Annual Report • Apr 29, 2016
Annual Report
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| CEO's Letter to Shareholders | 4 |
|---|---|
| Board of Directors' Report 2015 | 6 |
| Statement Regarding Determination of Salary and | |
| Other Benefits for Senior Management | 10 |
| The Board of Directors | 12 |
| Board of Directors' Statement on Policy for Corporate | |
| Governance | 14 |
| Senior Management | 18 |
| Auditor's Report | 75 |
| Responsibility Statement | 77 |
| Consolidated Statement of Financial Position | 20 |
|---|---|
| Consolidated Statement of Profit or Loss | 21 |
| Consolidated Statement of Comprehensive Income | 22 |
| Consolidated Statement of Changes in Equity | 22 |
| Consolidated Cash Flow Statement | 23 |
| Note 1 | Corporate Information | 24 |
|---|---|---|
| Note 2 | Summary of Significant Accounting Policies | 25 |
| 2.1 | Basis of Preparation | 25 |
| 2.1.1 | Future Changes in Standards | 25 |
| 2.2 | Consolidation | 25 |
| 2.3 | Associates | 26 |
| 2.4 | Segment Reporting | 26 |
| 2.5 | Foreign Currency Translation | 26 |
| 2.6 | Intangible Assets | 27 |
| 2.7 | Impairment of Non-financial Assets | 27 |
| 2.8 | Trade Receivables and other Financial Assets | 27 |
| 2.9 | Cash and Cash Equivalents | 27 |
| 2.10 | Share Capital | 27 |
| 2.11 | Current and Deferred Income Tax | 27 |
| 2.12 | Employee Benefits | 28 |
| 2.13 | Provisions | 28 |
| 2.14 | Revenue Recognition | 28 |
| 2.15 | Construction Contracts | 29 |
| 2.16 | Dividend Distribution | 29 |
| 2.17 | Trade Payables | 29 |
| 2.18 | Operating lease | 29 |
| Note 3 | Financial Risk Management | 30 |
| 3.1 | Financial Risk Factors | 30 |
| 3.1.1 | Market Risk | 30 |
| 3.1.2 | Credit Risk | 30 |
| 3.1.3 | Liquidity Risk | 30 |
| 3.1.4 | Covenant | 30 |
| 3.1.5 | Capital and Cash Management | 30 |
| 3.2 | Fair Value Estimation | 30 |
| 3.3 | Investigation | 30 |
| Note 4 | Accounting Estimates and Judgments | 31 |
| 4.1 | Critical Accounting Estimates and Assumptions | 31 |
| 4.2 | Critical Judgments in Applying the Group's Policies 31 | |
| Note 5 | Segment Information | 32 |
| Note 6 | Intangible Assets | 34 |
|---|---|---|
| Note 7 | Investment in Associates | 34 |
| Note 8a | Financial Instruments by Category | 35 |
| Note 8b | Credit Quality of Trade Receivables and Cash | 36 |
| Note 9 | Trade and Other Receivables | 37 |
| Note 10 | Cash and Cash Equivalents | 38 |
| Note 11 | Share Capital | 38 |
| Note 12 | Share-Based Payments | 40 |
| Note 13 | Other Current Liabilities | 40 |
| Note 14 | Taxes | 41 |
| Note 15 | Retirement Benefit Obligations | 42 |
| Note 16 | Provisions | 43 |
| Note 17 | Employee Benefit Expense | 44 |
| Note 18 | Financial Income and Financial Expense | 46 |
| Note 19 | Earnings per Share | 47 |
| Note 20 | Dividend per Share | 47 |
| Note 21 | Cash Generated from Operations | 47 |
| Note 22 | Contingencies and Debt Securities | 48 |
| Note 23 | Related Party Transactions | 48 |
| Note 24 | Operating Leases | 49 |
| Note 25 | Foreign Exchange Gain/(Loss) | 49 |
| Note 26 | Other Operating Expense | 49 |
| Note 27 | Other Non-Current Assets | 50 |
| Note 28 | Construction Contracts | 50 |
| Note 29 | Loan and variable fee Logitel | 50 |
| Note 30 | Other Non-Current Liabilities | 51 |
| Note 31 | Events After Balance Sheet Date | 51 |
| Balance Sheet | 53 |
|---|---|
| Income Statement | 54 |
| Cash Flow Statement | 55 |
| Accounting Policies | 56 | |
|---|---|---|
| Note 1 | Equity | 58 |
| Note 2 | Taxes | 59 |
| Note 3 | Fixed and Intangible Assets | 60 |
| Note 4 | Investment in Subsidiaries and Receivables | |
| and Liabilities to Companies in the Group | 62 | |
| Note 5 | Other Non-Current Assets | 64 |
| Note 6 | Cash and Cash Equivalents | 64 |
| Note 7 | Shares and Share Options Owned or | |
| Controlled by the Board of Directors and | ||
| Senior Management | 64 | |
| Note 8 | Shareholder Information | 65 |
| Note 9 | Employee Benefit Expense | 66 |
| Note 10 | Retirement Benefit Obligations | 68 |
| Note 11 | Other Operating Expense | 68 |
| Note 12 | Lease Agreements | 69 |
| Note 13 | Earnings per Share | 69 |
|---|---|---|
| Note 14 | Other Current Liabilities | 69 |
| Note 15 | Share-Based Payments | 70 |
| Note 16 | Related Party Transactions | 71 |
| Note 17 | Financial Risk Management | 71 |
| Note 18 | Contingencies | 72 |
| Note 19 | Operating Revenue | 72 |
| Note 20 | Provisions | 72 |
| Note 21 | Financial Income and Financial Expense | 73 |
| Note 22 | Trade and Other Receivables | 73 |
| Note 23 | Investment in Associates | 73 |
| Note 24 | Receivable from Related Parties | 74 |
| Note 25 | Events After Balance Sheet Date | 74 |
History suggests that after a sustained and sharp drop in oil prices there will be a strong recovery. Most analysts, as well as oil & gas industry executives like myself agree on this. The uncertainty lies in when this will happen and at what level one can expect that oil prices remain at in the years to come.
There is little we can do about the price of oil. What we can do, and what is probably the best way out of the current crisis, is to make the development of fields profitable at lower oil prices. The way to tackle this is to standardize and develop more efficient solutions for new field developments. We must reduce unnecessary documentary requirements, and we must gain control over the overall costs.
During 2015, Sevan Marine carried out a significant reduction of its own cost base in order to adapt to the changing market conditions. This has been a difficult process for many involved. It has been necessary though to further strengthen the overall competitiveness of the company. I strongly believe that with a significantly improved cost base, combined with a unique cost efficient technology, Sevan Marine is very well place to benefit from the inevitable recovery of the market.
The financial performance for the year was heavily impacted by declining activity, particularly in the core Floating Production segment. One-off costs related to the restructuring program and corporate investigation as well as impairments also negatively affected the results for the year. On a positive note, the group achieved breakeven operating cash flow and was able to increase its overall cash balance to USD 36.6 million during the course of the year. A key target for 2016 remains to be cash flow breakeven before one-off items.
The company is in a financially strong position with no debt, a healthy cash balance and a much reduced fixed cost base thanks to the cost reduction measures undertaken.
We set out a number of strategic objectives and goals for the organisation at the beginning of last year and have been working hard to achieve those during the year. I would like to highlight some of these in this letter.
It made a strong impression when we at the end of last year were able to announce entering into a License and Service agreement with a major oil company for a prospect in the UK sector of the North Sea. We have been working on this project and with this client for more than two years and even though a final investment decision is yet to be made, the selection of our FPSO concept for this field is a very important confirmation of the competitiveness and suitability of our design.
A further great milestone was achieved when the "Goliat" FPSO, the world's northernmost offshore platform, was put into operation at the beginning of this year. Our team has been involved with this project over many years and was part of the successful installation of the platform last summer. It has already demonstrated its superior motion characteristics during several severe winter storms. It is fully winterized and uses the most advanced technology to minimize the impact on the environment, including receiving power from shore.
Another important milestone was achieved when we were able to secure a feasibility study for our FLNG concept with another major oil company and for a specific field. We have been developing the FLNG solution in-house and on a generic basis over several years and obtaining this recognition from a major oil company was the first target. The study has now been completed with good results, and I'm confident that it will lead to further paid study work in 2016.
In June last year, the UMS unit "Arendal Spirit" commenced its 3 year charter in Brazil under a contract with Petrobras. The feedback we are receiving from Teekay, who is operating the unit, is that it's performing as expected in terms of stability and operational performance.
It was also gratifying to note that DnV GL has included a separate notation in their classification standard for cylindrical shaped vessels. This is something that we have been striving towards for a long time, and we consider this as an important recognition of the general acceptance of our design.
Significant progress has also been made in developing HiLoad LNG into a novel and highly competitive solution for offloading of LNG. Testing and simulations of the unit together with Technip were successfully carried out last year and show that this is a cost effective, safe and reliable solution for offloading of LNG to standard LNG carriers. We believe this has the potential to become a game changer in this field.
Our creative engineers have also developed an application for HiLoad LNG to be utilized as a regasification unit and referred to as the Floating Regasification Dock (FRD). Addressing the downstream market with this cost efficient solution opens up a geographic market in areas where the power infrastructure is less developed such as the Philippines, Indonesia and the Caribbean. We signed the first FRD licence and service agreement with Vires early this year and remain optimistic that this may lead to more studies and projects in this emerging market.
Within topsides and processing, KANFA secured a large project with Yinson Production for the delivery of four modules to their OCTP project outside Ghana. This has provided KANFA with a solid workload during 2015 and with the project nearing completion a positive margin is also expected on the project in 2016.
I believe that the market for small to medium size FPSOs in the North Sea will be an interesting niche for our technology in the years to come as well as potentially larger units in the more northern Barents Sea. In areas where ice is present, our design has inherent benefits which have been confirmed through extensive analysis and model testing.
FLNG continues to be a key market for Sevan Marine, and the advantages our design can offer in terms of no turret, excellent motion characteristics and cost efficiency make us very competitive versus other hull shaped solutions. This, in combination with the acquisition of the proprietary HiLoad technology for offshore loading of LNG, should improve safety, uptime and increase flexibility as well as improve overall project economics.
The favourable features and characteristics of the cylindrical design also open up new, creative and cost effective solutions for the industry such as; bridge-linked connections to fixed platforms (allowing dry-trees to be used), the use of steel catenary risers in deep waters (for example in the outer continental shelf in the Gulf of Mexico where positive signals from US regulatory bodies have been received for non-disconnectable FPSOs based on the Sevan design) and workover drilling package in combination with production facilities (studies carried out). In addition, we continue to work on exploring opportunities to use our design outside of the Oil and Gas industry for example as a floating nuclear power plant, gas to wire power generation and potentially even in fish farming.
The market within floating production is expected to remain challenging this year. We do see an increasing number of inquiries for early phase studies. I believe this is a signal that the downturn is about to level off, and that market activity should gradually start picking up again.
We remain dedicated to our strategy of providing the market with a unique, low cost and efficient cylindrical design. To be successful in this challenging new market place, we will need to increasingly work with strong partners across the value chain, including engineering partners, project execution partners, construction yards and suppliers. To this effect we have established during the last year several new contacts with leading companies in their respective fields, and we will continue to forge stronger relationships with these players in the years to come.
I continue to believe that in order to realize the full potential of our technology and to become a true global solution provider we need to team up with a strategic partner that will complement Sevan in terms of size and market reach. We remain committed to continuing to explore the various strategic alternatives that may exist.
On a final note, I want to emphasize that there is currently a big push towards solutions that contribute to bringing field development costs down. I firmly believe our technology and competences will play an important role in the years to come in achieving exactly that. I want to express my deepest gratitude for the efforts our employees make in this respect, and the support we get from our customers as well as from you, our shareholders.
Many thanks and kind regards,
Sevan Marine ASA ("Sevan Marine" or the "Company") and its subsidiaries (together with the Company, "Sevan" or the "Group") is a technology, project development and engineering company. Sevan Marine has developed a cylinder shaped floater suitable for the offshore environment. Sevan is delivering products and solutions to the E&P industry, utilizing its core competencies within the areas of design, engineering and project execution. The basis for the products and solutions provided is the Sevan technology.
Sevan Marine is a Norwegian public limited liability company, with head offices in Arendal and listed on the Oslo Stock Exchange (ticker: SEVAN). The Group has no interest-bearing debt and focuses on securing new projects under a technology license model within the FPSO, FSO and FLNG market, as well as within other offshore markets.
Sevan Marine´s business segment Topside and Process Technology has developed its business over the past years and contributes with a substantial portion of the Group's total revenue. Sevan has a strategic partnership with Technip, with an objective to develop its business in the North Sea and provide access to other oil and gas markets. Technip Norge AS ("Technip") owns 49 percent of KANFA AS. Technip has the option to take over the remaining 51 percent of KANFA AS in 2017 based on a multiple of 2014, 2015 and 2016 results.
During the year, Sevan Marine provided engineering and site support services for the Goliat, Dana Western Isles and Logitel projects. Sevan Marine remains entitled to a variable license fee based on actual production of the Dana Western Isles project. The unit is currently being completed at the Cosco yard in China and not expected to be in production before the second half of 2017.
Sevan Marine worked on several studies and tenders for upcoming FPSO/FSO prospects, like the potential FPSOs for the Bream and UK sector fields and the potential FSOs for the Bentley and Culzean fields. For the most part these projects have been delayed or in the case of Culzean an alternative concept was selected.
The selection of the Sevan Marine concept for the UK sector FPSO prospect and the entering into of both License and Service Agreements in December 2015 was a very positive development and yet another endorsement of the unique cylindrical design. Payments under the license agreement remain subject to the field developers' final investment decision and start of construction of the unit, which is not expected before the second half of 2016. Sevan Marine has been awarded engineering services to support the project.
HiLoad LNG continued the development of both the HiLoad offloading system for FLNG and the Floating Regas Dock ("FRD") for small scale regasification projects during 2015. For offloading, HiLoad worked with Technip, integrating and simulating the use of their offloading technology together with the HiLoad. With respect to the FRD, the first license and service agreement was signed in early January 2016 with Vires Energy Corporation ("Vires") to support their regasification project in the Philippines. Payment under the license agreement is subject to Vires constructing and operating the regasification terminal. Construction is currently expected to start in 2016.
During the year, Sevan Marine achieved a major milestone by completing a paid feasibility study with an oil major to explore the use of Sevan Marine's cylindrical hull for a specific FLNG development. This study may result in further paid study work during 2016. Sevan Marine also held several meetings with oil & gas majors regarding other specific FLNG prospects and remains confident that further studies can be secured in this area.
The cost cutting programs launched in Q1 2015 had a positive impact for the year ending December 31, 2015 in excess of USD 4m. Headcount has been reduced by 30 or over 25 per cent in Sevan Marine. Additional cost reduction measures were also taken including the implementation of temporary leave for certain employees, the consolidating of offices in Arendal and the settlement of the CeFront cooperation agreement.
Further cost reduction measures have recently also been carried out in Q1 2016. This has included a further reduction in staff and a simplification of the management team. The senior management has been reduced by the departure of the former Chief of Staff Morten Martens Breivik in February 2016 and the former COO Mr. Lars Ødeskaug. Mr. Alf-Roger Skikstein has been appointed the new Managing Director of Sevan Marine reporting to the CEO, Mr. Carl Lieungh.
Due to the challenging market circumstances and poor results, selected senior employees of the Group have agreed to voluntary salary reductions ranging from 10 to 50 percent starting January 01, 2016.
Logitel, a susidiary of Teekay Offshore Partners, owns and operates accomodation units based on the Sevan Marine cylindrical design. The first unit, Arendal Spirit, was successfully delivered from the yard in February, 2015 and started its three year charter with Petrobras in June 2015. The first payment of USD 10 million in relation to Arendal Spirit was received in August 2015. Two additional units are currently
under construction at the Cosco yard in China.
During the year and due to the market situation, Logitel Offshore delayed the delivery and construction of rigs 2 and 3. This leads to delays in payment to Sevan Marine ASA in relation to these two vessels, and in Sevan Marine's view substantially increased the risk that options for further new builds will not be called off and / or such call offs will be delayed. This led to a revised assessment of the carrying value of the convertible loan to Logitel Offshore and substantial non-cash impairments during 2015. Further delays in delivery or even cancellation of the rig 2 and 3 construction contracts, cannot be ruled out and remains a material risk.
The board of Sevan Marine has in 2016 initiated a review of the circumstances surrounding and the legality of the Logitel Offshore agreements, including the USD 60m bond loan granted by Sevan Holding V AS to Logitel Offshore Pte Ltd ("Logitel") in 2013 and the Fourpartite Agreement entered into in 2014 between Sevan Marine, CeFront, Logitel and Teekay. The outcome of this review has exposed potential breaches of Norwegian corporate law in relation to these agreements. This could result in the agreements being void or voidable. Sevan Marine has initiated a dialogue with Logitel in an attempt to resolve the issues raised in an amicable manner and within the framework of applicable law. The outcome of this dialogue is however uncertain and may lead to litigation. As such, there remains material uncertainty regarding both the amount and timing of payments due in relation to both the Logitel loan and variable payments due from Logitel.
The Topside and Process segment had increased revenue and reduced losses in 2015 driven by the large OCTP project and the chemical injection package for Johan Sverdrup Field Centre Phase 1 in KANFA. Losses were largely driven by write downs taken on historical projects.
A goodwill impairment charge of USD 6.0 million was taken with respect to Sevan Marine's 51% holding in KANFA AS. This is a reflection of the weak results in 2015, and outlook.
A USD 37.0 million non-cash impairment was taken in relation to the Logitel Offshore convertible loan to reflect the estimated recoverable value. The total outstanding loan obligation remains USD 50 million.
Sevan Marine also had a USD 3.6 million foreign exchange loss related to its NOK currency holdings in 2015. Sevan Marine has USD as its functional currency yet held NOK 230.8 million in cash as Sevan Marine has the majority of its costs in NOK. The strong depreciation in the NOK over the period has generated a book loss when converting the NOK holdings to USD.
As announced, the Board received in October 2015 the external investigation report regarding allegations of possible improper conduct related to historical contracts with Petrobras in Brazil from Advokatfirmaet Selmer DA ("Selmer"). Sevan Marine decided to hand the report over to the Norwegian authority for investigation and prosecution of economic and environmental crime ("ØKOKRIM"). Sevan Marine has made no payments and had no interaction with the agent in question or any of his companies since the IPO of drilling activities and restructuring of Sevan Marine ASA in 2011. Sevan Marine is cooperating fully with relevant authorities in the various jurisdictions involved (Norway, Brazil, US and UK). Sevan Marine adheres to the strictest of compliance and ethical standards and continues to take this matter very seriously. Sevan Marine ASA has to date not been charged by any of the authorities involved.
Sevan Marine appointed Pareto Securities in April 2015 to explore potential strategic options for the Company. The corporate investigation carried out between June and October resulted in delays to the strategic review. The Company continues the work to explore strategic options for Sevan Marine.
The Board has communicated an intention to pay a dividend depending upon developments. Given the uncertain market outlook, the Board has decided not to pay an ordinary dividend in 2015. An extraordinary dividend in 2016 may be considered depending upon developments during the year.
Operating revenue for 2015 was USD 80.0 million (USD 102.4 million). EBITDA was negative with USD 10.7 million (positive with USD 5.5 million), and operating loss was USD 17.1 million (loss of USD 0.9 million). Net loss was USD 62.0 million (loss of USD 11.0 million).
The net loss of USD 62.0 million is a result of the impairment of the Logitel Offshore convertible loan (USD 37.0 million), write-down of Goodwill related to Sevan Marine's 51 percent holding in KANFA AS (USD 6.0 million) as well as the tax provision recorded in relation to the disputed adjusted 2012 tax assessment (USD 4.5 million). In addition, an unrealized foreign exchange loss of USD 3.6 million related to NOK-nominated cash positions adversely affected the net result.
At December 31, 2015, total consolidated assets amounted to USD 86.6 million (2014: USD 144.8 million), of which USD 36.6.million (2014: USD 27.3 million) was cash and cash equivalents.
At year end, the equity ratio was 49.7% (2014: 70.9%).
The Group has prepared the financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by EU.
As of year-end 2015, cash and cash equivalents amounted to USD 36.6 million (USD 27.3 million). The increase in cash and cash equivalents of USD 8.7 million is largely attributable to the USD 10 million received from Logitel in relation to Arendal Spirit offset by a final payment of USD 0.8m related to the acquisition of the HiLoad FLNG rights and operating cash flows.
A detailed cash flow statement is included in the financial statements.
As announced on January 19, 2016, Sevan Marine received a notice from Skatt Sør (Norwegian tax authorities) that the tax assessment for 2012 will be adjusted. Sevan Marine has per December 31, 2015 therefore recorded conservatively a USD 4.5 million (NOK 40.9 million) provision for the full amount of the potential additional tax, interest and penalty tax. Sevan Marine strongly disagrees with the tax authorities' view with respect to the factual as well as legal issues and will take action to contest the decision.
Sevan Marine has approximately NOK 3.5 billion in total Norwegian tax losses which are not reflected on the balance sheet. Sevan Marine believes that these losses could generate substantial value in the future.
The Group is exposed to market risk, credit risk and liquidity risk. The Group's overall risk management program focuses on the uncertainty of financial markets and seeks to minimize potential adverse effects on the Group's financial performance.
The Group's major customers are typically oil companies with a strong financial basis, but, as with suppliers and customers in general, there is a risk that unforeseen financial difficulties on the counterparty' side may arise which could have material adverse effects on the financial condition, the cash flows and/or the prospects of the Group.
The exposure to the oil and gas market also means that the Group is subject to the market risk of declining work and price pressure as has been experienced in 2015 after the large decline in oil prices.
Reference is made to note 3 in the 2015 Annual Report for further information, as well as to comments made under Going Concern below.
Developing sound health, safety and environment (HSE) principles is a critical success factor for the Company. The employees are involved in the planning and building of offshore units, where health and security aspects are given high attention in planning, training and operations of projects. The Group aims at designing units with focus
on energy efficient operations and low emissions with best available technology (BAT) evaluations, continually seeking ways to reduce the environmental impact while maintaining a robust and flexible design, fulfilling the customers' needs and expectations.
Sick leave was 1.9% (2014: 2.0%) for the Company for the year. No serious work incidents or accidents resulting in personal injuries or damages to materials or equipment occurred in 2015.
There has been no Lost Time Incidents (LTI) during 2015.
The board would like to thank the management and the employees for their dedication and efforts related to HSE during the year.
The Company is certified according to ISO 9001:2008 Quality Management System and ISO 14001 Environment Management System with the following Scope: 'Technology and Concept development, Sales and Project Execution and delivery of offshore floating units.
The work environment is good and is measured annually through employee satisfaction surveys. The Board and the management continue to focus on equal opportunities for men and women. 27 percent of the employees in the Company are women. Four of seven Board members at year end were women. The Company strives to ensure that there is no discrimination due to gender, ethnicity, national origin, descent, race, religion or functional disability. Currently, the Company has not implemented any specific measures in order to meet the objective of the Discrimination Act and of the Anti-discrimination and Accessibility Act. The need for specific measures in this respect is continuously considered by the Board and the management.
During 2015, the company implemented formal guidelines, procedures, standards and routines in relation to anti-bribery and corruption. This included training for all employees.
The Company has not implemented formal guidelines, procedures, standards or routines regarding human rights and environment in its business strategies and its operation.
The Company aims at maintaining sound corporate governance routines that provide the basis for long term value creation, to the benefit of shareholders, employees, other interested parties and the society at large.
As a guiding basis for its conduct of corporate governance, the Company uses the national Norwegian Code of Practice for Corporate Governance, of October 30, 2014. The status of corporate governance is addressed in a separate section of the Annual Report.
In 2015 Sevan Marine had its Annual General Meeting on May 21st. Members of the board are listed in Note 17.
In accordance with section 3-3(a) of the Norwegian Accounting Act,
the Board confirms that the annual accounts have been prepared on a going concern assumption, which the Board believes is appropriate based on the Company's strategic plans and financial prognosis.
The Board is of the opinion that the increased focus on cost effective solutions in the petroleum industry should be favourable for the Company, as floating units based on Sevan's technology represent inherent advantages. Amongst these are excellent motion characteristics, high deck load capacity, large storage space and substantial lower cost compared with alternatives when a turret is needed.
Sevan Marine works to achieve a good utilization of its staff with ongoing and new FEED / study work during 2016 and to secure further license income by late 2016 or early 2017.
Additional cost reduction measures are being implemented to minimize operating losses and cash burn. These measures include a further 15 to 20% reduction in headcount, voluntary salary cuts by staff and senior management, simplification of the group structure as well as continued stringent cost control.
Sevan Marine's FLNG concept has been well received. After the successful completion of an initial study for a U.S. oil major in the fall of 2015, it is expected that additional paid work will be carried out in 2016. In the longer term, Sevan Marine is optimistic that it can also secure license revenue in the FLNG segment.
Sevan Marine is pursuing opportunities to use the HiLoad both as an FLNG offloading solution as well as an LNG regasification unit or Floating Regas Dock ("FRD"). The HiLoad has attracted substantial
market interest. The license and engineering agreements signed with Vires are expected to generate income in 2016. Sevan Marine also believes that additional paid study work related to the HiLoad can be generated in 2016.
In KANFA AS, a high workload is expected on the OCTP project during the first half of 2016 with a positive margin expected. KANFA continues to tender for further projects which if successful could provide for backlog from late 2016. Cost reduction measures are being taken.
KANFA Aragon is primarily focusing on gas processing and FLNG markets. KANFA Aragon has secured workload through a study contract with a Singapore based client which is expected to provide backlog and improve results for the first half of 2016. Sevan Marine is considering its strategic options with respect to its shareholding in KANFA Aragon which may result in either a disposal or greater integration of KANFA Aragon's activities into Sevan Marine during the first half of 2016.
Sevan Marine believes with its solid cash position and cost reduction plans that it has the resources and ability to successfully weather the current slowdown in activity.
The Board proposes the following appropriation of the annual loss of USD 31.0 million in the parent company Sevan Marine ASA:
Loss transferred to other equity : USD 31.0 million Total appropriation: negative USD 31.0 million
Oslo, April 29, 2016 The Board of Directors of Sevan Marine ASA
Pursuant to § 6-16a of the Norwegian Public Limited Liability Companies Act, the Board of Directors shall prepare a statement on the determination of salary and other benefits to Senior Management. It is further stated in § 5-6 (3) of the Norwegian Public Limited Liability Companies Act that an advisory vote shall be held at the Annual General Meeting regarding the Board of Directors' guidelines for determination of remuneration to Senior Management for the next accounting year (ref. (ii) below). To the extent the guidelines are linked to share-based incentive schemes, they will also be subject to approval by the General Meeting (ref. (iii) below).
(i) Remuneration and other Benefits to Senior Management for the Previous Accounting Year
The Company has a remuneration committee which prepares guidelines for the remuneration of the Senior Management.
The Board of Directors adopts the terms and conditions for the remuneration to the CEO in accordance with the guidelines of the remuneration committee, as well as the principal resolutions regarding the Group's remuneration policy and benefit schemes for all employees.
The current senior management of the Company (the "Senior Management") includes:
Carl Lieungh, CEO Reese McNeel, CFO Alf-Roger Skikstein, Managing Director Sevan Marine Fredrik Major, CBDO Otto Skjåstad, Chief Technology Officer Aslak Hjelde, Managing Director KANFA
Remuneration of Senior Management for the accounting year 2015 is disclosed in Note 17 of the consolidated financial statements.
The CEO will receive 6-24 months' salary upon termination of employment, depending on the circumstances relating to the termination.
The guidelines for determination of remuneration to the Senior Management and any allotment of options were discussed at the Annual General Meeting in May 2015. The Board of Directors has not deviated from these guidelines in relation to the compensation package for Senior Management during the accounting year 2015.
Certain members of the Senior Management sit on the board of directors in the Company's subsidiaries and do not receive any board remuneration for these assignments.
(ii) Remuneration and other Benefits to Senior Management for the Next Accounting Year
For advisory vote at the Annual General Meeting in 2016, the Board of Directors presents the following guidelines for determination of remuneration and other compensation to Senior Management for the accounting year 2016 (which, when finally approved and agreed, will be made effective as of January 1, 2016), the principles and details of which in all material respect (except where otherwise stated) are in conformity with last year's guidelines.
The main objective of the Company's remuneration policy for the Senior Management is to provide a competitive and realistic framework for remuneration, contribute to the recruitment of senior personnel with the required skills and secure development of relevant expertise. In addition to the base salary, Senior Management participates in the Group's bonus scheme along with other key employees. The compensation package for the CEO and other members of the Senior Management may also include a company car arrangement, newspapers, mobile phone and refund of expenses for internet subscription, all in accordance with common market practice. Senior Management further participates in the Group's collective pension and insurance schemes along with all employees in the Group, as well as a pension scheme for Senior Management and certain key employees which covers pension benefits above 12 G. The Company operates both defined benefit and defined contribution plans. The defined benefit plans have 27 participants and have been closed for new participants since 2008. The defined contribution plan has 121 participants.
The Board of Directors may grant loans from the Company to key employees. Satisfactory security arrangements shall be provided and the interest rate shall correspond to the current standard interest rate for loans granted to employees.
The Company's remuneration policy is based on defined roles and responsibilities, clear goals and key performance indicators, combined with evaluation of results and achievements. The total compensation package shall as a guideline be at a level that corresponds to the market median in the different markets and industries in which the Group operates.
The annual wage and base salary adjustment takes place on January 1 each year, and shall be based on the general development of wages in the market and relevant industries, combined with an evaluation of the previous year's achievements and results. Any individual salary adjustment shall be based on the annual performance appraisal.
The Group's and the business areas' financial and non-financial results shall form the basis for the collective bonus scheme. A bonus scheme tied to individual performance and results is also established for key employees, including the Senior Management. The collective and individual bonus schemes may in total constitute up to 50% of the base salary. Bonus may be paid annually, based on a performance appraisal of results and achievements and subject to approval by the Board of Directors.
The purpose of the bonus schemes is to incentivise value creation and performance and to align objectives of the Company. The Board of Directors believe the bonus schemes may increase motivation, enthusiasm and team spirit in the organization, reward strong leadership and help foster and increase cooperation across departments and disciplines.
Given the uncertain outlook for 2016, a very limited bonus may be paid under the 2015 bonus scheme. This is despite a large number of the key objectives having been met.
The Board of Directors has confidence in the employees and their motivation and ability to contribute to the Company's results. The Board of Directors is of the opinion that the Company's future success to a high degree depends on highly motivated, qualified and competent Senior Management and staff in general. A well-defined compensation program, together with a good and inspiring work environment in an exciting business, enables the Company to recruit and retain good employees at all levels, and thereby remain competitive. Remuneration of employees is considered an essential contributor to the strategy of creating shareholder value.
The Board of Directors continues to believe that sensible share related incentive schemes, with due regard to the Corporate Governance guidelines' section 12, should form part of the Company's compensation package for employees and Senior Management. The Board of Directors will propose to the Annual General Meeting in 2016 to adopt necessary formal resolutions to authorise the Board of Directors to issue shares under a share related incentive scheme to be implemented.
Oslo, April 29, 2016 The Board of Directors of Sevan Marine ASA
Ms. Hatlen holds a MSc (Master of Science) in process engineering from NTNU/NTH and an MBA from INSEAD. She has a background from various management positions within the offshore sector, mainly from Statoil ASA. Ms. Hatlen was previously EVP of Statkraft and CEO of Oslo Universitetssykeshus. Ms. Hatlen has long experience
from various Boards, and has among other served as Chairman AS Vinmonopolet and Helse Øst and as Director of SMEDVIG ASA, PGS ASA, Kongsberggruppen ASA and NTNU. She is at present among other Chair of the Board of Entra ASA, The Norwegian Board of Technology, the Norwegian University of Life Sciences (NMBU) and director of Eksportkreditt AS and Infrastrukturforetaket SF. During 2014-16 she served as member of the Government's Productivity commission.
Jørgen Peter Rasmussen has held various senior positions in companies in the oil service industry, including Schlumberger where he worked for 26 years, inclusive of 4 years as General Manager and President of Scandinavia Oilfield Services 1998-2001. He Served as CEO in Archer Limited from 2010 to 2012 and Executive Chairman in Seawell Limited
Ms. Sæther holds an Executive MBA in Shipping Management and has attended management courses at the London School of Economics, Wharton School of the University of Pennsylvania and Harvard University. Ms. Sæther has more than 20 years of experience in the shipping and offshore industry. She joined Teekay in 2002 as a result of Teekay's
acquisition of Navion AS from Statoil ASA. Ms. Sæther held various management positions in Teekay's conventional tanker business until 2007, when she assumed the commercial responsibility for Teekay's shuttle tanker activities in the North Sea. In this role she managed the growth of Teekay's shuttle fleet. In 2011, Ms. Sæther was appointed the position of President, Teekay Shuttle and Offshore Services with a responsibility for the global activity within this business area. Ms. Sæther also serves as a director of Norwegian Oil and Gas Association, and is active in several other industry boards and associations. Ms. Sæther is a Norwegian citizen with residence in Stavanger, Norway.
Mrs. Thjømøe has 25 years of experience from the oil and energy sector and has served as Senior VP in Statoil ASA. She has been CFO of KLP, and CFO and CEO of Norwegian Property ASA. Mrs. Thjømøe holds a Master of Business and Economics from BI Norwegian Business School and is a Chartered Financial
Analyst from the Norwegian School of Economics and Business Administration (NHH) in Bergen, Norway.
She runs a consultancy and investment business and is a board member in several private and public companies and has also served as the chairman of the board of directors.
Mr. Sjursen holds a MSc (Master of Science) in Economics and Business Administration "Siviløkonom" from NHH. Mr. Sjursen currently runs his own investment and advisory business. Mr. Sjursen has worked for nearly two decades in Investment Banking within Pareto Securities AS in Oslo, both in International Institutional Sales and
Corporate Finance, where he has been working on numerous transactions in the oil and oil service industry. Mr. Sjursen is on the Board of several Norwegian private companies. Mr. Sjursen is a Norwegian citizen with residence in Oslo, Norway.
Mr. Lytzen holds a BsC in Mechanical Engineering from Danish Technical University. Mr. Lytzen is CEO Teekay Petrojarl (a part of Teekay Corporation). He joined Teekay Petrojarl as President and Chief Executive Officer in 2007. Mr. Lytzen's experience includes over 30 years in the oil and gas industry and he joined Teekay Petrojarl from Mae-
rsk Contractors, where he most recently served as Vice President of Production. In that role, he held overall responsibility for Maersk Contractors' technical tendering, construction and operation of FPSO and other offshore production solutions. He first joined Maersk in 1987 and held progressively responsible positions throughout the organization. His international experience spans positions in the Far East and Europe. Mr. Lytzen is a Danish citizen residing in Copenhagen, Denmark.
Employee representative of the Board and Discipline Lead - Structure Hans Olav Sele has 15 years' experience in the ship and offshore industry and is currently employed in Sevan Marine as Discipline Lead Structure/Marine. He has worked in Sevan Marine since 2010. He is an employee elected member of the board of directors. Mr. Sele has previously worked in Det Norske Veritas AS
Employee representative of the Board and Manager and Principal Engineer Technical Safety
Torlaug Lode has 20 years of experience in the offshore and shipping industry. Mrs Lode is currently employed in Sevan Marine as Principal Engineer Technical Safety where she has worked since 2007. She has previously worked in Subsea 7, ABB Offshore Systems, Umoe
ASA and Sørco. Mrs. Lode holds a MSc in Mechanical Engineering from NTNU/NTH (Trondheim) 1992. Mrs Lode is Norwegian citizen with residence in Arendal, Norway.
(now DNVGL) as a maritime technical consultant from 2001-2007 and later for the division Offshore Classification from 2007 to 2010. Mr. Sele holds a Sivilingeniør (M.Sc) in Marine Technology from Norwegian University of Science and Technology. Mr. Sele is a Norwegian Citizen with residence in Oslo, Norway.
As a listed company on the Oslo Stock Exchange (Oslo Børs), the Company aims at conducting its business in accordance with the Norwegian Code of Practice for Corporate Governance of October 30, 2014 (the "Code of Practice"). The Company's principles of corporate governance are in addition to the Code of Practice based on the Continuing Obligations of stock exchange listed companies from the Oslo Børs and the relevant Norwegian background law such as the Norwegian Accounting Act and the Norwegian Public Limited Liability Companies Act. The Code of Practice may be found at www. nues.no and the Continuing Obligations of stock exchange listed companies may be found at www.oslobors.no.
The Company operates on the basis of principles aiming at ensuring openness, integrity and equal treatment of its shareholders. By practicing good corporate governance, appropriate division of roles between shareholders, the Board of Directors and the Senior Management will be secured, thereby contributing to reduced business risk and better shareholder value over time. The Board of Directors and the Senior Management annually evaluate the principles on corporate governance and how they are implemented in the Group.
The Company is committed to high ethical standards in its business dealings to ensure that the integrity of its employees, the organization and the Sevan brand is maintained. Corporate social responsibility for the Company is an extension of the way the Company conducts its business. The Company's ethics policy and social responsibility policy is posted at the Company's website, www.sevanmarine.com.
In accordance with section 3-3 b of the Norwegian Accounting Act, the Company shall in connection with its annual financial statements provide a statement on how the Company has implemented the principles of, and account for any deviations from, the Code of Practice. Below is an outline on the Company's principles for corporate governance, in accordance with the categories listed in the Code of Practice.
The Company's objective, as set out in § 3 of the Company's articles of association (the "Articles"), is "to deliver products and services to the oil industry and activities related to this, and investing in other companies". The Board of Directors is of the opinion that the business objectives laid down in the Articles provide predictability and direction for the Company's business strategy and the activities that it may conduct, acquire or initiate. The Articles are available at the Company's website.
The Company's vision is to be a world-class company in some of the technologically challenging segments of the offshore oil and gas market. The Company focuses on utilizing its competitive advantages within design, engineering, project execution and operations to offer
cost-efficient and innovative products and solutions to its clients, based on the proprietary Sevan design.
The Company seeks to maintain a healthy financial structure which is adjusted to its business and the offshore market fluctuations, as well as the duration of its contract portfolio. As of December, 31, 2015, the Group had an equity share ratio of 49.7 percent. The Board of Directors continually reviews the Group's capital situation in light of the Company's targets, strategies and risk profile.
The Company also aims at providing its shareholders with a competitive return on investment over time, and targets that the underlying values shall be reflected in the Company's share price. The Company shall aim at paying dividends to its shareholders on a regular basis to the extent prudent in the circumstances.
The Board of Directors will propose to the Annual General Meeting in 2016 to grant the Board of Directors authorization to increase the share capital in connection with the incentive scheme for employees.
The Company does not hold treasury shares and the Board of Directors has not been granted any further authorizations to issue shares or other financial instruments.
The Company has one class of shares only and each share entitles the holder to one vote at the Company's General Meetings. Transactions with close associates shall be on arm's-length basis and always in compliance with the Norwegian Public Limited Liability Companies Act.
The Company has one major shareholder, Teekay Corporation ("Teekay"), which currently holds 43.5% of the Company's shares. As two out of the five of the Company's shareholder-elected members are Teekay employees, and the Company may engage in business activities with or in cooperation with Teekay, the Company has established specific guidelines for how to handle matters concerning the commercial relationship between the Company and Teekay. This shall be handled at board level, with a view to securing a foreseeable and consistent practice which caters for potential conflict of interest situations, arm's-length treatment and sound governance.
Pursuant to the Company's Rules of Procedure for the Board of Directors, in the event of transactions which are not insignificant between the Company and its shareholders, Directors or Senior Management, the Board of Directors shall obtain a valuation from an independent third party. Directors, the CEO and members of the Senior Management shall notify the Board of Directors in advance if they have a significant interest in any agreement which may or is to be entered into by the Company.
For more information about transactions with related parties, please refer to Note 23 to the consolidated financial statements included in the 2015 Annual Report.
The Company's shares are listed on Oslo Børs and are freely negotiable.
The General Meeting is the Company's supreme corporate body. The Articles and the Norwegian Public Limited Liability Companies Act set out the authority and mandate of the General Meeting. Among other things, the General Meeting approves the Company's annual financial statements, elects the Directors and the auditor, and also functions as a forum for presentation and discussion of other issues of general interest to shareholders. All shareholders of the Company have the right to attend the General Meetings.
The date of the Annual General Meeting is published in the Company's financial calendar for the year, which is posted at the Company's website. Notice of General Meetings, including documentation relating to the items on the agenda and the recommendation of the Company's nomination committee, is in accordance with the Articles published at the Company's website no later than 21 days before the General Meeting is to be held. Individual shareholders are entitled to have the documents sent to them free of charge, upon request to the Company. The General Meetings of the Company may be held in Arendal or Oslo.
Attendance forms for the General Meeting may be sent to the Company up to the day before such General Meeting in order to enable as many shareholders as possible to attend. Shareholders who are unable to attend in person may attend by proxy, and the Company provides the shareholders with proxy forms which enable the relevant shareholder to instruct its representative on each individual item on the agenda. The shareholders may decide between granting proxy to a representative of own choice, or to the Chairperson of the Board. The minutes from the General Meeting are published on the Company's website as soon as possible following the General Meeting.
The Company has a three member Nomination Committee elected by the General Meeting for a term of two years.
The Nomination Committee, which works under the mandate and authority of the General Meeting makes preparations and recommends candidates for the General Meeting's election of members of the Board of Directors. It also proposes the remuneration to the Directors. The Nomination Committee is governed by a provision in the Articles and Guidelines for the Nomination Committee adopted by the General Meeting.
The General Meeting determines the remuneration to the members of the Nomination Committee. Information regarding the composition of the Nomination Committee, which members are up for election and how input and proposals can be submitted to the Nomination Committee, are posted on the Company's website.
As of the date hereof, the Company is not required to and does not have a Corporate Assembly.
The Board of Directors shall pursuant to the Articles consist of five to nine members. Two members shall be elected by and among the employees in the Group, and the remaining members shall be elected by the General Meeting. The Chairperson is elected by the General Meeting. The Board of Directors currently consists of eight members (six elected by the General Meeting and two by and among the employees). Biographical information on each Director is outlined on page 12 of the 2015 Annual Report and at the Company's website.
Four out of six Directors elected by the shareholders are deemed to be independent of the Company's main shareholders and material business contacts. The non-independent Directors in this respect are the two Directors associated with Teekay.
The members of the Board of Directors are encouraged to hold shares in the Company, and several of them do. Information on the Directors' shareholdings in the Company are set out on the Company's website and Note 17 of the Consolidated Financial Statements.
The Board of Directors is ultimately responsible for administering the Company's affairs and for ensuring that the Company's operations are organized in a satisfactory manner. Moreover, the Board of Directors is responsible for establishing supervisory systems and for overseeing that the business is run in accordance with the Company's core values and ethical guidelines.
The Board of Directors prepares an annual plan for its work, with emphasis on objectives, strategies and implementation. Furthermore, the Board of Directors approves the budget for the Group.
The Board of Directors has prepared Rules of Procedure for the Board of Directors which feature, among other things, guidelines on responsibilities, authorizations, notification, preparation and convening of board meetings.
The Board of Directors meets minimum six times a year and more frequently if required. The Board of Directors held 14 board meetings in 2015, of which 8 were physical board meetings and 6 were held by telephone conference. The average participation level was 93%.
The Board of Directors has established a Compensation Committee, which acts as a preparatory and advisory working committee and prepares guidelines for the remuneration of the Senior Management, and handles any matters which arise in this respect.
The Board of Directors established an Audit Committee in 2010, which acts as a preparatory and advisory working committee with regard to the financials of the Company. The Audit Committee further assists the Board of Directors in various matters relating to the Company's financial statements, financial reporting processes and
15 16 ANNUAL REPORT SEVAN MARINE
internal controls, and the qualifications, independence and performance of the external auditor. The members of the Audit Committee receive additional remuneration for duties relating to the committee responsibilities, such remuneration being subject to approval by the Annual General Meeting.
The Board of Directors established an Ethics Committee during 2015. The Ethics Committee assists the Board of Directors in matters regarding the internal authority structure, compliance with the Company's Ethics Policy and general risk management in areas such as corporate governance, anti-bribery compliance, competition, export control and data protection compliance. The members of the Ethics Committee receive no additional remuneration for duties relating to the committee.
The Board of Directors shall ensure that the Company has good internal control functions and appropriate systems for risk management tailored to its operations and in accordance with the Company's core values, ethical guidelines and social responsibility policy. A review of the Company's most important risk areas and its internal control functions is conducted by the Board of Directors on an annual basis. The Company's Rules of Procedure for the Board of Directors and the CEO of the Company sets out among other things, the division of roles between the Board of Directors, the CEO and the Audit Committee, and their respective areas of responsibility, including control functions.
The Group is exposed to a variety of risks, including market risks, financial risks and operational risks. The Group's overall risk management programme seeks to minimize the potential adverse effects on the Group's financial performance likely to be caused by its exposure to such risk factors, including but not limited to the use of derivative financial instruments and development of sound health, safety and environment (HSE) principles as well as prudent monitoring of activities.
The Company prepares and publishes quarterly and annual financial statements. The Group's consolidated financial statements are prepared in accordance with IFRS and IFRIC interpretations as adopted by the EU.
The remuneration of the members of the Board of Directors is determined on a yearly basis by the Annual General Meeting. The Directors may also be reimbursed for travelling, hotel and other expenses incurred by them in attending board meetings or in connection with the business of the Company.
Remuneration of the Board of Directors, as proposed by the Nomination Committee and approved by the Annual General Meeting, is not linked to the Company's performance.
Details of the remuneration to the Board of Directors are disclosed in Note 17 to the Company's consolidated financial statements, included in the 2015 Annual Report.
The Board of Directors has established guidelines for the remuneration of the members of the Senior Management. These guidelines are presented to and approved by the Annual General Meeting and are described in the "Statement Regarding Determination of Salary and Other Benefits for Senior Management" which is included in "Board of Directors' Statement on Policy for Corporate Governance" on page 9 of the 2015 Annual Report.
Certain members of the Senior Management sit on the board of directors in the Company's subsidiaries and do not receive any board remuneration for these assignments.
The Board of Directors has incorporated guidelines for the Company's reporting of financial and other information based on openness, and taking into account the requirements for equal treatment of all participants in the securities market.
In order to ensure equal treatment of its shareholders, an important objective for the Company is to make sure that the securities market is in possession of correct, clear and timely information about the Company's operations and condition at all times. This is essential for an efficient pricing of the Company's shares and for the market's confidence in the Company.
Initiatives taken to meet this equal treatment objective include timely and comprehensive reporting of the Company's interim results and publication of the annual and quarterly financial reports. In addition, information of significance for assessing the Company's underlying value and prospects is reported through Oslo Børs and are made available at the corporate website in addition to being distributed to email-subscribers. Further details, such as contact details and general updates and news about the Company, are available at the Company's website.
The Company also encourages coverage by securities analysts. The Company's CFO is responsible for Investor Relations and the Company seeks to provide relevant and updated information to its shareholders, Oslo Børs, analysts and investors in general. The Company seeks to clearly communicate its long-term potential, including its strategy, value drivers and risk factors.
The Company shall maintain an open and proactive investor relations policy and shall give presentations regularly in connection with interim financial reports. The Company's financial calendar is available at the Company's website. Updated shareholder information is published at the website in addition to being sent directly to email-subscribers.
The Board of Directors will handle any possible takeover in accordance with Norwegian corporate law and its fiduciary duties. Neither the Articles of Association nor any underlying steering document prevent or limit the opportunity for investors to acquire shares in the Company, nor do they impose restrictions relative to takeover attempts or authorise measures to be taken by the Board of Directors to interfere. The Board of Directors will not seek to hinder or obstruct an offer for the Company's activities or shares unless there are particular reasons for this. The Board of Directors has so far chosen not to adopt or publish any explicit guiding principles for how it will act in the event of a takeover bid. The Board of Directors will consider issuing such guidelines during 2016.
Ernst & Young AS was elected the external auditor in 2013. The auditor participates regularly in meetings with the Audit Committee throughout the year. In addition, the Board meets with the auditor, without any member of the Company being present, at least once a year. The auditor annually reports the main features of the plan for the audit to the Audit Committee.
Once a year, the auditor presents a review of the Company's internal control procedures, including identifying weaknesses and proposals for improvement, to the Audit Committee.
In connection with the issue of the auditor's report, the auditor provides the Board of Directors with a declaration of independence and objectivity, and the auditor participates in the board meeting in which the annual financial statements are approved. The proposal for approval of the remuneration of the auditor provides a breakdown of remuneration relating to statutory audit tasks and other assignments, and is reported to the Annual General Meeting.
Oslo, April 29, 2016 The Board of Directors of Sevan Marine ASA
Mr. Lieungh holds a Master of Science from the Norwegian Institute of Technology and a Master of Management from The Norwegian School of Management. Mr. Lieungh has previous experience from the position as CEO for Norse Cutting & Abandonment AS (NCA) from 2008 to 2011 and as Senior Vice President for Business Development Oil,
Gas and Marine Solutions Division in Siemens AG from 2004 to 2007. Mr. Lieungh held key positions s as President for Kvaerner Process System Group of companies from 2001 to 2003 and was Managing Director of Hitec Framnes AS from 1998 to 2000. Mr. Lieungh has more than 25 years of experience from the oil and gas industry including management and development of enterprises, project management, marketing and international business development. Mr. Lieungh is a Board member of Randaberg Group. Mr. Lieungh is a Norwegian citizen with residence in Arendal, Norway.
Mr. McNeel holds an MBA from IESE Business School, Barcelona, Spain and is a Chartered Financial Analyst (CFA). Mr. McNeel has previous experience as a Director at AlixPartners, a global advisory firm, where he held numerous interim finance management positions, including being the interim CFO at Sevan Marine during 2011. Prior to AlixPart-
ners, Mr. McNeel was a Senior Manager at PricewaterhouseCoopers based in London. Mr. McNeel has extensive finance experience including audit, controlling, cash management, capital markets and M&A. He has also worked with oil companies and offshore service providers. Mr. McNeel is a US citizen with residence in Oslo, Norway.
Managing Director Sevan Marine Mr. Skikstein holds a BA in Mechanical Engineering from Trondheim College of Engineering. Mr. Skikstein has previous experience as Mechanical Engineer and Project Manager in Kanfa from 2000 to 2007; Mechanical Engineer, Project Manager and Department Manager in Kværner Process Systems from 1990 to 2000. Mr. Skikstein is a Norwegian
citizen with residence in Asker, Norway
Mr. Major holds a BSc in Naval Architecture and an MSc in Computer Science from NTNU in Trondheim 1976. Mr. Major has previous experience as Vice President Business Development in Advanced Production and Loading from 1995 to 2005; Technical Director in Ericsson AS from 1994 to 1995; Founder and Managing Director of Semafor Data,
from 1983 to 1994 (later Semafor AS and acquired by Ericsson AS in 1994); Independent Consultant from 1979 to 1983; and Research Engineer at NSFI, The Ship Research Institute of Norway (now Marintek), from 1976 to 1979. Mr. Major is a Norwegian citizen with residence in Arendal, Norway.
Mr. Skjåstad holds an MSc in Naval Architecture from NTNU in Trondheim 1983. Mr. Skjåstad has previous experience as Project Manager, Section Manager and Technical Director (APL Inc) in Advanced Production and Loading from 1993 to 2008; Research Engineer at SINTEF Structural Engineering from 1983 to 1993. Mr. Skjåstad is a
Norwegian citizen with residence in Arendal, Norway.
Mr Hjelde holds a degree in Mechanical engineering from 1979 and a degree in Economics from 1984. Mr. Hjelde has previous experience from Kongsberg Våpenfabrikk, Consultas Engineering, SB Verksted and Kvaerner Process Systems as designer, technical director, QA responsible, project manager and sales director. Mr. Hjelde is a Norwegian
citizen with residence in Hamburgsund, Sweden.
| Figures in USD 1,000,000 | Note | 2015 | 2014 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Other fixed assets | 0.6 | 0.8 | |
| Intangible assets | 6 | 1.3 | 6.6 |
| Investments in associates | 7 | 0.0 | 0.4 |
| Deferred income tax assets | 14 | 0.0 | 0.1 |
| Loan | 8a, 23, 29 | 16.0 | 50.0 |
| Other non-current assets | 27, 29 | 5.4 | 8.9 |
| Total non-current assets | 23.3 | 66.8 | |
| Current assets | |||
| Trade and other receivables | 8a, 8b, 9, 23, 29 | 26.7 | 50.6 |
| Cash and cash equivalents | 8a, 8b, 10 | 36.6 | 27.3 |
| Total current assets | 63.3 | 77.9 | |
| Total assets | 86.6 | 144.8 | |
| EQUITY Capital and reserves attributable to equity holders of the Company |
|||
| Share capital | 11 | 34.6 | 34.6 |
| Share premium | 11 | 21.0 | 21.0 |
| Other equity | -12.6 | 47.0 | |
| Total shareholders' equity | 43.0 | 102.6 | |
| Non-controlling interest | 6.8 | 8.6 | |
| Total equity | 49.8 | 111.1 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Retirement benefit obligations | 15 | 0.9 | 1.1 |
| Deferred income tax liabilities | 14 | 0.3 | 0.2 |
| Other non-current liabilities | 30 | 0.0 | 1.1 |
| Total non-current liabilities | 1.2 | 2.4 | |
| Current liabilities | |||
| Debt to credit institutions | 10 | 0.6 | 0.0 |
| Tax payable | 14 | 4.5 | 0.0 |
| Trade payables | 8a, 23 | 3.9 | 6.0 |
| Provisions | 16 | 0.9 | 4.6 |
| Other current liabilities | 13 | 25.7 | 20.6 |
| Total current liabilities | 35.6 | 31.2 | |
| Total liabilities | 36.8 | 33.6 | |
| Total equity and liabilities | 86.6 | 144.8 |
| Figures in USD 1,000,000 | Note | 2015 | 2014 |
|---|---|---|---|
| Operating revenue | 5 | 80.0 | 102.4 |
| Operating expense | -48.6 | -44.8 | |
| Depreciation, amortization and impairment | 5.6 | -6.4 | -6.4 |
| Employee benefit expense | 17 | -28.9 | -36.0 |
| Other operating expense | 26 | -12.5 | -14.8 |
| Foreign exchange gain/(loss) related to operation | 25 | -0.7 | -1.3 |
| Total operating expense | -97.0 | -103.3 | |
| Operating profit/(loss) | -17.1 | -0.9 | |
| Income from associated companies | 7 | 0.0 | 0.0 |
| Financial income | 18 | 1.2 | 2.4 |
| Financial expense | 18 | -38.7 | -0.6 |
| Foreign exchange gain/(loss) related to financing | 25 | -2.7 | -3.5 |
| Net financial items | -40.2 | -1.7 | |
| Profit/(loss) before tax | -57.2 | -2.5 | |
| Tax income/(expense) | 14 | -4.8 | -8.4 |
| Net profit/(loss) | -62.0 | -11.0 | |
| Attributable to: | |||
| Equity holders of the Company | -60.2 | -9.4 | |
| Non-controlling interest | -1.8 | -1.6 | |
| Earnings per share for profit/(loss) attributable to the equity holders of the Company during the year (USD per share): | |||
| - Basic | 19 | -1.18 | -0.21 |
| - Diluted | 19 | -1.18 | -0.21 |
Oslo, April 29, 2016 The Board of Directors of Sevan Marine ASA
| Figures in USD 1,000,000 | 2015 | 2014 |
|---|---|---|
| Net profit/(loss) | -62.0 | -11.0 |
| Actuarial gains/losses pension plan not to be classified to profit or loss in subsequent period | 0.1 | 0.0 |
| Foreign currency translation to be classified to profit or loss in subsequent period | 0.7 | -1.4 |
| Comprehensive income | -61.2 | -12.4 |
| Comprehensive income attribitable to equity holders | -59.4 | -10.8 |
| Comprehensive income attribitable to non-controlling interest | -1.8 | -1.6 |
| Figures in USD 1,000,000 | Attributable to equity holders of the Company | ||||
|---|---|---|---|---|---|
| Note | Share capital |
Share premium |
Other equity* |
Non controlling interest |
Total equity |
| December 31, 2014 | 11 34.6 |
21.0 | 46.9 | 8.6 | 111.1 |
| Net loss | -60.2 | -1.8 | -62.0 | ||
| Actuarial gains/(losses) | 0.1 | 0.1 | |||
| Foreign currency translation | 0.7 | 0.7 | |||
| December 31, 2015 | 11 34.6 |
21.0 | -12.6 | 6.8 | 49.8 |
* Accumulated foreign currency translation differences amounts to USD -2.1 million at the end of 2015 (2014: USD -2.8 million).
| Figures in USD 1,000,000 | Attributable to equity holders of the Company | |||||
|---|---|---|---|---|---|---|
| Note | Share capital |
Share premium |
Other equity* |
Non controlling interest |
Total equity |
|
| December 31, 2013 | 11 | 34.6 | 21.0 | 67.5 | 3.2 | 126.3 |
| Sale of shares to non-controlling interest | 0.7 | 7.0 | 7.7 | |||
| Dividend | -10.5 | -10.5 | ||||
| Net loss | -9.4 | -1.6 | -11.0 | |||
| Foreign currency translation | -1.4 | -1.4 | ||||
| December 31, 2014 | 11 | 34.6 | 21.0 | 46.9 | 8.6 | 111.1 |
* Accumulated foreign currency translation differences amounts to USD -2.8 million at the end of 2014 (2013: USD -1.4 million)
| Unaudited figures in USD million | Note | 2015 | 2014 |
|---|---|---|---|
| Cash flows from operating activities | |||
| Cash from operations | 21 | 1.1 | -9.2 |
| Interest paid | 0.0 | 0.0 | |
| Taxes paid | -0.9 | -1.4 | |
| Net cash generated from operating activities | 0.2 | -10.6 | |
| Cash flows from investment activities | |||
| Purchase of property, plant and equipment (PPE) | -0.1 | -0.5 | |
| Purchases of intangible assets | -0.8 | 0.0 | |
| Repayment of Logitel loan | 10.0 | 0.0 | |
| Net cash flow from investment activities | 9.1 | -0.5 | |
| Cash flows from financing activities | |||
| Sale of shares in KANFA AS | 0.0 | 7.7 | |
| Dividend | 0.0 | -10.5 | |
| Net cash flow from financing activities | 0.0 | -2.8 | |
| Net cash flow for the period | 9.3 | -13.9 | |
| Cash balance at the beginning of the year | 27.3 | 41.2 | |
| Cash balance at the end of the year | 36.6 | 27.3 |
Sevan Marine ASA (the "Company") and its subsidiaries (together with the Company the "Group") have developed a cylinder shaped floater, suitable for all offshore environments. The Company's primary focus is to create value for its shareholders by delivering products and solutions to the offshore industry, utilizing its core competencies within the areas of design, engineering and project execution. The basis for the products and solutions is the Sevan technology.
The Company is a public limited liability company incorporated and domiciled in Norway. The address of its registered office is Kittelsbuktveien 5, 4836 Arendal.
The Company's shares are listed on the Oslo Stock Exchange.
These consolidated financial statements were approved by the Board of Directors on April 29th, 2016.
| Registered | Indirect | Shareholder | Profit/(loss) | |||
|---|---|---|---|---|---|---|
| Subsidiaries | office | interest held | Shareholder | interest | Equity | 2015 |
| KANFA AS | Norway | 51 % | Sevan Marine ASA | 51 % | -0.6 | -2.1 |
| KANFA Mator AS | Norway | 51 % | KANFA AS | 51 % | -0.5 | -0.9 |
| KANFA Ingenium Process AS | Norway | 28 % | KANFA AS | 54 % | 1.8 | 1.1 |
| KANFA South East Asia | Malaysia | 51 % | KANFA AS | 51 % | 0.1 | 0.0 |
| KANFA Aragon AS | Norway | 50 % | Sevan Marine ASA | 50 % | 1.4 | -2.5 |
| KANFA Aragon Americas Inc | USA | 25 % | KANFA Aragon AS | 50 % | -0.4 | -0.3 |
| HiLoad LNG AS | Norway | 95 % | Sevan Marine ASA | 95 % | -0.8 | -0.5 |
| Sevan Marine do Brasil Ltda | Brazil | 100 % | Sevan Marine ASA | 100 % | 0.0 | 0.0 |
| Sevan Holding V AS | Norway | 100 % | Sevan Marine ASA | 100 % | 15.9 | -38.6 |
| Sevan Asia Pte Ltd | Singapore | 100 % | Sevan Marine ASA | 100 % | 3.3 | -0.3 |
| Sevan Management Services Pte Ltd | Singapore | 100 % | Sevan Asia Pte Ltd | 100 % | 0.5 | -0.1 |
| Sevan (Shanghai) Co | China | 100 % | Sevan Asia Pte Ltd | 100 % | 2.5 | 0.3 |
| Registered | Indirect | Shareholder | |||
|---|---|---|---|---|---|
| Associates | office | interest held | Shareholder | interest | |
| Hemla Vantage AS | Norway | 25 % | KANFA Aragon AS | 50 % | |
| Arendal Brygge AS | Norway | 35 % | Sevan Marine ASA | 35 % |
(Amounts in the tables above are prepared in local GAAP and presented in USD 1,000,000)
Subsidiaries listed above are included in Sevan Marine ASA's consolidated financial statements, as the control criteria in IFRS 10 are met.
The interest percentage held in KANFA Mator AS and KANFA Ingenium Process AS reflects Sevan Marine ASA's indirect holdings after it sold 49% of its shareholding in KANFA AS to Technip Norway in 2014. Accordingly, the interest held in KANFA Aragon Americas INC also reflects Sevan Marine ASA's indirect holdings.
The ownership in KANFA companies shows the ownership interest Sevan Marine ASA has in the different companies. Sevan has evaluated the consolidation requirements in IFRS 10 with respect to continued control and thus continued consolidation. Sevan is of the opinion that the control requirements are fulfilled, and thus the KANFA companies are consolidated on a 100% basis.
KANFA Aragon AS acquired a 50% share in Hemla Vantage AS in 2015. The ownership of 25% in the table above reflects Sevan Marine ASA's indirect ownership in the company. The investment of USD 0.8 million is written down to zero. The control criteria in IFRS 10 are not met for this company.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The presentation currency of the Group is USD which corresponds to the functional currency of the majority of the entities in the Group. All numbers are in USD 1,000,000 unless otherwise stated.
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted by the European Union (EU) and valid as of December 31, 2015. The consolidated financial statements have been prepared under the historical cost convention. No changes have been made in IFRS framework conditions that have a material effect on this year's financial statements. For information regarding future changes in financial standards, see Note 2.1.1.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group's accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.
The consolidated financial statements will be affected by future changes in IFRS. The IASB has both published and is working on projects that might affect the Sevan Marine Group's financial statements. The most important standards that could entail changes are the new IFRS 15 Recognition of Income (published in May 2014), IFRS 9 Financial Instruments (published in July 2014) and IFRS 16 Leases (published in January 2016). Work is also in progress on changes in the IFRS Conceptual Framework and a new standard for Insurance Contracts. The new standards will not come into force until 2018/2019.
Subsidiaries comprise all entities (including special purpose entities) over which the Group has the power to control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
When the Group has less than a majority of the voting rights of an
investee, the Group consider all relevant facts and circumstances in assessing whether it has power over an investee, including:
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control over the subsidiary.
A change in ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction.
The Group applies the acquisition method to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets transferred, equity instruments issued and liabilities incurred assumed at the date of exchange. Acquisitionrelated costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities incurred in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognized amounts of acquiree's identifiable net assets.
The excess of the cost of the acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized in the income statement immediately.
Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group.
The group treats transactions with non-controlling interests as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the group ceases to have control or significant influence, any retained interest in the entity is re measured to its fair value, with the change in carrying amount recognized in profit or loss. The fair
15 26 ANNUAL REPORT SEVAN MARINE
value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.
Associates comprise all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Group's investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income are reclassified to profit or loss where appropriate.
The Group's share of associates' post-acquisition profits or losses is recognized in the income statement, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealized gains on transactions between the Group and associates are eliminated to the extent of the Group's ownership share in the associate. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates are changed where necessary to ensure consistency with the policies adopted by the Group.
Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors, responsible for making strategic decisions, allocating resources and assessing performance of the operating segments.
The Group's segment reporting is divided into two: (i) Floating Production and (ii) Topside and Process Technology.
The activities within the Floating Production segment relate to the design, engineering and project development of the Sevan platforms (FPSOs, FSOs and FAUs). This includes licensing of the Sevan proprietary design for floating units.
The segment Topside and Process Technology consists of the activities of KANFA AS and KANFA Aragon AS with subsidiaries which
mainly relate to the provision of services and equipment packages to the processing plants of floating units.
The Group's operating segments operate in the global offshore market and have common marketing and Senior Management functions. Currently, the Group does not consider the business from a geographic perspective.
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which each entity operates ('the functional currency'). The consolidated financial statements are presented in USD, which is the Group's presentation currency. The functional currency for the parent company is USD.
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from settlement of such transactions (realized items) and from translation at exchange rates prevailing at balance sheet date of monetary assets and liabilities denominated in foreign currencies (unrealized items) are recognized in the income statement, except when deferred in equity as qualifying cash flow hedges.
Foreign exchange gains and losses relating to interest-bearing debt and cash and cash equivalents are presented (net) as a separate line item in the income statement within financial items. Foreign exchange gains and losses relating to operation are presented (net) as a separate line item in the income statement within operating expenses.
The results and financial position of all Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency, are translated into the presentation currency as follows: Assets and liabilities are translated at exchange rates prevailing at balance sheet date.
Income and expenses are translated at average exchange rates. All resulting exchange differences are recognized in Other Comprehensive Income.
Upon consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is sold, exchange differences that were recorded in equity are recognized in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisition of subsidiaries is included in 'intangible assets'. Goodwill on acquisitions of associates is included in 'investments in associates'. Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
Acquired computer software is capitalized on the basis of the cost incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives, ranging from three to five years. Cost associated with developing or maintaining computer software programs are recognized in the income statement as incurred.
Acquired technology rights are capitalized on the basis of the cost incurred to acquire. These costs are amortized over their estimated useful lives.
Assets that have an indefinite useful life are not subject to amortization but are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less cost to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels at which separate cash flows are identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that has suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Recoverable amounts for the assets or CGUs for which impairment loss has been recognized or reversed during the period have been disclosed.
Trade receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets. Trade receivables and other financial assets are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables and other financial assets is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The provision for impairment of trade receivables is recognized in the income statement as 'other operating expense'. The provision for impairment of other financial assets is recognized in the income statement as 'financial expense'.
Hedge accounting has not been applied in 2015 or 2014.
Loans and receivables are measured at fair value at transaction date, subsequently remeasured at amortized cost. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets are included in current assets, except for those with maturities greater than 12 months after balance sheet date, in which case they are classified as non-current assets.
In the consolidated statement of cash flow, cash and cash equivalents includes cash in hand, bank deposits, other short-term highly liquid investments with original maturities of three months or less.
Ordinary shares are classified as equity. Incremental cost directly attributable to the issue of new shares is shown in equity as a deduction, net of tax, from the proceeds. Where any Group company acquires the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable cost (net of income taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable transaction cost and income tax, is included in equity attributable to the Company's equity holders.
The tax expense for the period comprises current and change in deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates
15 28 ANNUAL REPORT SEVAN MARINE
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit and loss. Deferred income tax is determined using tax rates (and legislation) that have been enacted or substantially enacted by balance sheet date and are expected to apply when the deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred income tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. The tax base included in the calculation of deferred income tax is calculated in local currency and translated into USD at foreign exchange rates prevailing at balance sheet date. Deferred income tax asset and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities related to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Group companies operate both defined benefit and defined contribution plans. The schemes are funded through payments to insurance companies. For defined contribution plans, the group pays contribution to privately administrated pension insurance plans. The group has no further payment obligation once the contribution has been paid. The contribution are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset in the extent that a cash refund or a reduction in the future payments is available.
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefits plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the balance sheet in respect of defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognized
past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates on government bonds in the currency which the benefit will be paid, and that have terms to maturity approximating to the terms of the related obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged directly against equity through the statement of comprehensive income.
The Group recognizes a provision where contractually obliged or where there is a constructive obligation. The provision takes into account the incurred portion of the measurement period and shall be based on a 'best estimate' of the expected achievements of the key performance indicators as set out in the actual bonus program.
A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and the amount has been reliably estimated.
Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured as the present value of the expected expenditures required to settle the obligation using a pre-tax discount rate that accounts for time value of money and risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.
Revenue comprises the fair value of the consideration receivable for the sale of goods and services in the ordinary course of the Group's activities. Revenue is shown, net of value-added tax, estimated returns, rebates and discounts and after eliminated sales within the Group.
The group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the group's activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
Revenue is recognized as follows:
Cost regarding construction contracts is expensed when incurred. When the outcome of a construction contract cannot be estimated reliably, the contract revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract is recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period.
When it is probable that the total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
The stage of completion method is used for calculating the revenue for a certain measurement period.
Dividend distribution to the Company's shareholders is recognized as a liability in the Group's financial statements in the period in which the dividend is approved by the Company's shareholders.
Trade Payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
The Group has entered into several office lease agreements. These office lease agreements fall in under the operating lease definition and are thus not capitalized.
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance.
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the NOK, EURO and GBP. Foreign exchange risk arises from future commercial transactions, recognized assets or liabilities, and net investments in foreign operations.
Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not an entity's functional currency. The Group aims at achieving a natural hedge between cash inflows and cash outflows.
The Group has certain investments in foreign operations, who's net assets are exposed to foreign currency translation risk.
Based on the balance sheet clean-up resulting from the restructuring the Group assess the foreign exchange risk to be immaterial at the time of this report.
The Group is exposed to commodity price risk at two main levels; The demand for Sevan units is sensitive to oil price developments, fluctuations in production levels, exploration results and general activity within the oil industry.
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as loans and credit exposures to customers. With the exception of the USD 50 million outstanding loan to Logitel Offshore, the Group has no significant concentration of credit risk towards single financial institutions and has policies that limit the amount of credit exposure to any single financial institution.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities, and the ability to close out market positions.
The Group has implemented routines to continuously update its cash flow forecast when changes to main assumptions relating to repayment schedules, milestone payments in relation to construction contracts etc to be able to foresee the necessary actions to taken to rectify any potential adverse effects on its future liquidity position.
15 30 ANNUAL REPORT SEVAN MARINE
Sevan Marine has provided security to Nordea for guarantees, overdraft facilities and derivative transactions for KANFA Aragon AS and the KANFA AS Group. In the security arrangements the Company is committed to keep a minimum of NOK 20 million in cash in the accounts.
The security arrangements are described further in note 22.
The Group has exercised a conservative capital and cash management during 2015. A sound financial position, with no interestbearing debt and an asset light balance sheet reduces the capital and cash management risks.
Financial assets and liabilities which are measured at fair value or for which fair value are disclosed apply the following measurement hierarchy:
At balance sheet date the Group does not have any financial instruments at fair value.
As announced, the Board received in October 2015 the external investigation report regarding allegations of possible improper conduct related to historical contracts with Petrobras in Brazil from Advokatfirmaet Selmer DA ("Selmer"). Sevan Marine decided to hand the report over to the Norwegian authority for investigation and prosecution of economic and environmental crime ("ØKOKRIM"). Sevan Marine has made no payments and had no interaction with the agent in question or any of his companies since the IPO of drilling activities and restructuring of Sevan Marine ASA in 2011. Sevan Marine is cooperating fully with relevant authorities in the various jurisdictions involved (Norway, Brazil, US and UK). Sevan Marine adheres to the strictest of compliance and ethical standards and continues to take this matter very seriously. Sevan Marine ASA has to date not been charged by any of the authorities involved.
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are assumed to be reasonable under current circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the actual results. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed below.
The Group annually tests whether goodwill has suffered any impairment in accordance with the accounting policy stated in Note 2.8. These calculations require the use of estimates. The recognized goodwill is related to Topside & Process Technology segment. In 2014, Sevan Marine ASA sold 49% of its shareholding in KANFA AS to Technip Norway. In addition, Technip Norway has an option in 2017 to purchase Sevan Marine ASA's remaining shareholding (51%) at the following formula:
Average EBITDA for 2014, 2015 and 2016 multiplied with 8 multiplied with 51%
Based on this option agreement, the goodwill impairment test for 2015 was based on the following criteria:
Based on the impairment test performed, Sevan has in 2015 written down fully the remaining USD 6 million capitalized as goodwill in relation to KANFA.
The recognition of revenue and the estimation of the outcome of construction contracts requires significant management's judgment, in particular with respect to estimating the stage of completion and the expected time to completion. In addition, significant management judgment is required to assess the expected loss when it is expected that the total project costs will exceed the project revenues in respect of construction contracts.
15 31 ANNUAL REPORT SEVAN MARINE
The Group is subject to income taxes in various jurisdictions. Judgment is required in determining the provision for income taxes. During the ordinary course of business, transactions and calculations occur for which the ultimate tax effect is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recognized, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
The accounting for deferred income tax asset relies upon management's judgment of the Group's ability to generate future positive taxable income in each respective jurisdiction.
The companies within the Sevan Marine Group have in sum material deductible temporary differences (reference is made to note 15) which, dependent on meeting the recognition requirements according to IAS 12, could result in recognition of deferred tax assets in the balance sheet. The Company is of the opinion that at present the recognition requirements are not met and no deferred tax assets have been recognized in 2015.
The Group uses estimates in calculating provisions. Reference is made to Note 16.
The remaining Convertible bond loan to Logitel Offshore Pte Ltd of USD 50 million is classified as loan. Management has used judgements when assessing the impact of the agreements entered into in connection with the Logitel Offshore transactions and is of the opinion that this classification is in accordance with the underlying facts. Management has estimated impairment of loan to Logitel Offshore. Reference is made to Note 29.
The Group's segment reporting is divided into two: (i) Floating Production and (ii) Topside and Process Technology. Determination of the operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors, responsible for making strategic decisions, allocating resources and assessing performance of the operating segments.
Revenue in the Floating Production segment consists of the activities relating to the Goliat project, the Western Isles project and several studies. Income related to the Goliat customer, ENI constitute 25.8% of total external customer revenues. Income related to the Western Isles customer, Dana Petroleum constitute 14.6% of total external customer revenues.
The Topside and Process Technology segment consists of the activities of KANFA AS, KANFA Aragon AS, KANFA Ingenium Process AS and KANFA Mator AS whose primary business activities relate to the provision of services and equipment to processing plants for FPSOs. Income related to the OCTP customer, Yinson constitute 67.3% of total external customer revenues.
| Topside | |||
|---|---|---|---|
| Floating | and Process | ||
| Production | Technology | Eliminations | Group |
| 28.3 | 51.7 | 0.0 | 80.0 |
| 0.7 | 0.3 | -0.9 | 0.0 |
| 28.9 | 52.0 | -0.9 | 80.0 |
| -8.4 | -2.3 | 0.0 | -10.7 |
| -14.7 | -2.4 | 0.0 | -17.1 |
| -37.5 | |||
| -2.7 | |||
| -57.2 | |||
| -4.8 | |||
| -62.0 | |||
| Topside | ||||
|---|---|---|---|---|
| Floating | and Process | |||
| Year ended December 31, 2014 | Production | Technology | Eliminations | Group |
| Revenue from external customers | 63.1 | 39.3 | 0.0 | 102.4 |
| Intragroup revenue | 0.5 | 1.9 | -2.4 | 0.0 |
| Total operating revenue | 63.6 | 41.3 | -2.4 | 102.4 |
| EBITDA | 8.9 | -3.4 | 0.0 | 5.5 |
| Operating profit/(loss) | 2.6 | -3.5 | 0.0 | -0.9 |
| Net financial profit/(loss) | -1.7 | |||
| Share of profit/(loss) from associates | 0.0 | |||
| Profit/(loss) before tax | -2.5 | |||
| Tax income/(expense) | -8.4 | |||
| Net loss | -11.0 |
| Topside | ||||
|---|---|---|---|---|
| Floating | and Process | |||
| Year ended December 31, 2015 | Production | Technology | Eliminations | Group |
| Depreciation | -0.2 | -0.1 | 0.0 | -0.3 |
| Amortization | -0.1 | 0.0 | 0.0 | -0.1 |
| Impairment charge | -6.0 | 0.0 | 0.0 | -6.0 |
| Total | -6.3 | -0.1 | 0.0 | -6.4 |
| Topside | ||||
|---|---|---|---|---|
| Floating | and Process | |||
| Year ended December 31, 2014 | Production | Technology | Eliminations | Group |
| Depreciation | -0.4 | -0.1 | 0.0 | -0.5 |
| Amortization | 0.0 | 0.0 | 0.0 | 0.0 |
| Impairment charge | -5.9 | 0.0 | 0.0 | -5.9 |
| Total | -6.3 | -0.1 | 0.0 | -6.4 |
| Floating | and Process | |||
|---|---|---|---|---|
| December 31, 2015 | Production | Technology | Eliminations | Group |
| Assets | 64.4 | 22.2 | 0.0 | 86.6 |
| Investment in associates | 0.0 | 0.0 | 0.0 | 0.0 |
| Total assets | 64.4 | 22.2 | 0.0 | 86.6 |
| Liabilities | 14.9 | 21.8 | 0.0 | 36.7 |
| Total Liabilities | 14.9 | 21.8 | 0.0 | 36.7 |
| Floating | and Process | ||
|---|---|---|---|
| Production | Technology | Eliminations | Group |
| 118.4 | 26.0 | 0.0 | 144.4 |
| 0.4 | 0.0 | 0.0 | 0.4 |
| 118.8 | 26.0 | 0.0 | 144.8 |
| 18.8 | 14.8 | 0.0 | 33.6 |
| 18.8 | 14.8 | 0.0 | 33.6 |
| Topside |
Segment assets consist primarily of property, plant and equipment, intangible assets (including goodwill and software) and cash and cash equivalents. Segment liabilities comprise operating liabilities and non-current liabilities. Capital expenditures comprise additions to property, plant and equipment and intangible assets.
The Group's operating segments operate in the global offshore market and have common marketing and Senior Management functions. The revenue split, based on customer location, is as follows: Norway: USD 24.9 million UK: USD 8.4 million Singapore: USD 43.4 million Malaysia USD 3.3 million. Accounting principles applied for segmentation are outlined in Note 2.
| Technology | ||||
|---|---|---|---|---|
| Goodwill | Software | Rights | Total | |
| Year ended December 31, 2015 | ||||
| Book value January 1 | 6.0 | 0.4 | 0.2 | 6.6 |
| Currency translation adjustments | 0.0 | 0.0 | 0.0 | 0.0 |
| Additions | 0.0 | 0.0 | 0.8 | 0.8 |
| Impairment charge | -6.0 | 0.0 | 0.0 | -6.0 |
| Amortization | 0.0 | -0.1 | -0.1 | -0.1 |
| Book value December 31 | 0.0 | 0.3 | 0.9 | 1.3 |
| At December 31, 2015 | ||||
| Cost or valuation | 11.9 | 8.1 | 1.0 | 21.0 |
| Accumulated amortization and impairment | -11.9 | -7.8 | -0.1 | -19.8 |
| Book value December 31 | 0.0 | 0.3 | 0.9 | 1.3 |
| Technology | ||||
|---|---|---|---|---|
| Goodwill | Software | Rights | Total | |
| Year ended December 31, 2014 | ||||
| Book value January 1 | 11.9 | 0.5 | 0.2 | 12.6 |
| Currency translation adjustments | 0.0 | 0.0 | 0.0 | 0.0 |
| Additions | 0.0 | 0.0 | 0.0 | 0.0 |
| Impairment charge | -5.9 | 0.0 | 0.0 | -5.9 |
| Amortization | 0.0 | -0.1 | 0.0 | -0.1 |
| Book value December 31 | 6.0 | 0.4 | 0.2 | 6.6 |
| At December 31, 2014 | ||||
| Cost or valuation | 11.9 | 8.1 | 0.2 | 20.2 |
| Accumulated amortization and impairment | -5.9 | -7.7 | 0.0 | -13.6 |
| Book value December 31 | 6.0 | 0.4 | 0.2 | 6.6 |
Goodwill is related to the segment Topside & Process Technology which is one of the Group's cash-generating units (CGU) as identified according to the operating segment. The recoverable amount of the CGU was determined based on the option agreement with Technip and future outlook. Based on the impairment test performed, Sevan Marine has written down the remaining goodwill of USD 6 million in 2015.
Reference is made to Note 4.1 regarding the assumption used in the impairment test of goodwill.
| 2015 | 2014 | |
|---|---|---|
| Book value January 1, | 0.4 | 0.4 |
| Income/(loss) from associated companies | 0.0 | 0.0 |
| Write-down | -0.4 | 0.0 |
| Book value December 31, | 0.0 | 0.4 |
The USD 0.4 million relates to a 35% shareholding in Arendal Brygge AS.
Accounting principles for financial instruments were applied to the line items below as indicated:
| Loans and | |
|---|---|
| December 31, 2015 | receivables |
| Financial assets | |
| Loan | 16.0 |
| Trade and other receivables | 8.1 |
| Cash and cash equivalents | 36.6 |
| Total financial assets | 60.7 |
| Loans and | |
| December 31, 2014 | receivables |
| Financial assets | |
| Loan | 60.0 |
| Trade and other receivables | 16.6 |
| Cash and cash equivalents | 27.3 |
| Total financial assets | 103.9 |
| December 31, 2015 | liabilities |
|---|---|
| Financial liabilities | |
| Trade payables | 3.9 |
| Debt to credit institution | 0.6 |
| Derivatives used for hedging | 0.5 |
| Total financial liabilities | 5.0 |
| Other financial | |
| December 31, 2014 | liabilities |
| Financial liabilities | |
|---|---|
| Trade payables | 5.7 |
| Debt to credit institution | 0.0 |
| Derivatives used for hedging | 0.0 |
| Total financial liabilities | 5.7 |
The credit quality of trade receivables and cash that were neither past due nor impaired was assessed by reference to external credit ratings (where available) and by analysis of historical information about counterparty default rates:
| Trade receivables - Counterparty with external credit rating | 2015 | 2014 |
|---|---|---|
| A+ | 1.9 | 0.0 |
| BBB | 1.5 | 0.0 |
| A- | 1.4 | 0.0 |
| AAA | 0.4 | 0.0 |
| B+ | 0.3 | 5.9 |
| AA+ | 0.1 | 0.0 |
| AA | 0.0 | 2.6 |
| A3 | 0.0 | 1.8 |
| BBB+ | 0.0 | 1.1 |
| AA- | 0.0 | 0.5 |
| Total | 5.6 | 11.9 |
| Trade receivables - Counterparty without external credit rating | 2015 | 2014 |
| Group 1 | 0.6 | 4.8 |
|---|---|---|
| Group 2 | 1.9 | 0.0 |
| Group 3 | 0.0 | 0.0 |
| Total | 2.5 | 4.8 |
| Total trade receivables | 8.1 | 16.6 |
Group 1 - New customers (less than 6 months)
Group 2 - Existing customers (more than 6 months) with no defaults in the past
Group 3 - Existing customers (more than 6 months) with some defaults in the past
| Cash at bank and short-term bank deposits | 2015 | 2014 |
|---|---|---|
| Aa2 | 18.2 | 0.0 |
| Aa3 | 5.5 | 0.4 |
| A1 | 12.2 | 0.0 |
| A2 | 0.0 | 18.5 |
| BBB+ | 0.0 | 7.9 |
| Not rated | 0.7 | 0.5 |
| Total cash and cash equivalents | 36.6 | 27.3 |
| 2015 | 2014 | |
|---|---|---|
| Trade receivables | 9.4 | 17.4 |
| Provision for impairment of receivables | -1.3 | -0.8 |
| Trade receivables – net | 8.1 | 16.6 |
| Prepayments | 1.2 | 3.0 |
| Loan Logitel - current part | 0.0 | 10.0 |
| Variable Logitel - current part | 5.0 | 0.0 |
| Other receivables | 0.5 | 4.2 |
| Accrued income | 11.8 | 16.8 |
| Trade and other receivables | 26.7 | 50.6 |
The Group has not made any actual losses on receivables during 2015 or 2014.
| 2015 | 2014 | |
|---|---|---|
| Trade receivables | 8.1 | 16.6 |
| Prepayments | 1.2 | 3.0 |
| Loan Logitel - current part | 0.0 | 10.0 |
| Variable Logitel - current part | 5.0 | 0.0 |
| Other receivables | 0.5 | 4.2 |
| Accrued income | 11.8 | 16.8 |
| Total trade and other receivables | 26.7 | 50.6 |
Trade receivables that are less than three months past due are generally not considered for impairment. At balance sheet date, trade receivables of USD 3.9 million (2014: 4.5) were past due but not impaired except for the provision of USD 1.3 million. These overdue receivables relate to several independent customers with whom the Group has no history of default.
| 2015 | 2014 | |
|---|---|---|
| Before due date | 4.2 | 12.1 |
| Up to 3 months after due date | 2.1 | 3.4 |
| Between 3 and 6 months after due date | 0.6 | 1.1 |
| More than 6 months after due date | 1.2 | 0.1 |
| Total trade receivables | 8.1 | 16.6 |
| 2015 | 2014 | |
|---|---|---|
| USD | 1.4 | 3.7 |
| GBP | 0.0 | 0.3 |
| NOK | 5.1 | 10.2 |
| EUR | 1.5 | 2.4 |
| Total trade receivables | 8.1 | 16.6 |
| 2015 | 2014 | |
|---|---|---|
| Cash at bank and in hand | 35.4 | 23.7 |
| Restricted employees' tax deduction fund | 0.6 | 1.3 |
| Restricted short-term bank deposits 1) | 0.5 | 2.4 |
| Total cash and cash equivalents | 36.6 | 27.3 |
| Debt to credit institutions | -0.6 | 0.0 |
| Net cash and cash equivalents | 36.0 | 27.3 |
1) USD 2.0 million in 2014 relates to deposit for bank guarantees in KANFA. The deposit was released in March 2015.
At year end 2015 the Group had NOK 35.4 million in unused overdraft facility. The facility relates to the T&P segment.
The total authorized number of ordinary shares was 52.6 million (2014: 52.6 million) with a par value of NOK 4.00 per share. All issued shares were fully paid at balance sheet date.
| Number of shares | Share capital | Share premium | Total | |
|---|---|---|---|---|
| January 1, 2015 | 52,606,999 | 34.6 | 21.0 | 55.6 |
| Proceeds from shares issued | 0 | 0.0 | 0.0 | 0.0 |
| Cost of share issues, net of tax | 0 | 0.0 | 0.0 | 0.0 |
| December 31, 2015 | 52,606,999 | 34.6 | 21.0 | 55.6 |
| Number of shares | Share capital | Share premium | Total | |
|---|---|---|---|---|
| January 1, 2014 | 52,606,999 | 34.6 | 21.0 | 55.6 |
| Proceeds from shares issued | 0 | 0.0 | 0.0 | 0.0 |
| Cost of share issues, net of tax | 0 | 0.0 | 0.0 | 0.0 |
| December 31, 2014 | 52,606,999 | 34.6 | 21.0 | 55.6 |
| 20 largest shareholder accounts at December 31, 2015: | Number of | Ownership |
|---|---|---|
| Shareholder accounts | No. of shares | %-share |
| TEEKAY SERVICE HOLDING | 21,091,847 | 40.1 |
| HOME CAPITAL AS | 2,435,448 | 4.6 |
| GOLDMAN SACHS INTERN | 2,217,852 | 4.2 |
| ILIAD INTERNATIONAL* | 1,801,784 | 3.4 |
| F2 FUNDS AS | 1,767,095 | 3.4 |
| SUNDT AS | 1,257,486 | 2.4 |
| MATHIAS HOLDING AS | 1,200,000 | 2.3 |
| DNB NOR MARKETS, AKS | 1,085,718 | 2.1 |
| PREDATOR CAPITAL MAN | 908,000 | 1.7 |
| MP PENSJON PK | 837,584 | 1.6 |
| ANDENERGY AS | 804,326 | 1.5 |
| INVESCO PERP EUR SMA | 765,804 | 1.5 |
| KING KONG INVEST AS | 700,000 | 1.3 |
| BAKLIEN ÅSMUND | 700,000 | 1.3 |
| MSCO EQUITY FIRM ACC | 681,266 | 1.3 |
| CARE HOLDING AS | 555,463 | 1.1 |
| BEKKESTUA EIENDOM AS | 534,000 | 1.0 |
| DEUTSCHE BANK AG | 500,000 | 1.0 |
| CITIBANK, N.A. | 493,241 | 0.9 |
| PERESTROIKA AS | 492,857 | 0.9 |
| Total, 20 largest shareholder accounts | 40,829,771 | 77.6 |
| Remaining shareholders | 11,777,228 | 22.4 |
| Total shareholders | 52,606,999 | 100.0 |
15 39 ANNUAL REPORT SEVAN MARINE
* Controlled by Teekay
| 20 largest shareholder accounts at December 31, 2014: | Number of | Ownership |
|---|---|---|
| Name | shares | share (%) |
| TEEKAY SERVICE HOLDING | 21,091,847 | 40.1 |
| ILIAD INTERNATIONAL * | 1,801,784 | 3.4 |
| VPF NORDEA KAPITAL | 1,752,019 | 3.3 |
| F2 FUNDS AS | 1,735,066 | 3.3 |
| THE BANK OF NEW YORK | 1,569,005 | 3.0 |
| DEUTSCHE BANK AG | 1,200,000 | 2.3 |
| SKANDINAVISKA ENSKILDA | 1,135,448 | 2.2 |
| MORGAN STANLEY & CO. | 1,095,879 | 2.1 |
| PREDATOR CAPITAL MANAGEMENT | 965,000 | 1.8 |
| MP PENSJON PK | 837,584 | 1.6 |
| SUNDT AS | 832,486 | 1.6 |
| ANDENERGY AS | 801,326 | 1.5 |
| INVESCO PERP EUR SMA | 765,804 | 1.5 |
| VPF NORDEA AVKASTNING | 736,553 | 1.4 |
| BAKLIEN ÅSMUND | 700,000 | 1.3 |
| CITIBANK, N.A. | 531,955 | 1.0 |
| DNB NOR MARKETS, AKS | 531,514 | 1.0 |
| BEKKESTUA EIENDOM AS | 512,000 | 1.0 |
| MATHIAS HOLDING AS | 500,000 | 1.0 |
| PERESTROIKA AS | 495,830 | 0.9 |
| 20 largest shareholder accounts | 39,591,100 | 75.3 |
| Remaining shareholders | 13,015,899 | 24.7 |
| Total shareholders | 52,606,999 | 100.0 |
* Controlled by Teekay
The exercise prices of share options awarded to employees was at minimum equal to the market price of the share at the time of the award. All of the remaining options may be exercised with 1/3 each year, first time one year following the award and expire five years following the award. Upon the occurrence of a "change of control" all outstanding options may be exercised. A "change of control" shall be deemed to have occurred if more than 1/3 of the Company's shares are owned by a shareholder or group of shareholders. In November 30, 2011 Teekay Corporation subscribed and paid for new shares, obtaining an ownership of more than 1/3 of the Company's shares. As a result of this, these share options are now exercisable and the related remaining share option cost was accounted for in full in 2011. The Group has no legal or constructive obligation to repurchase or settle the options in cash.
| 2015 | 2014 | |||
|---|---|---|---|---|
| Average exercise price | Average exercise price | |||
| after reverse share split | No. of | after reverse share split | No. of | |
| (NOK per share) | options | (NOK per share) | options | |
| January 1 | 881 | 33,000 | 881 | 33,000 |
| Granted | 0 | 0 | 0 | 0 |
| Exercised | 0 | 0 | 0 | 0 |
| Lapsed/forfeited | -881 | -33,0000 | 0 | 0 |
| December 31 | 0 | 0 | 881 | 33,000 |
At balance sheet date there are no remaining options (2014: 33 thousand), all options remaining in 2014 expired in 2015 and no options were exercised during 2015 and 2014.
| Exercise price after | Share options | ||
|---|---|---|---|
| reverse share split 1:100 | remaining at the end of year | ||
| Year of expiration | (NOK per share) | 2015 | 2014 |
| 2011 | 3,840 | 0 | 0 |
| 2011 | 3,880 | 0 | 0 |
| 2011 | 3,790 | 0 | 0 |
| 2011 | 3,520 | 0 | 0 |
| 2011 | 3,350 | 0 | 0 |
| 2012 | 3,760 | 0 | 0 |
| 2012 | 5,300 | 0 | 0 |
| 2012 | 5,825 | 0 | 0 |
| 2012 | 5,725 | 0 | 0 |
| 2012 | 5,875 | 0 | 0 |
| 2012 | 3,790 | 0 | 0 |
| 2013 | 6,275 | 0 | 0 |
| 2013 | 7,800 | 0 | 0 |
| 2015 | 881 | 0 | 33,000 |
| Total | 0 | 33,000 |
The average fair value of options awarded during 2010, determined using the Black-Scholes' option-pricing model, was NOK 209 after adjustment for the reverse share split. The significant inputs into the model were share price at the award dates, exercise prices as shown above, standard deviation of expected share price returns of 30%, dividend yield of 0%, estimated option life, and annual risk-free interest rate of 3.0%. No options were awarded during 2015 and 2014.
| 2015 | 2014 | |
|---|---|---|
| Income tax payable | 0.1 | 1.0 |
| Employer's contribution tax and other taxes | 1.9 | 2.4 |
| Project accruals | 14.7 | 9.5 |
| Employee related payables | 3.8 | 0.8 |
| Other current liabilities | 5.2 | 6.9 |
| Total other current liabilities | 25.7 | 20.6 |
Deferred income tax assets and liabilities are offset when a legally enforceable right to offset current tax assets against current tax liabilities exists.
| Net deferred tax assets/(liabilities) | 2015 | 2014 |
|---|---|---|
| – Deferred tax asset to be reversed after more than 12 months | 101.6 | 136.2 |
| – Deferred tax asset/(liability) to be reversed after more than 12 months | -2.0 | -6.7 |
| Net deferred tax assets/(liabilities) | 99.6 | 129.5 |
| Deferred tax assets not recognized in the balance sheet | -99.9 | -129.6 |
| Net deferred tax assets/(liabilities) recognized in the balance sheet | -0.3 | -0.1 |
| hereof capitalized as deferred tax assets | 0.0 | 0.1 |
| hereof capitalized as deferred tax liabilities | -0.3 | -0.2 |
| Reconciliation of deferred tax assets/(liabilities), net | 2015 | 2014 |
| Book value January 1, | -0.1 | 8.1 |
| Income statement charge relating to deferred tax assets | 0.1 | -8.0 |
| Income statement charge relating to deferred tax liabilities | -0.3 | -0.2 |
| Book value December 31, | -0.3 | -0.1 |
| 2015 | 2014 | |
|---|---|---|
| Unrealized currency gain/(loss) | -0.5 | -3.0 |
| Construction contracts | -0.9 | -1.6 |
| Fixed assets | 0.0 | -0.2 |
| Accounting revenue accruals | -0.6 | -2.0 |
| Total deferred tax liabilities | -2.0 | -6.7 |
| Pension liabilities | 0.2 | 0.2 |
| Investments and receivables | 4.6 | 45.6 |
| Fixed assets | 0.3 | 0.4 |
| Inventory | 0.0 | 0.1 |
| Accounting provisions | 0.2 | 0.2 |
| Losses carry forward | 96.4 | 89.8 |
| Total deferred tax assets | 101.6 | 136.2 |
Deferred income tax assets are recognized for tax loss carry-forwards and deductible temporary differences to the extent that the realization of the tax benefit through the future taxable profits is probable. At balance sheet date, the recognition criteria in IAS 12 was not met. Reference is made to Note 4.1 for further information.
| 2015 | 2014 | |
|---|---|---|
| Current tax | -0.2 | -0.4 |
| Adjustment tax return 2014 | -0.1 | 0.0 |
| Deferred tax | 0.0 | -8.0 |
| Disputed tax claim 2012 | -4.5 | 0.0 |
| Net tax income/(expense) | -4.8 | -8.4 |
| Reconciliation between tax charge based on the nominal statutory and actual tax rate | 2015 | 2014 |
|---|---|---|
| Profit/(loss) before tax | -57.2 | -2.5 |
| Tax calculated at domestic tax rates applicable to profits in each respective countries | 0.0 | 0.5 |
| Income not subject to tax | -2.0 | 2.3 |
| Currency translation adjustment | 0.0 | 0.0 |
| Expenses not deductible | 0.2 | -4.2 |
| Write down of previously capitalized deferred tax assets | 0.0 | -8.0 |
| Tax losses for which no deferred income tax asset was recognized | 1.8 | 1.4 |
| Tax income/(expense) | 0.0 | -8.0 |
| Gross revenue tax | -0.1 | -0.1 |
| Tax charge relating to previous years | -4.6 | 0.0 |
| Tax permanent establishment | 0.0 | 0.0 |
| Withholding tax | -0.1 | -0.3 |
| Net tax income/(expense) | -4.8 | -8.4 |
On January 19, 2016, Sevan Marine received a notice from Skatt Sør (Norwegian tax authorities) that the tax assessment for 2012 will be adjusted. Sevan Marine has per December 31, 2015 therefore recorded conservatively a USD 4.6 million (NOK 40.9 million) provision for the full amount of the potential additional tax (USD 3.4 million), interest (USD 0.1 million) and penalty tax (USD 1.1 million). Sevan Marine strongly disagrees with the tax authorities' view with respect to the factual as well as legal issues, and will take action to contest the decision.
Companies in the Group operate both defined benefit and defined contribution plans, as well additional pension assurance plans. The actuarial calculations for the Group's defined benefit plans were carried out by an independent actuary. Calculated pension obligation for 2015 is based on mortality table K2013 (2014: K2013). The principal actuarial assumptions are based on guidelines from the Norwegian Accounting Standards Board.
The defined benefit plans have 27 participants (2014: 27 participants) and these plans have been closed for new participants since 2008. Net pension obligation in the balance sheet is 0.9 (2014: 1.1) consisting of gross obligation of 5.9 (2014: 6.2) and pension plan assets of 5.0 (2014: 5.1). Gross obligation includes additional pension assurance plans obligation of 0.4 (2014: 0.3).
Pension cost charged to the income statement is 1.4 (2014: 2.3) whereof 0.4 (2014: 0.7) is related to defined benefit pension plans, 0.9 (2014: 1.3) is related to defined contribution plans and 0.1 (2014: 0.3) is related to additional pension assurance plan. The defined contribution plans have 121 participants (2014: 150 participants). The additional pension assurance plans have 17 participants (2014: 24 participants). The Group's pension schemes satisfy the requirements in the Norwegian legislation regarding mandatory occupational pension.
| Warranties | Bonus | Restructuring | Total | |
|---|---|---|---|---|
| January 1, 2015 | 0.2 | 0.0 | 4.4 | 4.6 |
| Currency translation adjustments | 0.0 | 0.0 | 0.0 | 0.0 |
| Arising during the year | 0.1 | 0.6 | 0.0 | 0.7 |
| Reversed during the year | 0.0 | 0.0 | -0.6 | -0.6 |
| Classified as accrual | 0.0 | 0.0 | -3.8 | -3.8 |
| Used during year | 0.0 | 0.0 | 0.0 | 0.0 |
| December 31, 2015 | 0.3 | 0.6 | 0.0 | 0.9 |
| Warranties | Bonus | Restructuring | Total | |
|---|---|---|---|---|
| January 1, 2014 | 0.2 | 2.5 | 4.4 | 7.1 |
| Currency translation adjustments | 0.0 | 0.0 | 0.0 | 0.0 |
| Arising during the year | 0.0 | 1.6 | 0.0 | 1.6 |
| Reversed during the year | 0.0 | -1.6 | 0.0 | -1.6 |
| Used during year | 0.0 | -2.5 | 0.0 | -2.5 |
| December 31, 2014 | 0.2 | 0.0 | 4.4 | 4.6 |
All provisions in 2015 and 2014 are current in nature.
Provision for warranties is based on historical experience as well as estimates for legal claims.
During 2014, bonus provision based on 2014 KPI's was accrued. This provision was reversed in December 2014 as due to the poor market outlook and need to reduce cost, it was agreed with the Board of Directors that no 2014 bonus shall be paid despite certain objectives having been reached. For 2015 the Company have accrued USD 0.6 million for bonuses to employees.
The remaining provision regarding the restructuring relates to expected claims under certain indemnities given to Teekay in relation to the sale of the FPSO Piranema Spirit in 2011. The Company adjusted the provision of USD 4.4 million downwards to USD 3.8 million in 2015, based on an updated calculation from Petrobras and correspondence with Teekay. The USD 3.8 million is expected to be paid in 2016 and is therefore classified as an accrual under other short term liabilities in the balance sheet.
| 2015 | 2014 | |
|---|---|---|
| Wages and salaries | 22.5 | 28.2 |
| Employer's contribution tax | 3.3 | 4.0 |
| Expensed portion of value of share options | 0.0 | 0.0 |
| Pension cost | 1.6 | 2.3 |
| Other employee benefit expense | 1.5 | 1.4 |
| Total employee expense | 28.9 | 36.0 |
| No. of man-years | 171 | 198 |
| 2015 | ||||
|---|---|---|---|---|
| Figures in USD 1,000 | Retirement | Other | ||
| Salaries* | benefits | benefits | ||
| Carl Lieungh | CEO | 494 | 51 | 33 |
| Reese McNeel | CFO | 481 | 22 | 25 |
| Lars Ødeskaug | COO | 332 | 28 | 4 |
| Alf-Roger Skikstein | Managing Director Sevan Marine | 212 | 52 | 5 |
| Fredrik Major | CBDO | 233 | 52 | 20 |
| Morten Martens Breivik | CoS | 197 | 15 | 4 |
| Otto Skjåstad | CTO | 200 | 11 | 3 |
| Aslak Hjelde | Managing Director KANFA AS | 263 | 23 | 26 |
| Total remuneration paid | 2,413 | 254 | 120 |
* Salaries includes bonus and sign-on fees
| 2014 | ||||
|---|---|---|---|---|
| Figures in USD 1,000 | Retirement | Other | ||
| Salaries* | benefits | benefits | ||
| Carl Lieungh | CEO | 851 | 68 | 42 |
| Kjetil Vangsnes | CFO | 401 | 26 | 5 |
| Lars Ødeskaug | COO | 540 | 26 | 6 |
| Fredrik Major | CBDO | 352 | 61 | 25 |
| Morten Martens Breivik | CoS | 296 | 20 | 5 |
| Otto Skjåstad | CTO | 299 | 14 | 4 |
| Aslak Hjelde | Managing Director KANFA | 500 | 33 | 27 |
| Total remuneration paid | 3,237 | 248 | 114 |
* Salaries includes bonus and sign-on fees
Salaries and other benefits included above were based on actual period of employment and translated at average exchange rates for each year.
Senior Management is included in the Group's collective retirement benefit plans. No loans were granted to current Senior Management or any member of the Board of Directors in 2015 or 2014. The CEO will receive 0-24 months' salary upon termination of employment dependent on certain conditions.
At balance sheet date there is no remaining options held by Senior Management (2014: 12 thousand), all options remaining in 2014 expired in 2015 and no options were exercised during 2015 and 2014.
| Figures in USD 1,000 | 2015 | 2014 |
|---|---|---|
| Siri Hatlen, Chairperson | 63 | 81 |
| Jørgen Rasmussen, Deputy Chairman **** | 43 | 28 |
| Arne Smedal, Deputy Chairman **** | 0 | 22 |
| Mari Thjømøe | 42 | 54 |
| Peter Lytzen *** | 0 | 0 |
| Ingvild Sæther *** | 0 | 0 |
| Kjetil Sjursen * | 15 | 0 |
| Kari Berte Daasvatn Bye * | 0 | 20 |
| Alf Reidar Sandstad * | 0 | 20 |
| Sidsel Skagen *, ** | 15 | 20 |
| Hans Olav Sele * | 31 | 20 |
| Torlaug Lode ** | 15 | 0 |
| Total remuneration paid | 226 | 264 |
* Sidsel Skagen and Hans Olav Sele entered the Board May 23th, 2014 as Employee representatives. Kari Berte Daasvatn Bye and Alf Reidar Sandstad resigned from the Board May 23th, 2014.
** Torlaug Lode entered the Board May 21th, 2015 as Employee representatives. Sidsel Skagen resigned from the Board May 21th, 2015.
*** The remuneration was paid to the Companies the Board members are employeed.
**** Jørgen Rasmussen entered the Board May 23th, 2014 as Deputy Chairman. Arne Smedal resigned from the Board May 23th, 2014.
***** Kjetil Sjursen entered the Board May 21th, 2015.
Remuneration of the Board of Directors was for the period from November 24th, 2014 to November 23th, 2015
| 2015 | 2014 | |||||
|---|---|---|---|---|---|---|
| Retirement | Other | Retirement | Other | |||
| Figures in USD 1,000 | Salaries | benefits | benefits | Salaries | benefits | benefits |
| Sidsel Skagen * | 109 | 4 | 1 | 158 | 9 | 3 |
| Hans Olav Sele | 133 | 8 | 2 | 170 | 9 | 2 |
| Torlaug Lode * | 112 | 7 | 2 |
* Torlaug Lode entered the Board May 21th, 2015 as Employee representatives. Sidsel Skagen resigned from the Board May 21th, 2015.
As of December 31, 2015, the following Board members and Senior Management owned or controlled shares in the Company:
| Board of Directors | |
|---|---|
| -- | -------------------- |
Mari Thjømøe, Board member, owns 7,050 shares through ThjømøeKranen AS.
Kjetil Sjursen, Board Member, owns 50,000 shares
Carl Lieungh, CEO, owns 266,000 shares through Florian AS.
Lars Ødeskaug, COO owns 150,000 shares directly and 70,000 shares through BLMF Holding AS.
Reese McNeel, CFO, owns 22.300 shares
Alf-Roger Skikstein, Managing Director Sevan Marine, owns 0 shares
| Fredrik Major, Vice President Business Development/R&D, owns 6,400 shares |
|---|
| Morten Martens Breivik, Chief of Staff, owns 7,020 shares |
| Otto Skjåstad, CTO, owns 0 shares |
| Aslak Hjelde, Managing Director KANFA, owns 2,283 shares |
| Reference is made to the 'Statement regarding determination of salary and other benefits for Senior Management' for further details of remuneration of Senior Management. |
Currency gains and losses relating to operational activities were classified as a separate line item as an operational expense in the Income Statement and are not included in the tables below. Currency gains and losses relating to financing activities were presented as separate line item as a financial income/ (expense) in the Income Statement and are specified in Note 25.
| Financial income: | 2015 | 2014 |
|---|---|---|
| Interest income | 0.3 | 2.1 |
| Partial reversal provision Piranema | 0.6 | 0.0 |
| Other financial income | 0.3 | 0.3 |
| Total financial income | 1.2 | 2.4 |
| Financial expense: | 2015 | 2014 |
| Interest expense | 0.5 | 0.2 |
| Impairment Logitel Loan | 37.0 | 0.0 |
| Write down investment in associate | 0.4 | 0.0 |
| Other financial expenses | 0.8 | 0.4 |
| Total financial expense | 38.7 | 0.6 |
| 2015 | 2014 | |
|---|---|---|
| Profit/(loss) attributable to equity holders of the Company (1,000,000 USD) | -62.0 | -11.0 |
| Weighted average number of ordinary shares on issue (thousands) | 52,607 | 52,607 |
| Basic earnings per share (USD per share) | -1.18 | -0.21 |
Basic earnings per share were calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the year.
Due to net losses for the periods reported, and according to the principle of no negative dilution (positive effects on earnings per share resulting from an increase in number of shares issued, are not to be included), diluted earnings per share was calculated as earnings per share.
| 2015 | 2014 | |
|---|---|---|
| Profit/(loss) attributable to equity holders of the Company (1,000,000 USD) | -62.0 | -11.0 |
| Profit/(loss) used to determine diluted earnings per share (1,000,000 USD) | -62.0 | -11.0 |
| Weighted average number of ordinary shares on issue (thousands) | 52,607 | 52,607 |
| Total remaining share options at balance date (thousands) | 0 | 33 |
| Weighted average number of shares for diluted earnings per share (thousands) | 52,607 | 52,607 |
| Diluted earnings per share (USD per share) | -1.18 | -0.21 |
No dividend was paid by the Company in 2015 (2014: NOK 1.20 per share). The Board of Directors will not propose an ordinary dividend to the Annual General Meeting on May 25, 2016. A proposal of an extraordinary dividend may be given later in 2016, if circumstances allow for it.
| 2015 | 2014 | |
|---|---|---|
| Profit/(loss) before tax | -57.2 | -2.5 |
| Adjustments for: | ||
| – Depreciation and impairment | 6.4 | 6.4 |
| – Unrealized disagio | 2.7 | 4.5 |
| – Loss provision T&P segment | 0.3 | 0.8 |
| – Impairment Logitel Loan | 37.0 | 0.0 |
| – Write down investment in associate | 0.4 | 0.0 |
| Profit/(loss) from operations before changes in working capital | -10.4 | 9.2 |
| Changes in working capital: | ||
| – Trade and other receivables | 23.9 | -11.7 |
| – Trade and other payables | -2.1 | 0.8 |
| – Other current liabilities, provisions and charges | -10.3 | -7.4 |
Cash generated from operations 1.1 -9.2
Members of the Group have contingent liabilities in respect of bank and other guarantees. Members of the Group have made a provision for guarantees/warranties amounting to USD 0.3 million at balance sheet date (2014: USD 0.2) relating to deliveries to third parties by companies within the KANFA Group.
Sevan Drilling is now part of the Seadrill group, yet Sevan Marine has not yet been formally released by Petrobras from its joint liablility with Sevan Drilling as intervening party (guarantor) under the charter and service agreements pertaining to "Sevan Brasil".
In connection with the sale of 49% of shares in KANFA AS to Technip, Sevan and Technip entered into a shareholders agreement where Technip has a put option regarding the initial sale. The put option, meaning that Sevan will be obliged to purchase back the initial 49% shares for the same price as Technip purchased them, will be an exit opportunity for Technip if KANFA AS does not conduct its business as per the agreed business plan in 2014, 2015 and 2016. At the time of this report, no indications exist that the put option will come into effect.
Sevan Marine is guarantor for a NOK 75 million facility in Nordea bank. The facility includes guarantees, overdraft facility and use of derivatives for KANFA Aragon AS.
In addition Sevan Marine is guarantor for 51% of a NOK 190 million facility in Nordea bank. The facility includes guarantees, overdraft facility and use of derivatives for KANFA AS.
| Sales to related parties | 2015 | 2014 |
|---|---|---|
| Teekay | 1.9 | 4.2 |
| Logitel Offshore | 8.7 | 8.4 |
| Financial income from Logitel Offshore | 0.0 | 1.0 |
| Purchases from related parties | 2015 | 2014 |
| Teekay | 0.2 | 0.0 |
| Arendal Brygge AS | 0.4 | 0.6 |
Year-end balances arising from sales/purchases of goods/services:
| Receivable from related parties | 2015 | 2014 |
|---|---|---|
| Teekay | 0.2 | 2.7 |
| Arendal Brygge AS | 0.1 | 0.2 |
| Logitel Offshore | 10.7 | 9.1 |
| Payable to related parties | 2015 | 2014 |
| Teekay | 0.0 | 0.0 |
| Arendal Brygge AS | 0.0 | 0.0 |
| Loan to related parties | 2015 | 2014 |
| Logitel Offshore | 16.0 | 60.0 |
Logitel Offshore became related party to Sevan Marine in Q3 2014, when Teekay acquired all the shares in Logitel Offshore. The sale figures towards Logitel Offshore reflects sale of engineering and site supervision services in addition to accrued license revenue.
The Group has entered into several lease- and rental-agreements for rental of offices.
At balance sheet date, the Group has entered into lease- and rental-obligations as follows:
| Lease- and rental obligations | 2015 | 2014 |
|---|---|---|
| No later than 1 year | 1.8 | 2.4 |
| Between 1-5 years | 2.7 | 5.1 |
| Later than 5 years | 1.0 | 1.9 |
| Total lease and rental-obligations | 5.5 | 9.4 |
The Group expensed USD 1.9 million in lease and rental cost for 2015.
Foreign exchange gain/(loss) related to financing is mainly due to cash and cash equivalents nominated in foreign currency.
| Foreign exchange gain/(loss) related to financing: | 2015 | 2014 |
|---|---|---|
| Realized gain/(loss) | -0.3 | 0.0 |
| Unrealized gain/(loss) | -2.4 | -3.5 |
| Total foreign exchange gain/(loss) related to financing | -2.7 | -3.5 |
| Foreign exchange gain/(loss) related to operation: | 2015 | 2014 |
| Realized gain/(loss) | -0.3 | -0.3 |
| Unrealized gain/(loss) | -0.4 | -1.0 |
| Total foreign exchange gain/(loss) related to operation | -0.7 | -1.3 |
| Other operating expense | 2015 | 2014 |
|---|---|---|
| Cost of hired personnel | 0.3 | 0.1 |
| Office cost (IT, rental etc) | 4.0 | 4.9 |
| Consultancy (audit, tax and legal) * / ** | 4.4 | 4.1 |
| Marketing | 0.3 | 0.6 |
| Travel expenses | 1.4 | 2.0 |
| Other | 2.1 | 3.1 |
| Total other operating expense | 12.5 | 14.8 |
| ** Specification of auditor's fee (excl. VAT) | 2015 | 2014 |
|---|---|---|
| Statutory audit | 0.2 | 0.2 |
| Audit related services | 0.1 | 0.1 |
| Tax related service | 0.0 | 0.0 |
| Other services | 0.0 | 0.0 |
| Total auditor's fee | 0.3 | 0.4 |
| 2015 | 2014 | |
|---|---|---|
| Long term receivables | 5.0 | 8.4 |
| Other | 0.4 | 0.5 |
| Total other non-current assets | 5.4 | 8.9 |
At balance sheet date other non-current assets consist mainly of a receivable for variable fee against Logitel Offshore and rental deposits.
| Construction contracts | 2015 | 2014 |
|---|---|---|
| Revenue from ongoing projects | 46.7 | 18.9 |
| Costs related to earned revenue | 46.2 | 19.7 |
| Allocated to operating result on ongoing projects | 0.4 | -0.8 |
| Earned revenue, not invoiced, from ongoing projects included as other receivables | 11.3 | 7.1 |
| Accrued costs related to ongoing projects, included in other current liabilities | 14.2 | 5.1 |
The construction contracts are executed within the T&P segment only.
It is not recognized any margin related to the OCTP Ghana project with Yinson Production in 2014 or 2015. It is expected that margin related to the project will be recognized during the first half of 2016.
The current carrying value of the Logitel transaction is reflected as follows in Sevan Marine's financial statements.
A USD 50 million convertible loan for which its recoverable value is currently assessed at USD 16 million. The value reflects the discounted value of the two remaining USD 10 million fixed payments expected for units 2 and 3. Remaining repayments of USD 30 million for units 4, 5 and 6 are dependent on Logitel's decision to start constructing and complete the units. Payment for unit 1 USD 10 million was received in Q3 2015.
The board of Sevan Marine has in 2016 initiated a review of the circumstances surrounding and the legality of the Logitel Offshore agreements, including the USD 60m bond loan granted by Sevan Holding V AS to Logitel Offshore Pte Ltd ("Logitel") in 2013 and the Fourpartite Agreement entered into in 2014. The outcome of this review has exposed potential breaches of Norwegian corporate law in relation to these agreements. This could result in the agreements
being void or voidable. Sevan Marine has initiated a dialogue with Logitel in an attempt to resolve the issues raised in an amicable manner and within the framework of applicable law. The outcome of this dialogue is however uncertain and may lead to litigation. As such, there remains material uncertainty regarding both the amount and timing of payments due in relation to both the Logitel loan and variable payments due from Logitel.
Arendal Spirit began operation with Petrobras under a 3 year charter contract in June 2015. Variable compensation associated with this vessel is due 12 months after the start of charter hire, June 2016. The total value of expected variable proceeds related to Arendal Spirit and unit number 2 is assessed at USD 10.0 million as of December 31, 2015. USD 5.0 million is presented as trade and other receivable and USD 5.0 million is presented as other non-current assets in the balance sheet.
Accrued severance pay including employer's contribution tax for payment for the period 01.01.2017 -31.07.2018 is USD 0.0 million (2014: USD 1.1 million). The balance was released in 2015.
On January 19, 2016, Sevan Marine received a notice from Skatt Sør (Norwegian tax authorities) that the tax assessment for 2012 will be adjusted. Sevan Marine has per December 31, 2015 therefore recorded conservatively a USD 4.6 million (NOK 40.9 million) provision for the full amount of the potential additional tax, interest and penalty tax. Sevan Marine strongly disagrees with the tax authorities' view with respect to the factual as well as legal issues, and will take action to contest the decision.
Sevan Marine has received a reservation of rights letter from Teekay Offshore Partners in relation to the Piranema Spirit stating that they will seek to recover any losses from Sevan Marine which they may suffer as a consequence of any possible corruption. Both Petrobras and Sevan Drilling have also requested further information in relation to the investigation and reserved their rights in particular in relation to Sevan Marine's continuing status as intervening party in relation to the Sevan Brasil charter with Petrobras. The outcome of the investigation and any losses suffered or potential fines imposed by authorities may have a material impact on Sevan Marine going forward. Sevan Marine will consider and if appropriate contest such claims and also seek to recover any losses from the responsible individuals but the outcome remains uncertain.
Reference is also made to the recent review regarding the circumstances and the legality of the Logitel Offshore agreements as highlighted in Note 29.
15 52 ANNUAL REPORT SEVAN MARINE Sevan Marine ASA 14
| Figures in USD 1,000,000 | Note | 2015 | 2014 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Fixed assets | 3 | 0.5 | 0.7 |
| Intangible assets | 3 | 0.3 | 0.4 |
| Investment in subsidiaries | 4 | 19.8 | 19.4 |
| Investment in associates | 23 | 0.0 | 0.4 |
| Deferred income tax assets | 2 | 0.0 | 0.0 |
| Receivables from companies in the Group | 4 | 0.0 | 20.3 |
| Other non-current assets from related parties | 24 | 10.0 | 8.4 |
| Other non-current assets | 5 | 0.4 | 0.5 |
| Total non-current assets | 31.1 | 50.1 | |
| Current assets | |||
| Trade and other receivables | 22 | 4.1 | 8.6 |
| Receivables from companies in the Group | 4 | 2.6 | 24.2 |
| Receivables from related parties | 24 | 0.5 | 1.7 |
| Cash and cash equivalents | 6 | 27.6 | 25.6 |
| Total current assets | 34.9 | 60.1 | |
| Total assets | 66.0 | 110.2 | |
| Capital and reserves attributable to equity holders of the Comapny | |||
| Share capital | 1, 8 | 34.6 | 34.6 |
| Share premium reserve | 1 | 21.0 | 21.0 |
| Other equity | 1 | -3.6 | 27.4 |
| Total equity | 52.0 | 82.9 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Retirement benefit obligations | 10 | 0.5 | 0.6 |
| Other non-current liabilities | 0.0 | 1.1 | |
| Total non-current liabilities | 0.5 | 1.6 | |
| Current liabilities | |||
| Interest-bearing debt | |||
| Trade payables | 0.6 | 3.0 | |
| Payables to companies in the Group | 4 | 0.8 | 11.9 |
| Provisions | 20 | 0.6 | 4.4 |
| Payable tax | 2 | 4.5 | 0.0 |
| Other current liabilities | 14 | 7.0 | 6.3 |
| Total current liabilities | 13.5 | 25.6 | |
| Total liabilities | 14.0 | 27.3 | |
| Total equity and liabilities | 66.0 | 110.2 |
| Figures in USD 1,000,000 | Note | 2015 | 2014 |
|---|---|---|---|
| Operating revenue | 16.19 | 23.7 | 59.3 |
| Operating expense | 8.3 | 19.8 | |
| Depreciation, amortization and impairment | 3 | 0.3 | 0.4 |
| Employee benefit expense | 9 | 15.2 | 20.7 |
| Other operating expense | 11 | 7.8 | 8.2 |
| Foreign exchange (gain)/ loss related to operation | -0.2 | 0.7 | |
| Total operating expense | 31.5 | 49.8 | |
| Operating profit/(loss) | -7.8 | 9.5 | |
| Financial income | 21 | 2.4 | 6.4 |
| Financial expense | 21 | -18.8 | -0.4 |
| Foreign exchange gain/ (loss) related to financing | -2.3 | -2.6 | |
| Net financial profit/(loss) | -18.7 | 3.4 | |
| Profit/(loss) before tax | -26.5 | 12.9 | |
| Tax income/(expense) | 2 | -4.5 | -10.8 |
| Annual net profit/(loss) | -31.0 | 2.1 | |
| Attributable to: | |||
| Equity holders of the Company | -31.0 | 2.1 | |
| Distribution of dividend: Dividend |
- | - | |
| Transfer to/from equity | -31.0 | 2.1 | |
| Annual net profit/(loss) | -31.0 | 2.1 | |
| Earnings per share for profit/(loss) attributable to the equity holders of the Company during the year (USD per share): |
| - Basic | 13 | -0.59 | 0.04 |
|---|---|---|---|
| - Diluted | 13 | -0.59 | 0.04 |
Oslo, April 29, 2016 The Board of Directors of Sevan Marine ASA
| Figures in USD 1,000,000 | 2015 | 2014 |
|---|---|---|
| Cash flows from operating activities | ||
| Profit/(loss) before tax | -26.5 | 12.9 |
| Adjustment for: | ||
| Depreciation/amortization | 0.3 | 0.4 |
| Loss provision on loan to third party | 0.0 | 0.3 |
| Write-down of investment and receivables in subsidiaries | 18.2 | 0.0 |
| Write down investment in Arendal Brygge AS | 0.4 | 0.0 |
| Unrealized forex loss/(gain) | 2.3 | 2.6 |
| Change in working capital: | ||
| Receivable and payables relating to companies in the Group | 9.3 | -13.6 |
| Trade and other receivable | 4.5 | 8.8 |
| Trade payables | -2.4 | -0.1 |
| Other liabilities, provision and charges | -6.9 | -6.0 |
| Cash generated from operations | -0.8 | 5.3 |
| Cash flows from operating activities | ||
| Cash from operations | -0.8 | 5.3 |
| Net cash flow from operating activities | -0.8 | 5.3 |
| Cash flows from investment activities | ||
| Investment in subsidiaries | -0.4 | -2.7 |
| Sale of shares in KANFA AS | 0.0 | 7.7 |
| Purchases of tangible assets | -0.1 | -0.4 |
| Net cash flow from investment activities | -0.5 | 4.6 |
| Loan to subsidiaries | 0.0 | -8.6 |
| Repayment of loan from subsidiaries | 3.3 | 1.5 |
| Paid dividend | 0.0 | -10.4 |
| Net cash flow from financing activities | 3.3 | -17.5 |
| Net cash flows for the period | 2.0 | -7.6 |
| Cash balance at the beginning of the year | 25.6 | 33.2 |
| Cash balance at the end of the year | 27.6 | 25.6 |
Sevan Marine ASA's ('the Company') financial statements have been prepared in accordance with the Accounting Act and generally accepted accounting principles in Norway.
Sevan Marine ASA is the parent company of the Sevan Marine Group ('the Group').
The Company`s functional currency is US dollar (USD). All numbers in the financial statements are in USD 1,000,000 unless otherwise stated.
Assets intended for long term ownership or use, are classified as fixed assets. Assets relating to the operating cycle are classified as current assets. Receivables are classified as current assets if they are to be repaid within one year after balance sheet date. Equivalent criteria apply to liabilities.
Current assets are valued at the lower of purchase cost and net realizable value. Current liabilities are reflected in the balance sheet at nominal value at establishment date.
Fixed assets are valued at purchase cost. Fixed assets whose value will decline are depreciated on a straight-line basis over the asset's estimated useful life. Fixed assets are written down to net realizable value if a value reduction occurs that is expected to be permanent. Long-term liabilities are reflected in the balance sheet at nominal value on establishment date.
Trade receivables and other receivables are reflected in the balance sheet at nominal value less provision for estimated losses. Estimated losses are provided for on the basis of an individual assessment of each debtor.
Trade Payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and the amount has been reliably estimated.
Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured as the present value of the expected expenditures required to settle the obligation using a pre-tax discount rate that accounts for time value of money and risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.
Fixed assets are reflected in the balance sheet and depreciated over the asset's expected useful life on a straight-line basis. Maintenance cost is expensed as incurred. Additions or improvements are added to the asset's cost price and depreciated with the asset. When changes in circumstances indicate that the carrying value of an asset may not be recoverable, an impairment charge is recognized and the asset is written down to recoverable amount (being the highest of net sales value and value in use). Value in use is the net present value of the expected future cash flows generated from the asset.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisition of subsidiaries is included in 'intangible assets'. Goodwill on acquisitions of associates is included in 'investment in associates'. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cashgenerating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
Acquired computer software is capitalized on the basis of the cost incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives, ranging from three to five years. Cost associated with developing or maintaining computer software programs are recognized in the income statement as incurred.
In the parent company's accounts, investments in subsidiaries and associated companies are recorded under the cost method. Investments are written down to fair value when a reduction in value is expected to be permanent.
Dividend is recognized as income in the year the provision is made in the subsidiary. If the dividend exceeds retained earnings, the excess represents repayment of invested capital, and dividend is deducted from the book value of the investment in the balance sheet.
Cash and bank deposits include cash in hand, bank deposits and other short-term highly liquid investments with original maturities of three months or less.
Cash and bank deposits, current assets, and current liabilities nominated in foreign currencies are converted to exchange rates prevailing at balance sheet date. Realized and unrealized exchange
15 57 ANNUAL REPORT SEVAN MARINE
gains and losses on assets and liabilities in foreign currencies are included as financial or operational items in the income statement depending on the characteristics of the underlying asset or liability.
The Company operates both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Cost associated with the defined contribution plans are expensed as incurred.
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefits plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The pension expense and pension commitments are calculated on a straight-line earning profile basis, based on assumptions relating to discount rates, projected salaries, the amount of benefits from the National Insurance Scheme, future return on pension assets, and actuarial calculations relating to mortality rate, voluntary retirement, etc. Pension funds are valued at net realizable value and deducted from the net pension obligation in the balance sheet.
Deferred income taxes is provided using the liability method on temporary difference at balance sheet date between the tax basis of assets and liabilities and their carrying amounts for financial reporting purpose. Tax-reducing temporary differences and losses carry forward are offset against tax-increasing temporary differences that are reversed in the same time intervals. Taxes consist of taxes payable (taxes on current year taxable income) and change in net deferred taxes. Tax base included in the calculation of deferred income tax is calculated in local currency and translated to USD at currency rates prevailing at balance sheet date.
Earnings per share are calculated by dividing net profit/loss by the weighted average of number of outstanding shares. Shares issued during the year are weighted in relation to the period they have been outstanding.
The cash flow statement is prepared in accordance with the indirect method.
Revenue comprises the fair value of the consideration receivable for the sale of goods and services in the ordinary course of business. Revenue is shown net of value-added tax and discounts.
The Company recognizes revenue when the amount of revenue can be reliably measured and in accordance with the underlying contracts.
Design fee/license revenue is recognized on in accordance with the underlying contracts.
Interest income is recognized on a time-proportion basis using the effective interest method.
Service income is recognized in line with the underlying contracts and the amount of work executed.
Leases in which a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. All lease agreements entered into by the Company at balance sheet date are considered to be operational leases.
The preparation of financial statements in accordance with generally accepted accounting principles requires management to use estimates and assumptions that impact the value of assets and liabilities as well as disclosure notes. Such estimates and assumptions may have significant impact on reported revenue and cost for a specific reporting period. Actual amounts may therefore deviate from the estimates.
Contingent losses, which are likely to occur as well as quantifiable, are expensed when incurred.
| Share | Share | Other | Total | |
|---|---|---|---|---|
| capital | premium | equity | equity | |
| December 31, 2014 | 34.6 | 21.0 | 27.4 | 82.9 |
| Actuarial gains/losses pension plan | 0.0 | 0.0 | ||
| Annual net profit/(loss) | -31.0 | -31.0 | ||
| December 31, 2015 | 34.6 | 21.0 | -3.6 | 52.0 |
| Share | Share | Other | Total | |
| capital | premium | equity | equity | |
| December 31, 2013 | 34.6 | 21.0 | 25.3 | 80.9 |
| Actuarial gains/losses pension plan | 0.0 | 0.0 | ||
| Annual net profit/(loss) | 2.1 | 2.1 | ||
| December 31, 2014 | 34.6 | 21.0 | 27.4 | 82.9 |
The total authorized number of ordinary shares was 52.6 million (2014: 52.6 million) with a par value of NOK 4.00 per share (2014: NOK 4.00 per share). All issued shares were fully paid at balance sheet date.
| 2015 | 2014 | |
|---|---|---|
| Profit/(loss) before tax | -26.5 | 12.9 |
| Permanent differences | -133.0 | 0.0 |
| Currency translation adjustment | 10.3 | 13.0 |
| Changes in temporary differences | 3.0 | -12.3 |
| Tax basis | -146.2 | 13.7 |
| Loss to be brought forward | 0.0 | -3.2 |
| Basis for taxes payable | -146.2 | 10.5 |
| Disputed tax claim 2012 | -4.5 | 0.0 |
| Taxes payable | 0.0 | -2.8 |
| Withholding tax payable | 0.0 | 0.0 |
| Change in deferred tax assets from income statement | 0.0 | -8.0 |
| Tax income/(expense) | -4.5 | -10.8 |
| Temporary differences: | ||
| 2015 | 2014 | |
| Unrealised forex | 1.9 | 5.2 |
| Fixed assets | -0.5 | -0.7 |
| Goodwill | -0.4 | -0.6 |
| Inventory | 0.0 | -0.2 |
| Pension liabilities | -0.3 | -0.2 |
| Receivable | -0.6 | -5.3 |
| Other Temporary differences | 2.5 | 7.2 |
| Net temporary differences | 2.4 | 5.4 |
| Investment | 0.0 | -163.1 |
| Losses carried forward relating to income statement | -144.3 | 0.0 |
| Basis for deferred tax assets from the income statement | -141.9 | -157.7 |
| Losses carried forward relating to items posted directly in the balance sheet | 0.0 | 0.0 |
| Basis for deferred tax assets | -141.9 | -157.7 |
| Deferred tax assets | -35.5 | -42.6 |
| Not recognised | 35.5 | 42.6 |
| Recognised in balance sheet | 0.0 | 0.0 |
| 2015 | 2014 | |
| Profit before tax | -26.5 | 12.9 |
| Expected tax charge | 0.0 | 3.5 |
| Tax charge in the income statement | 4.5 | 10.8 |
| Difference | -4.5 | -7.4 |
| 2015 | 2014 | |
|---|---|---|
| Tax effect not booked deferred tax | 35.5 | 42.6 |
| Tax effect deducted losses to be carried forward due to remission of dept | 0.0 | 0.0 |
| Tax effect redused losses to be bought forward | 0.0 | 0.0 |
| Tax effect from group relief received | 0.0 | 0.0 |
| Tax effect not recognized temporary differences 01.01.2012 | 0.6 | 5.4 |
| Tax effect other permanent differences | -38.7 | 0.0 |
| Tax effect investments | 0.0 | -44.0 |
| Withholding tax | 0.0 | 0.0 |
| Permanent currency difference | 2.6 | 3.5 |
| Disputed tax claim 2012 | 4.5 | 0.0 |
| Explained difference | 4.5 | 7.4 |
On January 19, 2016, Sevan Marine received a notice from Skatt Sør (Norwegian tax authorities) that the tax assessment for 2012 will be adjusted. Sevan Marine has per December 31, 2015 therefore recorded conservatively a USD 4.6 million (NOK 40.9 million) provision for the full amount of the potential additional tax (USD 3.4 million), interest (USD 0.1 million) and penalty tax (USD 1.1 million). Sevan Marine strongly disagrees with the tax authorities' view with respect to the factual as well as legal issues, and will take action to contest the decision.
| Fixed Assets | Machinery, fixtures |
|---|---|
| Year ended December 31, 2015 | |
| Book value January 1 | 0.7 |
| Additions | 0.0 |
| Disposals | 0.0 |
| Depreciation | -0.2 |
| Book value December 31 | 0.5 |
| Cost or valuation | 2.9 |
|---|---|
| Accumulated depreciation and impairment | -2.4 |
| Book value December 31 | 0.5 |
| Machinery, fixtures |
|---|
| 0.5 |
| 0.4 |
| 0.0 |
| -0.2 |
| 0.7 |
| Cost or valuation | 2.9 |
|---|---|
| Accumulated depreciation and impairment | -2.2 |
| Book value December 31 | 0.7 |
| Software | |
|---|---|
| Year ended December 31, 2015 | |
| Book value January 1 | 0.4 |
| Additions | 0.1 |
| Disposals | 0.0 |
| Impairment charge | 0.0 |
| Amortization charge | -0.1 |
| Book value December 31 | 0.3 |
| Cost or valuation | 5.9 |
|---|---|
| Accumulated amortization and impairment | -5.6 |
| Book value December 31 | 0.3 |
| Software | |
|---|---|
| Year ended December 31, 2014 | |
| Book value January 1 | 0.5 |
| Additions | 0.1 |
| Disposals | 0.0 |
| Impairment charge | 0.0 |
| Amortization charge | -0.2 |
| Book value December 31 | 0.4 |
| At December 31, 2014 | |
| Cost or valuation | 5.9 |
Accumulated amortization and impairment -5.4 Book value December 31 0.4
| Office | Cost | No of | Write- | Book | Profit/ | Ownership | ||
|---|---|---|---|---|---|---|---|---|
| Company name | location | price | shares | Equity | downs | value | (loss) | share |
| KANFA AS | Norway | 7.3 | 1,275 | 0.4 | 7.3 | 0.0 | -1.1 | 51 % |
| KANFA Aragon AS | Norway | 0.5 | 108,900 | 1.4 | 0.0 | 0.5 | -2.5 | 50 % |
| Sevan Marine do Brasil Ltda | Brazil | 24.2 | 48,216,535 | 0.0 | 0.0 | 0.3 | 0.0 | 100 % |
| Sevan Holding V AS | Norway | 316.2 | 10,000 | 15.9 | 9.9 | 16.0 | -38.6 | 100 % |
| Hiload LNG AS | Norway | 0.0 | 28,500 | -0.8 | 0.0 | 0.0 | -0.5 | 95 % |
| Sevan Asia Ptd ltd | Singapore | 4.0 | 1,105,057 | 3.3 | 1.0 | 3.0 | -0.3 | 100 % |
| Total book value | 352.3 | 18.2 | 19.8 |
* Sevan Invest AS and Sevan Holding I AS were merged into Sevan Holding V AS. Total debt to Sevan Marine ASA of MUSD 85,3 was converted to equity before the merger.
** Sevan 300 Pte Ltd was struck off during 2015
*** The carrying value of Sevan Holding V AS reflects the estimated carrying value of the convertible loan granted to Logitel Offshore Pte Ltd.
| Office | Cost | No of | Write- | Book | Profit/ | Ownership | ||
|---|---|---|---|---|---|---|---|---|
| Company name | location | price | shares | Equity | downs | value | (loss) | share |
| KANFA AS | Norway | 7.3 | 1,275 | 4.4 | 0.0 | 7.3 | -3.6 | 51 % |
| KANFA Aragon AS | Norway | 0.5 | 108,900 | 4.8 | 0.0 | 0.5 | 0.4 | 50 % |
| Sevan Marine do Brasil Ltda | Brazil | 24.2 | 48,216,535 | -0.1 | 0.0 | 0.3 | 0.0 | 100 % |
| Sevan 300 Pte Ltd | Singapore | 230.6 | 230,556,039 | 0.0 | 0.0 | 0.0 | 0.0 | 100 % |
| Sevan Invest AS | Norway | 266.6 | 100 | 0.0 | 0.0 | 7.7 | -2.9 | 100 % |
| Sevan Holding I AS | Norway | 49.6 | 100 | 9.3 | 0.0 | 0.0 | 5.3 | 100 % |
| Sevan Holding V AS | Norway | 0.0 | 10,000 | -1.8 | 0.0 | 0.0 | -1.2 | 100 % |
| Hiload LNG AS | Norway | 0.0 | 30 | -0.3 | 0.0 | 0.0 | -0.3 | 95 % |
| Sevan Asia Ptd ltd | Singapore | 3.6 | 1,105,057 | 3.2 | 0.0 | 3.6 | -0.3 | 100 % |
| Total book value | 582.4 | 0.0 | 19.4 |
| 2015 | 2014 | |
|---|---|---|
| Sevan Holding V AS | 0.0 | 20.3 |
| Total non-current receivables from companies within the Group | 0.0 | 20.3 |
| Book value | Write-down | Book value | Write-down | |
|---|---|---|---|---|
| end Dec. 2015 | 2015 | end Dec. 2014 | 2014 | |
| KANFA AS | 0.3 | 0.0 | 3.7 | 0.0 |
| KANFA Aragon AS | 0.0 | 0.0 | 0.0 | 0.0 |
| Sevan Holding I AS | 0.0 | 0.0 | 13.5 | 0.0 |
| Sevan Holding V AS * | 0.1 | 0.0 | 0.0 | 0.0 |
| Sevan Marine do Brasil Ltda | 0.3 | 0.0 | 0.3 | 0.0 |
| Sevan Invest AS | 0.0 | 0.0 | 4.4 | 0.0 |
| Sevan Asia Ptd ltd | 0.0 | 0.0 | 1.9 | 0.0 |
| Hiload LNG AS | 1.9 | 0.0 | 0.5 | 0.0 |
| Total current recivables from companies in the Group | 2.6 | 0.0 | 24.2 | 0.0 |
* Sevan Invest AS and Sevan Holding I AS were merged into Sevan Holding V AS.
| 2015 | 2014 | |
|---|---|---|
| Sevan Invest AS | 0.0 | 11.3 |
| Sevan Holding V AS | 0.0 | 0.0 |
| Sevan Marine do Brasil Ltda | 0.6 | 0.6 |
| KANFA Aragon AS | 0.2 | 0.0 |
| Current payables to companies in the Group | 0.8 | 11.9 |
| 2015 | 2014 | |
|---|---|---|
| Deposit | 0.4 | 0.5 |
| Äccrued revenue long term | 0.0 | 0.0 |
| Other receivables | 0.0 | 0.0 |
| Total other non-current assets | 0.4 | 0.5 |
| 2015 | 2014 | |
|---|---|---|
| Cash at bank and in hand | 26.8 | 24.4 |
| Restricted employees' tax deduction fund | 0.2 | 0.8 |
| Restricted bank deposits | 0.5 | 0.4 |
| Total cash and cash equivalents | 27.6 | 25.6 |
As of December 31, 2015, the total restricted cash of 0.5 million (2014: 0.4) relates to deposit for rental of offices of 0.3 million and pension funds of 0.2 million.
Mari Thjømøe, Board member, owns 7,050 shares through ThjømøeKranen AS.
Kjetil Sjursen, Board Member, owns 50,000 shares
Carl Lieungh, CEO, owns 266,000 shares through Florian AS.
Lars Ødeskaug, COO owns 150,000 shares directly and 70,000 shares through BLMF Holding AS.
Reese McNeel, CFO, owns 22.300 shares
Alf-Roger Skikstein, Managing Director Sevan Marine, owns 0 shares Fredrik Major, Vice President Business Development/R&D, owns 6,400 shares
Morten Martens Breivik, Chief of Staff, owns 7,020 shares
Otto Skjåstad, CTO, owns 0 shares
Reference is made to the 'Statement regarding determination of salary and other benefits for Senior Management' for further details of remuneration of Senior Management.
| 20 largest shareholder accounts at December 31, 2015: | Number of | Ownership |
|---|---|---|
| Shareholder accounts | No. of shares | %-share |
| TEEKAY SERVICE HOLDING | 21,091,847 | 40.1 |
| HOME CAPITAL AS | 2,435,448 | 4.6 |
| GOLDMAN SACHS INTERN | 2,217,852 | 4.2 |
| ILIAD INTERNATIONAL* | 1,801,784 | 3.4 |
| F2 FUNDS AS | 1,767,095 | 3.4 |
| SUNDT AS | 1,257,486 | 2.4 |
| MATHIAS HOLDING AS | 1,200,000 | 2.3 |
| DNB NOR MARKETS, AKS | 1,085,718 | 2.1 |
| PREDATOR CAPITAL MAN | 908,000 | 1.7 |
| MP PENSJON PK | 837,584 | 1.6 |
| ANDENERGY AS | 804,326 | 1.5 |
| INVESCO PERP EUR SMA | 765,804 | 1.5 |
| KING KONG INVEST AS | 700,000 | 1.3 |
| BAKLIEN ÅSMUND | 700,000 | 1.3 |
| MSCO EQUITY FIRM ACC | 681,266 | 1.3 |
| CARE HOLDING AS | 555,463 | 1.1 |
| BEKKESTUA EIENDOM AS | 534,000 | 1.0 |
| DEUTSCHE BANK AG | 500,000 | 1.0 |
| CITIBANK, N.A. | 493,241 | 0.9 |
| PERESTROIKA AS | 492,857 | 0.9 |
| Total, 20 largest shareholder accounts | 40,829,771 | 77.6 |
| Remaining shareholders | 11,777,228 | 22.4 |
| Total shareholders | 52,606,999 | 100.0 |
* Controlled by Teekay
| 20 largest shareholder accounts at December 31, 2014: | Number of | Ownership |
|---|---|---|
| Name | shares | share (%) |
| TEEKAY SERVICE HOLDING | 21,091,847 | 40.1 |
| ILIAD INTERNATIONAL * | 1,801,784 | 3.4 |
| VPF NORDEA KAPITAL | 1,752,019 | 3.3 |
| F2 FUNDS AS | 1,735,066 | 3.3 |
| THE BANK OF NEW YORK | 1,569,005 | 3.0 |
| DEUTSCHE BANK AG | 1,200,000 | 2.3 |
| SKANDINAVISKA ENSKILDA | 1,135,448 | 2.2 |
| MORGAN STANLEY & CO. | 1,095,879 | 2.1 |
| PREDATOR CAPITAL MANAGEMENT | 965,000 | 1.8 |
| MP PENSJON PK | 837,584 | 1.6 |
| SUNDT AS | 832,486 | 1.6 |
| ANDENERGY AS | 801,326 | 1.5 |
| INVESCO PERP EUR SMA | 765,804 | 1.5 |
| VPF NORDEA AVKASTNING | 736,553 | 1.4 |
| BAKLIEN ÅSMUND | 700,000 | 1.3 |
| CITIBANK, N.A. | 531,955 | 1.0 |
| DNB NOR MARKETS, AKS | 531,514 | 1.0 |
| BEKKESTUA EIENDOM AS | 512,000 | 1.0 |
| MATHIAS HOLDING AS | 500,000 | 1.0 |
| PERESTROIKA AS | 495,830 | 0.9 |
| 20 largest shareholder accounts | 39,591,100 | 75.3 |
| Remaining shareholders | 13,015,899 | 24.7 |
| Total shareholders | 52,606,999 | 100.0 |
* Controlled by Teekay
| 2015 | 2014 | |
|---|---|---|
| Salaries and vacation pay | 11.6 | 15.5 |
| Employer`s contribution tax | 2.0 | 2.5 |
| Pension costs | 0.9 | 1.5 |
| Expensed portion of value of share options | 0.0 | 0.0 |
| Other employee benefit expense | 0.7 | 1.2 |
| Total employee benefit expense | 15.2 | 20.7 |
| Number of man-years | 87 | 98 |
| 2015 | |||
|---|---|---|---|
| Retirement | Other | ||
| Figures in USD 1,000 | Salaries | benefits | benefits |
| Carl Lieungh, CEO | 494 | 51 | 33 |
| Reese McNeel CFO | 481 | 22 | 25 |
| Lars Ødeskaug, COO | 332 | 28 | 4 |
| Alf-Roger Skikstein, Managing Director Sevan Marine | 212 | 52 | 5 |
| Fredrik Major, CBDO | 233 | 52 | 20 |
| Morten Martens Breivik, CoS | 197 | 15 | 4 |
| Otto Skjåstad, CTO | 200 | 11 | 3 |
| Total remuneration paid | 2,149 | 231 | 94 |
* Salaries includes bonus and sign-on fees
| 2014 | |||
|---|---|---|---|
| Retirement | Other | ||
| Figures in USD 1,000 | Salaries | benefits | benefits |
| Carl Lieungh, CEO | 851 | 68 | 42 |
| Kjetil Vangsnes CFO | 401 | 26 | 5 |
| Lars Ødeskaug, COO | 540 | 26 | 6 |
| Fredrik Major, CBDO | 352 | 61 | 25 |
| Morten Martens Breivik, CoS | 296 | 20 | 5 |
| Otto Skjåstad, CTO | 299 | 14 | 4 |
| Total remuneration paid | 2,737 | 215 | 87 |
* Salaries includes bonus and sign-on fees
Salaries and other benefits included above were translated at average exchange rates for each year.
Senior Management is included in the Group's collective retirement benefit plans. No loans, prepayments or security were granted to current Senior Management or any member of the Board of Directors in 2015 and 2014. The CEO, will receive 0-24 months' salary upon termination of employment dependent on fulfilment of certain conditions.
Reference is made to the 'Statement regarding establishment of salary and other benefits for Senior Management' for further details of remuneration of Senior Management.
| Figures in USD 1,000 | 2015 | 2014 |
|---|---|---|
| Siri Hatlen, Chairperson | 63 | 81 |
| Jørgen Rasmussen, Deputy Chairman **** | 43 | 28 |
| Arne Smedal, Deputy Chairman **** | 0 | 22 |
| Mari Thjømøe | 42 | 54 |
| Peter Lytzen *** | 0 | 0 |
| Ingvild Sæther *** | 0 | 0 |
| Kjetil Sjursen * | 15 | 0 |
| Kari Berte Daasvatn Bye * | 0 | 20 |
| Alf Reidar Sandstad * | 0 | 20 |
| Sidsel Skagen *, ** | 15 | 20 |
| Hans Olav Sele * | 31 | 20 |
| Torlaug Lode ** | 15 | 0 |
| Total remuneration paid | 226 | 264 |
* Sidsel Skagen and Hans Olav Sele entered the Board May 23th, 2014 as Employee representatives. Kari Berte Daasvatn Bye and Alf Reidar Sandstad resigned from the Board May 23th, 2014.
** Torlaug Lode entered the Board May 21th, 2015 as Employee representatives. Sidsel Skagen resigned from the Board May 21th, 2015.
*** The remuneration was paid to the Companies the Board members are employeed.
**** Jørgen Rasmussen entered the Board May 23th, 2014 as Deputy Chairman. Arne Smedal resigned from the Board May 23th, 2014.
***** Kjetil Sjursen entered the Board May 21th, 2015.
Remuneration of the Board of Directors was for the periode of November 24th, 2014 to November 23 th, 2015
| 2015 | 2014 | |||||
|---|---|---|---|---|---|---|
| Retirement | Other | Retirement | Other | |||
| Figures in USD 1,000 | Salaries | benefits | benefits | Salaries | benefits | benefits |
| Sidsel Skagen * | 109 | 4 | 1 | 158 | 9 | 3 |
| Hans Olav Sele | 133 | 8 | 2 | 170 | 9 | 2 |
| Torlaug Lode * | 112 | 7 | 2 |
* Torlaug Lode entered the Board May 21th, 2015 as Employee representatives. Sidsel Skagen resigned from the Board May 21th, 2015.
Reference is made to Note 7 for further information about shares owned or controlled by the Board of Directors and Senior Management.
The company operate both defined benefit and defined contribution plans. The actuarial calculations for the Company's defined benefit plans were carried out by an independent actuary. Calculated pension obligation for 2015 is based on mortality table K2013 (2014: K2013). The principal actuarial assumptions are based on guidelines from the Norwegian Accounting Standards Board. The defined benefit plans have 15 participants (2014: 15 participants) and these plans have been closed for new participants since 2008. Net pension obligation is 0.5 (2014: 0.3) consisting of gross obligation of 3.9 (2014: 3.8) and pension plan assets of 3.4 (2014: 3.5). Gross obligation includes additional pension assurance plans obligation of 0.4 (2014: 0.3).
Pension cost charged to the income statement is 0.9 (2014: 1.5) whereof 0.2 (2014: 0.3) is related to defined benefit pension plans and 0.6 (2014: 0.9) is related to defined contribution plans and 0.1 (2014: 0.3) is related to additional pension assurance plan. The defined contribution plan has 67 participants per 31.12.2015 (2014: 91 participants). The Company's pension schemes satisfy the requirements in the Norwegian legislation regarding mandatory occupational pension.
| 2015 | 2014 | |
|---|---|---|
| Cost of hired personnel | 0.3 | 0.1 |
| Office cost (rental etc) | 2.7 | 3.3 |
| Consultancy (audit, tax and legal) * | 3.6 | 2.8 |
| Marketing | 0.2 | 0.5 |
| Travel expenses | 0.4 | 0.9 |
| Other | 0.6 | 0.6 |
| Total other operating expense | 7.8 | 8.2 |
| * Specification of auditor's fee (excl. VAT): | 2015 | 2014 |
|---|---|---|
| Statutory audit | 0.1 | 0.1 |
| Audit related services | 0.1 | 0.1 |
| Tax related services | 0.0 | 0.0 |
| Other services | 0.0 | 0.0 |
| Total auditor's fees | 0.2 | 0.2 |
The Company has entered into several agreements for rent of offices. Lease expense for offices amounted to 1.1 million for the year (2014: 1.7).
| 2015 | 2014 | |
|---|---|---|
| No later than 1 year | 1.4 | 1.8 |
| Between 1-5 years | 2.0 | 3.6 |
| Later than 5 years | 1.0 | 1.5 |
| Total lease and rental obligations | 4.4 | 6.9 |
| 2015 | 2014 | |
|---|---|---|
| Net profit/(loss) (USD 1,000,000) | -31.0 | 2.1 |
| Earnings per share (USD) | -0.59 | 0.04 |
| Earnings per share diluted (USD) | -0.59 | 0.04 |
| Average no. of outstanding shares (thousands) | 52,607 | 52,607 |
| Weighted avg. no. of ordinary shares for diluted earnings per share (thousands) | 52,607 | 52,607 |
Basic earnings per share were calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the year.
Due to net losses for the periods reported, and according to the principle of no negative dilution (positive effects on earnings per share resulting from an increase in number of shares issued, are not to be included), diluted earnings per share was calculated as earnings per share.
| 2014 | ||
|---|---|---|
| Payroll liabilities | 1.3 | 1.9 |
| Deferred income | 0.0 | 0.0 |
| Employer`s contribution tax and other taxes | 1.1 | 1.8 |
| Accrued interest, tax claim | 0.1 | 0.0 |
| Accrued severance pay | 0.1 | 1.1 |
| Rental charged as an expense | 0.0 | 0.3 |
| Accrued restructuring claim | 3.8 | 0.0 |
| Other payables | 0.6 | 1.2 |
| Total other current liabilities | 7.0 | 6.3 |
The exercise prices of share options awarded to employees was at minimum equal to the market price of the share at the time of the award. All of the remaining options may be exercised with 1/3 each year, first time one year following the award and expire five years following the award. Upon the occurrence of a "change of control" all outstanding options may be exercised. A "change of control" shall be deemed to have occurred if more than 1/3 of the Company's shares are owned by a shareholder or group of shareholders. In November 30, 2011 Teekay Corporation subscribed and paid for new shares, obtaining an ownership of more than 1/3 of the Company's shares. As a result of this, these share options are now exercisable and the related remaining share option cost was accounted for in full in 2011. The Company has no legal or constructive obligation to repurchase or settle the options in cash.
| 2015 | 2014 | |||
|---|---|---|---|---|
| Average exercise price | Average exercise price | |||
| after reverse share split | No. of | after reverse share split | No. of | |
| (NOK per share) | options | (NOK per share) | options | |
| January 1 | 881 | 29,000 | 881 | 29,000 |
| Granted | 0 | 0 | 0 | 0 |
| Exercised | 0 | 0 | 0 | 0 |
| Lapsed/forfeited | -881 | -29,000 | 0 | 0 |
| December 31 | 0 | 0 | 881 | 29,000 |
At balance sheet date there is no remaining options (2014: 29 thousand), all options remaining in 2014 expired in 2015 and no options were exercised during 2015 and 2014.
| Exercise price | ||||
|---|---|---|---|---|
| Year of | after reverse share split | Share options remaining | ||
| expiration | (NOK per share) | at the end of the year | ||
| 2015 | 2014 | |||
| 2015 | 881 | 0 | 29,000 | |
| Total | 0 | 29,000 |
The average fair value of options awarded during 2010, determined using the Black-Scholes' option-pricing model, was NOK 212 after adjustment for the reverse share split. The significant inputs into the model were share price at the award dates, exercise prices as shown above, standard deviation of expected share price returns of 30%, dividend yield of 0%, estimated option life, and annual risk-free interest rate of 3.0%. No options were awarded during 2015 and 2014.
The operating revenue includes revenue from Group companies amounting to 1.1 million. The Company charged companies within the Group 1.0 million for services relating to management, engineering and site supervision, and 0.1 million for management fees. The Company was charged 0.3 million for services relating to management and engineering.
The Company charged companies within the Group 1.3 million for interest relating to loans during 2015.
The operating revenue includes revenue from Teekay amounting to 1.4 million for services relating to management and engineering. The Company was charged 0.2 million from Teekay for services relating to management.
The operating revenue includes revenue from Logitel Offshore amounting to 3.7 million for services relating to license, management and engineering. Logitel Offshore became related party when Teekay acquired the company in August 2014.
The Company was charged 0.6 million from Arendal Brygge and St. Ybes for lease of offices in Arendal.
The Company's activities expose it to a variety of financial risks; market risk (including currency risk, interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance.
The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to NOK, EURO and GBP. Foreign exchange risk arises from future commercial transactions, recognized assets or liabilities, and net investments in foreign operations.
Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity's functional currency. The Company aims at achieving a natural hedge between cash inflows and cash outflows.
The Company has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
Based on the balance sheet clean-up resulting from the restructuring the Company assess the foreign exchange risk to be immaterial at the time of this report.
The Company is exposed to commodity price risk at two main levels: The demand for Sevan units is sensitive to oil price developments, fluctuations in production levels, exploration results and general activity within the oil industry.
The operating revenue includes revenue from Group companies amounting to 0.5 million. The Company charged companies within the Group 0.4 million for services relating to management, engineering and site supervision, and 0.1 million for management fees. The Company was charged 0.1 million for services relating to management and engineering.
The Company charged companies within the Group 4.9 million for interest relating to loans during 2014.
The operating revenue includes revenue from Teekay amounting to 2.3 million for services relating to management and engineering. The Company was charged 0.3 million from Teekay for services relating to management.
The operating revenue includes revenue from Logitel Offshore amounting to 4.1 million for services relating to license, management and engineering. Logitel Offshore became related party when Teekay acquired the company in August 2014.
The Company was charged 0.6 million from Arendal Brygge and St. Ybes for lease of office.
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers. The Company has no significant concentration of credit risk towards single financial institutions and has policies that limit the amount of credit exposure to any single financial institution.
The Company has exercised a conservative capital and cash management during 2015.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities, and the ability to close out market positions. The Company aims to maintain flexibility in its liquidity by keeping committed credit lines available.
The Company has implemented routines to continuously update its cash flow forecast when changes to main assumptions relating to repayment schedules, milestone payments in relation to construction contracts etc. to be able to foresee the necessary actions to taken to rectify any potential adverse effects on its future liquidity position.
Sevan Marine has provided security to Nordea for guarantees, overdraft facilities and derivative transactions within the Topside and Process Technology segment. In the security arrangements the Company is committed to keep a minimum of NOK 20 million in cash in the accounts.
The security arrangements are described further in note 18.
Sevan Drilling is now part of the Seadrill group, yet Sevan Marine has not yet been formally released by Petrobras from its joint liablility with Sevan Drilling as intervening party (guarantor) under the charter and service agreements pertaining to "Sevan Brasil".
In connection with the sale of 49% of shares in KANFA AS to Technip, Sevan and Technip entered into a shareholders agreement where Technip has a put option regarding the initial sale. The put option, meaning that Sevan will be obliged to purchase back the initial 49% shares for the same price as Technip purchased them, will be an exit opportunity for Technip if KANFA AS does not conduct its business as per the agreed business plan in 2014, 2015 and 2016. At the time of this report, no indications exist that the put option will come into effect.
Sevan Marine is guarantor for a NOK 75 million facility in Nordea bank. The facility includes guarantees, overdraft facility and use of derivatives for KANFA Aragon AS.
In addition Sevan Marine is guarantor for 51% of a NOK 190 million facility in Nordea bank. The facility includes guarantees, overdraft facility and use of derivatives for KANFA AS.
| 2015 | 2014 | |
|---|---|---|
| License and design fee other | 0.0 | 11.5 |
| License and design fee Logitel | 1.6 | 6.1 |
| Revenue Teekay | 1.4 | 2.3 |
| Revenue Logitel | 2.1 | 2.3 |
| Other revenue | 18.6 | 37.1 |
| Total operating revenue | 23.7 | 59.3 |
| Bonus | Restructuring | Total | |
|---|---|---|---|
| January 1, 2015 | 0.0 | 4.4 | 4.4 |
| Arising during the year | 0.6 | 0.0 | 0.6 |
| Reversed during the year | 0.0 | -0.6 | -0.6 |
| Classified as accrual | 0.0 | -3.8 | -3.8 |
| December 31, 2015 | 0.6 | 0.0 | 0.6 |
| Bonus | Restructuring | Total | |
|---|---|---|---|
| January 1, 2014 | 2.0 | 4.4 | 6.4 |
| Arising during the year | 1.6 | 0.0 | 1.6 |
| Reversed during the year | -1.6 | 0.0 | -1.6 |
| Used during year | -2.0 | 0.0 | -2.0 |
| December 31, 2014 | 0.0 | 4.4 | 4.4 |
All provisions in 2015 and 2014 were current in nature.
During 2014, bonus provision based on 2014 KPI's was accrued. This provision was reversed in December 2014 as due to the poor market outlook and need to reduce cost, it was agreed with the Board of Directors that no 2014 bonus shall be paid despite certain objectives having been reached. For 2015 the Company have accrued USD 0.6 million for bonuses to employees.
The remaining provision regarding the restructuring relates to expected claims under certain indemnities given to Teekay in relation to the sale of the FPSO Piranema Spirit in 2011. The Company adjusted the provision of USD 4.4 million downwards to USD 3.8 million in 2015, based on updated calculation from Petrobras and correspondence with Teekay. The USD 3.8 million is expected to be paid in 2016 and is therefore classified as an accrual under other short term liabilities in the balance sheet.
Currency gains and losses relating to operational activities were classified as a separate line item as an operational expense in the Income Statement and are not included in the tables below. Currency gains and losses relating to financing activities were presented as separate line item as a financial income/ (expense) in the Income Statement.
| Financial income: | 2015 | 2014 |
|---|---|---|
| Interest income | 0.2 | 0.3 |
| Other financial income | 0.3 | 1.2 |
| Reversed accruals penality | 0.6 | 0.0 |
| Financial income from companies within the Group | 1.4 | 4.9 |
| Total financial income | 2.4 | 6.4 |
| Financial expense: | 2015 | 2014 |
| Interest cost | 0.2 | 0.0 |
| Write-down investment in subsidiary | 18.2 | 0.0 |
| Write-down investment in related parties | 0.4 | 0.0 |
| Loss provision on loan to third party | 0.0 | 0.3 |
| Other financial expense | 0.1 | 0.1 |
| Financial expense from companies within the Group | 0.0 | 0.0 |
| Total financial expense | 18.8 | 0.4 |
| 2015 | 2014 | |
|---|---|---|
| Trade receivables* | 2.5 | 3.2 |
| Accrued income, not invoiced | 0.4 | 2.5 |
| Prepayment | 1.2 | 2.8 |
| Total trade and other current receivables | 4.1 | 8.6 |
| 2015 | 2014 | |
|---|---|---|
| Investment in Arendal Brygge | 0.0 | 0.4 |
| Investments in associates | 0.0 | 0.4 |
* The investment relates to a 35% shareholding in Arendal Brygge AS. Reference is made to Note 4.
| 2015 | 2014 | |
|---|---|---|
| Receivable Teekay | 0.2 | 0.8 |
| Receivable Logitel | 0.2 | 0.7 |
| Receivable Arendal Brygge | 0.1 | 0.2 |
| Receivables from related parties | 0.5 | 1.7 |
| Receivable Logitel | 10.0 | 8.4 |
| Other non-current assets from related parties | 10.0 | 8.4 |
The board of Sevan Marine has in 2016 initiated a review of the circumstances surrounding and the legality of the Logitel Offshore agreements, including the USD 60m bond loan granted by Sevan Holding V AS to Logitel Offshore Pte Ltd ("Logitel") in 2013 and the Fourpartite Agreement entered into in 2014. The outcome of this review has exposed potential breaches of Norwegian corporate law in relation to these agreements. This could result in the agreements being void or voidable. Sevan Marine has initiated a dialogue with Logitel in an attempt to resolve the issues raised in an amicable manner and within the framework of applicable law. The outcome of this dialogue is however uncertain and may lead to litigation. As such, there remains material uncertainty regarding both the amount and timing of payments due in relation to both the Logitel loan and variable payments due from Logitel.
On January 19, 2016, Sevan Marine received a notice from Skatt Sør (Norwegian tax authorities) that the tax assessment for 2012 will be adjusted. Sevan Marine has per December 31, 2015 therefore recorded conservatively a USD 4.6 million (NOK 40.9 million) provision for the full amount of the potential additional tax, interest and penalty tax. Sevan Marine strongly disagrees with the tax authorities' view with respect to the factual as well as legal issues, and will take action to contest the decision.
Sevan Marine has received a reservation of rights letter from Teekay Offshore Partners in relation to the Piranema Spirit stating that they will seek to recover any losses from Sevan Marine which they may suffer as a consequence of any possible corruption. Both Petrobras and Sevan Drilling have also requested further information in relation to the investigation and reserved their rights in particular in relation to Sevan Marine's continuing status as intervening party in relation to the Sevan Brasil charter with Petrobras. The outcome of the investigation and any losses suffered or potential fines imposed by authorities may have a material impact on Sevan Marine going forward. Sevan Marine will consider and if appropriate contest such claims and also seek to recover any losses from the responsible individuals but the outcome remains uncertain.
Reference is also made to the recent review regarding the circumstances and the legality of the Logitel Offshore agreements as highlighted in Note 24.
We confirm, to the best of our knowledge, that the financials statements for the period January 1 to December 31, 2015, have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit and loss of Sevan Marine ASA as well as the consolidated group.
We also confirm that the Board of Directors' Report includes a true and fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties facing the Company and the Group.
Oslo, April 29, 2016 The Board of Directors of Sevan Marine ASA
Sevan Marine ASA - Arendal Kittelsbuktveien 5 4836 Arendal NORWAY Phone: (+47) 37 40 40 00 Fax: (+47) 37 40 40 99
Sevan Marine - Oslo Verkstedveien 3 0277 Oslo NORWAY Phone: (+47) 91 70 40 00 Fax: (+47) 37 40 40 99 Sevan Marine - Singapore 435 Orchard Road Level 11, Wisma Atria SINGAPORE 238877 Phone: (+65) 68 38 05 75
Fax: (+65) 68 36 78 86
Nye Vakås vei 80 1395 Hvalstad NORWAY Phone: (+47) 64 00 18 00 Fax: (+47) 64 00 18 01
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