash flow, reserve and resource estimates, profitability and rate of growth depend on international and regional prices of oil and gas. Prices for oil and gas may fluctuate significantly based on factors beyond the company's control. The first half was impacted by very low petroleum prices following the Covid-19 pandemic outbreak combined with a supply-demand imbalance.
The company is also exposed to other financial risks as, but not limited to, fluctuations in exchange rates, increased interest rates and capital requirements. Reference is made to note 27 in OKEA's annual report for 2019 for further details on financial risks.
OKEA has managed through the turmoil experienced during the first half of the year without disruptions to operations and agreement was reached with the bondholders of OKEA02 and OKEA03 in June which secured financing terms better tailored for the current outlook. Management is very satisfied by the Norwegian Parliament's resolution in June for temporary changes to the petroleum tax system. The structure and terms of the amendments significantly improves the liquidity position of OKEA over the next twelve months.
Jointly, these issues concluded during June, constitute important enablers for the company to reassess plans for the profitable projects which were put on hold earlier this year. The target is to develop a project portfolio for Draugen which increases the resource base and/or reduces production expense. Hasselmus is one such potential project which may contribute to extending the economic lifetime at Draugen.
Preparations for the APA (Award in Predefined Areas) process 2020 is ongoing with a target to further develop the company's asset base. In addition to developing the organic growth potential of OKEA, Management will also continue to seek out new inorganic growth opportunities.
| 01.01-30.06 | 01.01-31.12 | |||||
|---|---|---|---|---|---|---|
| Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 | ||
| Amounts in NOK `000 | Note | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (audited) |
| Revenues from crude oil and gas sales | 6 | 258 997 | 1 042 370 | 762 657 | 1 790 486 | 2 935 635 |
| YME compensation contract breach | 6 | - | - | - | 22 098 | 22 098 |
| Other operating income / loss (-) | 6 | 15 587 | -2 892 | 62 698 | -8 877 | 61 833 |
| Total operating income | 274 584 | 1 039 479 | 825 354 | 1 803 707 | 3 019 566 | |
| Production expenses | -185 789 | -185 938 | -352 652 | -330 045 | -708 649 | |
| Changes in over/underlift positions and production inventory | 155 399 | -191 284 | 121 905 | -355 870 | -272 472 | |
| Exploration expenses | -10 452 | -33 825 | -37 892 | -46 227 | -299 446 | |
| Depreciation, depletion and amortization | 8 | -192 033 | -184 170 | -373 655 | -364 381 | -703 883 |
| Impairment | 8, 9, 10 | -297 969 | -43 010 | -931 689 | -96 658 | -105 394 |
| General and administrative expenses | -23 321 | -34 708 | -34 147 | -64 859 | -102 562 | |
| Total operating expenses | -554 165 | -672 936 | -1 608 129 | -1 258 039 | -2 192 406 | |
| Profit / loss (-) from operating activities | -279 581 | 366 543 | -782 775 | 545 668 | 827 160 | |
| Finance income | 11 | 19 620 | 25 269 | 56 718 | 50 315 | 103 893 |
| Finance costs | 11 | -104 115 | -94 293 | -181 922 | -184 131 | -444 880 |
| Net exchange rate gain/loss (-) | 11 | 176 936 | 13 166 | -205 429 | 41 013 | -66 777 |
| Net financial items | 92 441 | -55 858 | -330 632 | -92 802 | -407 764 | |
| Profit / loss (-) before income tax | -187 140 | 310 684 | -1 113 408 | 452 866 | 419 396 | |
| Taxes (-) / tax income (+) | 7 | 205 466 | -293 121 | 347 003 | -444 577 | -490 527 |
| Net profit / loss (-) | 18 326 | 17 564 | -766 404 | 8 289 | -71 131 | |
Items that will not be reclassified to profit or loss in subsequent periods:
| Remeasurements pensions, actuarial gain/loss (-) | - | - | - | - | 418 |
|---|---|---|---|---|---|
| Total other comprehensive income, net of tax | - | - | - | - | 418 |
| Total comprehensive income / loss (-) | 18 326 | 17 564 | -766 404 | 8 289 | -70 712 |
| Weighted average no. of shares outstanding basic | 102 502 650 | 85 009 436 | 102 285 760 | 83 614 716 | 92 848 011 |
| Weighted average no. of shares outstanding diluted | 103 737 650 | 93 202 430 | 102 285 760 | 92 383 097 | 92 848 011 |
| Earnings per share (NOK per share) - Basic | 0,18 | 0,21 | -7,49 | 0,10 | -0,77 |
| Earnings per share (NOK per share) - Diluted | 0,18 | 0,19 | -7,49 | 0,09 | -0,77 |
| 30.06.2020 | 30.06.2019 | 31.12.2019 | ||
|---|---|---|---|---|
| Amounts in NOK `000 | Note | (unaudited) | (unaudited) | (audited) |
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill | 9, 10 | 772 487 | 1 429 711 | 1 425 568 |
| Exploration and evaluation assets | 20 845 | 11 389 | 15 927 | |
| Oil and gas properties | 8 | 3 858 844 | 3 804 929 | 3 885 889 |
| Buildings | 8 | 85 563 | 90 188 | 87 875 |
| Furniture, fixtures and office equipment | 8 | 10 524 | 9 128 | 11 250 |
| Right-of-use assets | 3, 8 | 130 819 | 181 333 | 163 398 |
| Tax refund, non-current | 7 | 28 544 | - | - |
| Other non-current assets | 12 | 3 011 388 | 2 803 665 | 2 968 502 |
| Total non-current assets | 7 919 014 | 8 330 344 | 8 558 409 | |
| Current assets | ||||
| Trade and other receivables | 14 | 465 776 | 755 983 | 621 913 |
| Spareparts, equipment and inventory | 17 | 258 207 | 158 803 | 142 291 |
| Tax refund, current | 7 | 489 373 | - | - |
| Restricted cash Cash and cash equivalents |
- | 2 792 | - | |
| Total current assets | 15 | 916 958 | 1 329 263 | 1 663 478 |
| TOTAL ASSETS | 2 130 314 | 2 246 841 | 2 427 682 | |
| 10 049 328 | 10 577 185 | 10 986 091 | ||
| EQUITY AND LIABILITIES Equity |
||||
| Share capital | ||||
| Share premium | 13 | 10 250 | 10 184 | 10 206 |
| Other paid in capital | 1 912 462 | 1 912 195 | 1 912 462 | |
| Accumulated loss | 10 537 -1 014 498 |
2 152 -169 092 |
6 855 -248 094 |
|
| Total equity | ||||
| 918 751 | 1 755 439 | 1 681 430 | ||
| Non-current liabilities | ||||
| Asset retirement obligations | 16 | 4 069 235 | 3 916 736 | 4 024 420 |
| Pension liabilities | 3 | 28 326 | - | 26 857 |
| Lease liability | 3, 20 | 104 052 | 135 864 | 117 996 |
| Deferred tax liabilities | 7 | 1 001 330 | 695 385 | 830 417 |
| Interest-bearing loans and borrowings | 19 | 2 820 699 | 2 486 978 | 2 556 570 |
| Total non-current liabilities | 8 023 642 | 7 234 962 | 7 556 259 | |
| Current liabilities | ||||
| Trade and other payables | 18 | 899 889 | 945 354 | 1 371 587 |
| Income tax payable | 7 | 145 704 | 569 134 | 294 704 |
| Lease liability - current | 3, 20 | 26 752 | 45 544 | 45 544 |
| Public duties payable | 34 589 | 23 205 | 32 798 | |
| Provisions, current | - | 3 546 | 3 769 | |
| Total current liabilities | 1 106 934 | 1 586 784 | 1 748 402 | |
| Total liabilities | 9 130 576 | 8 821 746 | 9 304 661 | |
| TOTAL EQUITY AND LIABILITIES | 10 049 328 | 10 577 185 | 10 986 091 |
| Share | Other paid | Accumulated | |||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Share capital | premium | in capital | loss | Total equity |
| Equity at 1 January 2019 | 8 220 | 1 624 104 | 1 361 | -177 381 | 1 456 304 |
| Total comprehensive income/loss (-) for the period | 8 289 | 8 289 | |||
| Share issues, cash | 1 963 | 288 091 | 290 054 | ||
| Share based payment | 792 | 792 | |||
| Equity at 30 June 2019 | 10 184 | 1 912 195 | 2 152 | -169 092 | 1 755 439 |
| Equity at 1 July 2019 | 10 184 | 1 912 195 | 2 152 | -169 092 | 1 755 439 |
| Total comprehensive income/loss (-) for the period | -79 001 | -79 001 | |||
| Share issues, cash | 23 | 267 | 289 | ||
| Share based payment | 4 703 | 4 703 | |||
| Equity at 31 December 2019 | 10 206 | 1 912 462 | 6 855 | -248 094 | 1 681 430 |
| Equity at 1 January 2020 | 10 206 | 1 912 462 | 6 855 | -248 094 | 1 681 430 |
| Total comprehensive income/loss (-) for the period | -766 404 | -766 404 | |||
| Share issues, cash | 44 | 44 | |||
| Share based payment | 3 682 | 3 682 | |||
| Equity at 30 June 2020 | 10 250 | 1 912 462 | 10 537 | -1 014 498 | 918 751 |
| 01.01-30.06 | 01.01-31.12 | |||||
|---|---|---|---|---|---|---|
| Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 | ||
| Amounts in NOK `000 | Note | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (audited) |
| Cash flow from operating activities | ||||||
| Profit / loss (-) before income tax | -187 140 | 310 684 | -1 113 408 | 452 866 | 419 396 | |
| Income tax paid/received | 7 | -99 333 | 1 592 | -149 000 | 1 592 | -171 671 |
| Depreciation, depletion and amortization | 8 | 192 033 | 184 170 | 373 655 | 364 381 | 703 883 |
| Impairment | 8, 9, 10 | 297 969 | 43 010 | 931 689 | 96 658 | 105 394 |
| Accretion asset retirement obligations | 11 | 779 | 4 022 | 1 557 | 7 999 | 16 088 |
| Gain from sales of licenses | 6 | - | - | - | - | -19 063 |
| Interest expense | 11 | 111 111 | 55 542 | 183 372 | 109 960 | 297 998 |
| Loss on financial assets | - | - | 10 615 | - | - | |
| Change in trade and other receivables, and | ||||||
| inventory | 4 808 | 154 289 | 3 710 | 312 873 | 434 004 | |
| Change in trade and other payables | -74 407 | -113 989 | -468 991 | -186 147 | 335 354 | |
| Change in foreign exchange bond loans and | ||||||
| other non-current items | -249 039 | -23 021 | 244 715 | -49 859 | -10 267 | |
| Net cash flow from / used in (-) operating | ||||||
| activities | -3 220 | 616 299 | 17 915 | 1 110 323 | 2 111 116 | |
| Cash flow from investment activities | ||||||
| Investment in exploration and evaluation assets | -3 192 | -2 070 | -4 919 | -5 658 | -10 195 | |
| Business combination, cash paid | - | - | - | - | -40 000 | |
| Investment in oil and gas properties | -251 430 | -215 241 | -572 007 | -380 084 | -852 611 | |
| Investment in furniture, fixtures and office | ||||||
| machines | -1 541 | -3 077 | -1 792 | -7 183 | -11 628 | |
| Net investment in (-)/release of restricted cash | - | 139 331 | - | 45 535 | 48 327 | |
| Investment in financial assets | - | - | -10 615 | - | - | |
| Proceeds from sales of licenses | - | - | - | - | 18 716 | |
| Net cash flow from / used in (-) investment activities |
-256 163 | -81 057 | -589 333 | -347 389 | -847 391 | |
| Cash flow from financing activities | ||||||
| Net proceeds from borrowings, bond loan | - | - | - | - | 1 062 157 | |
| Repayment/buy-back of borrowings, bond loan | - | - | -51 690 | - | -1 107 839 | |
| Interest paid | -82 997 | -74 816 | -123 455 | -111 229 | -232 412 | |
| Net proceeds from share issues | 0 | 282 888 | 44 | 282 888 | 283 177 | |
| Net cash flow from / used in (-) financing | ||||||
| activities | -82 997 | 208 071 | -175 102 | 171 658 | 5 083 | |
| Net increase/ decrease (-) in cash and cash | ||||||
| equivalents | -342 381 | 743 314 | -746 520 | 934 593 | 1 268 807 | |
| Cash and cash equivalents at the beginning of | ||||||
| the period | 1 259 339 | 585 949 | 1 663 478 | 394 670 | 394 670 | |
| Cash and cash equivalents at the end of the | ||||||
| period | 916 958 | 1 329 263 | 916 958 | 1 329 263 | 1 663 478 | |
| Restricted cash at the end of the period | 0 | 2 792 | 0 | 2 792 | 0 | |
| Restricted and unrestricted cash at the end | ||||||
| of the period | 916 958 | 1 332 055 | 916 958 | 1 332 055 | 1 663 478 |
These financial statements are the unaudited interim condensed financial statements of OKEA ASA for the second quarter of 2020. OKEA ASA ("OKEA" or the "company") is a public limited liability company incorporated and domiciled in Norway, with its main office located in Trondheim. OKEA ASA's shares were listed on the Oslo Stock Exchange on 18 June 2019. The Company's ticker is OKEA.
The Company's overall vision is to be the leading company on the Norwegian Continental Shelf in terms of delivering safe and costeffective field developments and operational excellence, while maintaining a competent organisation with direct management engagement in all projects and activities.
The interim accounts have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim accounts do not include all the information required in the annual accounts and should therefore be read in conjunction with the annual accounts for 2019. The annual accounts for 2019 were prepared in accordance with EU`s approved International Financial Reporting Standards (IFRS).
The interim financial statements were authorised for issue by the company's Board of Directors on 13 July 2020.
The accounting policies adopted in the preparation of the interim accounts are consistent with those followed in the preparation of the annual accounts for 2019. New standards, amendments and interpretations to existing standards effective from 1 January 2020 did not have any significant impact on the financial statements.
The preparation of the interim accounts entails the use of judgements, estimates and assumptions that affect the application of accounting policies and the amounts recognised as assets and liabilities, income and expenses. The estimates, and associated assumptions, are based on historical experience and other factors that are considered as reasonable under the circumstances. The actual results may deviate from these estimates. The material assessments underlying the application of the company's accounting policies, and the main sources of uncertainty, are the same for the interim accounts as for the annual accounts for 2019.
The Company's only business segment is development and production of oil and gas on the Norwegian Continental Shelf.
Total other operating income/loss (-)
| 01.01-30.06 | 01.01-31.12 | ||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 |
| Sale of liquids | 230 143 | 930 937 | 648 659 | 1 501 098 | 2 486 165 |
| Sale of gas | 28 854 | 111 433 | 113 997 | 289 388 | 449 470 |
| Total petroleum revenues | 258 997 | 1 042 370 | 762 657 | 1 790 486 | 2 935 635 |
| Sale of liquids (boe*) | 946 957 | 1 772 730 | 1 854 479 | 3 031 989 | 5 024 339 |
| Sale of gas (boe) | 384 719 | 527 147 | 915 915 | 1 112 101 | 2 086 178 |
| Total Sale of petroleum in boe | 1 331 676 | 2 299 877 | 2 770 394 | 4 144 090 | 7 110 517 |
| *Barrels of oil equivalents | |||||
| Other operating income | |||||
| Yme compensation contract breach | - | - | - | 22 098 | 22 098 |
| Gain / loss (-) from put options, oil | -3 254 | -2 892 | 27 632 | -8 877 | -14 819 |
| Tariff income Gjøa | 13 315 | - | 28 496 | - | 56 681 |
| Sale of licenses | - | - | - | - | 19 971 |
| Joint utilisation of logistics resources | 5 526 | - | 6 569 | - | - |
15 587 -2 892 62 698 13 221 83 931
| 01.01-30.06 | 01.01-31.12 | ||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 |
| Change in deferred taxes current year | -312 451 | 15 868 | -170 914 | -24 997 | -72 117 |
| Taxes payable current year | - | -310 581 | - | -421 172 | -430 778 |
| Tax payable adjustment previous year | - | - | - | - | 117 251 |
| Tax refund current year | 517 917 | - | 517 917 | - | - |
| Change in deferred taxes previous year | - | - | - | - | -106 476 |
| Tax refund adjustment previous year | - | 1 592 | - | 1 592 | 1 592 |
| Total taxes (-) / tax income (+) recognised in | |||||
| the income statement | 205 466 | -293 121 | 347 003 | -444 577 | -490 527 |
| 01.01-30.06 | 01.01-31.12 | ||||
|---|---|---|---|---|---|
| Amounts in NOK `000 | Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 |
| Profit / loss (-) before income taxes | -187 140 | 310 684 | -1 113 408 | 452 866 | 419 396 |
| Expected income tax at nominal tax rate, 22% | 41 171 | -68 351 | 244 950 | -99 630 | -92 267 |
| Expected petroleum tax, 56% | 104 798 | -173 983 | 623 508 | -253 605 | -234 862 |
| Permanent differences, including impairment of | |||||
| goodwill | -42 317 | -31 830 | -511 376 | -71 970 | -61 583 |
| Effect of uplift | 87 231 | 6 942 | 102 299 | 13 257 | 47 993 |
| Financial and onshore items | 14 583 | -27 492 | -112 378 | -34 221 | -162 177 |
| Effect of new tax rates | - | - | - | - | |
| Change valuation allowance | - | - | - | - | - |
| Adjustments previous year and other | - | 1 592 | - | 1 592 | 12 368 |
| Total income taxes recognised in the income | |||||
| statement | 205 466 | -293 121 | 347 003 | -444 577 | -490 527 |
| Effective income tax rate | 110 % | 94 % | 31 % | 98 % | 117 % |
| Amounts in NOK `000 | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Tangible and intangible non-current assets | -1 991 045 | -1 835 460 | -1 945 367 |
| Provisions (net ARO), lease liability, pensions and gain/loss account | 1 148 657 | 1 164 430 | 1 163 869 |
| Interest-bearing loans and borrowings | -6 987 | -27 750 | -14 661 |
| Current items (spareparts and inventory) | -159 869 | -25 920 | -47 346 |
| Tax losses carried forward, onshore 22% | 1 190 | 679 | 1 190 |
| Tax losses carried forward, offshore 22% | - | - | - |
| Tax losses carried forward, offshore 56% | - | - | - |
| Uplift, offshore 56% | 6 723 | 28 637 | 11 898 |
| Valuation allowance (uncapitalised deferred tax asset) | - | - | - |
| Total deferred tax assets / liabilities (-) recognised | -1 001 330 | -695 385 | -830 417 |
Deferred tax is calculated based on tax rates applicable on the balance sheet date. Ordinary income tax is 22%, to which is added a special tax for oil and gas companies at the rate of 56%, giving a total tax rate of 78%.
Companies operating on the Norwegian Continental Shelf under the offshore tax regime can claim the tax value of any unused tax losses or other tax credits related to its offshore activities to be paid in cash (including interest) from the tax authorities when operations cease. Deferred tax assets that are based on offshore tax losses carried forward are therefore normally recognised in full.
There is no time limit on the right to carry tax losses forward in Norway.
| Amounts in NOK `000 | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Tax refund, non-current | 28 544 | - | - |
| Tax refund, current | 489 373 | - | - |
| Total tax refund | 517 917 | - | - |
Non-current tax refund is the tax value of exploration expenditures, which is paid in November the following year due to pledged terms under OKEA03.
Current tax refund is the residual tax value of tax losses in 2020, deducted for tax refund from exploration expenses. Current refund is received in six bi-monthly instalments, and is a part of the temporary change to tax regime for oil and gas companies for the income years 2020 and 2021, as enacted by the Norwegian Parliament in June 2020.
| Amounts in NOK `000 | Total |
|---|---|
| Tax payable at 1 January 2020 | 294 704 |
| Tax instalment paid | -49 667 |
| Tax payable at 31 March 2020 | 245 037 |
| Tax payable at 1 April 2020 | 245 037 |
| Tax instalments paid | -99 333 |
| Tax payable at 30 June 2020 | 145 704 |
| Oil and gas properties in production |
Oil and gas properties under development |
Buildings | Furniture, fixtures and office machines |
Right-of-use assets |
Total | |
|---|---|---|---|---|---|---|
| Amounts in NOK `000 | ||||||
| Cost at 1 January 2020 | 3 176 835 | 1 505 913 | 92 501 | 15 056 | 199 051 | 4 989 357 |
| Additions | 144 067 | 176 511 | - | 251 | - | 320 829 |
| Reclassification from inventory | 36 511 | - | - | - | - | 36 511 |
| Removal and | ||||||
| decommissioning asset | - | - | - | - | - | - |
| Disposals | - | - | - | - | - | - |
| Cost at 31 March 2020 | 3 357 413 | 1 682 424 | 92 501 | 15 308 | 199 051 | 5 346 697 |
| Accumulated depreciation and | ||||||
| impairment at 1 January 2020 |
-796 860 | - | -4 625 | -3 806 | -35 653 | -840 944 |
| Depreciation | -169 557 | - | -1 156 | -1 235 | -9 674 | -181 622 |
| Impairment | - | -35 060 | - | - | - | -35 060 |
| Disposals | - | - | - | - | - | - |
| Additional depreciation of IFRS 16 Right-of-use assets |
||||||
| presented gross related to | ||||||
| leasing contracts entered into | ||||||
| as licence operator | - | - | - | - | -11 289 | -11 289 |
| Accumulated depreciation | ||||||
| and impairment at | ||||||
| 31 March 2020 | -966 416 | -35 060 | -5 781 | -5 041 | -56 617 | -1 068 915 |
| Carrying amount at | ||||||
| 31 March 2020 | 2 390 997 | 1 647 364 | 86 719 | 10 267 | 142 435 | 4 277 781 |
| Cost at 1 April 2020 | 3 357 414 | 1 682 424 | 92 501 | 15 308 | 199 051 | 5 346 697 |
| Additions | 127 381 | 123 678 | - | 1 541 | - | 252 599 |
| Reclassification from inventory | - | - | - | - | - | - |
| Removal and | ||||||
| decommissioning asset | 372 | 372 | ||||
| Disposals | -8 746 | -8 746 | ||||
| Cost at 30 June 2020 | 3 485 166 | 1 806 101 | 92 501 | 16 849 | 190 306 | 5 590 923 |
| Accumulated depreciation and | ||||||
| impairment at | ||||||
| 1 April 2020 | -966 416 | -35 060 | -5 781 | -5 041 | -56 617 | -1 068 915 |
| Depreciation | -187 399 | - | -1 156 | -1 284 | -2 194 | -192 033 |
| Impairment | - | -243 548 | - | - | - | -243 548 |
| Disposals | 1 982 | 1 982 | ||||
| Additional depreciation of | ||||||
| IFRS 16 Right-of-use assets | ||||||
| presented gross related to | ||||||
| leasing contracts entered into | ||||||
| as licence operator | -2 659 | -2 659 | ||||
| Accumulated depreciation and impairment at |
||||||
| 30 June 2020 | -1 153 815 | -278 607 | -6 938 | -6 325 | -59 487 | -1 505 172 |
| Carrying amount at | ||||||
| 30 June 2020 | 2 331 351 | 1 527 494 | 85 563 | 10 524 | 130 819 | 4 085 751 |
| Technical | Ordinary | ||
|---|---|---|---|
| Amounts in NOK `000 | goodwill | goodwill | Total goodwill |
| Cost at 1 January 2020 | 1 114 547 | 416 415 | 1 530 962 |
| Additions through business combination | - | - | - |
| Cost at 31 March 2020 | 1 114 547 | 416 415 | 1 530 962 |
| Accumulated impairment at 1 January 2020 | -105 394 | - | -105 394 |
| Impairment | -352 735 | -245 925 | -598 660 |
| Accumulated impairment at 31 March 2020 | -458 130 | -245 925 | -704 054 |
| Carrying amount at 31 March 2020 | 656 417 | 170 491 | 826 908 |
| Cost at 1 April 2020 | 1 114 547 | 416 415 | 1 530 962 |
| Additions through business combination | - | - | - |
| Cost at 30 June 2020 | 1 114 547 | 416 415 | 1 530 962 |
| Accumulated impairment at 1 April 2020 | -458 130 | -245 925 | -704 054 |
| Impairment | -54 421 | - | -54 421 |
| Accumulated impairment at 30 June 2020 | -512 551 | -245 925 | -758 475 |
| Carrying amount at 30 June 2020 | 601 996 | 170 491 | 772 487 |
Tangible and intangible assets are tested for impairment whenever impairment indicators are identified and at least on an annual basis. Impairment is recognised when the book value of an asset or cash generating unit exceeds the recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use. The recoverable amount is estimated based on discounted future after tax cash flows. The expected future cash flows are discounted to net present value by applying a discount rate after tax that reflects the weighted average cost of capital (WACC).
Technical goodwill arises as an offsetting account to the deferred tax recognised in business combinations and is allocated to each Cash Generating Unit (CGU). When deferred tax from the initial recognition decreases, more goodwill is as such exposed for impairments.
Below is an overview of the key assumptions applied in the impairment test as of 30 June 2020:
| Year | Oil USD/BOE* |
Gas GBP/therm* |
Currency rates USD/NOK |
|---|---|---|---|
| 2020 | 40,9 | 0,23 | 9,7 |
| 2021 | 41,9 | 0,33 | 9,7 |
| 2022 | 43,0 | 0,37 | 9,7 |
| 2023 | 49,4 | 0,41 | 9,3 |
| 2024 | 59,0 | 0,41 | 8,5 |
| From 2025 | 65,0 | 0,43 | 8,0 |
* Prices in real terms
For oil and gas reserves future cash flows are calculated on the basis of expected production profiles and estimated proven and probable remaining reserves.
Future capex, opex and abandonment cost are calculated based on the expected production profiles and the best estimate of the related cost. For fair value testing the discount rate applied is 10.0% post tax.
The long-term inflation rate is assumed to be 2.0%.
Based on the impairment test, NOK 298 million in impairment charge was recognised in the second quarter of 2020 and relate to Yme asset under development with NOK 244 million with offsetting change in deferred tax of NOK 190 million and technical goodwill on Draugen and Gjøa with NOK 54 million. Impairments recognised in Q2 2020 were primarily driven by strengthening of NOK against USD, increased capital expenditures estimates for the Yme project and reduced reserve estimates for the P1 project on Gjøa, partly offset by increased forward prices for oil and a favourable impact of the new tax regulations.
The table below shows what impairment would have been in Q2 2020 changing various assumptions, based on all other assumptions remaining constant. The total figures shown are combined impairment for CGUs Gjøa, Draugen, Ivar Aasen and Yme.
| Alternative calculations of impairment in Q2 2020 (NOK '000) |
||||
|---|---|---|---|---|
| Increase in | Decrease in | |||
| Assumptions | Change | assumption | assumption | |
| Oil and gas price | +/- 10% | - | 970 834 | |
| Currency rate USD/NOK | +/- 1.0 NOK | - | 925 598 | |
| Discount rate | +/- 1% point | 454 807 | 167 236 | |
| Inflation rate | +/- 1% point | 197 999 | 417 981 |
| 01.01-30.06 | 01.01-31.12 | |||||
|---|---|---|---|---|---|---|
| Amounts in NOK `000 | Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 | |
| Interest income | 271 | 555 | 2 703 | 887 | 5 037 | |
| Unwinding of discount asset retirement | ||||||
| receivable (indemnification asset) | 19 349 | 24 714 | 38 698 | 49 428 | 98 856 | |
| Gain on buy-back bond loan | - | - | 15 318 | - | - | |
| Finance income | 19 620 | 25 269 | 56 718 | 50 315 | 103 893 | |
| Interest expense and fees to bondholders* | -111 111 | -60 315 | -183 372 | -119 408 | -297 882 | |
| Capitalised borrowing cost, development projects | 29 352 | - | 56 459 | - | - | |
| Interest expense shareholder loan | - | - | - | - | -116 | |
| Other interest expense | -235 | -740 | -785 | -829 | -12 300 | |
| Unwinding of discount asset retirement obligations | -20 127 | -28 736 | -40 255 | -57 427 | -114 944 | |
| Other financial expense | -1 993 | -4 501 | -13 969 | -6 466 | -19 639 | |
| Finance costs | -104 115 | -94 293 | -181 922 | -184 131 | -444 880 | |
| Put/call options, foreign exchange** | - | 3 361 | - | 6 875 | -42 171 | |
| Exchange rate gain/loss (-), bond loans | 223 289 | 23 670 | -295 153 | 51 060 | -3 396 | |
| Net exchange rate gain/loss (-), other | -46 353 | -13 864 | 89 725 | -16 922 | -21 210 | |
| Net exchange rate gain/loss (-) | 176 936 | 13 166 | -205 429 | 41 013 | -66 777 | |
| Net financial items | 92 441 | -55 858 | -330 632 | -92 802 | -407 764 |
*Interest expense bond loans in Q2 2020 includes waiver fees and costs related to increased redemption prices at maturity to 101% for OKEA02 and OKEA03, see note 19 for further information.
**Refer to note 21 for more information about derivatives.
| Amounts in NOK `000 | |
|---|---|
| Other non-current assets at 1 January 2020 (Indemnification asset) | 2 968 502 |
| Changes in estimates | 4 188 |
| Effect of change in the discount rate | - |
| Unwinding of discount | 38 698 |
| Total other non-current assets at 30 June 2020 | 3 011 388 |
The amount consists of a receivable from seller Shell from the acquisition of Draugen and Gjøa assets in 2018. The parties have agreed that the seller Shell will cover 80% of the actual abandonment expenses for the Draugen and Gjøa fields up to a predefined after-tax cap amount of NOK 638 million (2018 value) subject to Consumer Price Index adjustment. The present value of the expected payments is recognised as a pre-tax receivable on seller.
In addition, the seller has agreed to pay OKEA an amount of NOK 375 million (2018 value) subject to CPI adjustment according to a schedule based on the percentage of completion of the decommissioning of the Draugen and Gjøa fields.
The net present value of the receivable is calculated using a discount rate of 2.6% and recognised in the financial statements.
| Number of shares | Ordinary shares |
|---|---|
| Outstanding shares at 1.1.2020 | 102 064 050 |
| New shares issued during 2020 | 438 600 |
| Number of outstanding shares at 30 June 2020 | 102 502 650 |
| Nominal value NOK per share at 30 June 2020 | 0,1 |
| Share capital NOK at 30 June 2020 | 10 250 265 |
As per 30 June 2020 1,235,000 equity-settled warrants are still outstanding. See note 10 to the 2019 Annual Statements for further description.
| Amounts in NOK `000 | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Accounts receivable and receivables from operated licences | 37 775 | 103 698 | 254 626 |
| Accrued revenue | 38 291 | 279 317 | 73 211 |
| Prepayments | 26 490 | 33 701 | 9 883 |
| Working capital and overcall, joint operations/licences | 121 035 | 90 311 | 17 249 |
| Underlift of petroleum products | 241 102 | 193 785 | 262 095 |
| VAT receivable | 1 082 | 14 098 | 4 063 |
| Other short term receivables | - | 40 377 | - |
| Fair value put options, oil | - | 698 | 786 |
| Total trade and other receivables | 465 776 | 755 983 | 621 913 |
| Amounts in NOK `000 | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Bank deposits, unrestricted | 903 477 | 1 315 440 | 1 647 436 |
| Bank deposit, employee taxes | 13 481 | 13 823 | 16 041 |
| Total cash and cash equivalents | 916 958 | 1 329 263 | 1 663 478 |
| Amounts in NOK `000 | Total non current |
|---|---|
| Provision at 1 January 2019 | 3 859 308 |
| Additions and adjustments | - |
| Changes in estimates | -536 803 |
| Effects of change in the discount rate | 586 971 |
| Unwinding of discount | 114 944 |
| Total provisions at 31 December 2019 | 4 024 420 |
| Provision at 1 January 2020 | 4 024 420 |
| Additions and adjustments | - |
| Changes in estimates | 4 560 |
| Effects of change in the discount rate | - |
| Unwinding of discount | 40 255 |
| Total provisions at 30 June 2020 | 4 069 235 |
Provisions for asset retirement obligations represent the future expected costs for close-down and removal of oil equipment and production facilities. The provision is based on the company's best estimate. The net present value of the estimated obligation is calculated using a discount rate of 2%. The assumptions are based on the economic environment around the balance sheet date. Actual asset retirement costs will ultimately depend upon future market prices for the necessary works which will reflect market conditions at the relevant time. Furthermore, the timing of the close-down is likely to depend on when the field ceases to produce at economically viable rates. This in turn will depend upon future oil and gas prices, which are inherently uncertain.
For recovery of costs of decommissioning related to assets acquired from Shell, see note 12.
| Amounts in NOK `000 | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Inventory of petroleum products | 165 807 | 37 620 | 22 909 |
| Spare parts and equipment | 92 400 | 121 183 | 119 381 |
| Total spareparts, equipment and inventory | 258 207 | 158 803 | 142 291 |
| Amounts in NOK `000 | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Trade creditors | 19 208 | 53 812 | 339 909 |
| Accrued holiday pay and other employee benefits | 45 051 | 57 972 | 69 294 |
| Working capital, joint operations/licences | 447 422 | 451 455 | 613 329 |
| Accrued interest bond loans | 5 116 | 9 647 | 6 120 |
| Accrued consideration from acquisitions of interests in licenses | - | 164 782 | -0 |
| Prepayments from customers | 279 636 | 91 309 | 174 324 |
| Fair value put options, foreign exchange | - | 8 689 | - |
| Loan from shareholder OKEA Holdings Ltd | 1 257 | 1 141 | 1 257 |
| Other accrued expenses | 102 201 | 106 548 | 167 354 |
| Total trade and other payables | 899 889 | 945 354 | 1 371 587 |
| Amounts in NOK `000 | OKEA02 | OKEA03 | Total |
|---|---|---|---|
| Bond loans at 1 January 2020 | 1 540 153 | 1 016 417 | 2 556 570 |
| Amortisation of transaction costs | 4 938 | 2 672 | 7 610 |
| Buy-back OKEA02 | -67 008 | - | -67 008 |
| Increased redemption price at maturity to 101% | 16 781 | 11 593 | 28 374 |
| Foreign exchange movement | 179 337 | 115 817 | 295 153 |
| Bond loans at 30 June 2020 | 1 674 200 | 1 146 499 | 2 820 699 |
During 2019 and YTD 2020 the company was in compliance with the covenants under the bond agreements.
The company's proposed amendments to the bond agreements for OKEA02 and OKEA03 were adopted in bondholder meetings on 29 June 2020. The amendments secure financing terms better tailored for the current outlook
The revised bond terms affecting the covenants in the waiver period effective from 30 June 2020 to an including 31 December 2021 are for both OKEA02 and OKEA03 as following:
Shall not exceed:
(i) 3:1 to and including 30 June 2020;
(ii) 5:1 from 1 July 2020 to and including 30 September 2020;
(iii) 7:1 from 1 October 2020 to and including 30 June 2021;
(iv) 6:1 from 1 July 2021 to and including 30 September 2021; and
(v) 3:1 from 1 October 2021 to and including 31 December 2021.
During the waiver period, a breach of the Leverage Ratio covenant will only result in a default if the company is in breach on two consecutive calculation dates.
The covenant shall be calculated in USD by converting the cash equity capital using the NOK/USD exchange rate applicable at the time of registering the share capital.
Alignment of the definition of permitted hedging in the OKEA02 bond terms with OKEA03 bond terms
All call prices are increased by 1%
Outstanding bonds shall be redeemed at 101% of the nominal amount at the maturity date
All put prices are increased by 1%
The company shall not declare or make any dividends or grant any loans or other transfer of value to its shareholders
Security in any additional tax refund claims if at any time Norwegian law permits this
Extraordinary put option on 30 June 2021 up to 15% of outstanding bonds at 100% of the nominal amount
Fees related to the waiver process to bondholders and advisors have been expensed as finance cost in Q2 2020.
The Company has entered into operating leases for office facilities. In addition, the Company has entered into operating leases as an operator of the Draugen field for logistic resources such as platform supply vessel with associated ROV, base and spare part warehouse.
Amounts in NOK `000
| Payments of lease debt Total lease debt at 30 June 2020 |
-37 409 130 804 |
|---|---|
| Additions lease contracts Accretion lease liability |
4 673 |
| Lease debt 1 January 2020 | 163 540 |
| Break down of lease debt | |
|---|---|
| Short-term | 26 752 |
| Long-term | 104 052 |
| Total lease debt | 130 804 |
| Amounts in NOK `000 | 30.06.2020 |
|---|---|
| Within 1 year | 26 752 |
| 1 to 5 years | 104 707 |
| After 5 years | 53 918 |
| Total | 185 376 |
Future lease payments related to leasing contracts entered into as an operator of the Draugen field are presented gross.
| Amounts in NOK `000 | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Premium commodity contracts | - | 3 390 | 4 785 |
| Unrealised gain/loss (-) commodity contracts | - | -2 692 | -4 000 |
| Short-term derivatives included in assets | - | 698 | 786 |
| Premium currency contracts | - | - | |
| Unrealised gain/loss (-) currency contracts | - | -8 689 | - |
| Short-term derivatives included in assets/liabilities (-) | - | -8 689 | - |
It is assessed that the carrying amounts of financial assets and liabilities, except for interest-bearing loans and borrowings, is approximately equal to its fair values. For interest-bearing loans and borrowings, the fair value is estimated to be NOK 2 531 132 thousand at 30 June 2020. The OKEA02 and OKEA03 bond loans are listed on the Oslo Stock Exchange and the fair value is based on the latest quoted market prices (level 1 in the fair value hierarchy according to IFRS 13).
There are no subsequent events with significant accounting impacts that have occured between the end of the reporting period and the date of this report that are not already reflected or discloused in these financial statements.
| 01.01-30.06 | 01.01-31.12 | |||||
|---|---|---|---|---|---|---|
| EBITDA | Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 | |
| Amounts in NOK `000 | 3 months | 3 months | 6 months | 6 months | 12 months | |
| Profit / loss (-) from operating activities | -279 581 | 366 543 | -782 775 | 545 668 | 827 160 | |
| Add: depreciation, depletion and amortization | 192 033 | 184 170 | 373 655 | 364 381 | 703 883 | |
| Add: impairment | 297 969 | 43 010 | 931 689 | 96 658 | 105 394 | |
| EBITDA | 210 421 | 593 723 | 522 568 | 1 006 707 | 1 636 437 | |
| 01.01-30.06 | 01.01-31.12 | |||||
| EBITDAX | Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 | |
| Amounts in NOK `000 | 3 months | 3 months | 6 months | 6 months | 12 months | |
| Profit / loss (-) from operating activities | -279 581 | 366 543 | -782 775 | 545 668 | 827 160 | |
| Add: depreciation, depletion and amortization | 192 033 | 184 170 | 373 655 | 364 381 | 703 883 | |
| Add: impairment | 297 969 | 43 010 | 931 689 | 96 658 | 105 394 | |
| Add: exploration expenses | 10 452 | 33 825 | 37 892 | 46 227 | 299 446 | |
| EBITDAX | 220 872 | 627 548 | 560 461 | 1 052 934 | 1 935 883 | |
| 01.01-30.06 | 01.01-31.12 | |||||
| Production expense per boe | Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 | |
| Amounts in NOK `000 | 3 months | 3 months | 6 months | 6 months | 12 months | |
| Productions expense | 185 789 | 185 938 | 352 652 | 330 045 | 708 649 | |
| Minus: tariff income | -13 315 | - | -28 496 | - | -56 681 | |
| Divided by: produced volumes (boe) | 1 460 264 | 1 815 095 | 3 198 281 | 3 579 661 | 6 811 995 | |
| Production expense NOK per boe | 118,1 | 102,4 | 101,4 | 92,2 | 95,7 | |
| 01.01-30.06 | 01.01-31.12 | |||||
| Profit/loss (-) before tax per share | Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 | |
| Amounts in NOK `000 | 3 months | 3 months | 6 months | 6 months | 12 months | |
| Profit / loss (-) before income tax | -187 140 | 310 684 | -1 113 408 | 452 866 | 419 396 | |
| Divided by: weigh. average no. of shares | 102 502 650 | 85 009 436 | 102 285 760 | 83 614 716 | 92 848 011 | |
| Result before tax per share (NOK per share) | -1,83 | 3,65 | -10,89 | 5,42 | 4,52 | |
| 01.01-30.06 | ||||||
| Earnings per share | Q2 2020 | Q2 2019 | 2020 | 2019 | 2019 | |
| Amounts in NOK `000 | 3 months | 3 months | 6 months | 6 months | 12 months | |
| Net profit / loss (-) attributable to ordinary shares | 18 326 | 17 564 | -766 404 | 8 289 | -71 131 | |
| Divided by: weigh. ave. no. of shares - Basic | 102 502 650 | 85 009 436 | 102 285 760 | 83 614 716 | 92 848 011 | |
| or.div. by: weigh. average no. of shares - Diluted | 103 737 650 | 93 202 430 | 102 285 760 | 92 383 097 | 92 848 011 | |
| Earnings per share (NOK per share) - Basic | 0,18 | 0,21 | -7,49 | 0,10 | -0,77 | |
| Earnings per share (NOK per share) - Diluted | 0,18 | 0,19 | -7,49 | 0,09 | -0,77 | |
| Net interest-bearing debt | 30.06.2020 | 30.06.2019 | 31.12.2019 | |||
| Amounts in NOK `000 | ||||||
| Interest-bearing loans and borrowings | 2 820 699 | 2 486 978 | 2 556 570 | |||
| Minus: Cash and cash equivalents | 916 958 | 1 329 263 | 1 663 478 |
EBITDA is defined as earnings before interest and other financial items, taxes, depreciation, depletion, amortization and impairments.
EBITDAX is defined as earnings before interest and other financial items, taxes, depreciation, depletion, amortization, impairments and exploration expenses.
Net interest-bearing debt is book value of current and non-current interest-bearing debt excluding lease liability (IFRS 16) less cash and cash equivalents.
Production expense per boe is defined as production expense less tariff income divided by produced volumes.
Profit/loss (-) before tax per share is profit/loss (-) before income tax divided by weighted average number of shares outstanding.
We hereby confirm, to the best of our knowledge, that the unaudited interim financial statement for the period 1 January to 30 June 2020 of OKEA ASA have been prepared in accordance with IAS 34 Interim Financial Reporting and that the information presented gives a true and fair view of the company's assets, liabilities, financial position and results for the period viewed in their entirety and that the half year report gives a fair view of the information as described in the Securities Trading Act §5-6 fourth paragraph.
The Board of Directors of OKEA ASA Trondheim, 13 July 2020
Chaiwat Kovavisarach Nicola Carol Gordon Chairman of the Board Board Member
Board Member Board Member
Jan Atle Johansen Ragnhild Aas Board Member Board Member
Liv Monica Bargem Stubholt Rune Olav Pedersen Board Member Board Member
Michael William Fischer Erik Haugane Board Member CEO
Anne Lene Rømuld Paul Anthony Murray
Finn Haugan Prisana Praharnkhasuk Board Member Board Member
OKEA is an oil company contributing to the value creation on the Norwegian Continental Shelf with cost effective development and operation systems.
Ferjemannsveien 10 7042 Trondheim
www.okea.no
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