Annual Report • Apr 18, 2024
Annual Report
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DELIVERING EXCELLENCE, EXPANDING HORIZONS
| 2023 Highlights |
3 |
|---|---|
| An Interview with our CEO |
4 |
| Our Business |
6 |
| Odfjell Drilling at a glance |
7 |
| QHSSE | 9 |
| Sustainability Statement |
11 |
| How we manage sustainability |
12 |
| Environmental Impact |
13 |
| Social Impact Management |
21 |
| Governance and Ethics |
28 |
| Corporate Governance |
34 |
|---|---|
| Board of Directors during the year |
34 |
| Executive Management Team |
35 |
| Audit Committee Report |
36 |
| Corporate Governance Report |
38 |
| Executive Remuneration Report |
42 |
| Board Of Directors Report |
46 |
| Financials | 52 |
|---|---|
| Consolidated Group Financial Statements |
53 |
| Parent Company Financial Statements |
101 |
| Responsibility Statement |
121 |
| Auditors Report |
122 |
| Definitions of Alternative Performance Measures |
125 |
| Additional information: Sustainability Statement |
126 |
In an interview with Kjetil Gjersdal, CEO of Odfjell Drilling AS, we find out what has happened in 2023 and what he sees in the future for the Group.
"Busy. Very busy.
"For many reasons, this has been a landmark year for our Group and has placed us in a strong position from which we can continue to grow and develop in to 2024. We set a few important goals at the start of the year. First, safe and efficient operations is priority number one. Always. Thereafter, we were going to refinance the Group on favourable terms, add valuable contract backlog and eventually come into a position to start paying dividends. I am pleased to say that we delivered on all. "
"One major change is that the market has improved from last year.
"For so long now, I and so many of my peers and colleagues at various conferences and panels have spoken about the lack of investment in our sector, as well as a future lack of supply for tier 1 semi-submersible drilling units, like those in our fleet.
"I think this year, that has become a reality and I would say its come faster than some of us expected.
"Looking back to late 2022, contracts with day rates above \$450k per day seemed far away, however this year we have seen this threshold broken by ours and our peers' units multiple times.
"Demand continues to be strong and supply is struggling to meet it.
"Now when I speak to those same peers and colleagues at conferences and panels, we are talking about this being the start of a longer and sustainable upcycle for our industry."
"In contrast to some expectations, mature hydrocarbon basins are seeing investment, with new fields being developed, creating opportunities to develop lower carbon energy. We are also seeing the emergence of other areas, such as Brazil, Canada, Australia, offshore Mexico and Namibia; creating further demand. We also see production decline here in the North Sea, which will have to be replaced.
"The impact on the Group is higher day rates, and therefore higher contract values and the value of our units increasing. This greater momentum in the wider industry really helped us to secure our refinancing.
"With our ambition of being the number one drilling operator, there is always work to be done to constantly maintain this level of service."
"Like many businesses such as ours, we have used debt to facilitate growth and much of our debt facilities were due to mature during 2023 and 2024. As a result, we believed it was necessary to refinance this debt and also change the terms on these debt obligations."
"Debt refinancing was one of our key focus areas for 2023, and we were delighted to secure a USD 390 million secured bond, as well as bank facilities of USD 497 million, including a Revolving Credit Facility of USD 175 million, during the first half of this year.
"The value of these facilities and the flexibility of the terms we secured is significant and allow us to continue to comfortably service our debt obligations whilst also returning capital to shareholders, either via a share repurchase or via dividends which we have already started paying. The refinancing also gives our business increased liquidity and flexibility for growth opportunities.
"The position, confidence and enthusiasm now held by many stakeholders in our business owes a lot to the securing of this refinancing."
"Delivery, delivery, delivery! The most important focus area for our business will always be on providing the best in class operations in a safe manner to our clients.
"I am pleased with what we achieved. During 2023, we stepped up on our operational record. The Deepsea Stavanger alone drilled 13 wells during 2023, highlighting the exceptional capability of our employees and of the unit.
"It was also very pleasing to see that both the Breidablikk and Alvheim developments (operated by Equinor and Aker BP respectively) began production earlier than forecasted.
"It's really exciting to be supporting the development of these fields with the Deepsea Aberdeen and Deepsea Nordkapp and their crews, and we look forward to completing further wells on these developments in due course."
"As you would expect, there were some growing pains, but I believe we did ourselves proud.
"It says a lot about our Group that we have been able to grow so quickly and be so agile. This has come about as a result of a lot of hard work from our dedicated employees.
"Bear in mind, not only were the Hercules, Deepsea Mira and Deepsea Bollsta new rigs to us, but they were also drilling at the limits of their capability. That is no easy thing to accomplish.
"Not only did we have to get the Hercules, Deepsea Mira and Deepsea Bollsta operational and working in accordance with Odfjell Drilling standards, but we also had to set new industry records at the same time to get the job done safely and efficiently.
"We proved that we can do it though, and every single employee can be very proud of how we have delivered this year. Really proud."
"I will always say that our QHSSE record needs to be better. Our commitment to the safety, health and happiness of our people absolutely must remain at the absolute pinnacle of our industry. Period. I will never stop saying that.
"Firstly, if we are to continue to be recognised as the partner of choice for our clients, we must also be the employer of choice for current and future employees. To attract and retain the best; we have to be the best.
"Secondly, it is worth bearing in mind that high levels of QHSSE are not always an easy thing to deliver in practice. Creating a safe and healthy workplace takes time and dedication. You can't cut corners and take risks. Ultimately, the safer we are and the less incidents we have, the faster and more efficiently we drill. It really is that simple. We wouldn't be Odfjell Drilling if we didn't have this focus.
"As always though, there is more work to do."
"The 50th anniversary party! It was a chance to look back at the history of the Group and acknowledge how far we have come and how much we have to be proud of. It was also a great chance to see so many colleagues together celebrating."
"Firstly, solid execution of the SPS for Deepsea Atlantic and for Deepsea Aberdeen will be important.
"Then we have to continue our focus on our carbon reduction strategy. It's not just important for us, but it makes good business sense as well as helping the planet.
"This report also reflects that, in that it is our first integrated annual and sustainability report. I think this emphasises the importance we place on developing in that area.
"Otherwise, what is next for Odfjell Drilling? I guess that's the exciting bit, we have more options and flexibility than we have had for years for growth.
"New rigs or businesses could be considered, but the acquisition has to be accretive. Our business as it stands is exceptional, and it has growth already secured, with our fleet moving to higher value contracts and our existing fleet providing flexible solutions to our clients. Any acquisitions would have to be a credit to our Group and our name, adding value to our Group, rather than just growing it for the sake of growing it.
"We have started paying dividends to shareholders this year, which is really important. This is something we want to keep doing, hopefully increasing in the future.
"Looking ahead, our own fleet is entirely secured up to 2026 and beyond for some units, and is going to work on some of the most challenging developments in some of the toughest conditions on the planet.
"We enter 2024 with strong revenue generation ahead of us. This will be the year where we start rolling from legacy day rates over to market rates. We are well financed, have good liquidity and are supported by an exceptional workforce and asset base, working in an industry which is on the up.
"We are very excited about where this will take us and to see what Odfjell Drilling looks like as it enters 2025."
"I really feel like our Group is entering an extremely exciting period. Our industry appears to be at the start of a sustained upcycle; not a short blast of increased day rates, but the start of a slower sustained period of higher day rates which works for us, our peers and our clients.
"There is a long way to go, and this year we have a lot of key events coming up, like the SPS programs which are a key activity for our business, but one we are well versed in. We will execute these and get through them with the same kind of "can-do" attitude that Odfjell Drilling employees' exhibit in operations, so the future looks very bright."
We search for, invest in and retain people of the highest quality and competence. Our people are motivated, ambitious and focused on delivering the best standards and services.
It is because of our employees' focus on challenging themselves and meeting the challenges of our clients, that we can deliver extraordinary solutions and continue to push the boundaries in what our industry can deliver.
Our fleet consists of eight of the highest specification drilling rigs globally and are recognised as being able to operate in some of the harshest conditions in the world on some of the most technically challenging projects.
Our four owned units are recognised as being some of the most in demand units, and have an average of over two and a half years of firm contract backlog.
Enabled by our company culture, our people and our assets we have been drilling the exceptional...
ODFJELL DRILLING Annual Report 2023 6
Exceptional work force, determined to push the boundaries of our business and industry
with ambition to increase in the medium to long term
Deepsea Aberdeen was on contract in 2023 with Equinor, on the Breidablikk and Svalin fields, offshore Norway. It has been working with Equinor almost exclusively on the Breidablikk field since Spring 2022. As a result of the strong performance from everybody involved in the development, it was announced in 2023 that Breidablikk had come on stream ahead of schedule. Further wells have now been scheduled which result in Deepsea Aberdeen continuing its work on Breidablikk until at least the second half of 2025.
During 2023, the Deepsea Atlantic was drilling on the Johan Sve rdrup Phase II development, where it will continue until moving onto a new contract following its planned Special Periodic Survey ( "SPS " ) mid 2024. As part of its SPS program, the Deepsea Atlantic will be upgraded with a new blow-out-preventer ( "BOP " ) which will support the unit as it begins its deepwater campaign offshore UK.
The Deepsea Nordkapp was working with Aker BP throughout 2023 on the Alvheim Development. Deepsea Nordkapp also successfully completed it's 5-year SPS in December of 2023 , whilst entirely on operation and at sea; the first time this has been achieved in the North Sea. The Deepsea Nordkapp will continue to work with Aker BP until at least 2027.
During the year, the Deepsea Stavanger was working on various exploration projects for Equinor at an exceptional pace; drilling faster than had originally been anticipated. The Deepsea Stavanger has firm contract commitments with Equinor until the end of 2024, whereafter it will move onto a new 5 year contract with Aker BP.
Having completed re-activation work in 2022, Deepsea Bollsta was working throughout 2023 for Shell, offshore Namibia. Deepsea Bollsta will continue to drill with Shell until mid-2024.
In early 2023, the Deepsea Mira completed reactivation work before moving to Namibia to begin a multi-well exploration campaign for TotalEnergies. The Deepsea Mira will continue to work offshore Namibia for the remainder of the year.
The Deepsea Yantai worked for multiple operators offshore Norway including OMV, DN O Norge AS , Neptune Energy Norge , Var Energi and Wellesley Petroleum. The Deepsea Yantai will continue to work offshore Norway during 2024 and has a firm backlog which extends into Q 2 2025.
The Hercules completed its SPS in Q2 2023 before being deployed to offshore Canada for ExxonMobil. The unit subsequently began a drilling campaign for Galp Energia in Q3 2023 also Offshore Namibia. Hercules will return to Canada to drill for Equinor during 2024.
Offshore Namibia presents many challenges. Firstly, the unpredictability of the weather and currents mean that units have to be flexible and able to shoulder significant waves and swells quickly.
Secondly, the hydrocarbon targets offshore Namibia are at water depths which range from 2 ,000 meters to 3 ,000 meters, towards the very limit of the capabilities of drilling units.
Despite this, the Deepsea Mira, Deepsea Bollsta and Hercules have all drilled successfully in the area since H2 2023, without any detachments or safety incidents.
Once it had completed the 3 ,000 metre Venus 1X well, the Deepsea Mira also moved to its next drilling location with the blow-out preventer string still suspended at 3,000 met r es. Increasing the efficiency of mobilisation to its next drilling location.
With our Namibian drilling campaigns, Odfjell Drilling is proving the industry that our semi-submersibles can drill anywhere. Any country. Any weather. Any challenge.
3
Through a relentless pursuit of the very best QHSSE standards and continuous self-reflection, we continuously enhance our business to ensure high quality deliveries for our employees and clients around the world. This year, we have had an additional challenge of new units and new international operations, which have resulted in many new employees being onboarded and included in the 'Odfjell' way of working. I am delighted by our response to this challenge and the results we have demonstrated across our business.
Janike Myre SVP QHSSE
Safety performance continues to be our top priority and despite improvements achieved through 2023, our safety performance journey continues.
Our ultimate objective is to avoid major accidents which calls for continuous and purposeful commitment from all of us; in all we do.
Odfjell Drilling promotes a QHSSE culture based on competence, commitment, mutual respect, empowerment and involvement. We work continually to maintain and develop the highest quality standards for our products and services, to protect assets and to prevent harm to people and the environment. Leadership, strong understanding of risk and a continuous focus on QHSSE performance are essential in achieving this. QHSSE is a management responsibility starting with commitment from the top level, cascaded down through line management. The Plan-Do-Check-Act cycle is an integral part of our work culture to ensure continual improvement. We believe that risk understanding and strong barrier management are fundamentals for good safety, and increasing awareness of these will be a key priority in the coming years.
Odfjell Drilling's Annual QHSSE program is fortified by comprehensive QHSSE action plans, incorporating inputs such as audit results, Key Performance Indicator ("KPI") status, data analyses, risk registers, environmental aspects, and impacts registers, and management reviews, as well as insights from authorities, clients, and the industry. This holistic approach ensures a robust and proactive strategy for Quality, Health, Safety, Security and Environment. The QHSSE programme includes the main activities, objectives and KPIs to prioritise and measure during the year.
Odfjell Drilling prioritises maintaining the highest safety standards and safeguarding the wellbeing of employees and workers in the value chain. Our culture of cooperation with safety delegates both offshore and onshore, ensures effective communication and collaboration. Safety delegates play a pivotal role in reporting concerns to management, contributing to our commitment to occupational health and safety.
Worker participation, driven by the knowledge and experience of our workforce, is fundamental to safe operations. Odfjell Drilling's safety initiatives focus on understanding and learning from human factors, with an emphasis on safety leadership and proactive responses to errors. Our wellbeing campaign, launched in December 2022, underscores our commitment to employee well-being and is an initiative which we will continue to develop. Read more about our QHSSE management approach and performance in the Sustainability Statement.
All incidents are reported and classified according to the Odfjell Drilling incident classification matrix. Based on the actual or potential consequences, incidents are subject to a thorough investigation process. Corrective actions are implemented based on results from incident investigations and experience transfer carried out to prevent recurrence. Experience and learnings from 2023 are mainly based on human and organisational factors and the importance of daily risk management and supervision of operations.
Odfjell Drilling constantly places focus on safeguarding its personnel, assets, and business against potential security threats, with a particular focus on cyber security. In an era where digitalisation is transforming the way industries operate, cyber security has become a paramount concern. Odfjell Drilling's proactive approach to addressing these concerns places it at the forefront of safeguarding critical offshore assets. This commitment is ingrained in the responsibilities of line management, emphasising that the well-being and protection of employees take precedence in all business activities.
To realise this commitment, the Group engages in thorough risk analysis to identify and effectively manage security risks. Proactive measures are systematically implemented to minimise risks to a level deemed reasonably practicable. Adequate security training is imparted as needed, ensuring that employees, consultants, and contractors are well-versed in security protocols. Facilities, systems, and information are secured, and any security incidents undergo thorough investigation, with criminal acts promptly reported to law enforcement. Furthermore, a culture of awareness is fostered among all stakeholders, promoting personal responsibility for security matters and ensuring compliance with the laws of the countries where Odfjell Drilling operates and conducts business.
Deepsea Aberdeen has been awarded the DNV class notation "Cyber Secure (+)", marking a significant leap forward in ensuring the safety and reliability of its operations. Embracing the digital era, Deepsea Aberdeen has demonstrated its commitment to cyber security, solidifying its position in the offshore industry. The Cyber Secure class notation reflects the rig's robust cyber security measures, providing a shield against potential cyber threats and reinforcing the integrity of its critical systems. The significance of this milestone extends beyond Deepsea Aberdeen; it sends a clear message that cyber security is not just a checkbox but a continuous journey of vigilance and improvement. As the rig continues to operate at the intersection of technology and tradition, its commitment to cyber resilience positions it as a model for the other rigs in the fleet.
The Sustainability Statement presents Odfjell Drilling's governance and performance related to material sustainability topics, including detailed performance indicators and metrics. This section presents identified the Group's principles for sustainability reporting which form the basis for preparation of the statement.
The purpose of our reporting is to provide stakeholders with a fair and balanced picture of relevant aspects, engagements, practices, and results for 2023. The Sustainability Statement is prepared on the same consolidated basis as the financial statements. The basis for preparation of sustainability information that relates to business relationships in non-consolidated entities, including Odfjell Drilling's upstream or downstream value chain, is clearly identified as such. The Sustainability Statement is approved by the Board of Directors (the "Board").
This statement has been prepared in accordance with the Global Reporting Initiative ("GRI") 2021 Sustainability Reporting Standards and its GRI 11 Oil and Gas Sector including the Sustainability Accounting Standards Board's ("SASB") Oil & Gas – Services standard. This Sustainability Statement shall be read together with the GRI Index to get a full overview. We have implemented the recommendations of the Task Force on Climate-Related Financial Disclosures ("TCFD"), providing our shareholders and other stakeholders with information on our climaterelated risks and opportunities. See the reference index on our website.
In 2023, Odfjell Drilling began preparing for the EU Corporate Sustainability Reporting Directive ("CSRD") and the applicable European Sustainability Reporting Standards ("ESRS"), by integrating the sustainability report and the annual report and restructured its sustainability disclosures as applicable. Odfjell Drilling will report in compliance with the implementation schedule of the CSRD and applicable ESRS in the 2024 annual report.
The new reporting requirements mean increased resources, skills and tools are required for capturing and reporting data.
We recognise that the quality of our reported sustainability data can be affected by inherent limitations in accuracy of raw data, calculation and estimation procedures, including assumptions for such purposes, and in manual transfer of data. We strive to achieve data quality in line with expectations set out in GRI 101 "Reporting principles" and continue our work to improve internal reporting and control processes in line with The Committee of Sponsoring Organizations ("COSO") framework for internal control. The Sustainability Statement has not been assured by independent third parties, but it will be subject to limited assurance for the year 2024.
Sustainability is integrated into our daily operations and our processes, including strategy development, risk management and Group performance.
performance lies with the Board, which decides on strategic direction and policy commitments.
Our sustainability strategy outlines key responsibilities for integrating sustainability into both our strategic planning and daily operations. Our sustainability approach is both ambitious and practical, striving for realistic and attainable goals. In preparing for the CSRD, the Group did begin to restructure its sustainability governance in 2023, to integrate non-financial ESG reporting with financial reporting. Both financial and nonfinancial reporting are overseen by the Chief Financial Officer Odfjell Drilling AS ("CFO").
Our transparent Environmental, Social and Governance ("ESG") initiatives and reporting mechanisms, aim to foster trust among our stakeholders, including employees, financial institutions, and government bodies. By framing sustainability within our ESG framework, we acknowledge and address associated risks, while showcasing our management of these risks, and our ability to identify opportunities. The sustainability strategy is anchored on level 1 in the Company Management System ("CMS"). The purpose of the procedure is to align and link the Group's ESG effort and ambitions.
The governance model outlines clear responsibilities, with sustainability considerations being considered by the Board, which receives regular updates and engages in discussions as needed. From 2024 the Board will receive quarterly updates as our sustainability performance will be integrated to our quarterly reports.
Key functions such as corporate HR, QHSSE, and compliance play important roles in overseeing various aspects of sustainability, from employee well-being to environmental impact mitigation.
The formation of a Sustainability Forum in 2023 underscores our commitment to coordinated ESG efforts, facilitating the development and execution of our strategy and initiatives across the organisation.
The Vice President ("VP") of Sustainability is responsible for the development and implementation of our Group's sustainability strategy, reporting to the CFO, and collaborating closely with corporate and Group level functions. Governance responsibilities are distributed among the Board of Directors, Chief Executive Officer Odfjell Drilling AS ("CEO"), Executive Management Team, the Sustainability Forum, and dedicated task forces, ensuring comprehensive oversight and execution of sustainability initiatives.
This materiality assessment draws on insights from Odfjell Drilling's sustainability and subject matter experts across group functions, encompassing areas such as climate, environment, social responsibility, health and safety, diversity, inclusion and belonging, compliance and enterprise risk management.
Stakeholder perspectives are integral to the materiality assessment, which undergoes annual updates. Odfjell Drilling's group functions and core operations aggregate insights gathered through engagements with stakeholders, interactions with external subject matter experts, and feedback from users of Odfjell Drilling's sustainability reporting.
Assessment of impact materiality considers both actual and potential sustainability impacts, stemming from Odfjell Drilling's activities and business relationships across the upstream and downstream value chain. This evaluation aligns with recognised standards, such as the GRI Standards and OECD Due Diligence Guidance for Responsible Business Conduct.
Similarly, financial materiality evaluation examines the risk of negative reputational, financial, or commercial consequences associated with sustainability topics, while also recognising potential opportunities for Odfjell Drilling.
Odfjell Drilling has identified 15 topics considered material and two topics considered important to its business impact, utilising frameworks such as the GRI 2021 Standard and SASB Oil and Gas Services. The significance of these impacts is determined through stakeholder feedback, internal subject matter expertise, and alignment with the group's business strategy and enterprise risk management process. All sustainability-related impacts, risks, and opportunities considered material for stakeholders are detailed within the document. Each material sustainability topic has dedicated chapters in the sustainability statement, providing context, describing impacts, risks, and opportunities, and disclosing governance, strategy, policies, metrics, and targets associated with them.
Looking ahead to 2024, Odfjell Drilling is evaluating its material sustainability-related impacts, risks, and opportunities in accordance with the European Sustainability Reporting Standards and the concept of double materiality.
Odfjell Drilling continuously engages with its stakeholders to deliver on commercial, financial, environmental, and social targets, while fostering mutually beneficial relationships. Odfjell Drilling seeks to understand the unique value drivers of each group, by involving stakeholders to evaluate both positive and negative impacts from our activities. This approach ensures that diverse perspectives contribute to informed decisions, aligning with the Groups objectives
Stakeholders include anyone who may influence or be affected by the Group's operations. The Group engage with representatives of affected stakeholders, such as unions and nongovernmental organisations, suppliers, business partners, clients, and industry associations. In addition, the Group actively engage with users of the Sustainability Statement, including authorities, banks and investors. Odfjell Drilling also partner and engage with sustainability experts from academia to gain insight on our way to net zero drilling and other sustainability commitments and strategies.
The Group prioritise key stakeholders based on the overall impact that they have, making engagement with them an important source of insight for strategic decision-making and alignment. More detailed information on key stakeholder groups, engagement methods, interests, and outcomes, see the stakeholder dialogue table.
HOW WE MANAGE SUSTAINABILITY
Impacts of climate change, coupled with offshore oil and gas industry operations, affect the environment and biodiversity. Odfjell Drilling is committed to reduce the environmental impact from our operations. The foundation to mitigate environmental impact is anchored at corporate level in our Health, Safety, Environmental ("HSE") Policy andannual QHSSE Programme.
Odfjell Drilling does not hold production licences and are not involved with opening new areas for oil and gas production, but our operations impact biodiversity through emissions to air, spills and discharges to sea, waste and effluents. As a result, we have a role to play and work systematically to reduce our environmental impact and protect biodiversity.
The Group's operations have processes and activities that systematically identify environmental aspects and impacts. Significant environmental aspects form the basis for establishing environmental management procedures, controls, continuous improvement measures and strategic action plans. These are documented in environmental aspects and impacts registers for each rig. The life cycle perspective is considered in establishing such registers, e.g. purchasing from a local vendor will reduce environmental impact from transportation.
Our commitment to environmental management is reflected in our ISO 14001 certification. The process for recertification involves audits, with one being conducted in January 2024.
Controls are established to reduce environmental impact from activities that may result in spills and discharges to sea. Such controls are technical barriers (e.g. closed drain), maintenance programmes, procedures and, measuring and monitoring programmes. Events that can lead to accidental spills and discharges are identified and emergency response plans for operations within our control are established. Preventing spills and discharges to sea are anchored in the CMS, QHSSE programmes and action plans. Spills and discharges to sea are managed through the process of establishing and maintaining environmental aspects and impacts registers.
Operating in the oil and gas sector, we understand that climate risk poses challenges to our operations and stakeholders. While the future impact of climate change is uncertain, we acknowledge the importance of addressing and adapting to its effects. We encounter both risks and opportunities as we strive to reduce our climate impact and align with future energy demand. See the Board of Director's Report for risks. An opportunity comes from the fact we specialise in harsh environment, meaning we are well equipped to service areas with deteriorating weather conditions. Our net zero emission drilling projects make us a preferred supplier as the least carbon intensive rig provider. Drilling for CO2 storage wells is another opportunity.
The basis for calculation and presentation of environmental metrics is described in the methodology statement, including information on whether the metrics are measured directly or estimated based on sources such as third-party data or sector averages. Metrics are collected from Odfjell Drilling's fleet relying on local management systems and are typically based on process data systems, measurements, calculations, and purchasing data. Controls are performed to ensure that the information is complete and accurate. However, the scope of the Sustainability Statement and the absence of generally accepted reporting standards and practices for certain data may result in uncertainties in the reported information.
We are committed to delivering excellent drilling services to our clients, while aligning with the Paris Agreement, by achieving net zero emission drilling. We have integrated our comprehensive four-phase emissions reduction roadmap into our company strategy, with a strong focus on energy efficiency as a key lever. We are resolute in our pledge to play a central role in reducing greenhouse gas ("GHG") emissions across our entire portfolio, including our value chain and in support of our clients' emission reduction policies and targets.
The Group has set the targets for 40% emissions reduction by 2026, 70% by 2035, and net zero emissions by 2050 for our own fleet. To achieve these targets, several policies are in place to assess and mitigate direct, indirect and upstream emissions where possible. Energy efficiency and alternative energy sources are prerequisites for reaching our emission reduction targets, but also present an important business opportunity for Odfjell Drilling. The demand for energy efficient operations and services will only increase in the years to come.
As there is no readily available technical solution for immediate commercialisation and implementation, our primary focus is on energy efficiency. We recognise the close connection between achieving our emission reduction targets and enhancing operational efficiency and energy efficiency to fulfil the Group's ambitions. Our top priority has been to ensure both high operational efficiency and the concurrent reduction of daily emissions.
By working along these two fronts, we anticipate a significant reduction in emissions per well delivered.
Recognising the imperative for a paradigm shift in the energy sector, Odfjell Drilling acknowledges the importance of leveraging the capital and expertise amassed in the oil and gas industry for the transition to renewable energy. An example of this was in 2020, prior to the split of the Group, when Odfjell Drilling invested and established Odfjell Oceanwind, combining our offshore harsh environment expertise with floating wind for impactful wind energy commercialisation.
CO2 emissions per well, owned fleet, baseline 2014
Operating in a harsh environment makes it challenging to establish a consistent emission baseline across our rig fleet. Factors like wind, waves, currents, and well programs directly influence energy consumption, and each year varies in terms of the time rigs spend in transit, drilling, or idle. Consequently, simply comparing total fuel consumption and emissions from year to year does not offer a meaningful comparison or accurately document the impact of our improvement projects on emission reduction.
To address this, we measure emission reductions resulting from our energy efficiency initiatives against a baseline specific to each rig design. To minimise the influence of external factors, we rely on fuel consumption data from the anchored operational mode to evaluate energy efficiency performance and the corresponding emission reduction.
To accommodate the diversification of our fleet and manage our rigs in multiple modes of operation, the adoption of an activity-neutral reporting methodology becomes essential. In our ongoing quest to enhance fuel and emission reporting methods, we have introduced activityneutral KPIs as a pivotal metric for 2023. These KPIs serve to monitor energy management performance consistently across the entire fleet and various operational modes. Additionally, to account for operational efficiency, we recognise the need to continuously improve our system to quantify the work accomplished by our rigs.
Odfjell Drilling is dedicated to leveraging our assets, internal expertise, and market position to innovate for the future. The integration of alternative energy sources is pivotal to achieving our 2035 targets.
This endeavour necessitates collaboration with our clients to pilot low-carbon solutions, as addressing emissions reduction is a collective challenge within the industry. To invest in net zero emission concepts, even with support from the Norwegian NOx Fund, securing long-term contracts is imperative in our industry. Business stability and partnership with our clients in asset development are therefore essential factors in meeting our forthcoming emission reduction objectives.
The expertise gained through developing our decarbonisation concepts is now being utilised to develop new energy solutions within offshore wind, hydrogen, ammonia and CCS. This will enable emission reductions for Odfjell Drilling and our clients. To do this, we co-operate with industry partners, suppliers and research clusters.
Since our establishment in 1973, innovation has been at the core of our identity, propelling us to constantly seek pioneering solutions vital for a market in transition. Odfjell Drilling has defined its journey towards net zero emission drilling in four phases, to systematically implement and optimise sustainable practices, ensuring a structured approach towards achieving longterm decarbonisation goals while maintaining operational efficiency.
Enhancing energy efficiency involves turning off non-essential equipment during operations, benefiting the business economically, operationally, and in terms of emissions. Preliminary calculations indicate a potential 10% emission reduction through improved procedures, without compromising rig operations or safety. Incentivising good operational behaviour is a key success factor. This is supported by our in-house developed digital performance portal Panorama. The dashboard provides an overview of the actual fuel consumption compared to forecast and enables analysis of any overconsumption.
To achieve our goals, we are not just enhancing operational procedures; we are also introducing technical modifications—tools that reinforce our focus on energy optimisation and flatten the rig's energy consumption profile.
Depending on the type of drilling operation, the energy demand can increase by 4-5 MW instantly, but only for a few seconds. These energy peaks require the rig to run multiple diesel engines on back up so that they are ready when needed, operating at optimal efficiency.
Odfjell Drilling has state-of-the-art 6th generation rigs. An analysis conducted on the different technical solutions and the energy consumers, identified that several backup systems using energy were not dimensioned for our use. Optimisation efforts have been undertaken, as demonstrated by the following examples of emissions reduction projects:
• Variable Frequency Drives ("VFD") installed for sea water cooling pumps, which enable the pump to adjust the amount of water according to actual demand
Odfjell Drilling has invested a total of \$59m on our green rigs projects as of 2023. Several of these projects are supported by the Norwegian NOx Fund. Odfjell Drilling has as of 2023 received a full payment from the NOx Fund after successfully proving NOx emission reductions from our initiatives on our own fleet.
During phase three of our decarbonisation roadmap, Odfjell Drilling is poised to reap tangible outcomes from our strategic investments, heightened operational awareness, and the execution of advanced technical modifications.
Building on the installation of flywheel and battery technology in 2022, the focus of 2023 has been to achieve operational reliability and optimise the solutions. Analysis of operational data has verified that the system achieves significant peak shaving.
A notable milestone achieved in 2023 was the completion of a study on single generator operations, aimed at reducing emissions across our rigs. By transitioning to moored operations in a single bus configuration with a sole generator, we anticipate a significant enhancement in fuel efficiency. This transition is facilitated by the installation of flywheel and battery systems, alongside a DC grid on our rigs.
We recognise that the successful implementation of such initiatives hinges on close collaboration with our clients to realise our shared objectives. Furthermore, we are committed to optimising the Power Management System to fully leverage the potential from our phase two initiatives. This strategic approach will position our rigs to embrace net zero emission concepts, driving us closer to the attainment of our ambitious environmental goals.
Achieving reduced emissions is the primary objective for all decisions made in energy efficiency projects. Odfjell Drilling is continuing along the route to net zero emission drilling by developing concepts within the following technologies:
• Alternative fuels: key to delivering our targets for 2035 is alternative fuels, and Odfjell Drilling has now taken actions towards accelerating such technologies together with key players in the industry. It is concluded that Odfjell Drilling rigs are ready to operate on Hydrotreated Vegetable Oil ("HVO") biofuel to reduce CO2 emissions in our operations. Further, implementation of biofuel in our fleet is however contingent on the availability and cost of biofuel. Practical considerations and risks related to biofuels are monitored by the Group on a continuous basis.
Renewable biofuel has been piloted onboard Deepsea Atlantic in 2022 together with Equinor, proving to be a suitable drop-in fuel with a CO2 reduction of more than 80% compared to a fossil fuel comparator. The pilot was performed using HVO produced from waste oil, which was bunkered on Deepsea Atlantic in August 2022. The rig operated an engine successfully on biofuel during a test period of approximately two months, which also included gaseous emission measurements.
Equinor initiated a study on ammonia as a marine fuel which was carried out by Wärtsilä, KBR and Odfjell Drilling in 2022. A dual fuel concept for retrofitting a GVA7500 rig to utilise ammonia as fuel was established, with an estimated CO2 reduction of 58% during moored operations. The study was completed alongside Wärtsilä's ongoing DEMO2000 project with full scale testing of an ammonia engine.
GHG EMISSIONS
| Material Topics |
Impact, risk & opportunities |
Target | Status | |
|---|---|---|---|---|
| GHG and air emission |
Enhancing ecosystems, biodiversity, and societal well being through emission reduction. |
40% by 2026 70% by 2035 Net Zero by 2050 CO2 emissions per well |
||
| Target met in 2023 Target not met in 2023 |
Plan in place, on track to reach longer-term target Plan in place, not on track to reach longer-term target |
Odfjell Drilling is committed to achieving net zero drilling operations, aligning with the emissions reduction targets in the Paris Agreement and International Maritime Organisation ("IMO"). Our contribution will be through playing a pivotal role in the decarbonisation of the offshore energy sector. Our primary focus lies in making the most substantial impact by reducing emissions for our clients.
Through GHG accounting and a comprehensive emission reduction program, we are actively working towards our ambitious target of achieving our first milestone with a 40% CO2 emissions reduction per well by 2026, prioritising energy efficiency to accelerate our progress.
Our GHG accounting is done in accordance with the GHG protocol and ISO 14064, for further details see our methodology statement.
Looking ahead, in 2024, our objective is to further align the GHG accounting with the ESRS. We are merging environmental reporting with financial reporting, under the oversight of the CFO, VP Sustainability and VP of Group Accounting. Our main focus will be on establishing robust internal controls, enhancing and integrating reporting software, and refining reporting procedures to synchronise with established financial processes.
In 2023, we have clarified the classification of scope 1 and scope 3 GHG fleet emissions, effectively addressing double accounting.
The Norwegian Shipowner's Association, IADC and BIMCO conforms to the GHG protocol and the CSRD requirements, where operational control is required. The guidance acknowledges the intricacies of contracts within the oil and gas sector, emphasising the importance of aligning reporting with the entity that exercises primary control. Drilling equipment and parameters are predominantly dictated by the Exploration and Production operator under contracts.
This means that going forward, all GHG emissions during contract is reported as Scope 3, upstream or downstream assets depending on ownership of rig, and that the operator report for these emissions as Scope 1. All owned fleet emissions off contract, Odfjell Drilling will report as scope 1. Odfjell Drilling is fully committed to adhering to this guidance and will reflect its principles in our 2023 report and going forward, demonstrating our dedication to transparent and accurate emissions reporting practices.
The Group incurs indirect scope 2 emissions through purchased electricity for offices and bases. To reduce emissions from scope 2, the Group has a global "green office guideline", managed and monitored by location managers. This guideline offers best practices for reducing the environmental impact of office activities, emphasising energy efficiency, waste reduction, and responsible resource use. Solar panels were installed at our Odfjell Business Centre in Bergen in 2023, which produced 15% of total electricity consumption for the year.
Operational GHG emissions reduction is anchored at a corporate level in the Group's CMS, through the HSE Policy and QHSSE Programme.
The Group's fleet emissions, originate from combustion of marine gas oil ("MGO") in the engine and boilers on each rig. Given the varying activity levels and operational conditions such as wind, waves, currents, and well conditions, comparing total emissions from one year to another does not provide a complete picture of the impact of emission reduction measures on our rig fleet. Instead, we measure emission reduction from energy efficiency initiatives against a baseline for each rig, primarily using fuel consumption data from Posmoor ATA in anchored operational mode.
Odfjell Drilling has implemented an energy management system in compliance with ISO 50001 Energy Management System requirements, with detailed processes for energy review, baseline definition, energy performance indicators and design improvement. Each rig operates with a separate Unit Specific Energy Management Plan, describing how energy management is implemented and followed. The plan details specific KPIs used to monitor energy improvement daily, and performance is monitored by rig management. The main objectives with energy management systems in Odfjell Drilling are reducing CO ₂ emissions, NO ₓ emissions, fuel consumption and maintenance costs. Running a rig efficiently will mean using fewer fossil fuels (MGO).
We assess the impact of energy improvement initiatives primarily through continuous fuel monitoring, using the Panorama system as a digital performance portal.
Panorama offers insights into our fuel and emission trends and real-time monitoring of Energy Management KPIs, also defined in accordance with ISO 50001.
In 2023, despite a 47% increase in contract days compared to 2022, the main driver of emissions, CO ₂ emissions from operations on contract in 2023 remained the same per contract day. Key activity drivers influencing emissions in 2023, compared to 2022, are the successful mobilisation and commencement of contracts in Namibia for the Deepsea Mira and Hercules rigs, along with a significant increase in operational days.
Scope 1 direct GHG emissions for Odfjell Drilling primarily pertain to our owned rigs that are off contract. This includes emissions during periods when the rigs are in dock or in harbour, off hire.
Shore Power is utilised when available to reduce emissions from main engines and local noise pollution. Electricity consumption from shore power to rigs in harbour is reported when applicable. Going forward, we will incorporate electricity consumptions from yard stays in our reporting.
As fleet emissions from our rigs under operations are defined under operational control, Odfjell Drilling's significant GHG emissions are primarily located within our scope 3 categorisation. Emissions reporting is separated between own fleet and external fleet and can be found in their respective Scope 3 category 8 and 13 reporting.
Odfjell Drilling's dedication to technological innovation and emission reduction is evident through various initiatives. The deployment o f
a battery hybrid technology across all owned rigs, exemplified by the successful operation of the system on the Deepsea Aberdeen.
Our engagement with the Norwegian NO x Fund resulted in a full payment completed in 2023. Moreover, pioneering efforts such as the renewable biofuel pilot conducted on the Deepsea Atlantic by operating an engine on 100% renewable biofuel have been instrumental in curbing our carbon footprint. Concept studies exploring alternative energy sources, such as wind power from floating wind turbines and the utilisation of ammonia as a marine fuel on a MODU, highlight our proactive approach towards sustainable practices and underscore our commitment to technological developments to foster a greener maritime industry. Read more about our roadmap to net zero on page 14.
Odfjell Drilling is committed to reducing emissions in our external fleet, aligning with the high standards set by our owned fleet. Despite limited control over investment in emission reduction technology, we aim to implement our energy management philosophy on all rigs in our fleet. Close partnerships with rig owners are crucial for seamless collaboration and sustainable practices. Our managed units have specific KPIs aligned with efficiency principles, and we work closely with rig owners to enhance energy efficiency, including initiatives like Selective Carbon Reduction ("SCR") for Deepsea Bollsta and fuel additives for Deepsea Mira.
A screening study on Deepsea Yantai has been initiated by the Group, in collaboration with the rig owner, to identify the potential for further emission reduction on the rig. The deliverables will include comprehensive cost estimations and measures to reduce energy consumption and emissions.
Our supply chain procurement procedures are designed to prioritise the most emission-efficient freight options, giving preference to sea freight over land transport whenever possible. The responsibility for managing and monitoring performance under these policies lies with the purchasing and logistics functions. In our ongoing commitment to environmental responsibility, the Group plans to expand our scope 3 emissions overview in the coming years by engaging our supply chain, in collaboration with our key clients and suppliers.
To enhance our environmental performance, we are incorporating the ESRS reporting requirements into our supply chain data management. Emission data is meticulously reported at the Group level, encompassing all upstream and downstream transportation of goods booked through our frame agreement logistics providers. Currently, this reporting system captures approximately 85% of all logistics activity within the Group.
In our pursuit of reducing our emissions, we are exploring innovative solutions such as additive manufacturing and digital warehousing. These initiatives aim to reduce freight emissions, minimise physical storage requirements, lower waste production, and decrease power consumption.
In recent years, Odfjell Drilling has been actively exploring the possibilities and advantages of additive manufacturing for producing spare parts. Given the global geopolitical instability and its potential impact on our access to crucial spare parts precisely when and where we require them, it has become imperative to adopt new technologies. Additive manufacturing not only addresses these concerns but also plays a pivotal role in promoting a sustainable supply chain. The ability to locally manufacture, repair, and modify parts, rather than shipping them over long distances, promises significant reductions in freight emissions, costs, vulnerability, and lead times. Furthermore, additive manufacturing facilitates the transition to a circular economy, allowing us to reintegrate waste into our own value chain for reuse. In addition, transitioning from physical inventories to digital inventories, wherever feasible and advantageous, will result in reduced storage costs, decreased power consumption, and more efficiently allocated capital.
The other material types of emissions that have a negative impact on the environment in our operations are NOₓ (nitrogen oxide) and SOₓ (sulphur oxide). NOx emissions from rigs operating in Norway is a reporting requirement for rig owners and operators to the Norwegian authorities. SOx and NOx emissions are both regulated in MARPOL. SOₓ emissions are primarily controlled through the permitted level of sulphur in the MGO delivered to the rig. NOₓ emissions are primarily reduced by lowering fuel consumption. However, there is technology specifically targeting removing NOₓ from the exhaust from diesel engines. SCR systems inject urea in the exhaust gas, converting the NOₓ into water and nitrogen. Deepsea Nordkapp has installed these "scrubbers" which enables a NOₓ reduction of 70-80% compared to having no such technology installed. An SCR system is also installed on Deepsea Bollsta.
| Categories1 | Units | 2023 | 2022 | 2021 |
|---|---|---|---|---|
| SCOPE 1 |
||||
| units2 Scope 1 - owned |
tCO₂e | 3 0 |
349 | 7,142 |
| SCOPE 2 |
||||
| Location based |
tCO₂e | 7 | 5 | 234 |
| 5 Market based |
tCO₂e | 188 | Not available |
|
| 2 SCOPE 3 |
||||
| Category 4 – Upstream transportation & units6 distribution - owned |
tCO₂e | 724 | 1,272 | 1,094 |
| Category 4 – Upstream transportation & units7 distribution - managed |
tCO₂e | 10,670 | 630 | 204 |
| Category 6 – business travel |
tCO₂e | 873 | 208 | 97 |
| commuting8 Category 7 – employee |
tCO₂e | 7,701 | 1,772 | 1,239 |
| Category 8 – Upstream leased assets - managed units |
tCO₂e | 163,282 | 42,388 | 31,152 |
| Category 13 – Downstream leased assets - owned units |
tCO₂e | 136,889 | 149,594 | 154,165 |
| OTHER EMISSIONS TO AIR |
||||
| Nitrogen oxides (Nox) - owned units |
Ton | 1,529 | 1,685 | Not available |
| Nitrogen oxides (Nox) - managed units |
Ton | 2,215 | 5319 | Not available |
| Sulfur oxides (Sox) - owned units |
Ton | 38 | 45 | Not available |
| Sulfur oxides (Sox) - managed units |
Ton | 55 | 14 | Not available |
| OTHER | ||||
| GHG emission intensity per net revenue |
tCO₂e/MUSD | 239 | 266 | 309 |
| GHG emission intensity per contract day |
tCO₂e | 123 | Not available |
|
| Energy intensity per net revenue |
joules/MUSD | 7,147 | Not available |
|
| Energy consumption within the organization |
joules | 4,081,183 | Not available |
|
| Notes |
1 refer to the methodology statement for detailed definitions and methodology on all emissions categories
2 the scope 1 and scope 3 data were recalculated due to the redefinition of the GHG reporting boundary
3 zero-emission in scope 1 indicates that all the emissions happened under contract being classified as scope 3.13
4 the scope 2 location-based emissions for 2021 includes Odfjell Technology emissions pre spin-off
5 the scope 2 market-based calculation, aligned with the ESRS, firs year of reporting 2023
6 scope 3.Category 4 (owned units) emissions decreased due to reduced land transport and air freight.
7 scope 3.Category 4 (managed units) emissions rose due to expanded fleet and operations in Namibia and Canada.
8 the substantial increase in emissions in scope 3 category 7 is attributed to the expanded fleet and expansion of operations in Namibia and Canada.
| Material Topics |
Impact, risk & opportunities |
Target | Status |
|---|---|---|---|
| Water effluents |
Marine ecosystem and environmental health |
Bilge water effluent to sea < 15 ppm oil in water |
|
| Uncontrolled spills to sea = 0 |
|||
| Reduce 10% of hazardous chemicals (YoY) |
|||
| Target met in |
2023 Plan in place, on |
track to reach longer-term target |
|
| Target not met in 2023 Plan in place, not |
on track to reach longer-term targe |
While Odfjell Drilling does not operate in regions facing acute water scarcity, the Group recognises the critical role of water as a precious resource and the looming challenges posed by water scarcity globally, and places a strong emphasis on responsible water management.
Adherence to stringent regulations, internal procedures, and operator requirements, coupled with monitoring of wastewater effluents, reflects our commitment to responsible water practices. Our approach prioritises environmental stewardship, compliance, and the preservation of water resources for the well-being of communities and the broader ecosystem.
The United Nations Biodiversity Conference (COP15) in 2023 led to a landmark agreement on protecting biodiversity loss. Odfjell Drilling recognises our responsibility of providing high quality service to operators, to ensure environmental protection and mitigate negative impacts on biodiversity and nature.
Our adherence to environmental principles and management procedures ensures the implementation of mitigating actions, including:
Water on our rigs primarily originates from seawater sources, aligning with sustainable practices. We produce fresh water through distilled freshwater generators or reverse osmosis systems. The potable water system includes a potable water supply network that involves treatment of fresh water for making it suitable for potable purpose and distribution to different consumers onboard. In addition, there are two bunker stations onboard for bunkering water from vessels. Potable water is analysed on a frequent basis to verify water quality.
Our rigs operate according to International Maritime Organisations Ballast Water Management (BWM) convention, meaning that we have a ballast water management plan, ballast water record book and international ballast water certificate. Deepsea Bollsta and Hercules, which operated outside Norway in 2023, have installed a ballast water treatment system onboard according to BWMS Code. Deepsea Mira will install such a system in 2024.
All Odfjell Drilling's rigs are designed to be a closed rig, meaning that all fluids (rainwater, washing water, oil contents, mud etc.) go into a closed drain system. We separate between hazardous drain and non-hazardous drain. Example of hazardous drains are drains from the drill floor, shaker room, and pump room, while non-hazardous drains are from outside deck areas such as the riser deck and pipe deck.
In discharging sewage, Odfjell Drilling operates according to MARPOL Annex IV Regulation 11. Our rigs have a grey water system with discharge from scuppers, hospital area, galley area, laundry area, sinks, showers, and wash basins. Moreover, a black water sewage system from toilets is arranged. When overboard discharge is prohibited, the sewage storage tank in place will be used. If the threshold on our KPI, keeping drain fluid with oil in water content < 15 ppm, is exceeded, it will be treated onboard to separate oil from water, where oil is pumped to tank for delivery ashore and clean water with oil content below 15 ppm is pumped overboard.
Our commitment to prevent unintentional spills and discharges and operate sustainably, underscores Odfjell Drilling's dedication to environmental responsibility. This is realised as part of the operational performance provided to our clients, through proactive measures including contingency plans, relevant technologies, and compliance with internal and external requirements. The aim is to prevent spills, safeguard ecosystems, and uphold environmental standards, contributing to societal well-being.
Odfjell Drilling maintains a robust commitment to environmental responsibility through oversight of operational activities. Our proactive and sustainable approach underscores the rigorous management of rig design, technical barriers, and spill prevention measures for both owned and managed assets. It is imperative to delineate the boundary with clients, who bear responsibility for securing discharge permits, specifying usage, treatment, volume, and substance discharge. Additionally, our operators oversee the purchase, utilisation, and disposal of chemicals, and managing processes related to drilling fluids, additives, and consumables.
To effectively address the risk, Odfjell Drilling implements stringent risk management protocols, encompassing comprehensive procedures, maintenance programs, and technical barriers designed to prevent spills to the sea. Moreover, recognising the broader spectrum of activities associated with material handling and fluid transfers between vessel and rig, the organisation proactively identifies and mitigates risks to prevent any unintended spills to sea.
All uncontrolled discharge to sea is classified according to our incident classification matrix, considering factors such as the type of spill (e.g., oil), content (e.g., harmful additives in drilling fluid), and volume. All uncontrolled discharges are reported in the Group's incident reporting system Synergi.
The 2023 performance assessment highlights the achievement of zero significant spills to the sea, underscoring our commitment to stringent environmental standards. Additional details on tracked spills can be found in the appendix.
Responsible and safe consumption of chemicals are essential from an environmental point of view and for limiting exposure to chemicals for our employees as much as possible. The QHSSE department evaluates all new chemical requests according to defined criteria prior to purchasing. After a review of the chemical's Safety Data Sheet, they are risk assessed in the EcoOnline system. Risk assessments involve users and the exposure, including health, safety and environmental aspects, provide input to substitution of chemicals and information to end-users. Chemical inventories are maintained of all chemical products used and the Company has implemented an inventory of hazardous material (IHM) maintenace procedure. Existing chemicals are reviewed regularly for reduction or substitution.
Offshore waste management is subject to strict regulations imposed by regional authorities in the countries where Odfjell Drilling operates. The responsibility for managing and disposing of production waste generated during drilling operations lies with the client, placing it beyond our operational control.
Although the disposal of general business waste generated by drilling operations are typically the responsibility of the client and, in these cases, are also beyond our operational control, Odfjell Drilling remains committed to reducing the general business waste we generate offshore. This includes plastics, metals, cardboard, nondrilling chemicals, and food waste. Odfjell Drilling has a global waste management policy, focusing on reducing our environmental impact through strategies like waste elimination, reduction, reuse, recycling, and proper disposal. We have established waste segregation plans for all our facilities, including rigs, offices, warehouses, and yards.
At Odfjell Drilling, we prioritise waste management plans that comply with environmental regulations. Although operators typically handle waste disposal, we aim to align our services with their goals and cut down on the waste we generate offshore. Our CMS provides clear guidelines to maintain environmental standards, emphasising waste reduction and safe handling. We believe in segregating waste at its source, promoting recycling and reducing the risk of spills that could harm the environment and local communities.
Our HSE Policy states that environmentally preferable products and services shall be considered in the procurement processes. Purchasing consumables from local suppliers and selecting consumables with less packaging are typical factors that are continuously considered.
To work systematically to replace or reduce harmful chemicals is a priority for Odfjell Drilling as seen in our Environmental Principles. Substitution of harmful chemicals with green alternatives is a continuous effort and standardising the chemical catalogue across rigs has been helpful in driving this forward.
In our ongoing efforts to enhance our sustainability performance, we are actively working to improve our data-collection processes related to waste generation, water generation, and water consumption. The differing requirements across regions have presented challenges when it comes to consistent data reporting and meaningful comparisons. Our initiative seeks to tackle this problem and enhance the uniformity and precision of waste generation data. In 2022, we implemented a more systematic approach to reporting onshore waste through a SharePoint platform. In the coming year, we will place increased emphasis on enhancing our reporting process for waste generated offshore.
Odfjell Drilling will continue to work with clients, industry partners and stakeholders to identify technologies and solutions to further improve our waste management practices and promote these across our industry.
ODFJELL DRILLING Annual Report 2023 20
| Material Topics | Target | Indicator |
|---|---|---|
| Occupational health and safety |
Zero incidents | Fatalities, serious injuries, total recordable injuries |
| Asset integrity and incident management |
Zero serious incidents | Number of serious incidents |
| Non-discrimination and equal opportunities |
40% women in leadership by 2030 |
Representation % |
| Employment practices | Sick leave of <3%, target turn-over <5% |
Sick leave % turn over % |
| Freedom of association and collective bargaining |
Zero tolerance policy for anti-union tactics |
Number of violations of applicable rules |
Our greatest asset has and always will be our people. Their intelligence and resourcefulness set us apart, and it is a priority of the Group to provide a safe and satisfying place to work in. People and safety are two fundamental pillars of Odfjell Drilling's business strategy. Fostering a resilient safety culture andempoweringour people makes it possible to overcome challenges and deliver superlative results toour clients in a safe manner.
The Group strives for an ambitious goal of zero incidents across all facets of its operations, firmly believing that every incident is preventable. Our philosophy is to focus on root causes, learning from experience, and fostering continuous improvement.
By empowering employees with knowledge and skills, we ensure that every team member is equipped to recognise and mitigate risks proactively. This commitment to training not only enhances individual competence but also cultivates a culture of safety where every employee plays an active role in maintaining safe operations. To ensure continuous improvement, training materials are regularly reviewed and updated to incorporate the latestindustry standards.
Fair labour practice and human rights are an integrated part of day-to-day business in both letter and spirit. Taking care of people by creating a safe and prosperous working environment is a priority.
The dedication to good employment practices goes beyond mere compliance with labour laws. Monitored through metrics such as sick leave and turnover rates, our commitment
extends to understanding the overall health of the organisational working environment. High attention is placed on competence assurance and leadership development, fostering an organisational culture that upholds positive values, attitudes, and collaborative conditions.
In response to the historical male dominance in the oil and gas sector, Odfjell Drilling is proactively addressing the need for greater gender diversity and inclusivity within the industry. In 2023, the Group became a signatory of the Women International Shipping and Trading Association ("WISTA") Norway 40 by 30 pledge. Furthering this commitment, the Group has launched the initiative named 'Women in Drilling,' aimed at taking active steps to achieve our diversity targets.
Odfjell Drilling proactively mitigates actual and potential impact on human rights throughout our value chain. This resonates throughout Odfjell Drilling's ethical standards, recognised by employees, clients, and communities. This implies:
OCCUPATIONAL HEALTH AND SAFETY
| Material Topics |
Impact, risk & opportunities |
Target | Status |
|---|---|---|---|
| Occupational | Employee well-being, safer |
Serious Incident Frequency (SIF) = 0 |
SIF = 0 |
| health and safety |
workplaces, and community health. |
Total recordable incident frequency (TRIF) = 0 |
TRIF = 2.60 |
| Lost time injury frequency (LTIF) = 0 |
LTIF=0.71 | ||
| Safety and security |
Industrial activities impact public, employees, and the |
Well control incidents = 0 |
Well control incidents =0 |
| environment | Major security breaches = 0 |
||
| Employee well being |
Enhanced health and safety measures contribute to employee well-being |
Lost time injury frequency (LTIF) = 0 |
LTIF 0.71 |
| Target met in |
2023 Plan in place, |
on track to reach longer-term target |
|
| Target not met |
in 2023 Plan in place, |
not on track to reach longer-term target |
Odfjell Drilling recognise that the nature of onshore and offshore operations poses an inherent risk to personnel health and safety. Leadership, a strong understanding of risk, and a continuous focus on daily risk management are essential components in achieving and maintaining safe operations. This will alwaysbeour numberonepriority.
Odfjell Drilling's HSE Policy is signed and communicated by the CEO, documented in the CMS, and made accessible through our website, as well as posted on physical posters on and offshore. The HSE Policy states that Odfjell Drilling shall maintain the highest safety standard and protect the health of our employees and others associated with our operations. It also sets out our commitment to compliance with regulation, developing a culture based on commitment from all involved, and applying the Group HSE rules. Odfjell Drilling's approach to health and safety includes safeguarding employees and contractors under Odfjell Drilling's control. We have overall responsibility for the occupational health and safety of our employees, both on our offshore rigs and within our office environments.
Regular working environment surveys and collaboration with occupational health service providers reflect our dedication to employee wellbeing.
Occupational health and safety are a line management responsibility. However, a robust QHSSE organisation and occupational health services are supporting management and employees and monitoring the health and safety aspect of our operations. To ensure a satisfactory working environment for employees, mapping of relevant working environment factors that may affect employees' physical and mental health and welfare is performed. These factors include the organisation of work, ergonomic factors, chemical exposure, noise/vibration, illumination, indoor climate, work at computer monitors, and machine interfaces. Surveys, and analysis of results, shall adhere to acknowledged standards and methods. Mapping of working environment factors shall be performed by occupational health service providers with competent resources from various disciplines.
Odfjell Drilling's annual QHSSE Programme sets the overall objectives and improvement actions for the year, and the rigs develop their own specific action plans supporting the QHSSE Programme. Please see page 9 for more details. Objectives, improvement actions and KPIs are established based on safety statistic trends, past performance, risk level, industry best practice, legislative requirements and input from employees and other stakeholders. The result of the KPIs is used to monitor performance and identify areas that need special attention and follow up by management.
All employees and contractors working under Odfjell Drilling's supervision are required to adhere to the HSE Policy and to work in accordance with relevant requirements in the CMS. They are also responsible to risk assess their work, act when they see unsafe behaviour and conditions, and report hazards. Workforce representatives are elected and contribute actively to continuous improvement in daily operations and in dedicated arenas.
We have initiated people-oriented programmes to reward good safety behaviours and performance, such as the CEO's annual safety award, to recognise the best safety performance and exceptional effort in the safety arena.
Odfjell Drilling's CMS contains policies, processes, and procedures, and is the framework for operating our business, meeting the requirements and expectations of the Board, authorities, clients, and other stakeholders. The CMS is built on 50 years of operational experience within the drilling sector and complies with recognised international and national standards as well as national legislation. It consists of 5 levels, where level 0 contains policies established by the Board of Directors and level 4 contains unit specific work instructions.
Odfjell Drilling have the following certification and accreditation:
Odfjell Drilling practices a QHSSE risk management process for all operations by which hazards are identified, and associated risks are understood and managed in such a way that the risk levels are reduced to as low as reasonably practicable. Human performance principles are included in risk assessment processes through increased knowledge and awareness of the human factors influence on human performance. The implementation of Life Saving Rules from the International Association of Oil & Gas Producers enhances our commitment to industry-leading safety practices, providing proactive guidance to prevent serious injuries.
All incidents are registered in a system called Synergi, with actions tracked to completion. Incidents are investigated based on actual and potential consequences, according to the Group's Incident classification matrix.
The main difference between safety and security is that safety is being safe from unintended threats, and security is the protection against deliberate threats.
Odfjell Drilling prioritise the maintenance of safety, including security, throughout every phase of our operations. Asset integrity and critical incident management deal with the prevention and control of incidents that can lead to fatalities, injuries or ill health, environmental impacts, and impacts to infrastructure.
Accidental spill, and loss of well control, are significant environmental aspects of our offshore operations. We operate in a high-risk business, and preventing a major accident is a key and continuous focus area. The probability of such an accident is considered to be low, but the consequences would be disastrous for people, the environment, the business and the reputation of Odfjell Drilling.
Odfjell Drilling has established procedures and personnel working with risk and incident management and has this embedded throughout the Group. The QHSSE programme describes the focus on safe, secure and stable operations.
Technical and operational analyses form the basis for establishing emergency preparedness and Ship Oil Pollution Emergency Plans which are prepared to deal with asset integrity and critical incident management. The plans are based on Defined Situations of Hazard and Accident, to deal with situations related to personnel injury, environmental impact, material impact and cyber security.
The emergency preparedness organisation is trained and equipped to handle these types of incidents, either internally or with help from external parties, described in a bridging document between Odfjell Drilling and the client. Incidents are reported in accordance with Odfjell Drilling's risk management approach and incident classification matrix. Odfjell Drilling is a member of the Norwegian Maritime Cyber Resilience Center.
All safety and security incidents are investigated, with criminal acts reported to the police. Incidents are documented in the non-conformity and incident management system Synergi, following guidelines.
The IT department monitors IT systems daily and receives automated reports showing traffic, security threat findings from screenings, spam filters etc. In addition to reporting through IT Security mailbox, these tools help us monitor trends to assess when and where measures must be taken. Read more about our security and cyber security management approach on page 10.
In 2023, there were no significant incidents that necessitated the activation of our onshore emergency preparedness organisation. We did encounter some security concerns related to drones in the vicinity of our rigs on the Norwegian Continental Shelf; however, it's important to note that these incidents did not occur within the 500-metre safety zone and were not classified as serious security threats.
OWN WORKFORCE
| Material Topics |
Impact, risk & opportunities |
Target | Status |
|---|---|---|---|
| Prosperus work environment |
Healthy, productive and stable workforce |
Sick leave percentage of <3%, or 20% reduction from prior years sick leave levels |
4,71% total sick leave |
| Turnover | Stable and experienced workforce |
Turnover percentage <5% |
2,4 % total turnover |
| Personal development |
Wellbeing and motivation of the workforce |
All employees are offered a development talk |
100% were offered a development talk |
| Trained leaders |
Competence enhancement |
Every manager shall attend leadership training |
1280 hours OIM leadership training |
| Target met in 2023 Plan in place, on track to reach longer-term target Target not met in 2023 Plan in place, not on track to reach longer-term target |
Taking care of our workforce is a top priority to Odfjell Drilling. Committed, motivated and qualified employees are crucial to conduct safe operations and deliver services of the highest quality.
The ultimate accountability for the health and well-being of the workforce rests with the Board, while responsibility for strategy and execution lies with the SVP HR and the HR department. The HR department has specialised personnel who manage health and well-being initiatives. The department implements and enhances governance systems to empower line managers to fulfil their obligations, supports the other functions of the Group, and exercises oversight to ensure compliance with policies and procedures.
Odfjell Drilling launched "I See You", a campaign to raise awareness about the importance of mental health. The aim of the campaign is to encourage reflection around mental health topics and offer high-quality tools to improve mental wellbeing, which in turn will contribute to better life quality and safety.
The core of the campaign are videos made by psychologist Jan Martin Berge, made available in internal channels throughout the year with an interval of six weeks. At the end of 2023 there is a total of 11 videos covering topics such as work life-balance, the importance of good colleagues and inner motivation. Based on feedback, the campaign has been a success and will continue in 2024.
Competence is one of Odfjell Drilling's five Core Values. Safe and efficient operations can only be provided by competent and well-qualified people. This is reflected in the Competence Policy, anchored at a corporate level in the CMS. All offshore employees are trained in compliance with our competence management system. The Group's investment in competence assurance management systems in 2022 has made competence management in 2023 more transparent throughout the organisation.
Our annual development reviews are offered to all employees, and a gap analysis provides a clear picture of our competencies and capabilities.
In 2023 the Group invested in tailor-made Offshore Installation Manager leadership programs to target personalised development, and individual coaching. Offshore leaders have the widest reach of impact on our workforce, as most of the Group's personnel are offshore.
The global salary review procedure describes pay practices and provides guidance across the Group. The principles in the procedure additionally apply criteria to external suppliers, contractors and consultants, to ensure equitable, non-discriminatory pay and benefits practices across our areas of impact. A pay gap report is available for Norway on our website. The analysis shows contractual base salary. Additional analysis in accordance with the Norwegian Gender Equality Report compares additional pay elements beyond contractual base salary. The combined analysis show female and male salaries are comparable, and long-term prioritisation of this area has levelled gender salary differences.
"
At Odfjell Drilling, our success stems from unity and the dedication of our people. Through collaboration and innovation, we drive progress, guided by our core values, ensuring the highest quality in all our endeavours."
SVP Human Resources
Odfjell Drilling is dedicated to fostering a positive work environment and promoting well-being both during and outside work. Through initiatives like the global working environment survey, the Group ensures that employees not only work in compliance with legal standards but also experience good working conditions.
Monitoring and measurement of employees' workload is an important tool in identifying areas for improvement. Additional data and figures on our performance evaluation on employment practices can be found in the appendix at the end of this report.
Our management approach involves proactive communication with employee representatives, ensuring their involvement in discussions that impact workforce interests and well-being. This commitment is reinforced through regular communication sessions, partnerships, and documentation of local agreements, promoting transparency and accessibility of information for all employees.
All data related to employees in our workforce, and to contractors, is extracted from the HR module in the Group's ERP system, which is used in all locations in the Group. All registrations in the HR module follow the
same templates and dataset requirements. Data is updated daily and provides a good overview of the current situation in the Group, including access to historical data.
Odfjell Drilling conducts quarterly data analysis to track progress towards its diversity, equality, and inclusion objectives, as well as conducting yearly in-depth management assessments. Automated demographic reports are produced daily and monthly. The analysis encompasses all employees who are permanently or temporarily employed directly by the Group, while contractors and consultants are considered on a case to case situation.
Odfjell Drilling does not register any data related to religion, sexual orientation, medical history, or other sensitive information. Please find key insights and performance evaluation in the appendix of this report.
The Group upholds the right to freedom of association and collective bargaining for both our employees and workers in the value chain.
The majority of our workforce resides in Norway, where a century-old tradition of trade unions and employers' organisations has led to a robust system of workers' rights and privileges. In Norway, comprehensive collective bargaining agreements are established with labour unions, covering 100% of employees in Norway, irrespective of union membership.
Freedom of association and collective bargaining are material worker's rights for the Group's commitment to fair labour practices and human rights. The Group has a zero tolerance for anti-union tactics. Furthermore, all our suppliers, especially those providing third-party personnel, are expected to comply to the same standard and principles. As a result of ensuring fundamental labour rights and human rights, we also mitigate risk in relation to legal and regulatory compliance, supplier relations and potential cost implications.
Our procedures extend these principles to suppliers, emphasising adherence to collective bargaining agreements and promoting equitable practices in our engagement with third-party personnel and services. Suppliers of 3rd party crew are selected for Maritime Labour Convention 2006 adherence, and through supplier audits, including the recognition of collective bargaining. The Group actively terminates agreements with suppliers engaged in anti-union tactics or unwilling to improve in this crucial area, reinforcing our dedication to fostering fair and respectful working relationships throughout our supply chain.
ODFJELL DRILLING Annual Report 202
| Material Topics |
Impact, risk & opportunities |
Target | Status | |
|---|---|---|---|---|
| Ensure gender diversity in leadership and in technical roles |
Reduced diversity and innovation External and internal reputation Legal and compliance |
30% women in leadership positions by 2025 40% women in leadership positions by 2030 |
Increased female representation in leadership positions compared to 2022 |
Target met in 2023 Plan in place, on track to reach longer-term target
Target not met in 2023 Plan in place, not on track to reach longer-term target
Odfjell Drilling is taking active measures to increase the female share in a male dominated industry. The promotion of diversity and equality aligns with the Group's core values and contributes to the cultivation of a positive workforce.
Management establishes ambitious goals and clear policies in areas targeting diversity and equality through procedures like hiring, job transfers and advancements, training, career planning, compensation, and overall workplace conditions. Expectations of employees are clarified through policies, procedures and leadership training programs.
The Group works to promote a culture of inclusion as part of daily life at the workplace and endorses the Gender Equality Strategy for the Maritime Sector by the Norwegian Ministry of Trade, Industry and Fisheries. In 2023, Odfjell Drilling made a commitment in 2023 and signed the Women in Shipping and Trade Association's (WISTA) 40by30 pledge, setting the target to achieve the representation of women in leadership roles to 40% by 2030, following the original target of 30% by 2025.
An inclusive workplace enhances the working environment and contributes to Odfjell Drilling's overall success by attracting a variety of talents in recruitment processes. Our initiatives aim to foster inclusion and diversity, includes all employees, regardless of type of contract and position, and includes contractors and workers not on Odfjell Drilling payroll.
Diversity and non-discrimination declarations are included in a wide range of procedures in our CMS, for example the Code of Business Conduct ("COBC"), non-discrimination, recruitment, competence and retirement policies. Odfjell Drilling also complies with local labour laws and regulations, including the Norwegian Act relating to equality and a prohibition against discrimination.
In 2023, Odfjell Drilling launched the initiative Women in Drilling. Its mission is to create an inclusive workplace for female employees offshore and onshore, involving leaders in gender equality initiatives.
To realise our new40by30 pledgewe sawthe need to establish a network and facilitate open platforms for sharing insights, addressing opportunities, and overcomingchallengesintheindustry.
The aim is to heighten awareness on diversity, reduce gender bias across the organisation and to empower our current and future female employees. Additionally, we aim to assess our offshore assets, with particular emphasis on their physical conditions, ensuring inclusivity and diversity. More concrete, this will address the psychosocial environment onboard, with a specific focus on leadership training aimed at mitigating gender biases.
The initiative is anchored in Odfjell Drilling's strategy and the executive management. An advisory committee with representatives from every function in the Group is appointed by the executive management. The committee works closely with the HR department to support the delivery of action plans and initiatives, ensuring the realisation of Odfjell Drilling's gender equality targets.
By collaborating with the top management and HR, the initiative aims to implement strategies effectively and create tangible outcomes in promoting gender diversity and inclusivity within the Group across functions.
Meet the Women in Drilling Committee, from left to right: Sunniva Strønstad Sjo, Paloma Menino Drønen, Maria Antun Hjellvik, Marita Skogen, Karoline Flåte and Silje Guldhav
Odfjell Drilling is dedicated to the protection of fair labour practices and human rights in accordance with the International Bill of Human Rights, The ILO Core Conventions and Maritime Labour Convention. The actions to safeguard fundamental rights are carried out following The UN Guiding Principles on Business and Human Rights and OECD Guidelines for Multinational Enterprises. These internationally recognised instruments are made a part of Odfjell Drilling's corporate governance through the Human Rights Policy, and operationalised as an integrated part of risk assessments and day-to-day business.
The annual report highlights the key aspects of our Human Rights Strategy in 2023. Please read our Norwegian Transparency act report and UK Modern Slavery Act report published on our website 30th of June for further details.
The Human Rights Policy sets out the principles for Odfjell Drilling's human rights commitments and work to protect and avoid infringements of human rights of employees, contractors, suppliers, agents and business partners, as well as communities affected by the Group's business activities. The policy content is based on a multistakeholder process to identify material human rights focus areas for Odfjell Drilling.
The policy is owned and approved by the Board and the CEO. The Executive Management Team have the responsibility to ensure that the policy governs actual and potential impacts on human rights in all business activities. The commitment stated in the policy is integrated into other key processes, such as supply chain management, HR management, tender and contract processes and risk management. All employees are expected to comply with the policy and its human rights commitment.
The whistleblowing portal is the Group's grievance mechanism in case of concerns related to potential negative impacts on human rights and working conditions, either directly or indirectly caused by the Group. The whistleblowing portal is open to all and easily accessible on the Odfjell Drilling website. There has been no cases of concerns in 2023. In the case of activities that have caused or contributed to adverse effects on human rights appropriate remediation will be provided.
The identified human rights focus areas are subject to special attention and prioritised in risk management processes, including verification of suppliers. Human rights focus areas include prohibition of human trafficking, forced labour, and child labour.
Providing a safe and secure working environment with just and favourable working conditions, including protection against discrimination and the right to join unions and strike. These priorities have a direct impact on our QHSSE and HR policies and procedures, and extend to our supply chain approach through procedures, frame agreements, and verifications.
The drilling operations in Namibia during 2023 involved locals and contributed to the creation of well paid and safe jobs, as well as skills development and access to new technology, both nationally and within local communities. Being present in locations with developing human rights practices brings about new opportunities and challenges that elevates the significance of responsible business conduct.
Extensive verifications and audits of supplier's employment practices have been performed in 2023, especially in relation to our international operations.
Building upon the due diligence assessment conducted in 2022, Odfjell Drilling assessed risks related to actual and potential adverse impacts on human rights and labour practices in 2023. The due diligence assessment is done in compliance with the OECD Guidelines, taking into consideration sectoral, geographic, product and enterprise risk factors, in addition to, stakeholder engagement and known risk. The assessment includes both our own workforce and workers within the value chain
The majority of our own workforce is exposed to risk arising from working offshore and drilling operations. Specifically, this might be injuries to body and health, and long working hours as a result of shift work.
The drilling industry is heavily regulated, and the risk of injuries or other negative impact on human rights, are therefore considered low. Odfjell Drilling comply with mandatory regulations and standards and are subject to reporting requirements and government oversight and inspections. Safety is within our core values and adequate personal protective equipment, emergency response plans and training plans is an integrated part of our business, and continually followed up.
The Group acknowledges the advantage of having major administrative and operational presence in countries with strong human rights legislation. There has not been any identified actual negative impact on human rights in our own workforce in 2023. Please refer to the appendix for numbers on work related injuries, working hours, training hours and diversity.
| Read more | Approved by |
|---|---|
| Ethical Principles | The Board, 2021 |
| The Group's Core Values | The Board, 2011 |
| Human Rights Policy | The Board, 2022 |
| Modern Slavery Statements | The Board, anually |
| Corporate Social Responsibility Principles | CEO, 2022 |
| Code of Business Conduct | CEO, 2005 |
| Supplier Code of Conduct | CEO, 2022 |
| Human Rights Risk Assessment Procedure | CEO, 2022 |
| Competition Compliance Procedure | CEO, 2003 |
standards, compliance and integrity, with a focus on the importance of transparency. The ethical principles are anchored in policies on a corporate level and reported on annually. Topics of particular importance to Odfjell Drilling, are robust risk management, anti-corruption, fair competition and supply chainmanagement.
All approved policies, codes and principles are to be followed in both spirit and letter. The CEO is responsible for the overall implementation of the policies within the Group, while all division leaders and line managers are responsible for implementation within their division/line.
Everyone in Odfjell Drilling has a personal responsibility to work in a way that respects the policies and to encourage others to do the same. Detailed guidance to assist with upholding the policies is included in the COBC. In addition, the Compliance Officer and Corporate Legal are responsible for providing training and can be contacted for guidance. All the listed documents are anchored on a corporate level in the CMS and applicable to the entire Group in all its activities.
Odfjell Drilling believes that responsible and ethical business conduct is fundamental to achieve high operational performance and sustainable value creation. In 2023 Deepsea Bollsta, Deepsea Mira and Hercules have been operating on the Namibian continental shelf. Namibia has a CPI score of 49/100 by Transparency International (2023), which underlines the importance of policies and robust procedures to ensure ethical corporate governance, including supply chain management.
All business partners are expected to act in accordance with the Group's ethical principles. The supplier code of conduct is included in all supplier contracts and imposes additional guidelines on ethical business conduct.
Odfjell Drilling works systematically to reduce and mitigate risk. The policies are actively used in the risk review processes related to tenders and procurement, and form an important foundation for all our operations.
Odfjell Drilling generates value that benefits both owners and society through dividends and taxes. Our drilling operations create positive economic impact by producing cost-efficient and lowercarbon oil and gas, ensuring reliable energy while minimising emissions. The company promotes job creation locally and globally by prioritising local procurement whenever possible.
Odfjell Drilling participates in various industry organisations and partnerships, contributing to the advancement of knowledge and skills, including the innovation of sustainable technologies. We offer apprenticeship programs and collaborate with the Norwegian Shipowners Association to provide the Maritime Trainee Program, enhancing relationships and knowledge sharing within the maritime industry. These initiatives are valuable not only to Odfjell Drilling and our workforce but also to the apprentices and trainees involved.
The supply chain function impact the local communities in which we operate by choosing local procurement whenever possible. In Namibia, we use a local service provider who coordinates and establishes a network with local goods and service providers, such as freight forwarding, laboratory services and supply base facilities with logistics personnel.
ODFJELL DRILLING Annual Report 2023 28
ENTERPRISE RISK MANAGEMENT
Enterprise risks and opportunities are identified and controlled proactively in order to protect and add value to Odfjell Drilling and its stakeholders. The Board actively shapes and assesses the nature and impact of key risks, aligning them with the Group's strategic objectives to drive positive outcomes.
Recognising the pivotal role of robust risk management in corporate governance, the Group has in place risk management processes to safeguard operational continuity and achieve strategic objectives. The Board is confident in the adequacy of the internal controls and risk management systems in place, considering the extent and nature of the Group's activities. The Board defines risk management as encompassing the identification, evaluation, management, mitigation, review, and escalation of both risks and opportunities. It adheres to a risk management and internal control framework that aligns with the requirements set forth in ISO 31000, ensuring the resilience and sustainability of our operations in the face of diverse risks.
Risk, in the context of our operations, can take various forms, including but not limited to QHSSE, financial, legal/compliance, people, reputational, operational, climate-related, and strategic risks. Our approach to corporate risk management is comprehensive and structured. We maintain an Enterprise Risk Register that systematically identifies and reports significant risks to the Board. Additionally, we employ operational and project-specific risk registers to manage risks at their respective levels. These risk registers may also be established for individual projects or as a result of management of change reviews.
To ensure safety and mitigate risks, we conduct task-based risk assessments, including hazard identification, during the planning stages of our work. Following that, at the job site, we perform workplace assessments such as Safe Job Analysis and initiate safety checks and toolbox talks at the start of each job.
The CRC is part of the Group's tender, procurement and operational review process. CRC ensures that tenders, client contracts, and procurements exceeding a certain value and/ or with a certain risk profile are subject to a risk assessment, including integrity risk.
The purpose of the CRC process is to identify overall business exposure and opportunities, ensure early warning of risks, arrange for risk mitigation and opportunity optimisation, establish recommendations and actions, and contribute to lessons learned across the Group. A CRC process is always required in countries with a score lower than 40 on Transparency International's Corruption Perception Index.
We also actively manage risk through internal audits, ensuring compliance with established procedures. Lessons learned reviews are conducted to improve our practices and enhance control measures. Please refer to the risk review section in the Board of Directors Report.
| Material Topics |
Impact, risk & opportunities |
Target | Status |
|---|---|---|---|
| Anti - corruption |
Ensure legitimate business activities and fair competition that do not expose individuals to risk. External and internal reputation and value |
Zero tolerance to bribery and corruption, including own workforce and business partners |
Zero known incidents of corruption related to employees or business partners |
| Target met in 2023 Target not met in |
Plan in place, on track to 2023 Plan in place, not on track |
reach longer-term target to reach longer-term target |
The Group is committed to conduct operations with honesty, fairness and transparency. The Grouphas a zerotolerance for corruption and holds its suppliers and agents to the same standards of integrity. The purpose of the management approach related to anti-corruption is to protect our reputation, maintain investor value and confidence, and form a solid foundation for ouroperations.
Anti-corruption policies are included in the COBC, and apply to all directors, employees and representatives of Odfjell Drilling. The COBC requires compliance with all applicable laws, as well as the Organisation for Economic Cooperation and Development convention on antibribery and the United Nations Declaration of Human Rights. Facilitation payments are strictly forbidden. All stakeholders can rely on the integrity of Odfjell Drilling.
Odfjell Drilling does not tolerate and will not get involved in unethical or illegal business. The purpose of the management approach is to avoid the possibility of corrupt practices and ensure that Odfjell Drilling, and those acting on our behalf, do so with integrity, high ethical standards and comply with relevant anticorruption laws.
Failure to know and follow the COBC may result in disciplinary action. We expect suppliers, contractors, consultants and others who are temporarily assigned to perform work for us, to follow the Ethical Principles and COBC. Failure to do so may result in termination of their contract.
Odfjell Drilling has and will, in the future, operate in countries deemed high risk by Transparency International. The Group's policies and procedures aim to identify and mitigate corruption and bribery risks and ensure reporting of concerns.
The COBC course is a compulsory e-learning course in our HR training portal, which all new personnel are required to complete as part of onboarding. All personnel shall annually report and confirm compliance with the COBC. In addition, exposed personnel are required to take refresher courses.
The Group holds regular information and training sessions to promote compliance with applicable laws, rules and regulations. This includes applicable laws relating to insider trading and anti-corruption laws relating to bribery and corruption. Employees working in Namibia participated in workshops related to anticorruption in 2023, to ensure compliance with the COBC and local regulations. Through procedures and training tools, Odfjell Drilling seeks to ensure that all personnel are aware that any suspicious activity, particularly in relation to bribery and corruption, must be reported.
Odfjell Drilling's whistleblowing portal enables personnel and others to report infringements
of the COBC or other ethical/critical concerns. The portal is accessible for external parties, including clients and suppliers. It is available from the Odfjell Drilling website and intranet in English. An anonymous two-way dialogue may be initiated between the whistleblower and the case investigator from the Group's compliance team. All reported cases are processed seriously, and the compliance team responds to the whistleblower without unreasonable delay.
Personnel will not be retaliated against for making a good faith report. Cases of significant importance are reported to the Audit Committee and to the Board. Odfjell Drilling prohibits retaliation against anyone who reports or participates in an investigation of a possible violation of the COBC, other Group policies or the law. Individuals who report in good faith or are involved in investigations will receive protection and support. Odfjell Drilling encourage everyone to speak up about any wrongdoing and feel confident and safe to do so.
According to the Ethical Principles and the COBC, personnel shall avoid conflicts of interest and circumstances which might result in a perceived conflict. Personnel shall report any potential conflict of interest in the business compliance portal. External board positions and ownership in businesses that may be perceived to be in conflict with the Group's interests, shall be reported. Such businesses can be existing, prior or potential competitors, clients or suppliers of the Group.
Personnel may not accept any personal gift from existing or potential suppliers, vendors, clients or government representatives. Exceptions can be made if the gift has insignificant value or a refusal to accept is discourteous or otherwise harmful to the Group. If the gift is accepted it must be reported in the business compliance portal. This applies equally to the offering of gifts to existing or potential suppliers, vendors, clients and government representatives.
All clients, contractors, suppliers, agents and other third parties are subject to risk assessments according to Odfjell Drilling requirements, including corruption risk assessments, to ensure that the risks are known, understood and acceptable. Prior to any form of commitment, entering into agreements, or placing orders with new unknown third parties, a series of risk assessments is conducted.
The suppliers/third parties are categorised based on type of transaction or agreement, geographical area of operation and residing jurisdiction, based on Transparency International's Corruption Perception Index, and type of corporation. The risk category
determines the process for evaluating a supplier/ third party. A potential high-risk supplier/third party requires detailed integrity due diligence to be performed by the Compliance Officer.
Business opportunities will occasionally materialise in countries and regions where use of agents is common practice. Agent agreements, including renewals, are reviewed by the CRC. The corporate legal department shall review the draft agreement prior to CRC review. A positive conclusion from CRC is required before signing an agent agreement. The Compliance Officer maintains a list of all agent agreements entered into by the Group and is responsible for periodic reviews of agents, with the aim to confirm the agent's continuous compliance with the Group's standards.
Data from the whistleblowing portal is used to report any cases of corruption. Data from the BAS system is used to measure the number of due diligences performed. Data from our elearning portal is used to measure the number of employees who have undergone anti-corruption training and confirmed compliance with the COBC.
There were no confirmed incidents of corruption or incidents in which employees were dismissed or disciplined in 2023. We had no confirmed corruption incidents that resulted in termination or non-renewal of contracts with business partners, or public legal cases regarding corruption brought against any Group company or its employees. One potential supplier was not approved due to suspicion of non-compliance with our COBC.
The Group is an independent competitor, sets its own prices, decides its terms and conditions of sale, and selects its own clients. The Group competes in a fair and ethically justifiable manner, within the framework of applicable competition and anti-trust laws of the markets in which the Group operates. To ensure adherence to these standards, Odfjell Drilling places a strong emphasis on the continuous training of key personnel and the enforcement of the Competition Compliance Procedure and COBC, which together foster an environment of fair competition and compliance across all operations.
Fair competition is an important element in Odfjell Drilling's Competition Compliance Procedure and the COBC. These procedures clarify responsibilities, give personnel practical advice, explain the implications of infringement, and provide internal contacts for further assistance. All business decisions shall be made on the basis of an independent business judgement, and not due to indirect contact with competitors. These principles apply to the entire Group in all its activities. All employees shall strictly comply with any applicable competition law. Regional managers are responsible for ensuring that all new employees involved in marketing and sales activities understand the Competition Compliance Procedure.
The Group carries out training of key personnel periodically. Training sessions typically include a presentation of competition rules, with discussions based on practical examples and experiences. The objective of the training is to focus on information sharing with clients, partners and competitors, covering what is allowed, what is not allowed and what to do if put in a difficult position.
Odfjell Drilling is the manager of four drilling units owned by external parties. The Group has established separate guidelines and systems for ensuring compliance with competition law in relation to managed units, including but not limited to guidelines on appointment of clean persons and restrictions on information sharing.
Training needs are continuously evaluated, and sessions are documented with attendance records and documentation of scope. There are no legal actions pending or completed regarding anti-competitive behaviour or violations of antitrust/ monopoly legislation in which Group companies have been identified as a participant during 2023.
SUPPLY CHAIN MANAGEMENT
Supply Chain Management ("SCM") encompasses all purchasing and logistics functions, playing a pivotal role in ensuring smooth and efficient operations. Our global network of suppliers, spans various types, including providers of drilling equipment, spare parts, safety gear, operational consumables, and diverse services. We value engagement with key suppliers through consistent audits, reviews, and meetings, reflecting our dedication to reducing emissions and promoting human rights within our supply chain.
Odfjell Drilling SCM is organised centrally as part of the Global Business Services provided by Odfjell Technology. All main processes and procedures for SCM are applicable to all business units. SCM adheres to a global standard that governs ERP, SCM training, and parts catalogue code structure.
In preparation for the ESRS, we are improving our risk assessment of suppliers by upgrading our systems and integrating ESG risk factors. The Group actively work on reducing surplus stock and optimising inventories by monitoring process compliance, efficiency, and effectiveness consistently across operational units.
All suppliers are required to sign the Supplier Code of Conduct, which defines the basic requirements concerning their responsibilities to maintain high ethical standards, adhere to all applicable laws and avoid impropriety or conflicts of interest. This is to assure our governance and ethical standards are met down through the supply chain.
By signing our Supplier Code of Conduct, the supplier agrees to the following requirements:
Local procurement is a priority whenever possible and practical. In Canada and Namibia, our local procurement efforts have reached 50% and 10%, respectively. Having operations on a global scale, "local" is considered as in the same country as the end user.
Due Diligence is an important task to reduce the risk of being involved in corruption, irregularities and other illegal or unethical affairs. The purpose of Due Diligence is to identify red flags early in order to reduce risk, make well-informed decisions, pursue opportunities and handle difficult situations with greater comfort. Due Diligence includes a financial review to get an understanding of the financial position of a Third Party in order for the Group to verify financial strength and ability to meet payment obligations. Due Diligence also includes a human rights risk assessment of the Third Party.
Odfjell Drilling has a strategic approach to prioritise which suppliers undergo risk assessments in the short and long term, and how to continuously follow up the suppliers on our Approved Vendors List ("AVL").
All potential new suppliers are screened through the Become A Supplier (BAS) process before they are added to an AVL within our ERP system. The main categories of risk assessment to be conducted prior to entering into an agreement with a Third Party are the due diligence procedure, Human Rights Risk assessment procedure and prequalification procedure.
Suppliers are assessed for their compliance with statutory regulations and the Odfjell Drilling COBC. Depending on the type of supplier and products/services they provide, the supplier may also be evaluated by their management system.
For suppliers and third parties categorised as low to medium risk, a standardised due diligence process is conducted during the prequalification stage by specialised personnel within the SCM department, under the authorisation of the Vice President of Supply Chain. In cases where suppliers or third parties pose a high risk of corruption, a comprehensive integrity due diligence is performed by the Compliance Officer.
Existing suppliers that have been approved by the due diligence process undergoes continuous monitoring mechanisms such as follow-up visits, periodic audits, compliance checks, financial reviews, and invoice checks to ensure sustained compliance with ethical standards.
Suppliers shall maintain and uphold Odfjell Drilling's principles of openness and transparency and their performance is continuously monitored and followed up. The Code of Business Conduct ensures the right to audits and consequences of infringement. Suppliers are obliged to permit quality audit of its records related to its work for Odfjell Drilling by an independent auditor upon request, and shall also report concerns or breaches of the Supplier Code of Conduct in the whistleblower portal.
Suppliers onboarded before the implementation of our human rights risk assessment procedure in the BAS are being reevaluated to align with new supplier standards in accordance with the capacity of Supply Chain Management functions.
Supplier performance is crucial for our operations' uptime and quality. Continuous monitoring and follow-up occur throughout their lifecycle on our AVL through reviews, audits, and overall operational performance assessments.
When assessing a supplier's criticality, we evaluate potential consequences if they fail to deliver as agreed. This assessment considers operational, financial, environmental, and safety impacts, resulting in a "High," "Medium," or "Low" criticality score based on their intended products or services. New suppliers are initially given a criticality score based on their nature and the provided goods/services. If a supplier approved for a low-critical delivery experiences a scope change to higher criticality, we may reevaluate their capability. This involves either reprequalifying the supplier for the new scope or risk assessing the specific delivery, implementing mitigating actions for a secure and qualityassured outcome.
We assess the environmental impact in the supply chain by monitoring suppliers' daily performance. Reported non-conformances are categorised based on environmental relevance. Suppliers commit to environmental protection through our Supplier Code of Conduct. We collaborate on specific actions, including freight merging, minimising packing materials, adopting eco-friendly products, exploring additive manufacturing, digital warehousing, and embracing circular economy principles.
Odfjell Drilling uses a software-based screening process which receives and collates data from thousands of data sources across the world. Data sources are specific to the country the entity is located in. To identify potential politically exposed persons, the software screening system matches to the CIA World Leaders, Chiefs of State and Cabinet Members list, and is updated monthly. For watchlists, it matches to OFAC, HM Treasury and the EU Consolidated Files. By utilising the enhanced screening service, we link with the Regulatory Data Corporation.
SCM performed 63 supplier reviews in 2023. The scope of these reviews comprehensively addressed our supplier's management systems, compliance with agreements, safety culture, working environment and duty care verifications, employment practices, material security, etc.
All suppliers are committed to conduct business based on the International Bill of Human Rights, the United Nations Guiding Principles on Business and Human Rights, and the International Labour Organisation Declaration on Fundamental Principles and Rights at Work, as stated in the supplier code of conduct.
The BAS process includes a separate questionnaire on risks relating to human rights down the supply chain. Suppliers categorised as "high risk" after the initial self-evaluation are handled as non-conformances and further assessed and followed up individually.
Suppliers considered "high risk" will be deactivated from our Approved Vendors List if they are not willing to improve the protection of human rights to meet our standards.
SCM performed 244 risk assessments on human rights on new and existing suppliers in 2023. There has not been identified any actual negative impact on Human Rights related to products or services the Group has purchased in 2023. 28 suppliers were identified as having a high risk for potential negative impact and are followed up individually.
The ongoing mapping of our supplier network is being conducted, with suppliers identified as having high product risk factors. We purchase textiles, such as work wear, linen and towels for our offshore operations. Raw material production and processing is an identified material risk to Odfjell Drilling because of the textiles we purchase. We also purchase drilling equipment, spare parts and electronics consisting of metals related to extraction of minerals and mining.
A key challenge has been suppliers' reluctance to engage in human rights due diligence, with the BAS questionnaire being avoided. This has hindered our ability to assess risks and potential violations thoroughly, slowing our risk assessment progress in 2023. To address this challenge, SCM have been focusing on enhancing the stakeholder engagement processes, aiming to more effectively put pressure on suppliers to address human rights concerns.
The first measure to improve the human rights due diligence assessment is to take better advantage of stewardship and industry collaboration. Our strategic alliance with Aker BP incorporates responsible supply chain management and encompasses supplier assessments on human rights and environmental impact considerations. This collaborative effort not only amplifies our commitment to upholding human rights but also demonstrates our dedication to minimising our environmental footprint through conscientious supplier selection and evaluation.
Secondly, the implementation of new software for stakeholder engagement and collecting sustainability data will improve the quality and scope of due diligence in 2024. In addition, the human rights data, including data coming from the value chain, will be subject to audits. This is a way of ensuring quality and continuous improvement. Odfjell Drilling strongly believes that these measures will make the Group better equipped to deal with an intricate and diverse supply chain going forward.
244
human rights risk assessments
Simen Lieungh, born 1960 and a Norwegian resident, has an Msc in Mechanical Engineering from the University of Trondheim. With over 30 years experience in the global oil and gas industry, he has held various management positions and was previously CEO of Aker Solutions. He is also Chairman of the Group of Offshore Contractors (GOE) Norwegian Shipowners' Association. Mr Lieungh has been with Odfjell Drilling since 2010, previously in the role of Chief Executive Officer of Odfjell Drilling AS up until he was appointed Chair of the Board in Odfjell Drilling Ltd. He is also CEO of Odfjell Technology AS. Mr Lieungh controls 20,000 shares in the company as at 31 December 2023.
Helene Odfjell, born 1965 and a UK resident, holds a Bachelor of Business Administration from the Norwegian School of Economics (NHH), a Master of Business Administration in Finance and Strategy from London Business School and is a Chartered Financial Analyst. Ms. Odfjell has years of experience in business and management and holds many board and management positions in the affiliates of the Company. Ms. Odfjell controls 142,952,381 shares in the Company as at 31 December 2023.
Harald Thorstein, born 1979 and a UK resident, has a Master of Science Industrial Economics and Technology Management from the Norwegian University of Technology and Science. He is partner of the London based advisory firm Arkwright London Partners LLP and Chairman of the Board of Directors of Jacktel AS and B2 Impact ASA, and Director of DOF Group ASA and Yara ASA. Previous positions include Seatankers, DnB Markets, and Arkwright Norway. Mr Thorstein has extensive board experience including, AcquaShip AS, Altus Intervention, Archer, Deep Sea Supply, Solstad Offshore, Seadrill, Seadrill Partners, SFL Corp, Northern Offshore, Golden Ocean and Aktiv Kapital.
Knut Hatleskog, born in 1969 and a UK resident, has an extensive career in banking and finance, spanning nearly 30 years in the industry. Having served as a Managing Director and Global Head of Offshore and Oil Services for Nordea Bank and previously as Senior Vice President and Global Head of Syndications, he is currently working at IfchorGalbraiths, on the financing team. He serves on the board of both Jaco Invest AS and Marine Capital AS and was previously a member of the board of OMP Capital AS. Mr Hatleskog has an MA from the University of St. Andrews and completed the Nordea Executive Leadership program at the London Business School.
Further details on the Board can be found at www.odfjelldrilling.com.
From left to right: Erik Askvik, Director Odfjell Drilling Malta, Diane Stephen, General Manager, Håkon Klepsvik, Chief Technology Officer, Cecilie Isdahl Gjelsvik, General Counsel, Helge Maubach, SVP HR, Kjetil Gjersdal, Chief Executive Officer Odfjell Drilling AS, Michael Boysen Nielsen, Chief Commercial Officer, Janike Myre, SVP QHSSE. Frode Syslak, Chief Financial Officer Odfjell Drilling AS, Jakob Korsgaard, Chief Operating Officer Odfjell Drilling AS. Biographies can be found on our website at Corporate management - Odfjell Drilling
ODFJELL DRILLING Annual Report 2023 35
The Audit Committee in Odfjell Drilling (the "Committee") is appointed by the Odfjell Drilling Ltd Board and has a diverse range of competence based on the expertise and experience of the members.
The Committee's primary function is to assist the Board fulfil its responsibilities to the Company and the Group in respect of:
The Committee operates autonomously of management and refers all views and recommendations to the Board for discussion and resolution after each Committee meeting.
The Committee consists of two Board members, one of which is considered independent, and competent in accounting or auditing. Harald Thorstein is the Chair and is independent of the Executive Management of the Group. The CFO acts as secretary of the Committee.
The Committee holds four meetings a year with interim meetings called if required (four meetings held in 2023). Members of management, auditors, and others are invited to attend and provide pertinent information as necessary. The focus was on accurately prepared quarterly and annual reports, consistently using accounting principles defined by IFRS(R) Accounting Standards. The meetings also cover the Sustainability Report and interim and year end audit process and plans.
Documentation provided to the Committee to prepare for meetings include reports, memos and policies provided by accounting, tax, and legal experts, both internal and external.
Matters of interest and concern were promptly reported to the Board where action or improvements were required regarding any aspect of financial reporting, risk management, internal control, compliance, or audit-related activities. The Group's internal controls have been determined by the Committee to be appropriate and effective.
During the year, the Committee has considered all relevant laws, regulations, codes, and applicable rules. They have reviewed tax and compliance activities and matters, as well as any material disputes.
The Committee has focused on robust documentation and reasonable judgement applied in relation to significant estimates and assumptions. This includes impairment or reversal of impairment indicators of the mobile offshore drilling units. The Committee reviewed the indicators, analysis and justification for the reversal of impairments on the Deepsea Atlantic and Deepsea Stavanger, which were recognised during the year. Judgements on uncertain tax positions were also an area of focus.
The 2023 Audit plan was presented to the Committee by KPMG, discussing focus areas. The Committee reviewed other services provided by the audit firm and found there were no indications that these services had a negative impact on the auditor's independence.
The auditor's report to the Committee is used for understanding and improving the internal control systems of the Group.
During the year, there was a presentation on risk management in the Group and internal control and risk management in relation to financial reporting, where key processes were discussed.
The annual financial statements for the year ended 31 December 2023, as well as the external auditor's presentations, management's response, and the auditor's opinion, were reviewed by the Committee. The views of the Committee were communicated to the Board prior to its approval of the financial statements.
ODFJELL DRILLING Annual Report 202
Odfjell Drilling Ltd. (the "Company") is incorporated in Bermuda and subject to Bermudan law. The Company is managed and controlled from the United Kingdom ("UK"), with its head office in Aberdeen, and the majority of the Board being UK residents, resulting in the Company being resident in the UK for tax purposes. The Group is also subject to the laws of the countries in which it operates, as well as international law and conventions.
The Company's shares are listed on the Oslo Stock Exchange therefore the Group seeks to comply with the applicable legal framework for companies listed on the Oslo Stock Exchange and endorses the Code of Practice for Corporate Governance issued by the Norwegian Corporate Governance Board, revised 14 October 2021 (the "Code"). This report is prepared in accordance with section 1 of the Code and any deviations from the requirements set out in the Code are described and explained in this section of the annual report. ODFJELL DRILLING Annual Report 2023 Corporate Governance
The Board has approved a framework of policies which apply across Odfjell Drilling Ltd and its subsidiaries (the "Group"). The objectives of the governance framework are to increase and maximise the Group's financial results, support long-term sustainable success, deliver on ESG goals and increase returns to shareholders.
Shareholders exercise their rights at General Meetings. In accordance with the Company's Byelaws, the Board has authority to manage and conduct the business of the Company. In doing so, the Board may exercise all such powers which are not by law or by the Bye-laws required to be exercised in a General Meeting.
The General Meeting elects the members of the Board, details of which can be found in the Board of Directors section.
The Board convened twelve times during 2023 with attendance as follows:
| Board Members |
Audit Committee |
|
|---|---|---|
| Helene Odfjell |
12/12 | 4/4 |
| Simen Lieungh |
12/12 | N/A |
| Harald Thorstein |
10/12 | 4/4 |
| Knut Hatleskog* |
9/12 | N/A |
* was not a director for Board meetings held in January, February and March 2023.
In accordance with common practice for Bermuda incorporated companies, the Company's objects, as set out in its memorandum of association, are wider and more extensive than recommended by the Code. This is a deviation from section 2 of the Code. The Group's objectives and strategy are as follows:
The Group has five decades of operational experience. This has been used to expand internationally by offering a state-of-the-art fleet of mobile offshore drilling units to the harsh environment, ultra-deep water and deep water markets. The fleet consists of a mix of own assets and assets managed on behalf of other owners.
The Group's vision is to be the leading supplier of drilling units designed to the highest environmental and safety standards in the offshore oil and gas industry. This is achieved by utilising the Group's substantial track record along with investment in the latest and best technological solutions and the ability to implement best practice based on experience and lessons learned. The Group has a zero incident and failures objective and aims to be a trusted and leading partner for its blue-chip clients.
The Group had book equity of USD 1,394 million and a book equity ratio of 60% as of 31 December 2023. The Board regards the Group's present capital structure as appropriate.
The Company aims to maintain a quarterly dividend program. Dividend payments depend on several factors, including market outlook, contract backlog, cash flow generation, capital expenditure plans and funding requirements. They are also dependent on maintaining adequate financial flexibility, as well as restrictions under Bermuda law and financial covenants, along with other factors the Board consider relevant. The Company may also consider share buybacks as part of its distribution programme.
Pursuant to Bermuda law, the Board has wide powers to issue authorised but unissued shares on terms and conditions it may decide. Any class of shares may be issued with preferred, deferred, or other special rights, or such restrictions, with regard to dividend, voting, return on capital, or otherwise, as prescribed by the Company.
This represents a deviation from section 3 of the Code. However, such issuance of shares by the Company is subject to prior approval given by resolution of a General Meeting. Pursuant to Bermuda law and common practice for Bermuda incorporated companies, the Board also has the power to authorise the Company's purchase of its own shares, whether for cancellation or acquiring as treasury shares, and the power to declare dividends. These powers are neither limited to specific purposes nor to a specified period as recommended in the Code.
The Company had two classes of shares during the year: common shares and unissued preference shares, of which the common shares are listed. Each common share in the Company carries one vote, and all common shares carry equal rights, including the right to participate in General Meetings. All holders of common shares are treated on an equal basis.
The preference shares, which do not carry any voting rights, were repurchased by the Company in 2022 and were cancelled in 2023.
As is common practice for Bermuda limited companies listed on the Oslo Stock Exchange, no shares in the Company carry pre-emption rights, which is a deviation from section 4 of the Code.
The Board will arrange for a valuation from an independent third party in the event of significant transactions between the Company and its shareholders, a shareholder's parent company, members of the Board, executive personnel, or closely related parties of any such parties. An independent valuation will also be carried out in the event of transactions between companies within the same group where any of the companies have minority shareholders.
Employees are required to report potential conflicts via an internal portal which is monitored and escalated to the Board if appropriate.
Any transactions the Company carries out in its common own shares shall be either through the Oslo Stock Exchange or at prevailing stock exchange prices if carried out in an alternative way. If there is limited liquidity in the Company's shares, the Company shall consider other ways to ensure equal treatment of all shareholders.
The Company's constituting documents do not impose any transfer restrictions on the Company's commonshares.These sharesare freely transferable in Norway, provided that the Bye-laws include a right for the Board to decline to register a transfer of any share in the register of members, (or refuse to direct any company appointed registrar to transfer any interest in a share), where such transfer would result in 50% or more of the Company's shares or votes beingheld, controlledorowneddirectlyorindirectlyby individuals or legal persons resident for tax purposes in Norway (or, alternatively, such shares or votes being effectively connected to a Norwegian business activity). The purpose of this provision is to avoid the Company being deemed a "Controlled Foreign Company" pursuant to Norwegian tax rules. This represents a deviation from section 5 oftheCode, but the Board does not foresee that this provision will impactonthe free transferabilityofits shares.
The Board seek to ensure that the greatest possible number of shareholders may exercise their voting rights in General Meetings and that the General Meetings are an effective forum.
The Board ensures that for General Meetings:
▪ the notice, supporting documents and information on the resolutions to be considered are available on the Company's website no later than 21 days before the meeting is held
Shareholders who cannot be present at the General Meeting will be given the opportunity to vote using proxies. The Company will:
The Company does not have a Nomination Committee, and it is acknowledged that this represents a deviation from section 7 of the Code. As the Board consists of non-executive directors with 75% considered independent, the Board considers itself able to adequately fulfil the roles and responsibilities ordinarily assigned to a Nomination Committee.
When a need arises to appoint a new or additional director, a careful review of potential candidates will be carried out, considering the need for a diverse mix of skills, talent, and expertise, whilst also being mindfulofthe importanceofindependence.
The Board consists of three independent nonexecutive directors and one director who is also the majority beneficial shareholder. All the shareholder-elected members of the Board are independent of the Group's Executive Management and three are independent of the Company's major shareholder. The vacant director position was filled in April 2023 by Knut Hatleskog.
The Board is comfortable that there is no conflict of interest or compromise to the independence of directors who also serve as directors on the Company's subsidiary boards. The Board has no concerns surrounding external appointments held by the directors. The Chair of the Board is determined in accordance with the Company's Bye-laws rather than the General Meeting which is a deviation from the Code.
The Board of Director's section provides further details on each director's background, skills and expertise. As of 31 December 2023 the Board consisted of three males and one female, and three of the directors are UK resident. They possess the relevant expertise, capacity and diversity as set out in the Code and are elected on an annual basis at the Annual General Meeting, with the exception of vacancies, which may be filled by theBoard.
The Board schedules Board meetings in advance, as well as one information meeting. Interim meetings may be convened if required.
The Chair is responsible for ensuring the Board operates effectively and carries out its duties, with assistance and support from the General Manager and Corporate Secretary.
Meetings are chaired by the Board Chair unless otherwise agreed by a majority of directors attending. If the Chair is not present, the directors shall elect among themselves a Chair. If the Chair has a material interest or involvement in a particular matter to be resolved by the Board, the Board will consider asking another Board member to chair the discussions.
A Board charter is in place which defines matters reserved for decision by the Board and is equivalent to written instructions on the work of the Board. Delegations by the Board are recorded in Board minutes, resolutions, powers of attorney or service agreements. Subsidiaries and their branches operate within decision making guidelines, involving the Board in matters of strategic importance to the Group.
The Board is responsible for the Group's value creation and sets and monitors the Group's objectives, strategy, budgets, financial performance and control of assets, as wells as risk management. The Board also monitors and approves internal controls and authorises decisions in matters of an unusual nature or of importance to the Company and the Group.
The Board has appointed a General Manager to undertake day to day management of the Company, overseen and supervised by the Board. Group operational activities are delegated to Odfjell Drilling AS with duties and responsibilities defined in a service agreement.
The General Manager, Odfjell Drilling AS CEO and CFO are regular attendees at Company Board meetings. The Board maintains oversight of operational activities through a review of reports such as operational and strategic updates, monthly financial reports, QHSSE status reports, tenders and opportunities updates and quarterly and full-year results. Updates on risk and ESG are given throughout the year.
The Board has established an Audit Committee, whose duties include supervising and reviewing the Group's annual and interim financial reporting. This Committee consists of two Board members, with one considered independent.
The Company has not established a Remuneration Committee, which is a deviation from section 9 of the Code, but it should be noted that no member of the Executive Management is represented at the Board. Accordingly, the Board does not consider such committee as necessary, as decisions regarding compensation of executive personnel can be decided by the whole Board without executive involvement at Board meetings.
The Board undertook a self-evaluation in December 2023, reviewing results in 2024.
An annual review of directors' interests is undertaken, and directors are reminded to declare potential conflicts at the start of Board meetings. A register of directors' interests is maintained.
The Board recognises its responsibility to secure appropriate risk management systems and internal controls. The Group has comprehensive corporate manuals and procedures for all aspects of managing the business. These are continuously revised to incorporate best practice derived from experience orregulatory requirements.
Routines are in place to provide frequent, relevant management reporting on operational matters. The Board is continuously updated on both capital and liquidity and the performance of the business. This ensures adequate information is available for decision-making, and allows the Board to respond quickly to changing conditions and requirements.
The Group has established clear and safe communication channels between employees and management, to ensure effective reporting of any illegal or unethical activities in the Group, via a whistleblower reporting portal. More information is in the Sustainability Statement.
These measures ensure that considerations related to the Group's various stakeholders are an integrated part of the Group's decisionmaking processes and value-creation.
The Board also recognises its responsibilities for the Group's values and guidelines for ethics and corporate responsibilities. Core Values reflect the Group's focus on commitment, safety consciousness, creativity, competency, and result orientation. Guidelines for the behaviour of Group representatives are outlined in Odfjell Drilling's Ethical Principles and described in detail in the COBC. The Core Values and COBC are available on www.odfjelldrilling.com.
Further information on risk management systems and internal controls can be read in the Board of Directors Report.
The remuneration of the Board is decided by the shareholders at the AGM. Compensation to the Board reflects the responsibility, expertise, and level of activity in both the Board and any committees. The remuneration is not linked to Group performance and no share options are granted to Board members.
During the year, advisory services were provided by the director Harald Thorstein via Arkwright London Partners LLP, where Mr Thorstein is a partner. A total of £20,000 was spent on consulting services to provide support during the refinancing process. Other than detailed above, none of the members of the Board and/or companies with whom the Board members are associated, have taken on specific paid assignments for the Group in addition to their appointments as members of the Board in 2023.
Pursuant to Bermuda law and common practice for Bermuda incorporated companies listed on the Oslo Stock Exchange, the Board determines the remuneration of Executive Management. The remuneration of Executive Management for 2023 can be found in the Executive Remuneration Report.
Guidelines for the remuneration of Executive Management can be found in the Executive Remuneration Policy, which was approved in the 2022 AGM and can be found on our website www.odfjelldrilling.com. The policy for executive remuneration looks to use performance related remuneration by way of a variable bonus capped at 100% of salary and share option schemes for certain executives. The Remuneration Policy is set to attract and retain Executive Management of sufficient calibre. It also aims to align with shareholder's interests and the Group's strategy, long term interests and financial viability.
Currently, the determination of variable bonuses is made by the Board at a holistic level, rather than by analysing detailed components with weightings, criteria, targets and performance achieved ratings and therefore deviates from section 12 of the Code.
The Company has established guidelines for reporting to the market and is committed to providing timely and precise information to its shareholders, Oslo Stock Exchange and the financial markets in general, through the Oslo Stock Exchange information system. Such information is given in the form of annual reports, quarterly reports, press releases, notices to the stock exchange and investor presentations. In these communications, the Company aims to clarify its long-term potential, including strategies, value drivers and risk factors. The Company maintains an open and proactive approach for investor relations with detailed investor relations information, and contact information, available on the Company website.
An annual financial calendar is published with dates of important events such as the AGM, publishing of interim reports and financial stock market presentations.
The Company discloses all inside information as legally required unless exceptions apply and are invoked. Information will be provided about certain events, e.g. dividends, amalgamations, mergers/demergers, changes to the share capital, issuing of subscription rights, convertible loans and all agreements of major importance that are entered into by the Company and related parties.
The Company has considered communication with shareholders to ensure relevant information is shared with them in compliance with applicable laws and regulations. Shareholders can communicate with the Company through question and answer sessions on quarterly calls.
Information to the Company's shareholders is posted on the Company's website as well as published through the Oslo Stock Exchange. Shareholders can contact the Investor Relations e-mail address ([email protected]).
The Company will follow key principles from the Code for how to act in the event of a take-over offer. The Board will ensure that shareholders are treated equally and that the Company's activities are not unnecessarily interrupted. The Board will also ensure shareholders have sufficient information and time to assess offers. TheBoard shall:
The main underlying principles shall be that the Company's common shares shall be kept freely transferable and that the Board and the Company shall not establish any mechanisms which can prevent or deter take-over offers unless this has been decided by the General Meeting in accordance with applicable law. This includes only entering into agreements with a bidder to limit the Company's ability to arrange other bids if it is in the interests of the Company and its shareholders. Payment of financial compensation to a bidder if the bid does not go ahead should be limited to costs incurred by the bidder.
If an offer is made for the Company's common shares, the Board shall issue a statement evaluating the offer and making a recommendation as to whether the shareholders should accept. If the Board finds itself unable to give a recommendation, it should explain the reasons for this, being clear whether the views expressed are unanimous, and if this is not the case, explain why specific members of the Board do not concur.
The Board shall consider whether to arrange a valuation from an independent expert. If the bidder is a member of the Board, close associate of a member, has recently been a member of the Board or has a particular personal interest in the bid, the Board shall arrange an independent valuation. This shall also apply if the bidder is a major shareholder. Any such valuation should be enclosed with the Board's statement or reproduced or referred to in the statement.
The Group have appointed KPMG as Group auditor, with their reappointment approved at the 2023 AGM. The auditor participates in a Board meeting in which the annual accounts are presented, and during which, the executive personnel leave to allow the Board time with the auditor alone.
The auditors present highlights of the audit plan to the Audit Committee, as well as a review of the Group's internal control procedures, including identified weaknesses and proposed improvements.
There are processes in place to ensure that the Group does not utilise the services of the appointed auditor for advice beyond certain thresholds determined by the Board and in law. At the AGM, shareholders authorise the Board to determine the remuneration of the auditors, for audit work and other assignments. Details are in Note 32 - Remuneration to the Board of Directors, key Executive Management and auditor.
The Board of Directors present the Remuneration Report for 2023, which is prepared in accordance with Section 6-16 of the Norwegian Public Limited Liability Companies Act and the guidelines contained within the Norwegian Corporate Governance Board Code of Practice. It follows the Group Remuneration Policy approved by shareholders at the AGM held on 21 September 2022, which can be found at www.odfjelldrilling.com. The AGM also approved the 2022 Executive Remuneration Report. The objective is to present a clear and understandable analysis of executive remuneration and how this is linked to Group performance. This statement will be presented to shareholders in the 2024 AGM and subject to an advisory vote.
The objective of the policy is to ensure remuneration packages for executives are aligned with the Group's values, business strategy, and long-term interests, to create value for shareholders. Executive remuneration should be set at a competitive level to attract, retain, and motivate suitably qualified and experienced executives of a calibre who will deliver the Group's strategic objectives. As well as enhancing the future economic situation, the remuneration policy should also ensure environmental, sustainability and governance objectives are delivered.
2023 saw the Group's EBITDA increase from USD 308 million in 2022 to USD 329 million. The Group continues to secure backlog to give visibility of future revenue.
The 2023 EBITDA of USD 329 million reflects the ongoing cost discipline and efficient operations being delivered by the Group. Backlog stood at USD 2.1 billion at 31 December 2023 with contract extensions being secured and there was a positive cashflow before financing activities of USD 179 million.
QHSSE performance saw a reduction in the total recordable incident and the dropped objects > 40 joule frequency. The Group consistently works to ensure the safety of those working for us. Progress has been made in moving towards our net zero emission targets. Through collaboration, employee engagement and communication, and optimal resource management, the Executive Management have led the Group through an exceptional year. All eight units in the fleet have been operating during the year, some internationally. The successful refinancing exercise provides stability and security for the Group. Efficient execution of SPSs has begun on our own fleet. For these reasons, the Board approved the payment of bonuses for 2023.
Knut Hatleskog was appointed as a director on 3 April 2023 filling the vacancy left by the resignation of Thomas Marsoner on 9 November 2022.
There were no changes to or derogation from the policy during the year.
Set out below are details of the fees paid to directors and shares in the Group held by directors for the current and previous reporting period.
Fees were held at the 2022 level. Director's fees are not linked to the performance of the Group or to share options and are approved at the AGM.
| USD thousands | Year | Board Fees | Chair fees | Audit Committee | Other Directorships | Total Remuneration | No of shares owned |
|---|---|---|---|---|---|---|---|
| Helene Odfjell, Non-Executive Director and Chair until 29 March 2022 | 2023 | 35 | 5 | 40 | 142,952,381 | ||
| 2022 | 39 | 10 | 4 | 53 | 142,952,381 | ||
| Harald Thorstein Non-Executive Director - appointed 26 January 2022 and | 2023 | 35 | 10 | 45 | |||
| appointed Chair of Audit Committee 29 March 2022 | 2022 | 36 | 8 | 44 | |||
| Simen Lieungh, Non-Executive Director and Chair - appointed 29 March 2022 | 2023 | 35 | 35 | 71 | 20,000 | ||
| 2022 | 29 | 29 | 58 | ||||
| Knut Hatleskog - appointed 3 April 2023 | 2023 | 26 | 26 | ||||
| Susanne Munch Thore, Non-Executive Director - resigned 29 March 2022 | 2022 | 10 | 3 | 13 | 3,000 | ||
| Alasdair Shiach, Non-Executive Director - resigned 29 March 2022 | 2022 | 10 | 1 | 11 | |||
| Thomas Marsoner, Non-Executive Director - resigned 9th November 2022 | 2022 | 32 | 32 |
1. Includes shares held by related parties.
2. Payments are made for additional roles such as chair, or committee membership, reflecting the time commitment required.
3. Fees are paid in currency other than USD, so amounts are subject to exchange rates applicable at the time of payment.
4. Other than reimbursement of expenses incurred in fulfilling their duties, there are no other elements of remuneration.
| Fixed remuneration | Variable remuneration | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name of Director/Executive and position | Year | Base Salary |
Fees | Fringe benefits |
One-year variable |
Multi-year variable |
Extraordinary items |
Pension expense Total remuneration |
Proportion of fixed remuneration |
Proportionofvariable remuneration |
|||||||||
| Remuneration of Executive Management for the reported financial year from the company (Odfjell Drilling Ltd) -USD thousands | |||||||||||||||||||
| Diane Stephen, General Manager Odfjell Drilling Ltd (50% part-time from 28 | 2023 | 103 | 6 | 25 | 5 | 134 | 85% | 15% | |||||||||||
| March 2022) | 2022 | 116 | 7 | 23 | 6 | 152 | 85% | 15% | |||||||||||
| Remuneration of Executive management for the reported financial year from undertakings of the same group - USD thousands | |||||||||||||||||||
| Kjetil Gjersdal, CEO Odfjell Drilling AS (from 28 March 2022) | 2023 | 443 | 25 | 355 | 17 | 892 | 54% | 46% | |||||||||||
| 2022 | 308 | 19 | 263 | 13 | 604 | 56% | 44% | ||||||||||||
| Simen Lieungh, CEO Odfjell Drilling AS (until 28 March 2022) | 2022 | 189 | 7 | 130 | 1,507 | 5 | 1,839 | 11% | 89% | ||||||||||
| 2023 | 209 | 13 | 177 | 12 | 412 | 57% | 43% | ||||||||||||
| Frode Skage Syslak, CFO Odfjell Drilling AS (from 28 March 2022) | 2022 | 155 | 10 | 117 | 12 | 294 | 60% | 40% | |||||||||||
| Jone Torstensen, CFO Odfjell Drilling AS (until 28 March 2022) | 2022 | 84 | 7 | 62 | 5 | 159 | 61% | 39% |
1. Base salary - Set at a competitive rate reflecting the responsibilities of the role, the skills and experience of the individual and market conditions for the industry.
2. Fringe benefits - includes car allowances (in line with rates set across the manager population), private medical healthcare, life and income protection insurance, etc, all of which are in line with the benefit packages offered to the general employee population in the jurisdiction they are employed in.
3. Variable remuneration - The criteria and measurement for bonus payments are aligned to both Group performance against targets and an individual's personal performance, and are set out in annual Personal Business Commitments (PBC). Criteria for Group performance include achieving financial, strategic, and other targets. Criteria for personal performance are based on:QHSSE results and improvement over previous year, employee satisfaction within area of responsibility, demonstration of a holistic approach to Group challenges, encouraging collaboration across the Group, optimal resource and competence management, being visible, accessible, and acting as a role model, and efficient and clear communication and provision of information in own area. The one-year variable bonus payments are capped at 100% of fixed annual salary and there are no reclaim provisions.
4. The General Manager is employed by Odfjell Technology Ltd and amounts disclosed represent a recharge of 50% of costs applicable to the role of General Manager for Odfjell Drilling Ltd.
5. Long term bonus agreement – In April 2021 Simen Lieungh was granted a long term bonus agreement for a maximum accumulated value of NOK30 million. The agreement is valid for 3 years from 1 January 2021 and is conditional upon him being CEO of Odfjell Drilling AS. (It may be renegotiated in case of any restructuring of the Group). As this amount is at the discretion of the Board it is only accounted for when paid. This agreement was terminated in 2022.
6. Pension – Executive Management participate in the same pension plan, on the same terms, as all other employees in the jurisdiction they are employed in, with the exception of Kjetil Gjersdal, who is on a defined benefit plan which existed when he joined the Group.
The table above shows the fixed and variable elements ofremuneration to Executive Management employed at any point within theGroup forthe current and previous reporting period. It should be noted that assessment of the performance of Executive Management against the criteria set out in their PBC is done on a holistic level when determining the level of variable bonuses. For this reason the report does not analyse detailed components with weightings, criteria, targets and performance achieved scores.
The intention of the share programme described below, is to link reward to the creation of value for shareholders through increased share price.
| The main conditions of share option plan |
Information regarding the reported financial year |
Kjetil Gjersdal, CEO Odfjell Drilling AS |
Frode Skage Syslak, CFO Odfjell Drilling AS |
|
|---|---|---|---|---|
| Specification of plan |
The programme grants the option to purchase common exercisable |
OPENING BALANCE |
||
| shares in five equal tranches. The Company can choose to settle the options by a cash payment |
Share options awarded beginning of year |
750,000 | 400,000 - - 80,000 80,000 320,000 |
|
| Performance period |
5 years |
Share options vested |
- | |
| Award date |
27.06.2022 | DURING THE YEAR |
||
| Share options awarded |
- | |||
| Vesting date |
27.06.2023, 27.06.2024, 27.06.2025, 27.06.2026, 27.06.2027 |
Share options vested |
150,000 | |
| End of holding period |
02.07.2027 | CLOSING BALANCE |
||
| Exercise period |
The Option Holder may only exercise the vested shares in each relevant Tranche of Options in full, and within 5 working days after each Vesting |
Share options vested |
150,000 | |
| Date. Any Tranche of Options not exercised in an Exercise Period can be |
Share options awarded and unvested |
600,000 | ||
| carried forward and exercised in a future Exercise Period. Any options not exercised by the end of the period will be terminated. |
||||
| Strike price of the share |
NOK23.37 |
1. As at 31 December 2023 there were no share options subject to a performance condition or to a holding period
| Name and position of Executive Management |
Shares owned |
Notice period and severance pay entitlement |
Pension scheme |
|---|---|---|---|
| Diane Stephen, General Manager Odfjell Drilling Ltd |
0 | 6 months |
Standard UK defined contribution scheme |
| Kjetil Gjersdal, CEO Odfjell Drilling AS |
40,000 +2,450 owned by close associate |
6 months + 12 months Severance Pay |
Norway defined benefit pension scheme |
| Frode Skage Syslak, CFO Odfjell Drilling AS |
25,000 | 6 months + 6 months severance pay |
Standard Norway defined contribution pension scheme |
The table below sets out the development in executive remuneration along with key indicators of the Group's performance and the development of general employee remuneration.
| % change on |
% change on |
% change on |
% change on |
% change on |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | prior year |
2020 | prior year |
2021 | prior year |
2022 | prior year |
2023 | prior year |
|
| Director's and Executive's remuneration - USD thousands Helene Odfjell, Non-Executive Director and Chair |
85 | 204% | 74 | -13% | 87 | 18% | 53 | -39% | 40 | -25% |
| Susanne Munch Thore, Non-Executive Director |
36 | 53 | 47% | 55 | 5% | 13 | -77% | |||
| Alasdair Shiach, Non-Executive Director |
22 | 40 | 82% | 49 | 21% | 11 | -77% | |||
| Thomas Marsoner, Non-Executive Director |
22 | 37 | 68% | 44 | 18% | 32 | -27% | |||
| Harald Thorstein, Non-Executive Director |
44 | 45 | 2% | |||||||
| Simen Lieungh, Non-Executive Director and Chair |
58 | 71 | 22% | |||||||
| Knut Hatleskog, Non-Executive Director |
26 | |||||||||
| Diane Stephen, General Manager Odfjell Drilling Ltd |
223 | 152 | -32% | 134 | -12% | |||||
| Simen Lieungh, CEO Odfjell Drilling AS |
2,631 | 162% | 2,333 | -11% | 1,809 | -22% | 1,839 | 2% | ||
| Kjetil Gjersdal, CEO Odfjell Drilling AS |
604 | 892 | 48% | |||||||
| Atle Sæbø, CFO Odfjell Drilling AS |
537 | -1% | 512 | -5% | 476 | -7% | ||||
| Jone Torstensen, CFO Odfjell Drilling AS |
104 | 159 | 53% | |||||||
| Frode Skage Syslak, CFO Odfjell Drilling AS |
294 | 412 | 40% | |||||||
| Group Performance - USD Thousands |
||||||||||
| EBITDA | 331,759 | 28% | 420,403 | 27% | 303,541 | -28% | 308,004 | 1% | 328,506 | 7% |
| Net profit |
40,820 | 49% | 143,304 | 251% | 73,852 | -48% | 129,597 | 75% | 222,090 | 71% |
| Backlog | 2,300,000 | -4% | 2,300,000 | 0% | 2,100,000 | -9% | 1,900,000 | -10% | 2,100,000 | 11% |
| Leverage ratio |
3.8 | 0% | 2.5 | -34% | 3 | 20% | 2.5 | -17% | 2 | -20% |
| Average remuneration of employee on a full-time equivalent basis |
- USD thousands. |
(includes salary, |
benefits, bonuses |
and employer |
pension | contributions) | ||||
| Employees of the Company |
267 | 252 | -6% | 167 | -34% | 119 | -29% | 182 | 53% | |
| Employees of the Group |
111 | -2% | 110 | -1% | 117 | 6% | 134 | 15% | 138 | 3% |
Odfjell Drilling Ltd. (the "Company") is the parent company of the Odfjell Drilling group, comprised of the Company and its subsidiaries (the "Group"). The Group owns and operates a fleet of high quality midwater to ultra-deep-water harsh environment mobile offshore drilling units, as well as managing units on behalf of other asset owners. Our client base consists primarily of major oil and gas companies and the Group has five decades of experience in the industry. The Company has been listed on the Oslo Stock Exchange since 2013.
In March 2022, the Group spun-off its Well Services, Energy and Global Business Services areas into a new group under Odfjell Technology Ltd ("OTL"), which listed on the Oslo Stock Exchange.
Odfjell Drilling was founded in 1973 and began operating as a drilling contractor in 1974. Over the past five decades the business has built a solid reputation as a trusted drilling partner focused on delivering quality, value, and results for its client base, in a safe manner.
The Group has extensive contracting experience, operating in a number of jurisdictions over the years. The Group has operational expertise in semisubmersibles, jack-up platforms and drill ships, as well as modular drilling and well intervention rigs.
The Company is an exempted company incorporated in Bermuda, registration number 37607, with its registered address at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda, and it is tax resident in the United Kingdom with its head office at Prime View, Prime Four Business Park, Kingswells, Aberdeen, AB15 8PU.
Information regarding related parties can be found at Note 31 - Related parties - transactions, receivables, liabilities and commitments.
The Group has two main business segments:Own fleet and External fleet.
Operational management are primarily located in Norway, UK and Malta. Rigs are owned by UK companies who are tax registered in Malta.
The mission of Odfjell Drilling is to be an experienced, competence-driven international drilling contractor for harsh and deepwater operations, chosen by clients for our expertise and reputation.
Quality, Health, Safety, Security and Environmental Management are of paramount importance, and we strive for high quality performance and safe and secure operations through continuous improvement programmes. We aim for organisationalrobustness, zero injuries and failures, strong cyber and physical security, and stringent well controls, delivered by a competent and motivated workforce. Our onshore support centres work collaboratively in real time with our operations teams.
This philosophy defines not only the team-focused character of the Group, but also the way we run our rigs. We have invested in onshore support centres to operate as the nerve centres of our rigs, providing the best technological and management support to back up the hands-on expertise of our colleagues at sea. This integrated approach delivers tangible benefits for our clients, namely:
We have a clearly defined process for developing and managing strategic direction which involves analysis, planning, monitoring, and execution. Our corporate strategy and business model is explained in more detail in the Strategic Report.
Odfjell Drilling has five Core Values that define and instruct our business.
The Group had book equity of USD 1,394 million and a book equity ratio of 60% as at 31 December 2023.
The Company has one class of share in issuance, being the Common shares, and has authorised but unissued Preference shares. Each common share carries one vote, and all shares carry equal rights, including the right to participate in General Meetings and all shareholders are treated on an equal basis.
Preference shares issued to an affiliate of Akastor ASA were repurchased in November 2022. In October 2023, the Company cancelled all the 16,123,125 treasury preference shares.
The shares and negotiability section of the Corporate Governance Report details the transferability of common shares. The number of ordinary shares issued in Odfjell Drilling Ltd. as at 31 December 2023 is 236,783,202.
The Company has 6,837,492, outstanding warrants with exercise prices ranging from NOK 31.20 - NOK 93.15. The warrants remain exercisable in six equal tranches from 2019 to 2024.
On 27 June 2022, the Company implemented a long term incentive share option plan. A total of 1,850,000 options have been awarded to certain employees at a weighted average strike price of NOK 24.07 per share.
The Company is not aware of any shareholder or other agreements which limit trading of the Company's ordinary shares or voting rights as at 31 December 2023.
The Company and some of its subsidiaries, are governed from and tax resident in the United Kingdom ("UK"). Three out of four directors of the Company are UK residents. The Company has published its tax strategy on its website in compliance with the UK Finance Act 2016 Schedule 19.
The aim of the tax strategy is to support the business by maintaining a sustainable tax rate, while mitigating tax risks and complying with rules and regulations in the jurisdictions in which Odfjell Drilling operates.
The Group maintains internal policies and procedures to support its tax control framework and provides training to its personnel to manage tax risks.
The tax strategy aligns to the Group's wider risk and control framework, with key tax risks and issues escalated to and considered by the Audit Committee and Board of Directors regularly.
The Group may operate in different countries and is exposed to a variety of tax risks such as compliance and reporting, transactional and reputational.
Where appropriate, the Group looks to engage with tax authorities to disclose, discuss and resolve issues, risks, and uncertain tax positions. The subjective nature of global tax legislation means it is often not possible to mitigate all known tax risks. As a result, the Group may be exposed to financial and reputational risks arising from its tax affairs.
The Group acknowledges its responsibility to pay the level of tax required by the laws of the jurisdictions in which it operates and also its responsibility to its shareholders to structure its affairs in an efficient manner.
The Group seeks to comply with its tax filing, reporting and payment obligations globally and to foster good relationships with tax authorities.
During 2023, Odfjell Drilling successfully executed a planned refinancing exercise, raising USD 390 million via a bond, as well as extending and securing bank facilities of USD 497 million. This has removed any significant maturities until 2028 and paved the way for distributions in the form of dividends to be allowed which has been a main area of focus. Securing backlog has been another main areas of focus, and this involves exploring more international opportunities for new contracts as well as securing contract extensions.
The Global Reporting Initiative ("GRI") framework is used to drive continuous improvement in ESG efforts, and our focus is on creating clear Sustainability ownership in all operations and functions. We have an emissions reduction roadmap to help us achieve our net zero target by 2050.
Our human rights statement can be found on our website Human rights - Odfjell Drilling as well as the Modern Slavery Statement Modern slavery statement - Odfjell Drilling.
Gender pay gap reporting for Norway and the UK, can also be found on the website at Gender pay gap - Odfjell Drilling. Details on executive remuneration, can be found in our Executive Remuneration Report.
More detail on these matters can also be read in our Sustainability Statement.
Odfjell Drilling reports in accordance with the EU Taxonomy Regulation (2020/852), including the supplementing Disclosures Delegated Regulation (2021/2178). The CFO function is responsible for the taxonomy report and underlying assessments.
Odfjell Drilling had no taxonomy eligible economic activities in 2023. The assessment of eligibility was conducted based on the described activities in the Climate Delegated Regulation (2021/2139). The basis of the assessment was the total revenue, capital expenses and operating expenses for Odfjell Drilling in 2023. The assessment was done by members of the corporate management, finance function and internal and external stakeholders and subject matter experts on our sector. Assessment of alignment with the taxonomy was not relevant for 2023 reporting.
The Group closely follows developments within the taxonomy reporting requirements. In 2024 the main focus will be to expand the assessment of eligible activities to the Environmental Delegated Regulation (2023/2486). The Group will continue doing assessments to identify eligible activities, especially in relation to new operations and investments.
Demand has been high with a number of contract renewals and tenders won, particularly for our own fleet. The refinancing carried out during the year secures additional flexibility for strategic and growth opportunities. We are open to expanding capacity in a commercially secure manner by taking on the right assets, meeting the demands of the market, and with visibility of future work.
The expanded fleet has opened up deepwater opportunities elsewhere in the world, with Deepsea Mira, Deepsea Bollsta and Hercules deployed to Namibia and Hercules returning to work in Canada.
The Group's own semi-submersible drilling units operated across multiple projects in Norway during 2023, and were awarded a number of contract extensions, as well as extending our alliance agreement with Aker BP ASA and Haliburton AS for a further 5 years.
The Deepsea Stavanger worked with Equinor in the Norwegian Continental Shelf. Equinor exercised further work under the continued optionality mechanism extending firm backlog to Q4 2024, with options to exercise further wells. The rig also has a five-year firm contract with Aker BP ASA which is scheduled to commence in early 2025.
The Deepsea Atlantic worked on Johan Sverdrup ph. 2 development under the Master Frame Agreement with Equinor, where options were exercised to drill five additional wells, extending the firm backlog into Q2 2024. The SPS is then planned, after which the rig will operate for Equinor in Norway initially and then in the UK for a firm 23 months. There is also four one well options, and three further additional optional periods of approximately one year each.
The Deepsea Aberdeen was under contract with Equinor, working on the Breidablikk development. Following the exercising of options, this will take it up to the end of 2025, with further options thereafter added to the contract which could keep the rig contracted to 2029 if exercised.
The Deepsea Nordkapp was on contract with Aker BP as part of the alliance framework agreement. The rig worked on various exploration and development fields on the Norwegian continental shelf and following a contract extension, is now firm until the end of 2026 with rolling one-year unpriced optional periods thereafter. Towards the end of 2023, the SPS for Deepsea Nordkapp was completed successfully, entirely at sea with no downtime.
Our external fleet were deployed internationally during 2023, other than Deepsea Yantai which operated in Norway.
Deepsea Yantai was stacked in Bergen until late January 2023 when it then commenced a sequence of wells for OMV, Wellesley Petroleum, DNO Norge AS, Neptune Energy Norge, and Vår Energi. Thereafter, the rig is committed with Neptune Energy, Vår Energi , PGNiG Upstream Norway AS, A/S Norske Shell, DNO Norge AS and ConocoPhillips Skandinavia AS, which will take the rig up to Q1 2025.
The Deepsea Mira commenced operations in Namibia in June under a multi-country drilling contract with TotalEnergies.
Deepsea Bollsta has been in Namibia for Shell and will continue there until mid 2024 when it will undergo it's SPS.
Following the completion of the SPS and upgrade programme on Hercules, the rig drilled 1 well in Canada for ExxonMobil before transiting to Namibia to carry out operations for GALP Energia. In 2024, it will return to Canada for a contract for Equinor ASA.
High energy prices and the continuing focus in securing energy supply, along with a lack of supply and new builds means there is a strong outlook for demand for our rigs. With contracts being extended, we have firm backlog to at least 2026 and extending out to the end of 2029 when options are included.
There is still a preference for Tier 1 units such as ours, due to the ability to deliverlowertotalwell costs viahighperformance,operability andflexibility.
For the external fleet there is ongoing tendering activity, with free capacity available from Q2 2024 to meet demand.
We see opportunities in West Africa and Canada and both harsh environment and deep water. The amount of operators in Namibia continues to increase, and we have seen a number of semisubmersibles exit the Norwegian market over the last 18 months.
2024 and into 2025 will see SPS activity for the Deepsea Atlantic, Deepsea Aberdeen and Deepsea Stavanger. The organisation has extensive experience in efficiently executing these and has a strong focus on cost control.
Odfjell Drilling generated operating revenue of USD 732 million in 2023 (USD 650 million), an increase of USD 82 million. There is an increase in both segments.
Earnings before interest, tax, depreciation and amortisation ("EBITDA") was USD 329 million (USD 308 million), an increase of USD 21 million.
The operating profit ("EBIT") amounted to USD 306 million (USD 137 million), an increase of USD 169 million, mainly due to the USD 163 million reversal of impairment losses recognised in prior periods. Refer to Note 10 Tangible fixed assets for further information.
Net financial expenses amounted to USD 84 million (USD 48 million). The increase of USD 36 million was mainly explained by increased interest expenses of USD 20 million due to interest rate changes. The 2022 figures also include a gain from settlement of interest rate swaps of USD 14 million.
The income tax expense amounted to USD 0.3 million (USD 5.4 million). The 2023 tax expense was affected by the completion of a tax relocation of the rig owning companies to Malta. The true-up of the tax value of the rigs to market values led to deferred tax assets of USD 7.5 million being recognised in 2023.
The net profit from continuing operations for the Group was USD 222 million (USD 83 million). Net profit including discontinued operation was USD 222 million (USD 130 million).
Consolidated total assets as at 31 December 2023 amounted to USD 2,309 million (USD 2,219 million).
Total non-current assets amounted to USD 2,055 million (USD 1,949 million), an increase of USD 104 million mainly due to the reversal of impairment.
Current assets amounted to USD 254 million (USD 270 million), of which USD 129 million was cash and cash equivalents (USD 157 million).
Total equity amounted to USD 1,394 million (USD 1,208 million), an increase of USD 186 million. The equity ratio was 60% (54%).
Total liabilities amounted to USD 915 million (USD 1,011 million), reflecting a decrease in gross interest-bearing borrowings of USD 131 million. Net interest bearing debt amounted to USD 582 million (USD 685 million).
(Comparable figures in brackets include continuing operations only)
Cash flow from operating activities amounted to USD 265 million (USD 263 million). The variance of USD 41 million from EBIT is mainly explained by depreciation, impairment and amortisation offset by net interest and income taxes paid.
The cash outflow from investing activities continuing operations amounted to USD 55 million (USD 52 million), mainly due to capital expenditures. In addition, USD 31 million was paid in 2023 regarding the letter of indemnity to Odfjell Technology Ltd as part of discontinued operations.
The cash outflow from financing activities amounted to USD 196 million (cash outflow of USD 318 million). The Group had net proceeds of USD 535 million from the issuance of a bond and a new bank facility. The Group used USD 543 million in 2023 to repay loan facilities, seller's credit and a direct loan. In addition, the Group paid USD 160 million in instalments on credit facilities and leases. Dividends of USD 28 million were paid to shareholders.
Operating revenue for the Own Fleet segment was USD 573 million (USD 567 million). The main driver is a positive variance for Deepsea Aberdeen (USD 4 million), due to higherrate while working on the Svalin field in Q4 but partially offset by a lower day rate during Q1 2023 when compared to Q1 2022 when the rig worked for BP/Wintershall Dea. Deepsea Atlantic has a positive variance (USD 2 million) due to higher bonus. Deepsea Nordkapp has a negative variance (USD 2 million) driven by a lower day rate from Aker BP after the market adjustment from June 2022, partly offset by higher bonus in 2023. Deepsea Stavanger has a negative variance (USD 2 million) due to unplanned downtime inQ4 2023.
EBITDA for the Own Fleet segment was USD 315 million (USD 304 million), driven by improved EBITDA for Deepsea Atlantic (USD 8 million), Deepsea Aberdeen (USD 4 million), Deepsea Nordkapp (USD 1 million), but offset by reduced EBITDA for Deepsea Stavanger (USD 2 million).
Operating revenue for the External Fleet was USD 156 million (USD 78 million). The main driver for the increase is more rigs in operation during 2023.
EBITDA for the External Fleet was USD 24 million (USD 11 million). The main driver is higher management fee for Deepsea Mira (USD 5 million), Deepsea Bollsta (USD 3 million), and Hercules (USD 3 million) due to more days in operation than the previous year.
The Group makes estimates and assumptions concerning the future. These are based on the underlying business, its current and forecast profitability over time, and expectations about external factors such as interest rates, foreign exchange rates and other factors outside the Group's control.
There is estimation uncertainty in the Group's revenue recognition, value in use calculations, useful life assessment and warrant liability measurement. There is use of significant judgement in the impairment indicator reviews, evaluation of lease terms, and considerations related to contingent liabilities.
Please refer to Note - 3 Critical accounting estimates and judgements in the Consolidated Financial Statements for further information.
The business of the Parent Company, Odfjell Drilling Ltd., is as a holding company for investments in subsidiaries.
The Parent Company reported an operating loss (EBIT) of USD 4.2 million (USD 6.7 million), a positive change of USD 2.5 million, mainly due to loss on disposal of subsidiary related to the spinoff in the 2022 accounts of USD 3.4 million.
Interest income was USD 24 million (USD 13 million), interest expense was USD 10 million (USD 15 million).
A net profit of USD 6 million (USD 153 million) was reported. The change from last year is mainly due to dividends received in 2022.
Total assets in the Parent Company amounted to USD 993 million as at 31 December 2023 (USD 1,198 million), a decrease ofUSD205 million mainly related to reduced loan receivables to subsidiaries.
Equity in the Parent Company amounted to USD 951 million (USD 1,074 million), corresponding to an equity ratio of 93% (90%).
Cash flow used in operating activities was USD 20 million (USD 1.4 million). Cash flow from investing activities was USD 114 million (cash flow used of USD 108 million). Cash flow in 2023 was mainly related to proceeds from loans provided to subsidiaries.
Cash flow used in financing activities was USD 88 million (cash flow of USD 111 million), mainly due to repayment of the direct loan of USD 95 million as well as dividend payments, partly offset by proceeds from Group borrowing facilities.
The Group provides drilling rigs and services for the oil and gas industry, which historically has been cyclical in its development. The level of activity in the industry will depend, among other things, on the global economy, oil and gas prices, the investment level for oil and gas exploration, production and drilling and regulatory issues relating to operational safety and environmental hazards. Financial performance will also depend on the balance of supply and demand for mobile drilling units.
The Group seeks to mitigate these risks by securing contracts, preferably long term, with reputable clients, for its main assets and services. All offshore contracts are associated with risk and responsibilities, including technical, operational, commercial, and political risks. The Group will continuously adjust the insurance coverage as required to limit these risks.
As the Group's fully owned fleet currently consists of only four own assets, any operational downtime, or any failure to secure employment at satisfactory rates, will affect the results relatively more than for a group with a larger fleet. Odfjell Drilling has invested significant time and efforts to maintain a safe, predictable and profitable performance.
Factors that, in the Group's view, could affect its results materially include: volatile oil and gas prices, global political changes regarding energy composition and developments in the renewables sector, competition within the oil and gas services industry, changes in clients' spending budgets, cost inflation, access to qualified resources and developments in the financial and fiscal markets.
The Group is exposed to a range of financial risks discussed below. The financial risk management process, carried out at a Group level, focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. To some extent, the Group uses derivative financial instruments to reduce certain risk exposures.
The Group identifies, evaluates, and hedges financial risks in close co-operation with the Group's operational units. The Board has established written principles for risk management of foreign exchange risk, interest rate risk and the use of derivative financial instruments.
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities, and to have sufficient cash or cash equivalents at any time, to finance its operations and investments in line with the Group's strategic plan. More details can be found in Note 22 - Liquidity Risk.
Odfjell Drilling held cash and cash equivalents amounting to USD 129 million in addition to available drawing facilities of USD 165 million at the end of 2023, which is deemed sufficient funding for the Group's current activity levels and committed capital expenditures during 2024.
The liquidity risk is connected with the market risk and the re-contracting risk for mobile drilling units. Management continuously focuses on securing new profitable contracts to generate sufficient cash flow from operations, hence reducing the liquidity risk.
The Group's refinancing risk is considered low given the full refinancing exercise undertaken in 2023. Bank loan facilities do not start maturing until 2028 and the bond in Q2 2028. See Note - 17 Interest-bearing borrowings for further information about maturity of contractual amounts.
This is the risk of a change in market prices and demand, as well as changes in currency exchange rates and interest levels.
The re-contracting risk for the Group's wholly owned mobile drilling units is limited in 2024, as all units in the fleet have medium to long-term contracts.
The Group is exposed to currency fluctuations, primarily with respect to USD and NOK. These risks are minimised through currency hedging via financial instruments or by off-setting local currency elements in charter contracts.
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations at floating interest rates. The Group evaluates the level of interest rate hedging based on assessment of total interest rate risk and currently has a combination of fixed and floating interest rates in order to limit exposure. The Board considers interest payment hedging of the external financing and mandates administration to execute necessary changes.
Including interest rate swaps entered into, the fixed-rate portion of the Group's interest bearing debt as at 31 December 2023 is circa 60%.
The main market for the Group's services is the offshore oil and gas industry, and clients consist primarily of major international oil companies, independent oil and gas producers and government owned oil companies. The Group performs ongoing credit evaluations of clients and generally does not request material collateral. Credit risk is considered to be limited.
ESG risks are considered in day to day operations, as well as at an enterprise risk level and in line with new legislative requirements. There are robust processes in place to assess QHSSE risks and mitigating actions. Human rights risk registers are maintained and evaluations carried out during new country entry.
The Group integrates climate risks and opportunities into its overall enterprise risk management approach. In 2022, we undertook climate risk assessments aimed at reporting in compliance with both the GRI 2021 standard and the TCFD framework.
These assessments involved cross-functional teams from corporate, risk management, finance, supply chain, HR, and technical disciplines. This comprehensive analysis categorised issues into transitional and physical risks and opportunities, further distinguishing them across short-term (0-5 years), mediumterm (5-10 years), and long-term (10+ years).
Following this analysis, we systematically prioritised the identified risks and opportunities based on timelines for impacting our business and implications for our organisation. This allowed us to pinpoint primary risks, assess their impact, and identify potential courses of action. Furthermore, we will actively quantify these risks to facilitate future reporting, in alignment with the ESRS.
The most significant transition risks, along with mitigating actions were:
• Medium to long term - Changes in fossil energy demand due to policies and consumer behaviour changes, leading to reduced demand for our assets and reduced revenue. This will be factored in to any asset growth decisions and alternative use of assets will be considered
• Short to medium term - Cost of and access to capital may go up as banks move to low carbon portfolios, leading to increased interest costs. Consider debt structure and ensure carbon reducing initiatives understood by capital markets
The most significant physical risk identified, along with mitigating actions is:
• Short to long term - Impact of extreme weather offshore on crew and equipment logistics could increase costs and result in downtime. Critical spares analysis and robust planning required as well as protection in commercial contracts
More information can be found in the Sustainability Statement.
Odfjell Drilling has a group insurance policy for the liability of the Company's and its subsidiaries' Directors and Officers. The insurance covers personal legal liabilities including legal costs for defence. The limit of liability is NOK 75 million per claim and in aggregate per year.
The financial statements have been prepared on the basis of the going concern assumption and the Directors have confirmed that this was realistic at the time the accounts were approved - see Note 2 - Basis for preparing the consolidated financial statements.
When assessing the going concern assumption, Directors and management have considered cash flow forecasts, funding requirements and order backlog.
The upswing in the oil and gas market, with a focus to secure stable energy supply, has impacted the financial markets positively with better access to capital. Odfjell Drilling has strong backlog, a robust balance sheet with low leverage, and a long-standing relationship with its key lenders.
Taking all relevant risk factors and available options for financing into consideration, the Board has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future.
There have been no events after the balance date with material effect for the financial statements ended 31 December 2023.
The Board of Odfjell Drilling Ltd.
18 April 2024, London, United Kingdom
__________________________ __________________________ __________________________ __________________________ __________________________ Simen Lieungh Helene Odfjell Harald Thorstein Knut Hatleskog Diane Stephen
Chair Director Director Director General Manager
| Note | 2023 | 2022 |
|---|---|---|
| 5,6 | 732.5 | 649.5 |
| - | 0.0 | |
| 7 | (262.4) | (206.5) |
| 10,11 | (22.1) | (171.5) |
| 8 | (141.6) | (135.0) |
| (426.1) | (513.0) | |
| 306.4 | 136.5 | |
| 5.3 | 2.8 | |
| 8 | (75.2) | (55.4) |
| 8 | (14.1) | 4.4 |
| (84.0) | (48.3) | |
| 222.4 | 88.3 | |
| 9 | (0.3) | (5.4) |
| 222.1 | 82.9 | |
| 4 | 0.0 | 46.7 |
| 222.1 | 129.6 | |
| 222.1 | 129.6 | |
| 34 | 0.938 | 0.512 |
| 34 | 0.938 | 0.512 |
| 0.315 | ||
| 0.315 | ||
| 34 34 |
0.938 0.938 |
for the year ended 31 December
| USD million |
Note | 2023 | 2022 |
|---|---|---|---|
| NET PROFIT |
222.1 | 129.6 | |
| Items that will not be reclassified to profit or loss: |
|||
| Remeasurements of post employment benefit obligations (net of tax) |
9,19 | (0.4) | (0.0) |
| Items that are or may be reclassified to profit or loss: |
|||
| Cash flow hedges (net of tax) |
9,23 | (7.6) | 10.0 |
| Currency translation differences |
(0.5) | (8.9) | |
| Reclassification of foreign currency translation reserve |
4 | - | 27.0 |
| OTHER COMPREHENSIVE INCOME, NET OF TAX |
(8.5) | 28.0 | |
| TOTAL COMPREHENSIVE INCOME |
213.6 | 157.6 | |
| Total comprehensive income is attributable to: |
|||
| Owners of the parent |
213.6 | 157.6 |
Items in the statement of comprehensive income are disclosed net of tax. The income tax relating to each item of other comprehensive income is disclosed in Note 9 - Income Taxes.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
| USD million |
Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| ASSETS | |||
| Property, plant and equipment |
10 | 2,013.0 | 1,937.9 |
| Intangible assets |
11 | 3.0 | 3.4 |
| Deferred tax asset |
9 | 8.5 | 0.4 |
| Non-current receivable |
28 | 30.2 | - |
| Derivative financial instruments |
23 | - | 7.5 |
| TOTAL NON-CURRENT ASSETS |
2,054.7 | 1,949.2 | |
| Contract assets |
14 | 8.4 | 8.6 |
| Trade receivables |
15 | 100.0 | 91.0 |
| Other current assets |
12 | 16.6 | 13.3 |
| Cash and cash equivalents |
16 | 129.2 | 157.2 |
| TOTAL CURRENT ASSETS |
254.2 | 270.1 | |
| TOTAL ASSETS |
2,308.8 | 2,219.3 |
| USD million |
Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| EQUITY AND LIABILITIES |
|||
| Paid in equity |
25 | 370.2 | 370.2 |
| Other equity |
26 | 1,023.9 | 838.3 |
| TOTAL EQUITY |
1,394.0 | 1,208.5 | |
| Non-current interest-bearing borrowings |
17 | 561.8 | 529.0 |
| Non-current lease liabilities |
18 | 38.4 | 41.7 |
| Post-employment benefits |
19 | 0.7 | 0.6 |
| Derivative financial instruments |
23 | 1.3 | 2.8 |
| TOTAL NON-CURRENT LIABILITIES |
602.3 | 574.1 | |
| Current interest-bearing borrowings |
17 | 149.6 | 313.5 |
| Current lease liabilities |
18 | 24.9 | 26.5 |
| Contract liabilities |
14 | 22.1 | 13.7 |
| Trade payables |
48.9 | 35.8 | |
| Current income tax |
9 | 8.6 | 5.8 |
| Other current liabilities |
20 | 58.4 | 41.3 |
| TOTAL CURRENT LIABILITIES |
312.5 | 436.7 | |
| TOTAL LIABILITIES |
914.8 | 1,010.8 | |
| TOTAL EQUITY AND LIABILITIES |
2,308.8 | 2,219.3 |
The Board of Odfjell Drilling Ltd.
18 April 2024, London, United Kingdom
_____________________________ _____________________________ _____________________________ _____________________________ _____________________________ Simen Lieungh Helene Odfjell Harald Thorstein Knut Hatleskog Diane Stephen
Chair Director Director Director General Manager
| Attributable to |
owners of |
the parent |
Owners attributable |
equity to: |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Other | Equity attributable |
|||||||||||
| Share | contributed | Treasury | Total paid |
Other | Retained | Total other |
to owners of the |
Common | Preference | Total | ||
| USD million |
Note | capital | capital | shares | in equity |
reserves | earnings | equity | parent | shares | shares | equity |
| BALANCE AT 1 JANUARY 2022 |
2.5 | 562.4 | - | 565.0 | (109.5) | 812.7 | 703.2 | 1,268.2 | 1,178.6 | 89.5 | 1,268.2 | |
| Profit/(loss) for the period |
- | - | - | - | - | 129.6 | 129.6 | 129.6 | 121.3 | 8.3 | 129.6 | |
| Other comprehensive income for the period |
- | - | - | - | 28.1 | (0.0) | 28.0 | 28.0 | 28.0 | - | 28.0 | |
| Total comprehensive income for the period |
- | - | - | - | 28.1 | 129.5 | 157.6 | 157.6 | 149.4 | 8.3 | 157.6 | |
| Distribution of shares inOdfjell Technology Ltd.to common shareholders |
- | (119.8) | - | (119.8) | - | - | - | (119.8) | (119.8) | - | (119.8) | |
| Cash dividend to preference shareholders |
- | - | - | - | - | (2.2) | (2.2) | (2.2) | - | (2.2) | (2.2) | |
| Acquisition of treasury preference shares |
- | (74.8) | (0.2) | (75.0) | - | (20.2) | (20.2) | (95.2) | 0.4 | (95.6) | (95.2) | |
| Cost of share-based option plan |
33 | - | - | - | - | 0.4 | - | 0.4 | 0.4 | 0.4 | 0.0 | 0.4 |
| Settlement of share-based option plan |
33 | - | - | - | - | (0.5) | - | (0.5) | (0.5) | (0.5) | - | (0.5) |
| Transactions with owners |
- | (194.6) | (0.2) | (194.8) | (0.1) | (22.4) | (22.5) | (217.3) | (119.5) | (97.8) | (217.3) | |
| BALANCE AT 31 DECEMBER 2022 |
2.5 | 367.8 | (0.2) | 370.2 | (81.4) | 919.8 | 838.3 | 1,208.5 | 1,208.5 | - | 1,208.5 | |
| Profit/(loss) for the period |
- | - | - | - | - | 222.1 | 222.1 | 222.1 | 222.1 | - | 222.1 | |
| Other comprehensive income for the period |
- | - | - | - | (8.1) | (0.4) | (8.5) | (8.5) | (8.5) | - | (8.5) | |
| Total comprehensive income for the period |
- | - | - | - | (8.1) | 221.7 | 213.6 | 213.6 | 213.6 | - | 213.6 | |
| Dividends paid |
25 | - | - | - | - | - | (28.4) | (28.4) | (28.4) | (28.4) | - | (28.4) |
| Cancellation of treasury preference shares |
25 | (0.2) | - | 0.2 | - | - | - | - | - | - | - | - |
| Cost of share-based option plan |
33 | - | - | - | - | 0.4 | - | 0.4 | 0.4 | 0.4 | - | 0.4 |
| Transactions with owners |
(0.2) | - | 0.2 | - | 0.4 | (28.4) | (28.0) | (28.0) | (28.0) | - | (28.0) | |
| BALANCE AT 31 DECEMBER 2023 |
25,26 | 2.4 | 367.8 | - | 370.2 | (89.2) | 1,113.1 | 1,023.9 | 1,394.0 | 1,394.0 | - | 1,394.0 |
The accompanying notes are an integral part of these financial statements.
| USD million |
Note | 2023 | 2022 |
|---|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|||
| Profit before tax from continuing operations |
222.4 | 88.3 | |
| Profit before tax from discontinued operations |
- | 10.3 | |
| Adjustments for: |
|||
| Depreciation, impairment and amortisation |
10,11 | 22.1 | 173.8 |
| Change in fair value derivatives |
22 | 3.8 | 2.9 |
| Net interest expense |
69.9 | 54.0 | |
| Share of (profit) loss from joint ventures |
- | 0.4 | |
| Net (gain) loss on sale of tangible fixed assets |
- | (0.6) | |
| Post-employment benefit expenses less post-employment benefit payments |
(0.3) | (0.0) | |
| Net currency loss (gain) not related to operating activities |
8.8 | 0.6 | |
| Other provisions and adjustments for non-cash items |
5.2 | 1.6 | |
| Changes in working capital: |
|||
| Spare parts |
- | (0.4) | |
| Trade receivables and contract assets |
(11.4) | (17.1) | |
| Trade payables |
(11.2) | 13.3 | |
| Other accruals |
17.7 | (4.7) | |
| Cash generated from operations |
326.9 | 322.4 | |
| Net interest paid |
(56.2) | (45.0) | |
| Net income tax paid |
(6.0) | (2.1) | |
| NET CASH FLOW FROM OPERATING ACTIVITIES |
264.7 | 275.2 | |
| • of which from continuing operations |
264.7 | 263.0 | |
| • of which from discontinued operations |
- | 12.2 |
| USD million |
Note | 2023 | 2022 |
|---|---|---|---|
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|||
| Purchase of property, plant and equipment |
(66.2) | (66.6) | |
| Proceeds from grants |
10 | 12.7 | 6.4 |
| Proceeds from sale of property, plant and equipment |
- | 0.9 | |
| Payment regarding letter of indemnity to Odfjell Technology Ltd. |
28 | (30.8) | - |
| Other non-current receivables and investments |
(1.6) | (0.1) | |
| Disposal of discontinued operations, net cash disposed of |
- | (49.7) | |
| Cash payments to acquire interests in joint-ventures |
- | (1.8) | |
| NET CASH FLOW USED IN INVESTING ACTIVITIES |
(85.9) | (111.0) | |
| • of which from continuing operations |
(55.1) | (52.0) | |
| • of which from discontinued operations |
(30.8) | (59.0) | |
| CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings |
17 | 534.9 | 241.5 |
| Repayments of borrowings |
17 | (680.2) | (317.1) |
| Repayment of lease liabilities |
18 | (22.7) | (18.6) |
| Payment acquisition of treasury preference shares |
- | (75.2) | |
| Dividends paid |
25 | (28.4) | (2.2) |
| NET CASH FLOW FROM FINANCING ACTIVITIES |
(196.4) | (171.6) | |
| • of which from continuing operations |
(196.4) | (317.5) | |
| • of which from discontinued operations |
- | 145.9 | |
| Effects of exchange rate changes on cash and cash equivalents |
(10.3) | (8.5) | |
| NET CHANGE IN CASH AND CASH EQUIVALENTS |
(28.0) | (15.9) | |
| Cash and cash equivalents at 01.01 |
157.2 | 173.0 | |
| CASH AND CASH EQUIVALENTS AT 31.12 |
129.2 | 157.2 |
All amounts are in USD millions unless otherwise stated
| Note 1 |
General information |
59 |
|---|---|---|
| Note 2 |
Basis for preparing the consolidated financial statements |
59 |
| Note 3 |
Critical accounting estimates and judgements |
60 |
| Note 4 |
Discontinued operations |
61 |
| Note 5 |
Segment summary |
61 |
| Note 6 |
Revenue | 62 |
| Note 7 |
Personnel Expenses |
64 |
| Note 8 |
Combined items, income statement |
64 |
| Note 9 |
Income Taxes |
65 |
| Note 10 |
Tangible fixed assets |
67 |
| Note 11 |
Intangible assets |
70 |
| Note 12 |
Other assets |
70 |
| Note 13 |
Financial assets and liabilities |
71 |
| Note 14 |
Contract balances |
73 |
| Note 15 |
Trade receivables |
74 |
| Note 16 |
Cash and cash equivalents |
74 |
| Note 17 |
Interest-bearing borrowings |
75 |
| Note 18 |
Leases | 78 |
| Note 19 |
81 | |
|---|---|---|
| Post-employment benefits |
||
| Note 20 |
Other liabilities |
82 |
| Note 21 |
Financial risk management |
82 |
| Note 22 |
Liquidity risk |
83 |
| Note 23 |
Market risk |
85 |
| Note 24 |
Credit risk |
90 |
| Note 25 |
Share capital and shareholder information |
91 |
| Note 26 |
Other reserves |
93 |
| Note 27 |
Securities and mortgages |
93 |
| Note 28 |
Contingencies | 94 |
| Note 29 |
Commitments | 94 |
| Note 30 |
Subsidiaries | 95 |
| Note 31 |
Related parties - transactions, receivables, liabilities and commitments |
96 |
| Note 32 |
Remuneration to the Board of Directors, key executive management and auditor |
98 |
| Note 33 |
Share-based payments |
99 |
| Note 34 |
Earnings per share |
100 |
| Note 35 |
Events after the reporting period |
100 |
Odfjell Drilling Ltd. and its subsidiaries (together 'the Group') operates mobile offshore drilling units.
Odfjell Drilling Ltd., is incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. Odfjell Drilling Ltd's head office is at Prime View, Prime Four Business Park, Kingswells, Aberdeen, Scotland, United Kingdom and the Company is tax resident in the United Kingdom.
The consolidated financial statements including notes for Odfjell Drilling Ltd. for the year 2023 were approved by the Board of Directors on 18 April 2024.
The consolidated financial statements of the Group for the year ended 31 December 2023 comply with IFRS® Accounting Standards as endorsed by the European Union (EU).
The consolidated financial statements ended 31 December 2023 comprise the income statement, statement of comprehensive income, statement of financial position, statement of cash flows, statement of changes in equity and note disclosures.
Factors that, in the Group's view, could cause actual results to differ materially from the outlook contained in this report are the following: volatile oil and gas prices, global political changes regarding energy composition and development in the renewables sector, competition within the oil and gas services industry, changes in clients' spending budgets, cost inflation, access to qualified resources and developments in the financial and fiscal markets.
The Group's refinancing risk is considered low given the full refinancing exercise undertaken in 2023. Bank loan facilities do not start maturing until 2028 and the bond in Q2 2028
Taking all relevant risk factors and available options for financing into consideration, the Board has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. Hence, the Group has adopted the going concern basis in preparing its consolidated financial statements.
The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments, debt and equity financial assets, plan assets in defined benefit pension plans and contingent consideration that have been measured atfair value.
The preparation of financial statements in conformity with Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where the assumptions and estimates are significant to the consolidated financial statements are disclosed in each relevant note.
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries.
Subsidiaries are listed in Note 30.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group's accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Items included in the separate financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The Consolidated Financial Statements are presented in USD (in million), which is the Group's presentation currency.
Foreign currency transactions are translated into the functional currency using the monthly exchange rates for the month the transactions are recognised.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Foreign exchange gains and losses are presented in the income statement within 'otherfinancial items'.
The results and financial position of all the Group's entities that have a functional currency different from the presentation currency (USD) are translated into the presentation currency as follows:
| Average rate |
Closing rate |
as at 31.12 |
||
|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |
| NOK | 0.09464 | 0.10395 | 0.09831 | 0.10145 |
| GBP | 1.24370 | 1.23299 | 1.27150 | 1.20257 |
| EUR | 1.08184 | 1.05126 | 1.10500 | 1.06660 |
The Group presents assets and liabilities in the statement of financial position based on current/ non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
The Group classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The statement of cash flows is prepared under the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
The cash flow statement represents the cash flows for the total Group, including both continuing and discontinued operations. The split between continuing and discontinued operations are presented as separate lines within each category of the cash flow statement.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. These estimates are based on the actual underlying business, its present and forecast profitability over time, and expectations about external factors such as interest rates, foreign exchange rates and other factors which are outside the Group's control. The resulting estimates will, by definition, seldom equal the related actual results.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are listed below.
In March 2022, Odfjell Drilling successfully listed Odfjell Technology Ltd as a separate entity and the shares in Odfjell Technology was distributed to the shareholders in the Company.
The results of discontinued operations in 2022 of USD 47 million are presented separately from the continuing operations as a single amount of profit. The profit includes the results of discontinued operations until distribution, net of tax, which amounted to USD 10 million. Furthermore, a gain of USD 36 million was recognised in 2022 when distributing the discontinued operation. The gain equals the fair value of the discontinued operation less the book value of the net assets distributed, adjusted for the cumulative foreign currency translation reserve in Other Comprehensive Income recycled to the income statement.
Operating segments are reported in a manner consistent with the internal financial reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board.
The Group provides drilling and related services to oil and gas companies. The Group owned four mobile offshore drilling units during 2021 and 2022 with similar services, revenues, customers and production processes. Own drilling units (Own Fleet) is therefore assessed as one operating segment. The same applies for rig management services provided to other owners of other drilling units (External Fleet).
The segment operates mobile offshore drilling units owned by Odfjell Drilling.
The segment offers management services to other owners of drilling units; mainly operational management, management of regulatory requirements, marketing, contract negotiations and client relations, preparations for operation and mobilisation.
| Own Fleet |
External Fleet |
Corporate / |
other | Consolidated | ||||
|---|---|---|---|---|---|---|---|---|
| USD million |
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| External segment revenue |
572.9 | 567.3 | 156.3 | 78.0 | 3.3 | 4.3 | 732.5 | 649.5 |
| Inter segment revenue |
- | - | - | - | - | - | - | - |
| TOTAL REVENUE |
572.9 | 567.3 | 156.3 | 78.0 | 3.3 | 4.3 | 732.5 | 649.5 |
| EBITDA | 315.1 | 303.9 | 23.6 | 11.0 | (10.2) | (7.0) | 328.5 | 308.0 |
| Depreciation and amortisation |
(18.8) | (167.1) | - | - | (3.3) | (4.4) | (22.1) | (171.5) |
| EBIT | 296.3 | 136.9 | 23.6 | 11.0 | (13.5) | (11.3) | 306.4 | 136.5 |
| Net financial items |
(84.0) | (48.3) | ||||||
| PROFIT BEFORE TAX - CONSOLIDATED GROUP |
222.4 | 88.3 |
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control over rendered services to the customer.
Sometimes, the Group receives short-term advances from customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Group has, as a practical expedient in IFRS 15, recognised the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwisewouldhave recognisedisone yearorless.
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The Group has only operating leases as a lessor. Rental income and the lease component of drilling contracts is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. The lease term may vary from contract to contract, and only includes the non-cancellable period of the contract with the addition of optional renewable periods if the lessee is reasonably certain to extend. None of the existing contracts have optional periods included in the lease term. The lease term is reassessed when options to extend are exercised. Contingent rents are recognised as revenue in the period in which they are earned.
There is estimation uncertainty in the Group's revenue recognition related to bonus and other variable considerations Most of the contracts include fees for variable or conditional service fee arrangements, such as bonuses for meeting or exceeding certain performance targets. The Group estimate these variable fees using a most likely amount approach on a contract by contract basis. Management makes a detailed assessment of the amount of revenue expected to be received and the probability of success in each case. Variable consideration is included in revenue only to the extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is resolved (generally upon completion of a well or drilling program).
The revenue is primarily derived from drilling contracts with customers. The core promise in the contracts with the customers is to be available to provide drilling services over the operation period of a contract. Drilling services primarily consists of providing the mobile offshore drilling unit, crews, related equipment and services necessary to operate the rig. The contract rates include both a lease component and a service component. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Therefore, the Group follow the series guidance in IFRS 15 and treat the series of distinct services as a single performance obligation.
Revenue is based on the transactions price in the contracts with the customers. The main part of the transaction price is day rates, which range from a full operating day rate to lower or zero rates for periods when drilling operations are interrupted. Payment of the day rate based transaction price is usually due on a monthly basis.
Some contracts entitle the Group to receive compensation for mobilisation and demobilisation, contract preparation, customerrequested goods and services or capital upgrades. The compensations are either as fixed lump-sums or based on variable day rates. Lump-sums are usually paid up-front or when certain milestones are met. The payment terms do not contain any significant financing components.
Revenue from drilling contracts is generally recognised in the period from commencing a contract and until completion of the drilling programme ("the drilling operation period"). No revenue is recognised in the mobilisation and demobilisation period.
Since the customers continuously gain control over the drilling services, revenue is recognised over time, in line with transfer of control.
The likelihood of options being exercised, and thereby included in estimates for expected total revenue and the drilling operation period, is based on an assessment of whether a customer option provides a material right for the customer. If a contract includes an option that provides a material right for the customer, a proportion of contract revenue will be allocated to the material right and recognised as revenue when the additional service is provided or when the option expires.
Day rate considerations in the drilling operation period are attributed to the period to which the drilling operations are performed and recognised as revenue in the same period. Other compensations, as described above, are allocated to the contract and recognised as revenue on a straight-line basis over the drilling operation period. Refer to Note 14 - Contract balances. Bonuses and other variable or conditional service fees are allocated to either the entire drilling operation period or to individual periods during the contract (using the series of services guidance in IFRS 15) depending on what the variable contract revenue relates to.
The costs to prepare the rig for contract and the cost for mobilisation of the rig to the drilling location, are capitalised as Assets from contract costs and expensed as operating cost over the drilling operations period. Refer to Note 14 - Contract balances. Demobilisation expenses are expensed as incurred.
The segment offers management services to other owners of drilling units; mainly operational management, management of regulatory requirements, marketing, contract negotiations and client relations, preparations for operation and mobilisation. The transaction price is mainly day rate based management fees, usually payable on a monthly basis.Referto Note 14 -Contract balances for payment terms related to the management agreementforDeepsea Yantai. The payment terms do not contain any significant financing components. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. Variable or conditional service fee arrangements, such as bonuses, are treated according to principles described above. The period for recognising revenue is generally equalto the contract period.
| USD million |
2023 | 2022 |
|---|---|---|
| Revenue from contracts with customers (IFRS 15) |
448.7 | 393.7 |
| Lease component in Own Fleet contracts |
283.4 | 255.2 |
| Other operating revenue |
0.4 | 0.6 |
| OPERATING REVENUE |
732.5 | 649.5 |
| 2023 | 2022 |
|---|---|
| 441.9 | 375.6 |
| 127.2 | 129.2 |
| 85.0 | - |
| Own | Fleet | External | Fleet | Corporate | / Other |
Consolidated | ||
|---|---|---|---|---|---|---|---|---|
| USD million |
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Norway | 572.9 | 567.3 | 65.5 | 74.9 | 3.3 | 4.3 | 641.7 | 646.4 |
| Namibia | - | - | 82.4 | 3.1 | - | - | 82.4 | 3.1 |
| Canada | - | - | 8.4 | - | - | 8.4 | - | |
| TOTAL OPERATING REVENUE |
572.9 | 567.3 | 156.3 | 78.0 | 3.3 | 4.3 | 732.5 | 649.5 |
Amounts allocated to performance obligations that are to be completed under existing customer contracts are set out as service elements in the following table.
The firm contract backlog does not include variable consideration which is constrained. The services provided under these contracts will be billed based on time incurred and at day rates according to contract.
| USD million |
Future minimum lease payments |
Performance obligations |
Total firm backlog |
|---|---|---|---|
| Within one year |
249 | 211 | 460 |
| Between one and two years |
390 | 231 | 621 |
| Between two and three years |
274 | 146 | 420 |
| Between three and four years |
98 | 59 | 156 |
| Between four and five years |
100 | 59 | 159 |
| After five years |
104 | 59 | 163 |
| TOTAL | 1,215 | 765 | 1,980 |
| USD million |
Note | 2023 | 2022 |
|---|---|---|---|
| Salaries and wages |
188.3 | 152.9 | |
| Employer`s national insurance contributions |
30.7 | 23.6 | |
| Pension expenses |
19 | 15.3 | 13.2 |
| Cost of share-based option plan |
33 | 0.4 | 0.4 |
| Other benefits |
8.5 | 6.0 | |
| Hired personnel |
19.1 | 10.4 | |
| TOTAL PERSONNEL EXPENSES |
262.4 | 206.5 |
| 2023 | 2022 | |
|---|---|---|
| No. of employees (annual average) |
1,471 | 1,240 |
| USD million |
Note | 2023 | 2022 |
|---|---|---|---|
| Hired services |
48.5 | 45.1 | |
| Hired equipment |
27.7 | 27.9 | |
| Repair and maintenance, inspection, tools, fixtures and fittings |
36.2 | 35.3 | |
| Insurance | 3.4 | 3.6 | |
| Freight and transport |
2.1 | 2.2 | |
| Premises facility expenses |
1.4 | 1.7 | |
| Travel and course expenses |
13.5 | 9.7 | |
| Other operating and administrative expenses |
6.5 | 5.4 | |
| Capitalised contract cost |
14 | - | (0.7) |
| Amortised other operating contract cost |
14 | 2.3 | 4.9 |
| TOTAL OTHER OPERATING EXPENSES |
141.6 | 135.0 |
| USD million |
Note | 2023 | 2022 |
|---|---|---|---|
| Interest expenses borrowings |
61.0 | 44.4 | |
| Amortised transaction costs borrowings |
17 | 7.9 | 6.3 |
| Interest expenses lease liabilities |
18 | 4.2 | 4.2 |
| Other interest expenses |
2.1 | 0.6 | |
| TOTAL INTEREST EXPENSES |
75.2 | 55.4 |
| USD million |
Note | 2023 | 2022 |
|---|---|---|---|
| Net currency gain / (loss) |
(8.6) | (3.6) | |
| Gain from settlement of interest rate swaps |
23 | - | 13.7 |
| Change in value of market-based derivatives * |
23 | (3.8) | (4.5) |
| Other financial expenses |
(1.7) | (1.2) | |
| TOTAL OTHER FINANCIAL ITEMS |
(14.1) | 4.4 |
* Change in value of market-based derivatives includes change in fair value of warrant liabilities.
The mobile offshore rigs were up until December 2023 allocated to and operated by Dubai registered branches of their respective UK tax resident companies. Net profit related to the rigs were attributable to the Dubai branch of the respective company in accordance with the foreign branch exemption, and were therefore not taxable in the UK. There was no corporate income tax for the Dubai branches in 2022 and 2023.
On 1 December 2023 the rig owning subsidiaries together with their immediate parent companies completed a tax relocation from the United Kingdom to Malta. Later in December 2023 the mobile offshore rigs were transferred from the Dubai branches to the Malta taxable companies. The tax value of the rigs when entering Malta tax jurisdiction were set to estimated market values, which was higherthan the book value ofthe assets. This resulted in a deferred income tax asset of USD 7.7 million being recognised. The deferred tax asset is calculated using a tax rate of 5% which represent the statutory tax rate expected to apply
when the temporary differences reverse.
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised 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 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 recognised, using the liability method, on temporary differences arising between thetaxbasesofassetsandliabilitiesandtheircarrying amountsintheconsolidatedfinancialstatements.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected toapplywhenthe relateddeferredincome taxassetis realisedorthedeferredincome tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax assets 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 relate 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.
The Group is within the scope of the OECD Pillar Two model rules, however the effects of the global minimum tax ('GloBE) is not expected to come into effect with the current set-up for the Group until 2026 at the earliest, and likely not until 2027 due to the
| 2023 | 2022 |
|---|---|
| (8.2) | (6.2) |
| 7.9 | 0.8 |
| (0.3) | (5.4) |
| 0.1 % |
5.5 % |
| (0.3) | (5.4) |
| - | 0.0 |
revenue thresholds in the rules. Since the Pillar Two legislation was not effective at the reporting date, the Grouphasnorelatedcurrenttax exposure.TheGroup applies the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments toIAS12issuedinMay2023.Underthe legislation, the Group will be liable to pay a top-up tax for the difference between their GloBE effective tax rateperjurisdictionandthe15%minimumtax rate.
TheGroup is in the process of assessing its exposure to the Pillar Two legislation for when it comes into effect. Due to the complexities in applying the legislation and calculating GloBE income, the quantitative impact of the enacted or substantively enacted legislation is not yetreasonably estimable.
Odfjell Drilling is continuously evaluating its structure to ensure that it has the most suitable and efficient corporate organisation and set-up. Following the spinoff of Odfjell Technology in 2022, the rationale behind the previous set-up has lessened, and the reorganisation was initiated.
| Tax reconciliation |
||
|---|---|---|
| USD million |
2023 | 2022 |
| Profit from continuing operations before income tax expense |
222.4 | 88.3 |
| Profit from discontinued operation before income tax expense |
- | 10.3 |
| Total profit before income tax expense |
222.4 | 98.5 |
| Tax calculated at domestic tax rates applicable to profits in respective countries |
(3.0) | 0.5 |
| Effect of tax relocation to Malta |
7.7 | - |
| Effect of adjustments recognised related to prior periods |
(0.0) | (0.3) |
| Effect of net non-taxable income / (expenses) |
(5.0) | (5.6) |
| INCOME TAX EXPENSE |
(0.3) | (5.4) |
* Domestic tax rates applicable to the Group varies between 0% and 25% for corporate income taxes (CIT).
** The majority of non-tax deductible expenses are related to limitations regarding tax-deductible interest expenses in theUK.
The Group does not have any material tax losses for which no tax asset has been recognised.
Refer to Note 28 Contingencies for information regarding letter of indemnity and payment made in 2023 in relation to the Odfjell Offshore Ltd tax case.
| USD million |
2023 | 2022 |
|---|---|---|
| Net deferred tax assets/(deferred tax liabilities) at 01.01 |
0.4 | 1.3 |
| Income statement charge |
7.9 | 0.8 |
| Change in deferred tax on other comprehensive income |
0.2 | 0.0 |
| Disposal through distribution of operation to shareholders |
- | (1.8) |
| Currency translation differences |
(0.0) | 0.1 |
| NET DEFERRED TAX ASSETS/(DEFERRED TAX LIABILITIES) AT 31.12 |
8.5 | 0.4 |
The Group's recognised deferred tax assets are related to operations in Malta and Norway.
| USD million |
Tax losses |
Current assets |
Net pension liabilities |
Fixed assets |
Lease liabilities |
Total |
|---|---|---|---|---|---|---|
| Opening balance 01.01.2022 |
- | 0.2 | 1.3 | 0.4 | 9.8 | 11.7 |
| Income statement charge |
- | - | (0.0) | (0.0) | 6.0 | 6.0 |
| Change in deferred tax on other comprehensive income |
- | - | 0.0 | - | - | 0.0 |
| Disposal through distribution of operations to shareholders |
- | (0.2) | (1.2) | (0.3) | (2.4) | (4.1) |
| Currency translation differences |
- | - | (0.0) | (0.0) | (0.9) | (0.9) |
| CLOSING BALANCE 31.12.2022 |
- | - | 0.1 | - | 12.5 | 12.7 |
| Income statement charge |
10.2 | 0.2 | (0.1) | - | (1.4) | 8.9 |
| Change in deferred tax on other comprehensive income |
- | 0.1 | 0.1 | - | - | 0.2 |
| Currency translation differences |
- | 0.0 | (0.0) | - | (0.5) | (0.5) |
| CLOSING BALANCE 31.12.2023 |
10.2 | 0.3 | 0.2 | - | 10.6 | 21.3 |
| Deferred | Fixed | Right-of | ||
|---|---|---|---|---|
| USD thousands |
capital gains |
assets | use Assets |
Total |
| Opening balance 01.01.2022 |
(1.2) | - | (9.2) | (10.4) |
| Income statement charge |
0.2 | (0.1) | (5.3) | (5.1) |
| Disposal through distribution of operations to |
||||
| shareholders | 0.0 | 2.3 | 2.3 | |
| Currency translation differences |
0.1 | - | 0.9 | 1.0 |
| CLOSING BALANCE 31.12.2022 |
(0.8) | (0.1) | (11.4) | (12.3) |
| Income statement charge |
0.2 | (2.3) | 1.2 | (1.0) |
| Currency translation differences |
0.0 | 0.0 | 0.4 | 0.5 |
| CLOSING BALANCE 31.12.2023 |
(0.6) | (2.4) | (9.7) | (12.8) |
| USD million |
2023 | 2022 |
|---|---|---|
| Deferred tax assets |
21.3 | 12.7 |
| Deferred tax liabilities offset in deferred tax assets |
(12.8) | (12.3) |
| NET BOOK VALUE OF DEFERRED TAX ASSET AT 31.12. |
8.5 | 0.4 |
The income tax (charge)/credit relating to components of the other comprehensive income is as follows:
| Before tax |
Tax (charge)/ credit |
After tax |
Before tax |
Tax (charge)/ credit |
After tax |
|
|---|---|---|---|---|---|---|
| USD million |
2023 | 2023 | 2023 | 2022 | 2022 | 2022 |
| Remeasurements of post employment benefit obligations |
(0.5) | 0.1 | (0.4) | (0.1) | 0.0 | (0.0) |
| Cash flow hedges |
(7.7) | 0.1 | (7.6) | - | - | - |
| OTHER COMPREHENSIVE INCOME |
(8.2) | 0.2 | (8.0) | (0.1) | 0.0 | (0.0) |
| Deferred tax |
0.2 | 0.0 |
Property, plant and equipment comprise mainly of mobile offshore drilling units, well services equipment and machinery and equipment. Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes purchase price, any directly attributable costs of bringing the asset to working condition and borrowing costs.
Depreciation is calculated on a straight-line basis over the useful life of the asset or component. The depreciable amount equals historical cost less residual value. Items of property, plant and equipment with components that have substantially different useful lives are treated separately for depreciation purposes. The total expenditure on the rigs is therefore allocated into groups of components that have different expected useful lifetimes.
Subsequent costs for day-to-day repairs and maintenance are expensed as incurred.
The cost of modernisation and rebuilding projects is included in the asset's carrying amount when it is probable that the Group will derive future financial benefits and the cost of the item can be measured reliably. The carrying amount of the replaced part is written off. Modernisation and rebuilding projects are depreciated over the remaining useful life of the related assets.
The useful lives of assets and the depreciation methods are reviewed periodically in order to ensure that the method and period of depreciation are consistent with the expected pattern of financial benefits from the asset.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices less cost of disposal for mobile drilling units after a 30 year useful lifetime. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Residual values for property, plant and equipment are estimated to be zero.
Rig and equipment are depreciated over a period from 5 to 30 years. Periodic maintenance is depreciated over the expected period until next docking, estimated as 5 years.
Government grants are recognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Investment grants are capitalised and recognised systematically over the asset's useful life. Investment grants are recognised as adeductionofthe asset's carryingamount.
All non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised 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 costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). For mobile offshore drilling units, each unit is deemed to be a CGU. Value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Non-financial assets, other than goodwill, that have suffered an impairment, are reviewed for reversal of the impairment whenever events or changes in circumstances indicate that the impairment loss recognised in prior periods may no longer exist or may have decreased.
Mobile drilling units and Periodic maintenance contain assets used in contracts with customers that contain a lease component.
| USD million | Mobile drilling units | Periodic maintenance | Other fixed assets | Right-of-use assets | Total fixed assets |
|---|---|---|---|---|---|
| COST | |||||
| At 1 January 2023 | 2,979.1 | 185.2 | 2.2 | 93.9 | 3,260.3 |
| Additions | 26.9 | 51.8 | 0.6 | 19.7 | 98.9 |
| Currency translation differences | 0.0 | - | (0.0) | (2.1) | (2.1) |
| COST AS AT 31 DECEMBER 2023 | 3,006.0 | 237.0 | 2.7 | 111.5 | 3,357.2 |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT | |||||
| At 1 January 2023 | (1,183.8) | (108.1) | (0.5) | (30.1) | (1,322.4) |
| Depreciation | (118.0) | (45.0) | (0.4) | (21.8) | (185.3) |
| Reversal of impairment | 163.4 | - | - | - | 163.4 |
| Currency translation differences | - | - | (0.0) | 0.1 | 0.1 |
| AS AT 31 DECEMBER 2023 | (1,138.4) | (153.1) | (0.9) | (51.8) | (1,344.2) |
| NET BOOK VALUE AT 31 DECEMBER 2023 | 1,867.6 | 83.9 | 1.8 | 59.7 | 2,013.0 |
| Useful lifetime | 5 - 30 years | 5 years | 3 - 5 years | 2-12 years | |
| Depreciation schedule | Straight line | Straight line | Straight line | Straight line |
For more information about Right-of-use assets, refer to Note 18 - Leases.
The Group have received USD 12.7 million from the Norwegian NOx fund in 2023 (USD 6.4 million in 2022). The grants are recognised as a deduction of additions presented in the table above.
Deepsea Atlantic is depreciated from 4 August 2009, Deepsea Stavanger is depreciated from 16 September 2010, Deepsea Aberdeen is depreciated from 21 April 2015, and Deepsea Nordkapp is depreciated from 10 May 2019.
| USD million | Mobile drilling units | Periodic maintenance Well Services equipment | Other fixed assets | Right-of-use assets | Total fixed assets | |
|---|---|---|---|---|---|---|
| COST | ||||||
| At 1 January 2022 | 2,945.3 | 171.7 | 407.7 | 21.6 | 60.0 | 3,606.2 |
| Additions | 33.9 | 13.9 | 7.3 | 1.9 | 42.0 | 99.0 |
| Additions due to previously eliminated inter-segment leases | - | - | - | - | 16.6 | 16.6 |
| Disposal | - | (0.4) | (2.5) | (0.2) | (1.3) | (4.3) |
| Disposal through distribution of operations to shareholders | - | - | (413.4) | (21.3) | (18.2) | (452.8) |
| Currency translation differences | - | - | 0.9 | 0.1 | (5.3) | (4.3) |
| COST AS AT 31 DECEMBER 2022 | 2,979.1 | 185.2 | - | 2.2 | 93.9 | 3,260.3 |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT | ||||||
| At 1 January 2022 | (1,071.2) | (69.5) | (321.9) | (18.2) | (16.5) | (1,497.3) |
| Depreciation from continuing operations | (112.6) | (39.0) | (0.2) | (19.5) | (171.3) | |
| Depreciation from discontinued operations | - | - | (2.0) | (0.1) | (0.2) | (2.3) |
| Adjustments due to previously eliminated inter-segment leases | - | - | - | - | (2.7) | (2.7) |
| Disposals | - | 0.4 | 2.2 | 0.1 | 1.3 | 4.0 |
| Disposal through distribution of operations to shareholders | - | - | 322.6 | 18.1 | 6.2 | 346.8 |
| Currency translation differences | - | - | (0.9) | (0.1) | 1.4 | 0.4 |
| AS AT 31 DECEMBER 2022 | (1,183.8) | (108.1) | - | (0.5) | (30.1) | (1,322.4) |
| NET BOOK VALUE AT 31 DECEMBER 2022 | 1,795.3 | 77.1 | - | 1.7 | 63.8 | 1,937.9 |
| Useful lifetime | 5 - 30 years | 5 years | 3 - 10 years | 3 - 5 years | 2-12 years | |
| Depreciation schedule | Straight line | Straight line | Straight line | Straight line | Straight line |
Mobile drilling units impaired in previous periods, are assessed for reversal of the impairment whenever there are indicators that the impairment loss previously recognised no longer exist or has decreased. Odfjell Drilling did per 30 September 2023 identify indications that there are significant favourable effects in the market environment, leading to changes in the estimate used to determine the recoverable amount when the rigs were impaired. These changes mainly impact the expected future day rates.
On the basis of the identified indicators of impairment reversal, Odfjell Drilling assessed the two impaired drilling rigs for impairment reversal.
Based on the estimated recoverable amount for the previously impaired rigs, the Group has recognised reversal of impairment of USD 71 million for Deepsea Atlantic and USD 92 million for Deepsea Stavanger as at 30 September 2023.
This is a reversal of all previous impairment for these rigs. The carrying amount for the rigs is now equal to the amount that would have been determined, net of depreciation, had no impairment loss been recognised in prior periods.
| Key assumptions |
Deepsea Atlantic |
Deepsea Stavanger |
|---|---|---|
| Weighted Average Cost of Capital (WACC) |
11.0% | 11.0% |
| Pre-tax discount rate |
12.1% | 12.1% |
| Estimated firm contract days |
984 | 2,101 |
| Estimated average day rate for firm periods (USD thousand) |
396 | 398 |
| Future base case day rates (USD thousand) |
450 | 450 |
| Future base case OPEX day rates (USD thousand) |
160 | 160 |
| Financial utilisation in periods without firm contract |
95% | 95% |
| Estimated impairment write-down if: |
Deepsea Atlantic |
Deepsea Stavanger |
|
|---|---|---|---|
| • WACC increased by |
1,5 pp |
- | - |
| • WACC increased by |
3,0 pp |
4 | 15 |
| • Day rate level decreased by * |
10% | - | - |
| • Day rate level decreased by * |
20% | 61 | 11 |
| • Normalised opex level increased by |
10% | - | - |
| • Normalised opex level increased by |
20% | 1 | 12 |
| • Financial utilisation in normalised period decreased by |
10 pp |
- | - |
| • Financial utilisation in normalised period decreased by |
20 pp |
61 | 18 |
* excluding firm contractual day rates
There is estimation uncertainty in the estimation of value in use / estimated recoverable amount as described above related to reversal of impairment.
There is also estimation uncertainty in the evaluation of useful lifetime of the mobile drilling units. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Management evaluates both external and internal sources of information when assessing remaining useful lifetime, including estimated effects of the climate change and the shift to renewable energy sources.
Management exercises significant judgement in determining whether there are any indicators of impairment. Management evaluates both external and internal sources of information in the indicator assessments. The assessments include estimated effects of the climate change and the shift to renewable energy sources
Odfjell Drilling has not identified any impairment indicators as at 31 December 2023.
| USD million |
Goodwill | Software | Total intangible assets |
|---|---|---|---|
| COST | |||
| At 1 January 2023 |
3.0 | 0.7 | 3.6 |
| Currency translation differences |
(0.1) | (0.0) | (0.1) |
| COST AS AT 31 DECEMBER 2023 |
2.9 | 0.7 | 3.5 |
| ACCUMULATED AMORTISATION AND IMPAIRMENT |
|||
| At 1 January 2023 |
- | (0.3) | (0.3) |
| Amortisation | (0.3) | (0.3) | |
| Currency translation differences |
- | (0.0) | (0.0) |
| AS AT 31 DECEMBER 2023 |
- | (0.5) | (0.5) |
| NET BOOK VALUE AT 31 DECEMBER 2023 |
2.9 | 0.1 | 3.0 |
| Useful lifetime | 3-7 years | ||
| Depreciation schedule | Straight line |
The intangible assets are not material for the Group, and no further information is therefore disclosed.
| USD million |
Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| Derivative financial instruments |
23 | 1.6 | 2.4 |
| Investment in 9.875% USD bond HMH Holding b.v. |
1.6 | - | |
| Prepaid expenses |
8.0 | 4.3 | |
| Assets from contract costs |
14 | 1.4 | 3.7 |
| Income tax receivables |
0.6 | 0.1 | |
| VAT receivables |
0.3 | 1.8 | |
| Other current receivables |
3.0 | 0.9 | |
| TOTAL OTHER CURRENT ASSETS |
16.6 | 13.3 |
Afinancial instrumentis any contractthat gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
The Group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
The Group's financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 17 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.
TheGroup measures financial instruments such as derivatives, atfair value at each balance sheet date.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
The Group has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. Changes in parameters such as volatility of share price, riskfree interest rate etc. could have substantial impacts on the estimated warrant liability. See further information about the warrant liability and assumptions applied in Note 23 Market risk.
The tables below analyse financial instruments carried at fair value, by valuation method, based on the lowest level input that is significant to the fair value measurement as a whole. The different levels have been defined as follows:
• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 derivatives held at fair value through profit or loss and hedging derivatives comprise interest rate swaps and foreign exchange agreements. Interest rate swaps and foreign exchange agreements are fair valued using forward rates extracted from observable yield curves. Interest rate swaps and foreign exchange agreements are recognised according to mark-to-market reports from external financial institutions.
Warrant liabilities are Level 3 derivatives held at fair value through profit or loss. The Group has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. No changes have been made as of 31 December 2022 related to the warrant agreements, nor to the modelling technique used to calculate fair value, other than an adjustment of the number of warrants and exercise price as explained in Note 23. Changes in book value relate to fair value changes.
| USD million |
Note | Level | 31.12.2023 | 31.12.2022 |
|---|---|---|---|---|
| FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS |
||||
| Derivatives not designated as hedging instruments |
||||
| • Foreign exchange forward contracts - Other current assets |
23 | 2 | - | 2.4 |
| Derivatives designated as hedging instruments |
||||
| • Interest rate swaps - Other non-current assets |
23 | 2 | - | 7.5 |
| • Foreign exchange forward contracts - Other current assets |
23 | 2 | 1.6 | - |
| Investment in bonds |
12 | 2 | 1.6 | - |
| OTHER FINANCIAL ASSETS |
||||
| Contract assets |
14 | 8.4 | 8.6 | |
| Trade receivables |
15 | 100.0 | 91.0 | |
| Other current receivables |
12 | 3.0 | 0.9 | |
| Cash and cash equivalents |
16 | 129.2 | 157.2 | |
| TOTAL ASSETS AS AT 31.12 |
243.8 | 267.7 | ||
| USD million |
Note | Level | 31.12.2023 | 31.12.2022 |
| FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS |
||||
| Derivatives not designated as hedging instruments |
||||
| • Foreign exchange forward contracts - Other current liabilities |
23 | 2 | 0.0 | - |
| Derivatives designated as hedging instruments |
||||
| • Interest rate swaps - Other non-current liabilities |
23 | 2 | 1.3 | - |
| • Foreign exchange forward contracts - Other current liabilities |
0.2 | |||
| Warrant liabilities - Other non-current liabilities |
23 | 3 | - | 2.8 |
| Warrant liabilities - Other current liabilities |
23 | 3 | 4.2 | |
| OTHER FINANCIAL LIABILITIES |
||||
| • Non-current interest-bearing borrowings |
17 | 561.8 | 529.0 | |
| • Current interest-bearing borrowings |
17 | 149.6 | 313.5 | |
| • Non-current lease liabilities |
18 | 38.4 | 41.7 | |
| • Current lease liabilities |
18 | 24.9 | 26.5 | |
| • Trade payables |
48.9 | 35.8 | ||
| • Other current liabilities |
20 | 33.5 | 27.9 | |
| TOTAL LIABILITIES AS AT 31.12. |
862.9 | 977.2 |
The fair value of financial assets and liabilities at amortised cost is not materially different from their carrying amount.
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
For costs to fulfil contracts where the Group operates as a lessor, the Group has chosen to apply the guidance in IFRS 15 by analogy.
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
| USD million |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Contract assets |
8.4 | 8.6 |
| Contract liabilities |
(22.1) | (13.7) |
The contract assets as at 31 December 2023 and 31 December 2022 are related to the management agreement with CIMC Raffles regarding management and operation of the Deepsea Yantai. Accrued revenue for the services provided during transit and first mobilisation is payable at the expiry or the termination of the management agreement, or will be offset in the purchase price of the rig, should Odfjell Drilling purchase the unit.
| USD million |
2023 | 2022 |
|---|---|---|
| Amounts included in contract liabilities at the beginning of the |
||
| year | 10.8 | 15.6 |
| Performance obligations satisfied in the previous years |
7.2 | 3.3 |
| USD million |
Note | 2023 | 2022 |
|---|---|---|---|
| Asset recognised at 31 December from costs incurred to fulfil a contract |
12 | 1.4 | 3.7 |
| Amortisation recognised as cost of providing services during the period |
2.3 | 4.9 |
The Group has recognised assets for costs incurred to fulfil a contract with customers. The assets are presented within other current assets in the balance sheet.
The asset is amortised on a straight-line basis over the term of the specific contract it relates to, consistent with the pattern of recognition of the associated revenue.
A receivable represents the Group's right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Trade receivables are financial assets and are recognised and measured according to accounting policies described in Note 13 - Financial assets and liabilities.
| USD million |
Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| Trade receivables |
79.1 | 47.4 | |
| Earned, not yet invoiced operating revenues |
20.8 | 43.7 | |
| Loss allowance |
24 | - | - |
| TRADE RECEIVABLES - NET |
100.0 | 91.0 |
As the receivables are due in the short term, the fair value is approximately equal to the carrying amount, and the future cash flows are not discounted.
For information about currencies, ageing and loss allowance, refer to Note 24 - Credit risk.
Cash and cash equivalents include cash in hand, deposits held at call with banks, other current highlyliquid investments with original maturities of three months or less.
| USD million |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Cash in bank |
56.8 | 46.2 |
| Time deposits |
54.0 | 89.4 |
| Retention accounts * |
8.4 | 13.2 |
| Restricted bank deposits ** |
9.9 | 8.4 |
| TOTAL CASH AND CASH EQUIVALENTS |
129.2 | 157.2 |
* Retention accounts consist of cash provision for accrued, but not paid, interest and instalments due within one to five months.
** The restricted bank deposits are mainly related to tax withholdings for employees.
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. Fees related to revolving credit facilities are amortised on a straight-line basis over the period which the credit facility is available.
Also refer to accounting policies regarding Financial liabilities in Note 13 - Financial assets and liabilities.
| Non-current | Current | Total | Non-current | Current | Total | |
|---|---|---|---|---|---|---|
| USD million |
31.12.2023 | 31.12.2023 | 31.12.2023 | 31.12.2022 | 31.12.2022 | 31.12.2022 |
| Borrowings | 518.9 | 141.4 | 660.3 | 483.5 | 289.9 | 773.4 |
| Transaction cost, unamortised |
(9.3) | - | (9.3) | (3.3) | (1.8) | (5.1) |
| Seller's credit |
52.2 | - | 52.2 | 48.8 | 20.0 | 68.8 |
| Accrued interest expenses |
- | 8.1 | 8.1 | - | 5.4 | 5.4 |
| CARRYING AMOUNTS INTEREST-BEARING BORROWINGS |
561.8 | 149.6 | 711.4 | 529.0 | 313.5 | 842.5 |
| Non-current | Current | Total | Non-current | Current | Total | |
|---|---|---|---|---|---|---|
| USD million |
2023 | 2023 | 2023 | 2022 | 2022 | 2022 |
| CARRYING AMOUNT AS AT 1 JANUARY |
529.0 | 313.5 | 842.5 | 875.4 | 161.1 | 1,036.4 |
| CASH FLOWS: |
||||||
| New borrowings |
547.1 | - | 547.1 | 219.2 | 25.0 | 244.2 |
| Paid transaction costs related to amendments and new borrowings |
(12.2) | - | (12.2) | (2.2) | (0.6) | (2.7) |
| Repayment borrowings and seller's credit |
(434.6) | (245.5) | (680.2) | (125.0) | (192.1) | (317.1) |
| NON-CASH FLOWS: |
||||||
| Disposal through distribution of operations to shareholders |
- | - | - | (125.3) | (25.6) | (150.9) |
| Seller's Credit |
- | - | - | 20.0 | - | 20.0 |
| Reclassified | (75.4) | 75.4 | - | (342.6) | 342.6 | - |
| Change in transaction cost, unamortised |
7.9 | - | 7.9 | 6.3 | 0.0 | 6.3 |
| Change in accrued interest cost |
- | 6.2 | 6.2 | - | 3.0 | 3.0 |
| Currency translation differences |
- | - | - | 3.2 | (0.0) | 3.2 |
| CARRYING AMOUNT AS AT 31 DECEMBER |
561.8 | 149.6 | 711.4 | 529.0 | 313.5 | 842.5 |
| Non-current | Current | Total | Non-current | Current | Total | |
|---|---|---|---|---|---|---|
| USD million |
31.12.2023 | 31.12.2023 | 31.12.2023 | 31.12.2022 | 31.12.2022 | 31.12.2022 |
| Within 3 months |
- | 64.5 | 64.5 | - | 19.6 | 19.6 |
| Between 3 and 6 months |
- | 32.3 | 32.3 | - | 45.6 | 45.6 |
| Between 6 and 9 months |
- | 12.3 | 12.3 | - | 19.6 | 19.6 |
| Between 9 months and 1 year |
- | 32.3 | 32.3 | - | 225.2 | 225.2 |
| Between 1 and 2 years |
91.2 | - | 91.2 | 437.3 | - | 437.3 |
| Between 2 and 3 years |
93.3 | - | 93.3 | 95.0 | - | 95.0 |
| Between 3 and 4 years |
93.3 | - | 93.3 | - | - | - |
| Between 4 and 5 years |
284.8 | - | 284.8 | - | - | - |
| Beyond 5 years |
8.6 | - | 8.6 | - | - | - |
| TOTAL CONTRACTUAL AMOUNTS |
571.1 | 141.4 | 712.6 | 532.3 | 309.9 | 842.2 |
The table above analyses Odfjell Drilling's financial liabilities into relevant groupings based on the remaining instalments and payments due at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual cash flows. Refer to Note 22 and Note 23 for further information regarding liquidity risk and interest risk.
Odfjell Drilling has in the first half of 2023 completed its planned refinancing through the issuance of a secured bond and through amending, extending and securing bank facilities.
The new bank facilities carry a floating average interest rate of Secured Overnight Financing Rate (SOFR) + 324 basis points.
The company issued a USD 390 million secured bond maturing in May 2028. The bond has a fixed interest of 9.25% p.a. and semi-annual instalments of USD 20 million. The bond is secured by standard first lien security related to the Deepsea Aberdeen and Deepsea Atlantic, as well as guaranteed by Odfjell Drilling Ltd and various subsidiaries.
Odfjell Drilling Ltd. currently holds USD 7 million of the bond. The bond liability in the consolidated balance sheet at 31 December 2023 is therefore USD 363 million.
The remaining contractual amount of USD 107 million of the old facility was repaid in June 2023.
The Odfjell Invest Ltd. facilities
Remaining contractual amount for the old senior bank facility ofUSD220 million andUSD100 million forthe juniorfacility was repaid in June 2023.
A new USD 300 million bank facility on Deepsea Stavanger, maturing in February 2028, was secured in Q2 2023. The facility consisted of a USD 125 million term loan tranche and a USD 175 million reducing revolving credit facility ("RCF").
USD 43 million was drawn on the RCF in June 2023. In September 2023 USD 26 million was repaid, and in October 2023, the remaining USD 17 million was repaid.
The term loan, less scheduled instalment of USD 3.6 million, was made available 5 October 2023. At 31 December 2023, the remaining contractual amount of the term loan amounts to USD 118 million.
The facility with a remaining contractual amount of USD 197 million was amended and extended to January 2029.
Remaining contractual amount of USD 180 million as at 31 December 2023 for the bank facility.
USD 20 million was repaid in June 2023.
USD 95 million was repaid in October 2023.
Seller's credit, including capitalised interest amount to USD 52 million as at 31 December 2023. The seller's credit was repaid as scheduled in January 2024.
The fair value of non-current borrowings equals their carrying amount, as the loans mostly have floating rates and credit margins have been stable from the loan raising.
Odfjell Drilling has USD 165 million available on the RCF facility as per 31 December 2023.
The main financial covenants are listed in the table below. The covenants are calculated based on Odfjell Drilling Ltd consolidated financial statements.
| Financial covenants |
The Odfjell Rig III Ltd senior secured bond |
The Odfjell Invest Ltd. RCF and Term loan |
The Odfjell Rig V Ltd. Facility |
|---|---|---|---|
| Equity | n/a | ≥ USD 600m |
≥ USD 600m |
| Equity ratio |
≥ 30% |
≥ 30% |
≥ 30% |
| Total liquidity |
n/a | ≥ 7.5% of Interest-bearing debt |
≥ 5% of Interest-bearing debt |
| Free liquidity |
≥ USD 50m |
≥ USD 50m |
≥ USD 50m |
| Current ratio |
≥ 1.0x |
≥ 1.0x |
≥ 1.0x |
| Leverage ratio |
n/a | ≤ 3.0x |
≤ 5.0x |
The Odfjell Drilling Group is compliant with all financial covenants as at 31 December 2023.
The main distribution restrictions are listed in the table below.
| Distribution restrictions |
The Odfjell Rig III Ltd senior secured bond |
The Odfjell Invest Ltd. RCF and Term loan |
The Odfjell Rig V Ltd. Facility |
|---|---|---|---|
| Leverage ratio |
≤ 3.00 (reducing to 2.00 from December 2025) |
≤ 3.0x |
≤ 3.0x |
| Total cash (including undrawn RCF) |
≥ \$150 million (reducing to \$100 million after completion of the Company's final Special Periodic Survey in H1 2025) |
n/a | n/a |
| Free cash |
n/a | ≥ \$75 million |
≥ \$75 million |
This note relates to the Group as a lessee only.
The Group leases various offices, workshops and warehouses in addition to some equipment. Rental contracts are typically made for fixed periods of 6 months to 10 years, but may have extension or termination options. Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.
The lease payments are discounted using the lessee's incremental borrowing rate. To determine the incremental borrowing rate, the Group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease, e.g. term, country, currency and security.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Right-of-use assets are measured at cost, comprising of the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs, and any restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise ITequipment and smaller items of office equipment.
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group's business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group's operations.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
Most extension options have not been included in the lease liability, because the Group could replace the asset without significant cost of business disruption, or because the Group is not certain it would need the asset in the option period.
As at 31 December 2023, potential future cash outflows of USD 53 million (not discounted) have not been included in the lease liability because it is not reasonable certain that these leases will be extended (or not terminated).
| Total Right-of-use |
Total Right-of-use |
||||||
|---|---|---|---|---|---|---|---|
| Properties Other |
fixed assets |
assets | Properties Other |
fixed assets |
assets | ||
| USD million |
2023 | 2023 | 2023 | 2022 | 2022 | 2022 | |
| COST | |||||||
| At 1 January |
41.2 | 52.7 | 93.9 | 60.0 | - | 60.0 | |
| Additions | 1.6 | 18.0 | 19.7 | 3.8 | 38.2 | 42.0 | |
| Additions due to previously eliminated inter-segment leases |
- | - | - | - | 16.6 | 16.6 | |
| Disposals | - | - | - | - | (1.3) | (1.3) | |
| Disposal through distribution of operations to shareholders |
- | - | - | (18.2) | - | (18.2) | |
| Currency translation differences |
(1.2) | (0.9) | (2.1) | (4.5) | (0.8) | (5.3) | |
| COST AS AT 31 DECEMBER |
41.6 | 69.9 | 111.5 | 41.2 | 52.7 | 93.9 | |
| ACCUMULATED DEPRECIATION AND IMPAIRMENT |
|||||||
| At 1 January |
(13.0) | (17.0) | (30.1) | (16.5) | - | (16.5) | |
| Depreciation from continuing operations |
(3.6) | (18.1) | (21.8) | (3.6) | (15.8) | (19.5) | |
| Depreciation from discontinued operations |
- | - | - | (0.2) | - | (0.2) | |
| Adjustments due to previously eliminated inter-segment leases |
- | - | - | - | (2.7) | (2.7) | |
| Disposals | - | - | - | - | 1.3 | 1.3 | |
| Disposal through distribution of operations to shareholders |
- | - | - | 6.2 | - | 6.2 | |
| Currency translation differences |
0.3 | (0.2) | 0.1 | 1.2 | 0.2 | 1.4 | |
| AS AT 31 DECEMBER |
(16.4) | (35.3) | (51.8) | (13.0) | (17.0) | (30.1) | |
| NET BOOK VALUE AT 31 DECEMBER |
25.2 | 34.5 | 59.7 | 28.1 | 35.7 | 63.8 |
The Right-of-use assets are included in the line item "Property, plant and equipment" in the balance sheet, refer to Note 10 - Tangible fixed assets.
| USD million |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Non-current | 38.4 | 41.7 |
| Current | 24.9 | 26.5 |
| TOTAL | 63.3 | 68.2 |
| Non-current | Current | Total | Non-current | Current | Total | |
|---|---|---|---|---|---|---|
| USD million |
2023 | 2023 | 2023 | 2022 | 2022 | 2022 |
| Carrying amount as at 1 January |
41.7 | 26.5 | 68.2 | 38.3 | 7.8 | 46.1 |
| CASH FLOWS: |
||||||
| Payments for the principal portion of the lease liability |
- | (22.7) | (22.7) | - | (18.6) | (18.6) |
| Payments for the interest portion of the lease liability |
- | (4.6) | (4.6) | - | (4.3) | (4.3) |
| NON-CASH FLOWS: |
||||||
| New lease liabilities recognised in the year |
19.7 | - | 19.7 | 42.1 | - | 42.1 |
| Additions due to previously eliminated inter-segment leases |
- | - | - | 13.9 | - | 13.9 |
| Disposal through distribution of operations to shareholders |
- | - | - | (9.4) | (2.6) | (12.0) |
| Interest expense on lease liabilities |
4.2 | - | 4.2 | 4.3 | - | 4.3 |
| Reclassified | (26.3) | 26.3 | - | (45.4) | 45.4 | - |
| Currency exchange differences |
(0.9) | (0.6) | (1.5) | (2.1) | (1.1) | (3.2) |
| CARRYING AMOUNT AS AT 31 DECEMBER |
38.4 | 24.9 | 63.3 | 41.7 | 26.5 | 68.2 |
| USD million |
2023 | 2022 |
|---|---|---|
| Expenses relating to short-term leases |
15.3 | 20.4 |
| Expenses relating to low value items |
- | - |
The Group has occupational pension plans for employees. The pension plans are measured and presented according to IAS 19.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
The Group has funded defined benefit pension schemes in one Norwegian company covering a total of 8 active members and 19 pensioners as at 31 December 2023. The scheme entitles employees to defined future benefits. These are mainly dependent on the number of years of service, the salary level at pensionable age and the size of benefits paid by the national insurance.The liabilities are covered through an insurance company.
In addition to the pension obligations that arises from the funded defined benefit plans, the Group's Norwegian companies have unfunded defined benefit obligations related to pensions and early retirement pensions. The early retirement pensions entitle staff to benefits (about USD 12,000 a year) from the company from the age of 62 until they are eligible for a national insurance pension when reaching the age of 67, if they retire and meet requirement to receive CPA (see below).
The Group has contractual pension agreement (CPA) schemes in Norway established in multiemployer plans. These multi-employer plans are defined benefit plans, but the Group does not have access to the necessary information for the accounting years 2023 and 2022 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
The Norwegian subsidiaries in the Group with employees are required to have a civil service pension scheme according to the Norwegian Act relating to mandatory occupational pensions. These subsidiaries have pension schemes in accordance with the requirements in this Act.
| USD million |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Present value of funded obligations |
7.6 | 7.4 |
| Fair value of plan assets |
(6.8) | (6.8) |
| DEFICIT OF FUNDED PLANS |
0.7 | 0.6 |
| Present value of unfunded obligations |
- | - |
| TOTAL DEFICIT OF DEFINED BENEFIT PENSION PLANS |
0.7 | 0.6 |
| USD million |
2023 | 2022 |
|---|---|---|
| Pension expenses from defined benefit scheme included in personnel expenses |
0.2 | 0.5 |
| Pension expenses from defined contribution schemes |
7.9 | 6.4 |
| Pension expenses from multi-employer plans accounted for as defined contribution schemes |
7.3 | 6.3 |
| TOTALPENSIONEXPENSESINCLUDEDINPERSONNELEXPENSES | 15.3 | 13.2 |
See Note 7 - Personnel expenses for further information regarding personnel expenses.
| USD million |
Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| Derivative financial instruments |
23 | 4.4 | - |
| Social security and other taxes |
20.4 | 13.4 | |
| Accrued salaries, holiday pay and employee bonus |
16.9 | 15.2 | |
| Other payables and financial liabilities |
2.2 | 5.0 | |
| Other accrued expenses |
14.4 | 7.7 | |
| TOTAL OTHER CURRENT LIABILITIES |
58.4 | 41.3 |
Refer to Note 28 - Contingencies for further information about accounting policy for provisions and accruals, as well as significant judgement applied and estimation uncertainty.
The primary objective of the Group's capital management is to ensure that it maintains required capital ratios and liquidity available to support the business. Capital management should be such that the capital structure is sufficiently robust to withstand prolonged adverse conditions in significant risk factors, such as long-term down-cycles in our markets and unfavourable conditions in financial markets. Capital management also comprises securing the Group to be
in compliance with covenants on interest bearing debt. Reference is made to Note 17 - Interestbearing borrowings which disclose information about covenants on long-term interest-bearing liabilities.
The Group will manage the capital structure and adjust it, to maintain an optimal structure adapted to current economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payments, buy treasury shares, return capital to shareholders or issue new shares.
| 31.12.2023 | 31.12.2022 | |
|---|---|---|
| Equity | 1,394.0 | 1,208.5 |
| Total assets |
2,308.8 | 2,219.3 |
| EQUITY RATIO |
60% | 54% |
| Cash and cash equivalents excl.restricted capital |
119.3 | 148.8 |
| Available drawing facilities |
165.0 | - |
| TOTAL AVAILABLE LIQUIDITY |
284.3 | 148.8 |
Financial risk factors
The Group is exposed to a range of financial risks: liquidity risk, market risk (including currency risk, interest rate risk, and price risk), and credit risk.
The financial risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.
To some extent, the Group uses derivative financial instruments to reduce certain risk exposures.
Risk management is carried out on a Group level. The Group identifies, evaluates and hedges financial risks in close co-operation with the Group's operational units. The board of Odfjell Drilling Ltd. has established written principles for risk management of foreign exchange risk, interest rate risk and use of derivative financial instruments.
The Group's policy regarding the management of the cash positions has three main objectives:
Investments may only be made in securities with a rating of Investment grade, BAA (Moodys) , BBB- (Standard and Poors and Fitch IBCA) or better. The Board can approve deviations on a case by case basis.
A list of counter-party exposure limits is reported to the Board of Odfjell Drilling on a yearly basis.
The following instruments are allowed for short term placements;
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and to have sufficient cash at any time to be able to finance its operations and investments in accordance with the Group's strategic plan.
With regular forecasts and liquidity analysis updates, the Group will ensure sufficient available liquidity to fulfil its duties at loan maturity, without unacceptable loss or risk of damaging the Group's reputation.
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through credit facilities and the ability to close out market positions.
The Group's cash flow forecasting is performed by Group Finance. Group Finance monitors rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs at all times, so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group's debt financing plans and covenant compliance.
Surplus cash held by the operating entities over and above the balance required for working capital management is transferred to the Group Treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.
Odfjell Drilling held cash and cash equivalents amounting to USD 129 million in addition to available drawing facilities of USD 165 million at the end of 2023. This is deemed to be sufficient funding for the Group's current activity levels and committed capital expenditures during 2024.
The liquidity risk is connected with the market risk and the re-contracting risk for mobile drilling units. The management continuously focuses on securing new profitable contracts for the Group's mobile drilling units to generate sufficient cash flow from operations, hence reducing the liquidity risk going forward.
The Group's refinancing risk is considered low, as the Group completed a refinancing in 2023. See Note 17 - Interest-bearing borrowings for further information about maturity of contractual amounts.
The amounts disclosed in the table are the contractual non-discounted cash flows. The table include estimated interest payments for drawn facilities at the balance sheet date, based on the remaining period at the end of the reporting period to the contractual maturity date. The estimated interest payments include payments based on forward rates for the interest rate swaps.
| Less than |
Between 2 |
Carrying | |||||
|---|---|---|---|---|---|---|---|
| USD million |
6 months |
6 - 12 months |
Between 1 and 2 years |
and 5 years |
Over 5 years |
Total contractual cash flows |
amount |
| Interest-bearing borrowings |
127.1 | 72.0 | 140.0 | 557.9 | 8.7 | 905.8 | 711.4 |
| Lease liabilities |
12.2 | 12.9 | 16.4 | 21.2 | 10.5 | 73.1 | 63.3 |
| Trade payables |
48.9 | - | - | - | - | 48.9 | 48.9 |
| Other current payables |
33.5 | - | - | - | - | 33.5 | 33.5 |
| Less than |
Between 1 |
Between 2 |
Total contractual |
Carrying | |||
|---|---|---|---|---|---|---|---|
| USD million |
6 months |
6 - 12 months |
and 2 years |
and 5 years |
Over 5 years |
cash flows |
amount |
| Interest-bearing borrowings |
94.8 | 271.0 | 471.3 | 101.3 | - | 938.4 | 842.5 |
| Lease liabilities |
13.3 | 13.2 | 22.2 | 16.0 | 12.0 | 76.8 | 68.2 |
| Trade payables |
35.8 | - | - | - | - | 35.8 | 35.8 |
| Other current payables |
21.4 | 6.5 | - | - | - | 27.9 | 27.9 |
Market risk is the risk of a change in market prices and demand, as well as changes in currency exchange rates and interest levels.
The re-contracting risk for theGroup's wholly owned mobile drilling units is limited in 2024, as all units in the fleet has medium to long-term contracts.
The Deepsea Atlantic was drilling on the Johan Sverdrup Phase II development during 2023, where it will continue until it begins its campaign on the Rosebank field, offshore UK. Current drilling contracts are expected to take firm operations through the first half year of 2026. The day rate for drilling on the Johan Sverdrup consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day. The drilling contract for the Rosebank field include a GBP element intended to cover GBP operating costs. In addition, the Group has entered into forward exchange contracts to hedge some of the residual currency exposure.
During the year, the Deepsea Stavanger was working on various exploration projects for Equinor. The Deepsea Stavanger has firm contract commitments with Equinor until the end of 2024, whereafter it will move onto a new contract with Aker BP expected to take firm operations through 2029. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOKoperating costs per day.
Deepsea Aberdeen was on contract in 2023 with Equinor, on the Breidablikk and Svalin fields, offshore Norway. Deepsea Aberdeen is expected to continue its work on Breidablikk until at least the end of 2025. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
The Deepsea Nordkapp was working with Aker BP throughout 2023 and will continue to work with Aker BP until at least 2027. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Following an assessment of climate risks and opportunities, both physical and transitional risks in the short, medium and long term, were prioritised. The most significant transition risks, along with mitigating actions were:
The most significant physical risk identified, along with mitigating actions is:
• Impact of extreme weather offshore on crew and equipment logistics could increase costs and result in downtime. Critical spares analysis and robust planning required as well as protection in commercial contracts.
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within financial income/expenses.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria or the Group has elected not to apply hedge accounting, they are classified as 'held for trading' for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period, or they are expected to be settled in the normal operating cycle.
The Group has the following derivative financial instruments in the following line items in the balance sheet:
| USD million |
31.12.2023 | 31.12.2022 |
|---|---|---|
| NON-CURRENT ASSETS |
||
| Interest rate swaps - at fair value through profit or loss |
- | - |
| Interest rate swaps - cash flow hedges under hedge accounting |
- | 7.5 |
| TOTAL NON-CURRENT DERIVATIVE FINANCIAL INSTRUMENTS ASSET |
- | 7.5 |
| CURRENT ASSETS |
||
| Foreign exchange contracts - at fair value through profit or loss |
- | 2.4 |
| Foreign exchange contracts - cash flow hedges under hedge accounting |
1.6 | - |
| TOTAL CURRENT DERIVATIVE FINANCIAL INSTRUMENTS ASSET |
1.6 | 2.4 |
| NON-CURRENT LIABILITIES |
||
| Interest rate swaps - cash flow hedges under hedge accounting |
(0.8) | - |
| Other Interest rate instruments - cash flow hedges under hedge accounting |
(0.6) | |
| Warrant liability - at fair value through profit or loss |
- | (2.8) |
| TOTAL NON-CURRENT DERIVATIVE FINANCIAL INSTRUMENTS |
||
| LIABILITIES | (1.3) | (2.8) |
| CURRENT LIABILITIES |
||
| Foreign exchange contracts - at fair value through profit or loss |
(0.0) | - |
| Foreign exchange contracts - cash flow hedges under hedge accounting |
(0.2) | - |
| Warrant liability - at fair value through profit or loss |
(4.2) | - |
| TOTAL CURRENT DERIVATIVE FINANCIAL INSTRUMENTS LIABILITIES |
(4.4) | - |
The consolidated material subsidiaries' reporting and functional currencies are USD and NOK.
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to USD and NOK. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity's functional currency. The Group is exposed to risks due to fluctuations in exchange rates, especially as charter contracts are mainly priced in USD while most of the operating expenses are in local currency. The Group's hedging reserves disclosed in Note 26 - Other reserves related to the following instruments:
| USD million |
Currency forwards |
Interest rate swaps |
Total hedge reserves |
|---|---|---|---|
| OPENING BALANCE 1 JANUARY 2022 |
0.6 | (2.9) | (2.3) |
| Change in fair value of hedging instruments recognised in OCI |
(0.3) | 12.8 | 12.4 |
| Reclassified from OCI to profit or loss |
(0.2) | (2.2) | (2.4) |
| CLOSING BALANCE 31 DECEMBER 2022 |
- | 7.7 | 7.7 |
| Change in fair value of hedging instruments recognised in OCI |
1.5 | (0.8) | 0.6 |
| Reclassified from OCI to profit or loss |
- | (8.2) | (8.2) |
| CLOSING BALANCE 31 DECEMBER 2023 |
1.5 | (1.3) | 0.1 |
In addition to the amounts disclosed in the reconciliation of the hedging reserves above, the following amounts were recognised in profit or loss in relation to derivatives:
| USD million |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Interest rate swaps - at fair value through profit or loss |
||
| Amounts recognised in interest expenses |
- | (0.1) |
| Gain from settlement of swaps |
- | 12.1 |
| Change in fair value |
- | (5.0) |
| Foreign exchange contracts - at fair value through profit or loss |
||
| Change in fair value |
(2.4) | 2.4 |
| Warrant liability - at fair value through profit or loss |
||
| Change in fair value |
(1.4) | (1.9) |
The Group seeks to minimise these risks through currency hedging via financial instruments or by offsetting local currency elements in charter contracts.
Quoted mark-to-market values from financial institutions have been used to determine the fair value of the foreign exchange contracts at the end of the year. The foreign exchange contracts are only used for economic hedging purposes and not as speculative investments. However, these derivatives did not meet the hedge accounting criteria, and are accounted for at fair value through profit or loss.
| USD million |
NOK | GBP | USD |
|---|---|---|---|
| Cash and cash equivalents |
(4.8) | 2.8 | 29.2 |
| Trade receivables |
7.5 | 0.1 | 36.3 |
| Contract assets |
- | - | - |
| Interest-bearing borrowings |
- | - | - |
| Lease liabilities |
(19.3) | - | (17.0) |
| Trade payables |
(5.4) | (0.5) | (3.7) |
| Other current payables |
(0.2) | (2.3) | (3.2) |
| Foreign currency contracts |
|||
| Buy foreign currency (at fair value through profit or loss) |
6.3 | - | - |
| Sell foreign currency (at fair value through profit or loss) |
- | 6.4 | - |
| Buy foreign currency (cash flow hedges under hedge accounting) |
64.3 | - | - |
| Sell foreign currency (cash flow hedges under hedge accounting) |
41.0 | 25.4 | - |
| USD million |
NOK | GBP | USD |
|---|---|---|---|
| Cash and cash equivalents |
71.2 | 0.9 | 12.6 |
| Trade receivables |
2.5 | 0.1 | 20.8 |
| Contract assets |
- | - | - |
| Interest-bearing borrowings |
- | - | - |
| Lease liabilities |
(11.2) | - | (26.3) |
| Trade payables |
(1.1) | (0.2) | (6.6) |
| Other current payables |
(0.2) | (0.0) | (0.6) |
| Foreign currency contracts |
|||
| Buy foreign currency (at fair value through profit or loss) |
103.5 | - | - |
| Sell foreign currency (at fair value through profit or loss) |
116.3 | - | - |
Foreign exchange risk - Exposure - 31.12.2022
| Foreign currency contracts |
Currency | Notional amount |
Maturity date |
Hedge ratio |
Weighted average hedged rate |
Carrying amount |
|---|---|---|---|---|---|---|
| 31.12.2023 | ||||||
| Buy foreign currency (at fair value through profit or loss) |
NOK | 64.1 | 15.04.2024 | n/a | 0.09831 | (0.0) |
| Sell foreign currency (at fair value through profit or loss) |
GBP | 5.0 | 15.04.2024 | n/a | 1.26027 | * |
| Buy foreign currency (cash flow hedges under hedge accounting) |
NOK | 257.5 | 16.06.2024-17.08.2026 | 1:1 | 0.09831 | (0.2) |
| Sell foreign currency (cash flow hedges under hedge accounting) |
GBP | 20.0 | 16.06.2024-17.08.2026 | 1:1 | 1.26582 | * |
| Buy foreign currency (cash flow hedges under hedge accounting) |
NOK | 128.8 | 24.01.2024-22.08.2024 | 1:1 | 0.09709 | 0.4 |
| Sell foreign currency (cash flow hedges under hedge accounting) |
NOK | 136.9 | 24.01.2024-22.08.2024 | 1:1 | 0.09132 | (0.1) |
| Buy foreign currency (cash flow hedges under hedge accounting) |
NOK | 267.8 | 24.06.2024-26.08.2025 | 1:1 | 0.09524 | 1.9 |
| Sell foreign currency (cash flow hedges under hedge accounting) |
NOK | 280.6 | 24.06.2024-26.08.2025 | 1:1 | 0.09087 | (0.6) |
| 31.12.2022 | ||||||
| Buy foreign currency (at fair value through profit or loss) |
NOK | 290.0 | 30.05.2023 | n/a | 0.10345 | 0.8 |
| Sell foreign currency (at fair value through profit or loss) |
NOK | 321.3 | 30.05.2023 | n/a | 0.09337 | (0.3) |
| Buy foreign currency (at fair value through profit or loss) |
NOK | 729.8 | 01.06.2023 | n/a | 0.10276 | 2.3 |
| Sell foreign currency (at fair value through profit or loss) |
NOK | 825.0 | 01.06.2023 | n/a | 0.09091 | (0.5) |
* Carrying amount included in the line above
| USD million |
2023 | 2022 |
|---|---|---|
| Net currency gain / (loss) included in finance costs |
(8.6) | (3.6) |
As shown in the table above, the Group is primarily exposed to changes in USD/NOK exchange rates.
| Sensitivity to changes in USD/NOK exchange rates |
USD is strengthened by 20 % against NOK |
USD is strengthened |
by 10 % against NOK |
USD is weakened by 10 % against NOK |
|||
|---|---|---|---|---|---|---|---|
| USD million |
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| Cash and cash equivalents |
5.7 | (9.8) | 3.1 | (5.3) | (3.8) | 6.5 | |
| Current receivables |
6.0 | 3.0 | 2.9 | 1.7 | (2.8) | (2.0) | |
| Current liabilities |
0.2 | (3.5) | 0.1 | (1.9) | (0.1) | 2.3 | |
| NET EFFECT ON PROFIT BEFORE TAX |
11.8 | (10.2) | 6.1 | (5.6) | (6.7) | 6.8 |
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations at floating interest rates. The Group evaluates the share of interest rate hedging based on assessment of the Group's total interest rate risk and currently has a combination of fixed and floating interest rates in order to limit exposure. The Board of Directors is on regular basis considering the interest payment hedging of the external financing and mandate administration to execute necessary changes.
The Group had interest rate swap agreements as well as interest Floor and Caps instruments at 31 December 2023. Quoted mark-to-market values from financial institutions have been used to determine the fair value of the swap agreements at the end of the year. Some of the instruments used during 2023 were documented as cash flow hedges and other as financial investments, and changes in fair value were recognised in other comprehensive income (cash flow hedging) and others recognised through profit and loss statement (financial investments not defined as cash flow hedges).
Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item. This will effectively result in recognising interest expense at a fixed interest rate for the hedged floating rate loans.
Including interest rate swaps entered into, the fixed-rate portion of the Group's interest bearing debt per 31 December 2023 is approximately 60%.
The swap contracts require settlement of net interest receivable or payable. The settlement dates coincide with the dates on which interest is payable on the underlying debt.
Average interest rate as of 31.12.2023 was 8.7%, including the effect of interest rate hedging.
Estimated fair value calculations from external financial institutions have been used to determine the fair value of the swap agreement at the end of the year.
The Group monitors its interest rate exposure on a dynamic basis. The Group calculates the impact on profit and loss of a defined interest rate shift.
| Notional amount |
Maturity date |
Hedge ratio |
Weighted average hedged rate |
Carrying amount |
|
|---|---|---|---|---|---|
| Interest rate swaps - Cash flow hedges under hedge accounting |
58.9 | 2028 | 1:1 | 4.1620% | (0.8) |
| Synthetic instruments - Cash flow hedges under hedge accounting |
58.9 | 2028 | 1:1 | * | (0.6) |
* Floor and Caps instruments, see further description below
Caps and Floors are financial instruments used to manage interest rate risk. A cap is a type of interest rate derivative that sets a maximum limit, or cap, on the interest rate that can be paid. The Group have entered into two cap contracts to protect to the Group against interest rate increases beyond 5.5%. A floor is the opposite of a cap. It sets a minimum limit, or floor, on the interest rate that can be received. The Group has entered into two floors instruments with an interest rate of 2.88% and 3.0125% respectively.
| Notional amount |
Maturity date |
Hedge ratio |
Weighted average hedged rate |
Carrying amount |
|
|---|---|---|---|---|---|
| Cash flow hedges under hedge accounting |
213.8 | 2023 | 1:1 | 1.4392% | 6.6 |
| Cash flow hedges under hedge accounting |
21.6 | 2024 | 1:1 | 1.4415% | 1.0 |
The exposure of the Group's borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period are as follows:
| USD million |
31.12.2023 | % of total loans |
31.12.2022 | % of total loans |
|---|---|---|---|---|
| Variable rate borrowings |
283.7 | 40% | 471.8 | 56% |
| Fixed rate borrowings - repricing or maturity dates: |
||||
| Less than 1 year |
- | 0% | 213.8 | 25% |
| 1-5 years |
428.9 | 60% | 156.6 | 19% |
| Later than 5 years |
- | 0% | - | 0% |
| TOTAL CONTRACTUAL AMOUNTS* |
712.6 | 100% | 842.2 | 100% |
* Including Seller's credit
The result of the calculation on sensitivities returns the following expected values (incl. interest rate swaps entered into as at 31December):
• If interest rate is increased by 1.0 %, the effect would be an increase in financing costs of approximately USD 3 million for the next 12 months as at 31 December 2023, compared to USD 5 million at 31 December 2022.
On 30 May 2018 the company issued warrants for 5,925,000 common shares to an affiliate of Akastor ASA for a total consideration of USD 1.00. Following the spin-off of Odfjell Technology, the hurdle rate and number of warrants has been adjusted to maintain the same value of the warrants, increasing the number of issued warrants to 6,837,492, and decreasing the exercise prices from the range of NOK 36 - NOK 107.50 to the range of NOK 31.20 - NOK 93.15.
The warrants will be exercisable in six equal tranches from 2019 to 2024. A tranche which has become exercisable may also be exercised on the exercise dates for the subsequent tranches if the conditions for such subsequent exercise(s) are satisfied. Each tranche may be exercised if the price of the Shares has increased by a defined percentage over NOK 31.20 on the relevant exercise date (i.e. 31 May in 2019, 2020, 2021, 2022, 2023 and 2024 respectively), being NOK 37.43 for tranche 1, NOK 44.92 for tranche 2, NOK 53.91 for tranche 3, NOK 64.69 for tranche 4, NOK 77.62 for tranche 5 and NOK 93.15 for tranche 6. On 30 May 2024, any non-exercised warrants will, to the extent the thresholds have not been met, be exercisable on a linear prorate basis, subject to the company's share price being within the range of NOK 31.20 and NOK 93.15.
No warrants have been exercised in 2022 or 2023.
In accordance with Accounting Standards, a contract to issue a variable number of shares fails to meet the definition of equity and must instead be classifiedasaderivative liabilityandmeasuredatfair value with changes in fair value recognised in the consolidated statements of operations and comprehensive loss at each period-end. The derivative liabilities will ultimately be converted into theCompany's equity (common shares)if and when thewarrants are exercised, orwill be extinguished on the expiry of the outstanding warrants, and will not result in the outlay of any cash by the Company. Immediately prior to exercise, the warrants are remeasuredattheir estimatedfair value.
Upon exercise, the intrinsic value is transferred to share capital (the intrinsic value is the share price at the date the warrant is exercised less the exercise price of the warrant). Any remaining fair value is recorded through the statement of operations and comprehensive loss as part of the change in estimated fair value of derivative warrantliabilities.
The Company has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. The pathdependent nature of the instrument is modelled using a Monte Carlo simulation approach which uses computer generated random numbers to simulate share price paths. The price paths are generated using a process known as Geometric Brownian Motion (GBM). The price distributions generated by GBM are consistent with the assumptions underlying the widely used Black-Scholes model to price equity options.
Based on the valuation, fair value of the warrant liability is estimated to be NOK 43 million / USD 4.2 million as at 31 December 2023 (NOK 28 million / USD 2.8 million as at 31 December 2022).
The negative change in fair value in 2023 of USD 1.4 million (negative change of USD 1.9 million in 2022) was recognised as part of Other financial items.
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables and contract assets, the Group applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forwardlooking factors specific to the debtors and the economic environment.
TheGroup operates in two segments:Own Fleet and External Fleet. The marketfortheGroup's services is the offshore oil and gas industry, and the customers consist primarily of major integrated oil companies, independent oil and gas producers and government owned oil companies. The Group performs ongoing credit evaluations of the customers and generally doesnotrequestmaterial collateral.
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents, marketable securities, other receivables and certain derivatives instruments receivable amount, the Group's exposure to credit risk arises from default of the counter-party, with a maximum exposure equal to the carrying amount of these instruments. However, the Group believes this risk is limited as the counter-parties mainly have a high credit quality.
The maximum exposure regarding trade receivables is the carrying amount of USD 100 million.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to non-billed work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2023 or 31 December 2022 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables
The Group has not recognised any impairment losses in 2022 or 2023, and the expected loss rate is set to 0.
No provision for impairment losses is recognised as at 31 December 2023.
| Expected loss rate |
Gross amount |
Loss allowance |
Net amount |
|
|---|---|---|---|---|
| USD million |
31.12.2023 | 31.12.2023 | 31.12.2023 | |
| Not due |
0.0% | 92.6 | - | 92.6 |
| 0 to 3 months |
0.0% | 7.4 | - | 7.4 |
| 3 to 6 months |
0.0% | - | - | - |
| Over 6 months |
0.0% | - | - | - |
| TOTAL | 100.0 | - | 100.0 |
| Expected loss rate |
Gross amount |
Loss allowance |
Net amount |
|
|---|---|---|---|---|
| USD million |
31.12.2023 | 31.12.2023 | 31.12.2023 | |
| Not due |
0.0% | 8.4 | - | 8.4 |
| Expected loss rate |
Gross amount Loss allowance |
Net amount |
||
|---|---|---|---|---|
| USD million |
31.12.2022 | 31.12.2022 | 31.12.2022 | |
| Not due |
0.0% | 87.4 | - | 87.4 |
| 0 to 3 months |
0.0% | 2.6 | - | 2.6 |
| 3 to 6 months |
0.0% | 1.1 | - | 1.1 |
| Over 6 months |
0.0% | - | - | - |
| TOTAL | 91.0 | - | 91.0 |
| Expected loss rate |
Gross amount |
Loss allowance |
Net amount |
||
|---|---|---|---|---|---|
| USD million |
31.12.2022 | 31.12.2022 | 31.12.2022 | ||
| Not due |
0.0% | 8.6 | - | 8.6 |
| No.of shares |
Nominal value |
Share capital - USD thousands |
|
|---|---|---|---|
| Listed shares / Common shares issued as at 1 January 2023 |
236,783,202 | USD 0.01 |
2,368 |
| LISTED SHARES / COMMON SHARES ISSUED AS AT 31 DECEMBER 2023 |
236,783,202 | USD 0.01 |
2,368 |
| Preference shares issued as at 1 January 2023 |
16,123,125 | USD 0.01 |
161 |
| Cancellation of preference shares |
(16,123,125) | USD 0.01 |
(161) |
| TOTAL ISSUED PREFERENCE SHARES AS AT 31 DECEMBER 2023 |
- | - | |
| TOTAL SHARE CAPITAL |
2,368 |
Authorised, not issued shares was 63,216,798 as at 31 December 2023. There are no changes in issued common shares in 2023. All issued shares are fully paid.
The Group has not acquired any of its own common shares in 2023, and no common shares are held by entities in the Group.
The Company has only one class of ordinary shares. Each common share in the Company carries one vote, and all common shares carry equal rights, including the right to participate in General Meetings. All shareholders are treated on an equal basis.
The Company's common shares are freely transferable in Norway, provided however, that the Bye-laws include a right for the Board to decline to register a transfer of any share in the register of members, (or if required, refuse to direct any registrar appointed by the Company to transfer any interest in a share) where such transfer would result in 50% or more of the Company's shares or votes being held, controlled or owned directly or indirectly by individuals or legal persons resident for tax purposes in Norway (or, alternatively, such shares or votes being effectively connected to a Norwegian business activity).
29 November 2022, the Group repurchased the issued preference shares. In Q4 2023, the Odfjell Drilling Ltd cancelled the 16,123,125 treasury preference shares.
As per 31 December 2023 the Group does not hold any treasury shares.
Shares that are bought back are recorded in a separate treasury stock account with the share capital amount. Premium to par value is shown as an adjustment to share premium. Discount to par value is shown as an adjustment to retained earnings. The repurchase of shares is viewed as a temporary reduction in shareholders' equity. The treasury stock account is kept active until the share are resold or cancelled.
22 August 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in September 2023. 1 November 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in November 2023.
Total dividend payments in 2023 was 0.12 USD per share equal to approximately USD 28.4 million.
| Largest common shareholders at 31 December 2023 |
Account type |
Holding | % of shares |
|---|---|---|---|
| Odfjell Partners Holding Ltd. |
Ordinary | 142,952,381 | 60.37% |
| Merrill Lynch Prof. Clearing Corp. |
Nominee | 7,371,649 | 3.11% |
| State Street Bank and Trust Comp |
Nominee | 4,120,330 | 1.74% |
| The Bank of New York Mellon SA/NV |
Nominee | 3,677,753 | 1.55% |
| Verdipapirfondet Storebrand Norge |
Ordinary | 3,398,356 | 1.44% |
| Goldman Sachs International |
Nominee | 3,118,587 | 1.32% |
| Citibank | Nominee | 1,919,859 | 0.81% |
| State Street Bank and Trust Comp |
Nominee | 1,868,620 | 0.79% |
| J.P. Morgan SE |
Nominee | 1,773,571 | 0.75% |
| The Bank of New York Mellon SA/NV |
Nominee | 1,700,648 | 0.72% |
| The Northern Trust Comp |
Nominee | 1,599,543 | 0.68% |
| The Bank of New York Mellon SA/NV |
Nominee | 1,587,480 | 0.67% |
| The Bank of New York Mellon SA/NV |
Nominee | 1,542,382 | 0.65% |
| Brown Brothers Harriman & Co. |
Nominee | 1,535,318 | 0.65% |
| Verdipapirfondet DNB SMB |
Ordinary | 1,136,902 | 0.48% |
| The Northern Trust Comp |
Nominee | 1,131,810 | 0.48% |
| BNP Paribas |
Nominee | 1,119,571 | 0.47% |
| J.P. Morgan Securities PLC |
Ordinary | 1,119,289 | 0.47% |
| Nordnet Livsforsikring AS |
Ordinary | 1,116,714 | 0.47% |
| CACEIS Bank |
Nominee | 1,026,002 | 0.43% |
| TOTAL 20 LARGEST COMMON SHAREHOLDERS |
184,816,765 | 78.05% | |
| Other common shareholders |
51,966,437 | 21.95% | |
| TOTAL COMMON SHAREHOLDERS |
236,783,202 | 100.00% |
| USD million |
Note | Cash flow hedges |
Translation differences |
Share-Option plan |
Acquisition non-controlling interests |
Total |
|---|---|---|---|---|---|---|
| At 1 January 2022 |
(2.3) | (74.5) | 1.9 | (34.5) | (109.5) | |
| Change in fair value of hedging instruments recognised in OCI |
23 | 12.4 | - | - | - | 12.4 |
| Reclassified from OCI to profit or loss |
23 | (2.4) | - | - | - | (2.4) |
| Currency translation difference |
- | (8.9) | - | - | (8.9) | |
| Reclassification of foreign currency translation reserve |
4 | 27.0 | - | - | 27.0 | |
| Cost of share-based option plan |
33 | - | - | 0.4 | - | 0.4 |
| Settlement of share-based option plan |
33 | - | - | (0.5) | (0.5) | |
| AT 31 DECEMBER 2022 |
7.7 | (56.5) | 1.8 | (34.5) | (81.4) | |
| Change in fair value of hedging instruments recognised in OCI |
23 | 0.6 | - | - | - | 0.6 |
| Reclassified from OCI to profit or loss |
23 | (8.2) | - | - | - | (8.2) |
| Deferred taxes cashflow hedges |
(0.0) | (0.0) | ||||
| Currency translation difference |
- | (0.5) | - | - | (0.5) | |
| Cost of share-based option plan |
33 | - | - | 0.4 | - | 0.4 |
| AT 31 DECEMBER 2023 |
0.1 | (57.0) | 2.2 | (34.5) | (89.2) |
| USD million |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Non current liabilities - contractual amounts |
571.1 | 532.3 |
| Current liabilities |
149.6 | 315.3 |
| TOTAL | 720.7 | 847.6 |
| USD million |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Property, plant and equipment |
2,013.0 | 1,937.9 |
| Receivables and contract assets |
125.0 | 112.9 |
| Bank deposits |
129.2 | 157.2 |
| TOTAL | 2,267.1 | 2,208.0 |
| The Odfjell Rig III Ltd senior secured bond |
The Odfjell Invest Ltd. RCF and Term loan |
The Odfjell Rig V Ltd. Facility |
|
|---|---|---|---|
| Guarantors | Odfjell Drilling Ltd and various subsidiaries |
Odfjell Drilling Ltd and various subsidiaries |
Odfjell Drilling Ltd and various subsidiaries |
| Collateral Rigs |
Deepsea Aberdeen and Deepsea Atlantic |
Deepsea Stavanger |
Deepsea Nordkapp |
A provision is recognised when an obligation exists (legal or constructive) as a result of a past event, it is probable that an economic settlement will be required as a consequence of the obligation, and a reliable estimate can be made of the amount of the obligation.
Thebestestimateoftheexpenditurerequiredtosettle the obligation is recognised as a provision. When the effect is material, the provision is discounted using a marketbasedpre-taxdiscountrate.
Contingent liabilities and contingent assets are not recognised. Contingent liabilities are disclosed unless the possibility of an economic settlement as a consequence of the obligation is remote. Contingent assets are disclosed where an economic settlement as a consequence of the asset is probable.
The Group may from time to time be subject to various legal proceedings, disputes and claims including regulatory discussions related to the Group's business, investments etc., of which the outcomes are subject to significant uncertainty. Management applies significant judgement when evaluating the degree of probability of an unfavourable outcome and the ability to make a reasonable estimate of the amount of loss. Unanticipated events or changes in these factors may require the Group to accrue for a matter that has not been previously accrued for because it was not considered probable, or a reasonable estimate could not be made, or increase or decrease an amount accrued for a matter in previous reporting periods.
Odfjell Offshore Ltd, a previous subsidiary of Odfjell Drilling Ltd., now a subsidiary of Odfjell Technology Ltd, was registered as a Norwegian Registered Foreign Company (NUF) on 08.03.2016 after migration of the company in January 2016, and is taxable for income to Norway. In 2017, the company filed for a tax deduction, of approximately NOK 2.3 billion, on redemption of shares in Deep Sea Metro Ltd. A total of NOK 1.3 billion of this loss has been utilised through Group contributions received from other Norwegian entities within the Odfjell Drilling Ltd Group in the period 2017 to 2021.
Odfjell Drilling Ltd has on 1 March 2022 issued a letter of indemnity to Odfjell Technology Ltd (OTL) to hold OTL indemnified in respect of any liability that may occur in relation to the Odfjell Offshore Ltd tax case. This includes financing of any (pre-) payments to the Norwegian Tax Authorities, and funds for any legal proceedings.
21 December 2022 Odfjell Offshore Ltd received a tax ruling from the Norwegian Tax Authorities where the tax loss on the realisation of shares in 2017 was denied on the basis of the antiavoidance rule developed as tax case law. Odfjell Offshore Ltd has appealed the ruling, and the Group is still of the opinion that the most likely outcome of a court case is that the antiavoidance rule should not be applicable and the denial of the tax loss should be revoked.
Odfjell Offshore Ltd have made an upfront payment 1 February 2023 of NOK 307 million (USD 31 million) in taxes and interest for the financial years 2017 through to 2021, which the Odfjell Drilling Group have had to fund in accordance with the indemnity letter.
As stated above the Group's best judgement is that the tax case will be won by Odfjell Offshore Ltd. The Group has therefore not recognised a provision for the contingent indemnification liability. Consequently, the Group has recognised the upfront payment made as a non-current receivable that will be repaid if the legal appeal prevails.
There are no other material contingencies to be disclosed as per 31 December 2023.
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
| USD million |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Rig investments |
51.5 | 46.7 |
| TOTAL | 51.5 | 46.7 |
The major part of committed capital expenditure as at 31 December 2023 is related to the new BOP for the rig Deepsea Atlantic, as well as the upcoming periodic maintenance for Deepsea Atlantic and Deepsea Nordkapp.
| Name of entity |
Country of incorporation |
Principal place of business |
Functional currency |
Owner-ship 2023 |
Owner-ship 2022 |
Principal activities |
|---|---|---|---|---|---|---|
| Odfjell Rig Owning Ltd. |
Bermuda | UK | USD | 100 | 100 | Holding company |
| Odfjell Invest Ltd. * |
Bermuda | Malta | USD | 100 | 100 | Holding company |
| Odfjell Rig III Ltd. * |
Bermuda | Malta | USD | 100 | 100 | Holding company |
| Odfjell Drilling Malta Ltd. |
Malta | Malta | USD | 100 | - | Holding company |
| Odfjell Rig V Ltd. ** |
England | Malta | USD | 100 | 100 | Rig owning |
| Odfjell Drilling Shetland Ltd. ** |
Scotland | Malta | USD | 100 | 100 | Rig owning |
| Deep Sea Atlantic (UK) Ltd. ** |
England | Malta | USD | 100 | 100 | Rig owning |
| Deep Sea Stavanger (UK) Ltd. ** |
England | Malta | USD | 100 | 100 | Rig owning |
| Odfjell Drilling South Africa Ltd. |
Scotland | South Africa / Namibia |
USD | 100 | 100 | Drilling operations |
| Odfjell Invest AS |
Norway | Norway | NOK | 100 | 100 | Drilling operations |
| Odfjell Invest II AS |
Norway | Norway | NOK | 100 | 100 | Drilling operations |
| Deep Sea Drilling Company AS |
Norway | Norway | NOK | 100 | 100 | Drilling operations |
| Deep Sea Drilling Company I AS |
Norway | Norway / Canada |
NOK | 100 | 100 | Drilling operations |
| Deep Sea Rig AS |
Norway | Norway | NOK | 100 | - | Drilling operations |
| Odfjell Drilling AS |
Norway | Norway | NOK | 100 | 100 | Management |
| Deep Sea Management AS |
Norway | Norway | NOK | 100 | 100 | Crewing |
| Deep Sea Management International AS |
Norway | Norway | USD | 100 | 100 | Crewing |
| Odfjell Drilling Services Ltd. |
Bermuda | UK | USD | 100 | 100 | Holding company |
* The company completed a relocation of the business from the United Kingdom to Malta in December 2023
** The company completed a relocation of the business from the United Arab Emirates to Malta in December 2023
The company's principal subsidiaries are set out in table above. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the company, and the proportion of ownership interests held equals the voting rights held by the company.
| Name of entity |
Country of incorporation |
Principal place of business |
Functional currency |
Owner-ship 2023 |
Owner-ship 2022 |
Principal activities |
|---|---|---|---|---|---|---|
| Deep Sea Drilling Company II KS |
Norway | Norway | NOK | 100 | 100 | No activity |
| Odfjell Drilling Cooperatief UA |
Netherlands | Netherlands | EUR | 100 | 100 | Holding - no activity |
| Odfjell Invest Holland BV |
Netherlands | Netherlands | EUR | 100 | 100 | No activity |
| Odfjell Perfuracoes e Servicos Ltda |
Brazil | Brazil | BRL | 100 | 100 | No activity |
| Odfjell Drilling Netherlands BV |
Netherlands | Netherlands | EUR | 100 | 100 | Holding - no activity |
| Odfjell Drilling Brasil BV |
Netherlands | Netherlands | EUR | 100 | 100 | Holding - no activity |
| Odfjell Drilling Brasil Ltda. |
Brazil | Brazil | BRL | 100 | 100 | No activity |
| Odfjell Gestao de Perfurancoes do Brasil Ltda. |
Brazil | Brazil | BRL | 100 | 100 | No activity |
| USD million |
Relation | 2023 | 2022 |
|---|---|---|---|
| Companies within the Odfjell Technology Ltd. Group |
Related to main shareholder |
2.9 | 1.2 |
| Odfjell Oceanwind AS |
Related to main shareholder |
0.5 | 0.5 |
| Odfjell Land As |
Related to main shareholder |
0.4 | 0.6 |
| TOTAL SALES OF SERVICES TO RELATED PARTIES |
3.7 | 2.3 |
The revenues are related to administration services and are included in "Corporate/Other" column in the segment reporting.
| USD million |
Relation | 2023 | 2022 |
|---|---|---|---|
| Companies within the Odfjell Technology Ltd. Group |
Related to main shareholder |
51.5 | 44.9 |
| Odfjell Oceanwind AS |
Related to main shareholder |
0.1 | - |
| TOTAL PURCHASES FROM RELATED PARTIES |
51.6 | 44.9 |
Purchases consist of services and rentals, as well as global business services, provided by well services, engineering and technology companies within the Odfjell Technology Group. All transactions have been carried out as part of the ordinary operations. Amounts listed in the table above do not include payment for rentals considered as leases, see table below.
As a part of the day-to-day running of the business, Odfjell Drilling have the following current receivables and liabilities towards companies in the Odfjell Technology Ltd. Group (the discontinued operations). All receivables and liabilities have less than one year maturity.
| USD million |
Related party |
Relation | 31.12.2023 | 31.12.2022 |
|---|---|---|---|---|
| Trade receivables |
Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
0.3 | 0.5 |
| Other current receivables |
Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
0.4 | 0.0 |
| Trade payables |
Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
(4.7) | (10.1) |
| Other current payables |
Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
(6.4) | (1.5) |
| NET CURRENT PAYABLES RELATED PARTIES |
(10.4) | (11.0) |
| USD million |
Lease liability |
Lease liability |
Payments | Payments | ||
|---|---|---|---|---|---|---|
| Related party |
Relation | Type of asset |
31.12.2023 | 31.12.2022 | 2023 | 2022 |
| Odfjell Land AS |
Related to main shareholder |
Properties | 25.2 | 28.5 | 5.4 | 4.5 |
| Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
Mooring and drilling equipment |
36.3 | 37.5 | 21.4 | 17.3 |
| TOTAL | 61.5 | 66.0 | 26.8 | 21.8 |
Helene Odfjell (Director), controls Odfjell Partners Holding Ltd, which owns 60.37% of the common shares in the Company as per 31 December 2023.
Simen Lieungh (Director) owns 20.000 shares (0.01%), Kjetil Gjersdal (CEO of Odfjell Drilling AS) and his close associate owns 42.450 shares (0.02%), while Frode Syslak (CFO of Odfjell Drilling AS) owns 25.000 shares (0.01%) in the Company as per 31 December 2023.
Key management includes directors (executive and non-executive). The compensation paid or payable to key management for employee services is shown in Note 32 - Remuneration to the Board of Directors, key executive management and Group auditor.
| USD thousands |
Salary | Bonus | Other remuneration |
Pension premium |
Expense share-based payments |
Total | |
|---|---|---|---|---|---|---|---|
| Kjetil Gjersdal |
CEO - Odfjell Drilling AS |
443 | 338 | 25 | 17 | 161 | 985 |
| Frode Syslak |
CFO - Odfjell Drilling AS |
209 | 151 | 13 | 12 | 86 | 471 |
| Diane Stephen |
General Manager - Odfjell Drilling Ltd. |
103 | 25 | 6 | 5 | - | 139 |
| TOTAL | 755 | 515 | 44 | 34 | 247 | 1,595 |
| USD thousands |
Salary | Bonus | Other remuneration |
Pension premium |
Expense share-based payments |
Total | |
|---|---|---|---|---|---|---|---|
| Kjetil Gjersdal |
CEO from April 2022 - Odfjell Drilling AS |
344 | 182 | 19 | 13 | 91 | 649 |
| Frode Syslak |
CFO from April 2022 - Odfjell Drilling AS |
155 | 44 | 10 | 12 | 48 | 269 |
| Simen Lieungh |
CEO to March 2022 - Odfjell Drilling AS |
189 | 1,507 | 7 | 5 | 192 | 1,901 |
| Jone Torstensen |
CFO to March2022 - Odfjell Drilling AS |
84 | 156 | 7 | 5 | - | 253 |
| Diane Stephen |
General Manager - Odfjell Drilling Ltd. |
116 | 21 | 7 | 6 | - | 150 |
| TOTAL | 889 | 1,910 | 50 | 42 | 332 | 3,222 |
The amounts listed as Salary, Bonus, and Other remuneration in the table above represent cash payments in 2023 and 2022. Refer to the Executive Remuneration Report for bonuses earned in 2023 and 2022.
Amounts listed as Pension premium and Expense share-based payments relates to the expense accounted for as personnel expenses in 2023 and 2022.
For details regarding the current incentive share option programme, refer to Note 33 - Share-based payments.
| USD thousands |
2023 | 2022 |
|---|---|---|
| Simen Lieungh |
71 | 20 |
| Helene Odfjell |
40 | 69 |
| Harald Thorstein |
45 | 19 |
| Knut J. Hatleskog |
9 | - |
| Susanne Munch Thore |
- | 36 |
| Alasdair Shiach |
- | 33 |
| Thomas Marsoner |
- | 53 |
| TOTAL REMUNERATION PAID TO BOARD OF NON-EXECUTIVE |
||
| DIRECTORS | 165 | 231 |
| USD thousands |
2023 | 2022 |
|---|---|---|
| Audit | 308 | 369 |
| Other assurance services |
2 | - |
| Tax advisory fee |
||
| Fees for other services |
66 | 13 |
| TOTAL REMUNERATION TO THE GROUP'S AUDITOR |
376 | 383 |
All listed fees are net of VAT
The company long term equity settled incentive share option programme in which the employee receives remuneration in the form of sharebased payment for services rendered.
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details below.
That cost is recognised in personnel expenses together with a corresponding increase in equity, over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end ofthat period.
The company entered at 16 May 2018 into a long term incentive share option programme with Simen Lieungh (CEO at the time), granting him options to purchase 960,000 common shares. On 31 May 2022 this share option programme was settled. As a result of the spin off and a change in CEO, the programme was settled in cash for a total of NOK 4.5 million.
On 27 June 2022 the Company implemented a new share option plan and allocated options for a total of 1,450,000 common shares, at a strike price of NOK 23.37 per share to certain of its employees. In 2023 a further 400,000 options were allocated at a strike price of NOK 26.61 per share.
The options can only be exercised in five equal tranches, with vesting periods of one to five years. The options may be exercised in the exercise period starting at vesting date and ending five working days after. Any options not exercised in the first tranches can be rolled forward to the next tranches. Any options not exercised by 2 July 2027 / 5 February 2028 will be terminated.
| Overview of outstanding options: |
2023 | 2022 |
|---|---|---|
| Outstanding options 1.1 |
1,450,000 | 960,000 |
| Options granted |
400,000 | 1,450,000 |
| Options forfeited |
- | - |
| Options exercised |
(960,000) | |
| Options expired |
- | - |
| OUTSTANDING OPTIONS 31.12 |
1,850,000 | 1,450,000 |
| Of which exercisable |
290,000 | - |
The fair value of the options has been calculated using Black & Scholes option-pricing model. The average fair value of the options granted in 2022 is NOK 11.36, while the fair value of options granted in 2023 is NOK 10.32 The total cost of the share option plan is calculated based on the fair value x options granted. The total cost equals NOK 20.6 million (approximately USD 2 million) and is recognised over the period until January 2028.
The calculations are based on the following assumptions:
The basic earnings per share are calculated as the ratio of the profit for the year that is due to the shareholders of the parent divided by the weighted average number of common shares outstanding.
When calculating the diluted earnings per share, the profit that is attributable to the common shareholders of the parent and the weighted average number of common shares outstanding are adjusted for all the dilution effects relating to warrants and share options.
The calculation takes account of all the warrants and share options that are "in-the-money" and can be exercised. In the calculations, warrants and share options are assumed to have been converted/ exercised on the first date in the fiscal year. Warrants and share options issued this year are assumed to be converted/ exercised at the date of issue/ grant date. The dilution effect on warrants and share options is calculated as the difference between average fair value in an active market and exercise price or the sum of the not recognised cost portion of the options.
The Company has issued warrants for 6,837,492 common shares, see further description in Note 23 - Market risk, and has in addition a share option plan for 1,850,000 common shares, see further description in Note 33 - Share-based payments. The warrants represent contingently issuable shares.
Neither the warrants nor the options affect the basic or diluted number of shares in 2022 or 2023.
The warrants and share option plan may have dilutive effects in later periods.
| USD million |
2023 | 2022 |
|---|---|---|
| Profit/(loss) due to owners of the parent |
222.1 | 129.6 |
| Adjustment for dividends on preference shares |
- | (8.3) |
| Profit/(loss) for the period due to holders of common shares |
222.1 | 121.3 |
| Adjustment related to warrants and share option plan |
- | - |
| Diluted profit/(loss) for the period due to the holders of common shares |
222.1 | 121.3 |
| 2023 | 2022 | |
|---|---|---|
| Weighted average number of common shares in issue |
236,783,202 | 236,783,202 |
| Effects of dilutive potential common shares: |
||
| Warrants | - | - |
| Share option plan |
- | - |
| Diluted average number of shares outstanding |
236,783,202 | 236,783,202 |
| 2023 | 2022 | |
|---|---|---|
| Basic earnings per share (USD) |
0.938 | 0.512 |
| Diluted earnings per share (USD) |
0.938 | 0.512 |
| EARNINGS PER SHARE - CONTINUING OPERATIONS |
||
| Profit/(loss) for the period due to holders of common shares |
222.1 | 74.6 |
| Diluted profit/(loss) for the period due to the holders of common shares |
222.1 | 74.6 |
| Basic earnings per share - continuing operations (USD) |
0.938 | 0.315 |
| Diluted earnings per share - continuing operations (USD) |
0.938 | 0.315 |
There have been no events after the balance sheet date with material effect on the financial statements ended 31 December 2023.
| USD thousands |
Note | 2023 | 2022 |
|---|---|---|---|
| OPERATING REVENUES |
4 | 137 | 180 |
| Other gains and losses |
3 | - | (3,438) |
| Personnel expenses |
5 | (429) | (834) |
| Other operating expenses |
4,6 | (3,898) | (2,571) |
| Total operating expenses |
(4,327) | (3,405) | |
| OPERATING PROFIT / (LOSS) - EBIT |
(4,189) | (6,663) | |
| Interest income |
4,7 | 24,252 | 12,721 |
| Dividends from subsidiaries |
4,8 | - | 296,257 |
| Interest expenses |
4,7 | (10,446) | (15,232) |
| Impairment of investments in subsidiaries |
8 | - | (134,660) |
| Other financial items |
7 | (3,285) | 448 |
| Net financial items |
10,522 | 159,534 | |
| PROFIT / (LOSS) BEFORE TAX |
6,332 | 152,870 | |
| Income tax |
17 | - | - |
| PROFIT / (LOSS) FOR THE PERIOD |
6,332 | 152,870 | |
| Of which attributable to common shareholders |
(868) | 143,804 | |
| Of which attributable to preference shareholders |
7,200 | 9,066 | |
| EARNINGS PER SHARE (USD) |
|||
| Basic earnings per share |
18 | (0.00) | 0.61 |
| Diluted earnings per share |
18 | (0.00) | 0.61 |
| USD thousands |
Note | 2022 | 2022 |
|---|---|---|---|
| Profit / (loss) for the period |
6,332 | 152,870 | |
| Other comprehensive income: |
|||
| Items that will not be reclassified to profit or loss: |
- | - | |
| Items that are or may be reclassified to profit or loss: |
- | - | |
| OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX |
- | - | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD |
6,332 | 152,870 | |
| Total comprehensive income for the period is attributable to: |
|||
| Common shareholders |
(868) | 143,804 |
The accompanying notes are an integral part of these financial statements.
| USD thousands |
Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| Assets | |||
| Investments in subsidiaries |
8 | 857,140 | 856,742 |
| Non-current receivables subsidiaries |
4 | 116,629 | 339,078 |
| Non-current receivable Odfjell Technology Ltd |
10 | 30,196 | - |
| TOTAL NON-CURRENT ASSETS |
1,003,965 | 1,195,821 | |
| Other current assets |
10 | 9,152 | 675 |
| Other current receivables subsidiaries |
1,702 | - | |
| Cash and cash equivalents |
11 | 8,178 | 1,951 |
| TOTAL CURRENT ASSETS |
19,031 | 2,626 | |
| TOTAL ASSETS |
1,022,996 | 1,198,446 |
The accompanying notes are an integral part of these financial statements.
| USD thousands |
Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| Equity and liabilities |
|||
| Share capital |
14 | 2,368 | 2,529 |
| Other contributed capital |
367,785 | 442,623 | |
| Other reserves |
2,638 | 2,241 | |
| Retained earnings |
577,858 | 626,212 | |
| TOTAL EQUITY |
950,649 | 1,073,605 | |
| Non-current interest-bearing borrowings |
12 | - | 95,000 |
| Non-current liabilities subsidiaries |
4 | 64,475 | 25,753 |
| Warrant liabilities |
- | 2,810 | |
| TOTAL NON-CURRENT LIABILITIES |
64,475 | 123,563 | |
| Warrant liabilities |
4,240 | - | |
| Trade payables |
583 | 83 | |
| Other current liabilities |
10 | 3,050 | 1,195 |
| TOTAL CURRENT LIABILITIES |
7,873 | 1,278 | |
| TOTAL LIABILITIES |
72,348 | 124,841 | |
| TOTAL EQUITY AND LIABILITIES |
1,022,996 | 1,198,446 |
The Board of Odfjell Drilling Ltd.
18 April 2024, London, United Kingdom
Simen Lieungh Helene Odfjell Harald Thorstein Knut Hatleskog Diane Stephen Chair Director Director Director General Manager
_______________________ ____________________________ ___________________________ ____________________________ _____________________________
ODFJELL DRILLING Annual Report 2023 103
| USD thousands |
Note | Share capital |
Other contributed capital |
Other reserves |
Retained earnings |
Total equity |
Equity attributable to common shares |
Equity attributable to preference shares |
Total equity |
|---|---|---|---|---|---|---|---|---|---|
| BALANCE AT 1 JANUARY 2022 |
2,529 | 562,430 | 1,873 | 477,875 | 1,044,707 | 955,168 | 89,539 | 1,044,707 | |
| Profit/(loss) for the period |
- | - | - | 152,870 | 152,870 | 143,804 | 9,066 | 152,870 | |
| Other comprehensive income for the period |
- | - | - | - | - | - | - | - | |
| Total comprehensive income for the period |
- | - | - | 152,870 | 152,870 | 143,804 | 9,066 | 152,870 | |
| Distribution of shares in Odfjell Technology Ltd. to common shareholders |
3 | - | (119,807) | (119,807) | (119,807) | - | (119,807) | ||
| Cash dividend to preference shareholders |
14 | - | - | - | (4,533) | (4,533) | - | (4,533) | (4,533) |
| Cost of share-based option plan |
5 | - | - | 368 | 368 | 368 | - | 368 | |
| Transactions with owners |
- | (119,807) | 368 | (4,533) | (123,972) | (119,439) | (4,533) | (123,972) | |
| BALANCE AT 31 DECEMBER 2022 |
2,529 | 442,623 | 2,241 | 626,212 | 1,073,605 | 979,534 | 94,072 | 1,073,605 | |
| Profit/(loss) for the period |
- | - | - | 6,332 | 6,332 | (868) | 7,200 | 6,332 | |
| Other comprehensive income for the period |
- | - | - | - | - | - | - | - | |
| Total comprehensive income for the period |
- | - | - | 6,332 | 6,332 | (868) | 7,200 | 6,332 | |
| Dividend to common shareholders |
14 | - | - | - | (28,415) | (28,415) | (28,415) | - | (28,415) |
| Cash dividend to preference shareholders |
14 | - | - | - | (2,332) | (2,332) | - | (2,332) | (2,332) |
| Repurchase and cancellation of preference shares |
14 | (161) | (74,839) | - | (23,940) | (98,940) | - | (98,940) | (98,940) |
| Cost of share-based option plan |
5 | - | - | 398 | - | 398 | 398 | - | 398 |
| Transactions with owners |
(161) | (74,839) | 398 | (54,687) | (129,289) | (28,017) | (101,272) | (129,289) | |
| BALANCE AT 31 DECEMBER 2023 |
2,368 | 367,785 | 2,638 | 577,858 | 950,649 | 950,649 | - | 950,649 |
The accompanying notes are an integral part of these financial statements.
for the year ended 31 December
| USD thousands |
Note | 2023 | 2022 |
|---|---|---|---|
| Cash flow from operating activities: |
|||
| Profit/(loss) before tax |
6,332 | 152,870 | |
| Adjustments for: |
|||
| Loss disposal of subsidiaries |
- | 3,438 | |
| Cost of Share-option plan |
- | 197 | |
| Net interest expense / (income) |
(20,644) | 1,684 | |
| Change in value of market-based derivatives |
16 | 1,986 | 1,331 |
| Impairment of investments in subsidiaries |
8 | - | 134,660 |
| Income from subsidiaries |
4,8 | 561 | (296,257) |
| Net currency loss /(gain) not related to operating activities |
- | 7 | |
| Changes in working capital: |
|||
| Trade payables |
500 | 9 | |
| Other accruals and current receivables /payables |
(8,879) | 632 | |
| CASH GENERATED FROM OPERATIONS |
(20,144) | (1,429) | |
| Net interest received / (paid) |
459 | 40 | |
| NET CASH FLOW FROM OPERATING ACTIVITIES |
(19,685) | (1,389) |
The accompanying notes are an integral part of these financial statements.
| USD thousands |
Note | 2023 | 2022 |
|---|---|---|---|
| Cash flows from investing activities: |
|||
| Proceeds from non-current receivables subsidiaries |
4 | 144,970 | 1,500 |
| Proceeds from current intercompany loans |
4 | - | 4,827 |
| Payments to subsidiaries, non-current receivables |
4 | - | (109,800) |
| Payment of capital increases in subsidiaries |
- | (5,010) | |
| Payment regarding letter of indemnity to Odfjell Technology Ltd |
(30,757) | - | |
| NET CASH FLOW FROM INVESTING ACTIVITIES |
114,213 | (108,483) | |
| Cash flows from financing activities: |
|||
| Proceeds from external borrowings |
12 | - | 95,000 |
| Repayment of external borrowings |
12 | (95,000) | - |
| Proceeds from borrowing facilities from subsidiaries |
4 | 35,114 | 18,224 |
| Dividends paid |
14 | (28,415) | (2,220) |
| NET CASH FROM FINANCING ACTIVITIES |
(88,301) | 111,003 | |
| Exchange gains/(losses) on cash and cash equivalents |
- | (7) | |
| NET CHANGE IN CASH AND CASH EQUIVALENTS |
6,227 | 1,124 | |
| Cash and cash equivalents at 01.01 |
1,951 | 826 | |
| CASH AND CASH EQUIVALENTS AT 31.12 |
8,178 | 1,951 |
All amounts are in USD thousands unless otherwise stated
| Note 1 |
Accounting policies |
107 |
|---|---|---|
| Note 2 |
Critical accounting estimates and judgements |
107 |
| Note 3 |
Other gains and losses |
107 |
| Note 4 |
Related parties - transactions, receivables and liabilities |
108 |
| Note 5 |
Personnel expenses |
111 |
| Note 6 |
Operating expenses |
111 |
| Note 7 |
Financial income and expenses |
112 |
| Note 8 |
Investments in subsidiaries |
112 |
| Note 9 |
Financial assets and liabilities |
113 |
| Note 10 |
Other assets and liabilities |
114 |
| Note 11 |
Cash and cash equivalents |
114 |
|---|---|---|
| Note 12 |
Interest-bearing borrowings |
115 |
| Note 13 |
Warrant Liabilities |
115 |
| Note 14 |
Share capital and shareholders |
116 |
| Note 15 |
Guarantees and securities |
116 |
| Note 16 |
Financial Risk Management |
117 |
| Note 17 |
Income taxes |
119 |
| Note 18 |
Earnings per share |
120 |
| Note 19 |
Events after the reporting period |
120 |
The principal activities of the Company is owning its shares in subsidiaries, as well as providing management services.
The financial statements for Odfjell Drilling Ltd., have been prepared and presented in accordance with IFRS® Accounting Standards as endorsed by EU, and are based on the same accounting policies as the Consolidated Group Financial Statements with the following additions:
Investments in subsidiaries are based on the cost method. Refer to Note 8 - Investments in subsidiaries.
Dividends and group contribution from subsidiaries are recognised in profit or loss in the parent company financial statements when the Company's right to receive the dividend is established.
For further information, reference is made to the consolidated group financial statements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. These estimates are based on the actual underlying business, its present and forecast profitability over time, and expectations about external factors such as interest rates, foreign exchange rates and other factors which are outside the Company's control. The resulting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
The most important areas where estimates and judgements are having an impact are listed below.
Detailed information regarding significant judgement is disclosed in the following notes:
Detailed information regarding estimation uncertainty is disclosed in the following notes:
• Warrant liabilities measured at fair value (Note 13 - Warrant Liabilities)
Refer to Consolidated Financial Statements Note 3 - Critical accounting estimates and judgements.
Taking all relevant risk factors and available options for financing into consideration, the Board has a reasonable expectation that the Company has adequate resources to continue its operational existence for the foreseeable future.
Refer to the Note 4 Discontinued operations in the Consolidated Financial Statements for information regarding the spin-off of Odfjell Technology in 2022.
The fair value of the net assets distributed to the shareholders in 2022 was USD 119.8 million, compared to a book value of the shares in Odfjell Technology Ltd of USD 123.2 million. A loss of USD 3.4 million was recognised in 2022.
There are no other gains and losses in 2023.
ODFJELL DRILLING Annual Report 2023 107
| Type of transaction |
Related party |
Relation | 2023 | 2022 |
|---|---|---|---|---|
| Management fee |
Companies in Odfjell Drilling Ltd Group |
Subsidiary | 76 | 69 |
| Other consultancy services |
Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
61 | 110 |
| Dividends | Odfjell Drilling Services Ltd. |
Subsidiary | - | 280,000 |
| Dividends | Odfjell Offshore Ltd. |
Subsidiary | - | 16,257 |
| Interest income non-current loan |
Odfjell Rig Owning Ltd. |
Subsidiary | 23,793 | 12,681 |
| Guarantee provision |
Companies in Odfjell Drilling Ltd Group |
Subsidiary | 1,702 | 2,166 |
| TOTAL | 25,632 | 311,284 |
| Type of transaction |
Related party |
Relation | 2023 | 2022 |
|---|---|---|---|---|
| Interest on long term loan |
Odfjell Drilling Services Ltd. |
Subsidiary | 3,608 | 14,313 |
| Interest on long term loan |
Odfjell Offshore Ltd. |
Subsidiary | - | 92 |
| Service fee |
Odfjell Drilling AS |
Subsidiary | 98 | 96 |
| Service fee |
Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
9 | 10 |
| Facility services |
Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
146 | 145 |
| TOTAL | 3,862 | 14,656 |
| Subsidiary | Interest conditions |
Maturity date |
Receivable 2023 |
Receivable 2022 |
Interest income 2023 |
Interest income 2022 |
|---|---|---|---|---|---|---|
| Odfjell Rig Owning Ltd. |
3 mnt USD Term SOFR+ 3.5% margin |
09.05.2029 | 116,629 | 339,078 | 23,793 | 12,681 |
| TOTAL NON-CURRENT |
116,629 | 339,078 | 23,793 | 12,681 |
| USD thousands |
2023 | 2022 |
|---|---|---|
| Carrying amount as at 1 January |
339,078 | 220,410 |
| Cash flows: |
||
| New loans provided to subsidiaries |
- | 109,800 |
| Payments received from subsidiaries |
(144,970) | (1,500) |
| Non-cash flows: |
||
| Reclassified from current receivables |
(2,332) | (2,313) |
| Repurchase of preference shares offset loan receivable |
(98,940) | - |
| Interest accrued |
23,793 | 12,681 |
| CARRYING AMOUNT AS AT 31 DECEMBER |
116,629 | 339,078 |
The company has a loan agreement with subsidiary Odfjell Rig Owning Ltd.
Refer to Note 8 - Investments in subsidiaries for impairment indicator assessment as at 31 December 2023.
Refer to Note 28 Contingencies in the Group Financial Statements for information about the letter of indemnity issued by the Company to Odfjell Technology Ltd.
| Non-current loans from subsidiaries: |
Interest conditions |
Maturity date |
Liabilities 2023 |
Liabilities 2022 |
Interest expenses 2023 |
Interest expenses 2022 |
|---|---|---|---|---|---|---|
| Odfjell Offshore Ltd. |
n/a | n/a | n/a | n/a | - | 92 |
| Odfjell Drilling Services Ltd. |
3 mth LIBOR + 3.5% margin |
09.11.2025 | 64,475 | 25,753 | 3,608 | 14,313 |
| TOTAL LOANS FROM SUBSIDIARIES |
64,475 | 25,753 | 3,608 | 14,405 |
The loan agreement with Odfjell Offshore Ltd., was settled in February 2022.
The loan agreement between the Company and the subsidiary Odfjell Drilling Services Ltd is expected to be amended in 2024 in order to convert the interest conditions from LIBOR to a USD Term SOFR based interest rate.
| USD thousands |
2023 | 2022 |
|---|---|---|
| Carrying amount as at 1 January |
25,753 | 273,217 |
| Cash flows: |
||
| Proceeds from loan |
35,114 | 18,224 |
| Repayment of loan |
- | - |
| Non-cash flows: |
||
| Dividend received offset in loan |
- | (280,000) |
| Interest cost accrued |
3,608 | 14,313 |
| CARRYING AMOUNT AS AT 31 DECEMBER |
64,475 | 25,753 |
The loan agreement with Odfjell Drilling Services Ltd., a subsidiary to the company, was amended in December 2022 The new due date was set to 9 November 2025, and the maximum aggregated loan amount for the borrowing facility is now USD 200 million.
| USD thousands |
2023 | 2023 | 2022 | 2022 | ||
|---|---|---|---|---|---|---|
| Type of transaction |
Related party |
Relation | Receivables | Liabilities | Receivables | Liabilities |
| Trade | Subsidiaries | Subsidiary | 92 | (98) | - | - |
| Trade | Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
77 | (110) | 112 | (199) |
| Other current |
Subsidiaries | Subsidiary | 1,702 | - | - | - |
| Other current |
Companies in Odfjell Technology Ltd Group |
Related to main shareholder |
- | (2,071) | ||
| TOTAL CURRENT |
1,870 | (2,279) | 112 | (199) |
* The current receivables and liabilities have less than one year maturity.
| USD thousands |
2023 | 2022 |
|---|---|---|
| Wage cost |
||
| Salaries | 178 | 352 |
| Payroll tax |
27 | 51 |
| Pension costs |
15 | 19 |
| Employee benefits |
35 | 8 |
| Management compensation: |
||
| Board of directors fee |
174 | 207 |
| Cost of Share-option plan |
- | 197 |
| TOTAL PERSONNEL EXPENSES |
429 | 834 |
The company had two employees at 31 December 2023 and (two at 31 December 2022).
For details of salary, variable pay and other benefits provided to the General Manager and compensation to the Board of Directors, refer to Note 32 - Remuneration to the Board of Directors, key executive management and Group auditor in the Group Financial Statements.
The expense related to services provide by the General Manager are part of the Other operating expenses.
Refer to Note 33 - Share-based payments in the Group Financial Statements for information about the Cost of Share-option plan.
No loans or guarantees have been given to the members of the board of directors.
| USD thousands |
Note | 2023 | 2022 |
|---|---|---|---|
| Fee to the auditor (excluding VAT): |
|||
| Auditors fee |
123 | 141 | |
| Other services from auditor |
23 | 13 | |
| Other operating expenses: |
|||
| Service fee |
4 | 108 | 106 |
| Facility services |
4 | 146 | 145 |
| Fees legal and financial assistance |
3,366 | 2,076 | |
| Travel expenses |
11 | 19 | |
| Other expenses |
121 | 71 | |
| TOTAL OPERATING EXPENSES |
3,898 | 2,571 |
| USD thousands |
Note | 2023 | 2022 |
|---|---|---|---|
| Interest income from subsidiaries |
4 | 23,793 | 12,681 |
| Other interest income |
459 | 40 | |
| TOTAL INTEREST INCOME |
24,252 | 12,721 | |
| USD thousands |
Note | 2023 | 2022 |
| Interest expenses borrowings from subsidiaries |
4 | (3,608) | (14,405) |
| Interest expense external borrowings |
12 | (6,838) | (827) |
| Other interest expenses |
- | (0) |
| USD thousands |
2023 | 2022 | |
|---|---|---|---|
| Guarantee commissions |
4 | 1,702 | 2,166 |
| Change in value of market-based derivatives |
16 | (1,986) | (1,331) |
| Net currency gain / (loss) |
(3,000) | (388) | |
| TOTAL OTHER FINANCIAL ITEMS |
(3,285) | 448 |
| Acquisition/ | Shares | Voting | Functional | Share capital |
Profit / (loss) |
Equity as at |
Book value as at |
||
|---|---|---|---|---|---|---|---|---|---|
| Company | formation date Registered office |
Place of business |
owned | rights | currency | in USD |
2023 | 31.12.2023 | 31.12.2023 |
| Odfjell Drilling Services Ltd. |
2011 Hamilton, Bermuda |
Aberdeen, UK |
100% | 100% | USD | 10,000 | 2,884 | 53,174 | 50,450 |
| Odfjell Rig Owning Ltd. |
2015 Hamilton, Bermuda |
Aberdeen, UK |
100% | 100% | USD | 10,000 | 376,231 | 1,073,227 | 806,690 |
| TOTAL | 857,140 |
Investments in subsidiaries are valued at cost in the company accounts. The investment is valued as cost of acquiring shares, providing they are not impaired. An impairment loss is recognised for the amount by which the carrying amount of the subsidiary exceeds its recoverable amount. The recoverable amount is the higher of fair value less cost to sell and value in use. The recoverable amount of an investment in a subsidiary would normally be based on the present value of the subsidiary's future cash flow.
The Company has not received any dividends in 2023.
Investment in subsidiaries are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment exceed the recoverable amount.
Odfjell Drilling has not identified any impairment indicators for the investments as at 31.12.2023.
The tables below analyse financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
| USD thousands |
Note | Level | 31.12.2023 | 31.12.2022 |
|---|---|---|---|---|
| Financial assets at fair value through profit or loss |
||||
| Derivatives not designated as hedging instruments |
||||
| • Foreign exchange forward contracts - Other current assets |
16 | 2 | - | 529 |
| Investment in bonds |
2 | 8,715 | - | |
| Other financial assets |
||||
| • Non-current receivables subsidiaries |
4 | 116,629 | 339,078 | |
| • Other current assets |
183 | 129 | ||
| • Other current receivables subsidiaries |
1,702 | - | ||
| • Cash and cash equivalents |
11 | 8,178 | 1,951 | |
| TOTAL ASSETS AS AT 31.12 |
135,407 | 341,686 |
Warrant liabilities are Level 3 derivatives held at fair value through profit or loss. The Company has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. No changes have been made as of 31 December 2023 related to the warrant agreements, nor to the modelling technique used to calculate fair value. Changes in book value relate to fair value changes.
The fair value of the financial assets and liabilities at amortised cost approximate their carrying amount.
| USD thousands |
Note | Level | 31.12.2023 | 31.12.2022 |
|---|---|---|---|---|
| Financial liabilities atfair value through profit orloss |
||||
| Derivatives not designated as hedging instruments |
||||
| • Foreign exchange forward contracts - Other current liabilities |
15 | 2 | 27 | - |
| Warrant liabilities - Other non-current liabilities |
13 | 3 | - | 2,810 |
| Warrant liabilities - Other current liabilities |
13 | 3 | 4,240 | - |
| Other financial liabilities |
||||
| • Non-current interest-bearing borrowings |
12 | - | 95,000 | |
| • Non-current liabilities subsidiaries |
4 | 64,475 | 25,753 | |
| • Other current liabilities |
3,038 | 1,182 | ||
| • Trade payables |
583 | 83 | ||
| TOTAL LIABILITIES AS AT 31.12. |
72,363 | 124,828 |
| USD thousands |
Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| Derivative financial instruments |
16 | - | 529 |
| Investment in 9.25% USD bond Odfjell Rig III |
7,115 | ||
| Investment in 9.875% USD bond HMH Holding b.v. |
1,600 | ||
| VAT receivables |
253 | 18 | |
| Other current receivables |
4 | 183 | 129 |
| TOTAL OTHER CURRENT ASSETS |
9,152 | 675 | |
| USD thousands |
Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| Derivative financial instruments |
16 | 27 | - |
| Accrued interest expenses |
12 | - | 827 |
| Social security and other taxes |
11 | 13 | |
| Accrued salaries, holiday pay and employee bonus provisions |
37 | 82 | |
| Other payables and financial liabilities |
2,519 | - | |
| Other accrued expenses |
455 | 272 | |
| TOTAL OTHER CURRENT LIABILITIES |
3,050 | 1,195 |
Refer to Note 28 Contingencies in the Group Financial Statements for information about the letter of indemnity issued by the Company to Odfjell Technology Ltd.
| USD thousands |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Current account NOK |
31 | 1,425 |
| Current account USD |
710 | 429 |
| Current account GBP |
2,437 | 97 |
| Time deposit USD |
5,000 | - |
| TOTAL CASH AND BANK DEPOSITS |
8,178 | 1,951 |
None of the bank deposits are restricted.
Specification
| Non-current | Current | Total | Non-current | Current | Total | |
|---|---|---|---|---|---|---|
| USD thousands |
31.12.2023 | 31.12.2023 | 31.12.2023 | 31.12.2022 | 31.12.2022 | 31.12.2022 |
| Borrowings | - | - | - | 95,000 | - | 95,000 |
| Accrued interest expenses |
- | - | - | - | 827 | 827 |
| CARRYING AMOUNTS INTEREST-BEARING BORROWINGS |
- | - | - | 95,000 | 827 | 95,827 |
The direct loan of USD 95 million was repaid in October 2023.
| Non-current | Current | Total | Non-current | Current | Total | |
|---|---|---|---|---|---|---|
| USD thousands |
2023 | 2023 | 2023 | 2022 | 2022 | 2022 |
| Carrying amount as at 1 January |
95,000 | 827 | 95,827 | - | - | - |
| Cash flows: |
||||||
| New borrowings |
- | - | - | 95,000 | - | 95,000 |
| Repayment borrowings |
(95,000) | - | (95,000) | - | - | - |
| Non-cash flows: |
||||||
| Change in accrued interest cost |
- | (827) | (827) | - | 827 | 827 |
| CARRYING AMOUNT AS AT 31 DECEMBER |
- | - | - | 95,000 | 827 | 95,827 |
Refer to Note 23 Market risk in the Group Financial Statements.
The 16,123,125 preference shares were issued in 2018 to an affiliate of Akastor ASA.("Akastor"). 29 November 2022, Odfjell Rig Owning Ltd, a subsidiaryoftheCompany,purchasedthepreference shares from Akastor. Warrants held by Akastor are notpartofthe transactionand remainwithAkastor.
In October 2023, the Odfjell Drilling Ltd repurchased and cancelled all the 16,123,125 treasury preference shares.
As per 31 December 2023 the Group does not hold any treasury shares.
The Company paid cash dividends of USD 2.3 million in June 2023 (USD 0.145 per share) to subsidiaryOdfjellRigOwning Ltd as the holder ofthe preference shares at that point. The dividend was offsetin the loan agreementwith the subsidiary.
22 August 2023, the Board of Directors approved a dividend distribution of 0.06 USD per common share, equal to approximately USD 14.2 million, which was paid in September 2023.
1 November 2023, the Board of Directors approved a dividend distribution of 0.06 USD per common share, equal to approximately USD 14.2 million, which was paid in November 2023.
Total dividend payments in 2023 was 0.12 USD per common share equal to approximately USD 28.4 million.
Odfjell Drilling Ltd has furnished an On-Demand Guarantee underthe following facility agreements:
• USD 300 million bank facility agreement entered into in 2023 with Odfjell Invest Ltd., as borrower and DNB Bank ASA as Agent on behalf of the Lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 390 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
| Other | securities | |
|---|---|---|
USD thousands 31.12.2023 31.12.2022 Shares in Odfjell Rig Owning Ltd. 806,690 806,292 Intra-group receivables (Odfjell Drilling group) 118,331 339,078 Bank deposits 8,178 1,951 TOTAL BOOK VALUE OF ASSETS PLEDGED AS SECURITY 933,199 1,147,321
Refer to Note 27 - Securities and mortgages in the Consolidated Financial Statements.
Odfjell Drilling Ltd., has issued parent company guarantee related to Odfjell Drilling AS' property rental contract with Odfjell Land AS Group.
| USD thousands |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Loan agreement in Odfjell Invest Ltd., senior facility * |
- | 359,262 |
| Loan agreement in Odfjell Invest Ltd., junior facility * |
- | 130,035 |
| Loan agreement in Odfjell Invest Ltd., Term loan and RCF |
208,492 | - |
| Loan agreement in Odfjell Rig III Ltd. * |
- | 253,200 |
| Bond loan in Odfjell Rig III Ltd |
470,407 | - |
| Loan agreement in Odfjell Rig V Ltd. |
280,804 | 314,708 |
| Seller's credit in Odfjell Rig Owning Ltd * |
- | 25,178 |
| TOTAL GUARANTEE LIABILITIES |
959,703 | 1,082,383 |
| * Repaid in 2023 |
Refer to Note 21 - Financial risk management in the Group Financial Statements.
The liquidity risk is low as a result of adequate long-term funding and available liquidity in subsidiaries.
The amounts disclosed in the table are the contractual non-discounted cash flows. The table include estimated interest payments for drawn facilities at the balance sheet date, based on the remaining period at the end of the reporting period to the contractual maturity date.
| Between 1 and 2 |
Between 2 and 5 |
Total contractual |
|||||
|---|---|---|---|---|---|---|---|
| USD thousands |
Less than 6 months |
6 - 12 months |
years | years | Over 5 years |
cash flows |
Carrying amount |
| Non-current liabilities subsidiaries |
3,101 | 3,101 | 69,809 | - | - | 76,012 | 64,475 |
| Other current liabilities |
3,038 | - | - | - | - | 3,038 | 3,038 |
| Trade payables |
583 | - | - | - | - | 583 | 583 |
In addition to the financial liabilities listed in table above, the company has issued guarantees in relation to subsidiaries' loans agreements. See further information in Note 15.
| Between 1 and 2 |
Between 2 and 5 |
Total contractual |
|||||
|---|---|---|---|---|---|---|---|
| USD thousands |
Less than 6 months |
6 - 12 months |
years | years | Over 5 years |
cash flows |
Carrying amount |
| Non-current interest-bearing borrowings |
4,588 | 4,563 | 9,175 | 108,688 | - | 127,014 | 95,827 |
| Non-current liabilities subsidiaries |
923 | 923 | 1,847 | 27,969 | - | 31,662 | 25,753 |
| Other current liabilities |
355 | - | - | - | - | 355 | 355 |
| Trade payables |
83 | - | - | - | - | 83 | 83 |
The Company has foreign exchange contracts at fair value through profit and loss.
| Weighted average |
||||||
|---|---|---|---|---|---|---|
| Foreign currency contracts |
Currency | Notional amount |
Maturity date |
Hedge ratio |
hedged rate |
Carrying amount |
| 31.12.2023 | ||||||
| Buy foreign currency (at fair value through profit or loss) |
NOK | 64,100 | 15.04.2024 | n/a | 12.82000 | (27) |
| Sell foreign currency (at fair value through profit or loss) |
GBP | 5,000 | 15.04.2024 | n/a | 12.82000 | included in amount above |
| 31.12.2022 | ||||||
| Buy foreign currency (at fair value through profit or loss) |
NOK | 290,000 | 30.05.2023 | n/a | 0.10345 | 825 |
| Sell foreign currency (at fair value through profit or loss) |
NOK | 321,300 | 30.05.2023 | n/a | 0.09337 | (296) |
| USD thousands |
31.12.2023 | 31.12.2022 |
|---|---|---|
| Foreign exchange contracts - at fair value through profit or loss |
||
| Change in fair value |
(556) | 529 |
| Warrant liability - at fair value through profit or loss |
||
| Change in fair value |
(1,430) | (1,860) |
| USD thousands |
NOK | GBP Other |
non-USD currencies |
|---|---|---|---|
| Cash and cash equivalents |
31 | 2,437 | - |
| Foreign currency contracts |
|||
| Buy foreign currency (at fair value through profit or loss) |
6,301 | - | - |
| Sell foreign currency (at fair value through profit or loss) |
- | 6,357 | - |
The company is to a limited extent exposed to changes in USD/GBP exchange rates. If USD is strengthened by 10% against GBP, the reduction Cash and cash equivalents of USD 0.24 million will reduce net profit before taxes. If USD is weakened by 10% against GBP, the increase Cash and cash equivalents of USD 0.24 million will increase net profit before taxes.
The company have related parties interestbearing receivables and liabilities, refer to Note 4 - Related parties - transactions, receivables and liabilities. Both receivables and liabilities are variable rate borrowings based on USD SOFR or LIBOR. Should these increase by 1%, interest income would increase by USD 1.2 million, while interest expenses would increase by USD 0.6 million, resulting in a net increase of profit before taxes of USD 0.6 million.
The company is exposed to credit risk related to related party current and non-current receivables as listed in Note 4 - Related parties transactions, receivables and liabilities. Furthermore, the Company has issued financial guarantees to subsidiaries as listed in Note 15 - Guarantees and Securities.
Following IFRS 9 Financial Instruments, the company assess expected credit losses at each reporting date. The credit risk for the receivables and financial guarantee contracts mentioned above has not increased significantly since initial recognition, and the company therefore measures the loss allowance to an amount equal to 12-months expected credit losses.
Due to the low estimated probability of default in the next 12-month period no loss provision is recognised.
Odfjell Drilling Ltd. is registered in Bermuda.
There is no Bermuda income, corporation, or profit tax, withholding tax, capital gains, capital transfer tax, estate duty or inheritance tax payable by the company or its shareholders not ordinarily resident in Bermuda. The company is not subject to Bermuda stamp duty on the issue, transfer or redemption of its shares.
The company has received from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1996 an
assurance that, in the event of there being enacted in Bermuda any legislation imposing tax computed on profits or income, or computed on any capital assets, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not until 2035 be applicable to the company or to any of its operations, or to the shares, debentures or other obligations of the company except insofar as such tax applies to persons ordinarily resident in Bermuda and holding such shares, debentures or other obligations of the company or any land leased or let to the company.
As an exempted company, the company is liable to pay a registration fee in Bermuda at a rate presently amounting to USD 19,605 per annum.
The company is from 11 December 2018 tax resident in the United Kingdom as a consequence of the Special General Meetings resolution 11 December 2018, amending then Bye-laws and subsequently changing the composition of the Board of Directors to a majority of UK residents. The company is as all United Kingdom resident companies residents liable for UK corporate income taxes.
The company did not pay any taxes to the United Kingdom for the fiscal year 2021, and does not expect to pay any taxes to the United Kingdom for the fiscal year 2022.
The company does not have any material temporary differences and therefore have not recognised any deferred taxes.
| USD thousands |
2023 | 2022 |
|---|---|---|
| Profit / (loss) before tax |
6,332 | 152,870 |
| Tax calculated at domestic tax rate - 25% (19%) |
(1,583) | (29,045) |
| Effect of non-taxable income and expenses |
3,452 | 29,573 |
| Effect of group relief |
(1,869) | (528) |
| TOTAL INCOME TAX EXPENSE |
- | - |
| USD thousands |
2023 | 2022 |
|---|---|---|
| Profit/(loss) for the period |
6,332 | 152,870 |
| Adjustment for dividends on preference shares |
(7,200) | (9,066) |
| PROFIT/(LOSS) FOR THE PERIOD DUE TO HOLDERS OF COMMON SHARES |
(868) | 143,804 |
| Adjustment related to warrants and share option plan |
- | - |
| DILUTED PROFIT/(LOSS) FOR THE PERIOD DUE TO THE HOLDERS OF COMMON SHARES |
(868) | 143,804 |
Refer to Note 34 - Earnings per share in the Group Financial Statements for accounting policy and further description
| 2023 | 2022 | |
|---|---|---|
| Weighted average number of common shares in issue |
236,783,202 | 236,783,202 |
| Effects of dilutive potential common shares: |
||
| Warrants | - | - |
| Share option plan |
- | - |
| DILUTED AVERAGE NUMBER OF SHARES OUTSTANDING |
236,783,202 | 236,783,202 |
| 2023 | 2022 | |
|---|---|---|
| Basic earnings per share |
(0.00) | 0.61 |
| Diluted earnings per share |
(0.00) | 0.61 |
There have been no events after the balance sheet date with material effect on the financial statements ended 31 December 2023.
ODFJELL DRILLING Annual Report 2023 121
We confirm, to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2023 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 or loss of the entity and the company taken as a whole.
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 entity and the company, together with a description of the principal risks and uncertainties facing the entity and the company.
The Board of Odfjell Drilling Ltd.
18 April 2024, London, United Kingdom
_______________ _______________ _______________ _______________ ________________
Simen Lieungh Helene Odfjell Harald Thorstein Knut Hatleskog Diane Stephen Chair Director Director Director General Manager
KPMG AS Kanalveien 11 P.O. Box 4 Kristianborg N-5822 Bergen
Telephone +47 45 40 40 63 Internet www.kpmg.no Enterprise 935 174 627 MVA
To the General Meeting of Odfjell Drilling Ltd
Report on the Audit of the Financial Statements
We have audited the financial statements of Odfjell Drilling Ltd, which comprise:
Our opinion is consistent with our additional report to the Audit Committee.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical
| C KPMG AS, a Norwegian limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by quarantee. All rights reserved, |
Oslo Alta |
Elverum Finnsnes Hamar |
Mo i Rana Molde |
Tromsø Trondheim |
|---|---|---|---|---|
| Statsautoriserte revisorer - medlemmer av Den norske Revisorforening | Arendal Bergen Bodø Downtown was |
Haugesund Knarvik between the company of |
Sandefiord Stavanger Stord Chapter of the Contract of |
Tynset Ulsteinvik Alesund |
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
To the best of our knowledge and belief, no prohibited non-audit services have been provided.
We have been the auditor of the Company for 3 years from the election by the general meeting of the shareholders on 21 September 2021 for the accounting year 2021.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Reference is made to Note 3 Critical accounting estimates and judgements and Note 10 Tangible fixed assets
| The Key Audit Matter | How the matter was addressed in our audit |
|---|---|
| The Group's own fleet of drilling rigs represents a significant portion of total assets. The Group regularly reviews whether there are any impairment reversal indicators and tests the |
We obtained an understanding of the process for identifying impairment reversal indicators. |
| individual assets for impairment reversal if an indicator is identified. The drilling units Deepsea Stavanger and Deepsea Atlantic have been previously impaired and are assessed for potential impairment reversal. |
Our audit procedures included an assessment of key input factors in the impairment reversal indicator assessment. These factors include observations and judgement supporting an expected increase in dayrates driven by increased demand and supply-side constraints. |
| In order to assess whether an impairment reversal indicator exists, management applies judgment related to the market conditions in which the drilling rigs operate. The determination of impairment reversal indicators are particularly sensitive to management's assumptions made around the rate level for contract extensions and redeployments after current contracts expire. For both assets management identified an |
For both assets where management identified such indication of impairment reversal, we evaluated the value-in-use calculations prepared by management, including the key assumptions applied. We assessed the estimates of future cash flows and challenged whether these were appropriate considering both historical performance and recently awarded dayrates for similar assets. |
| impairment reversal indicator and determined the recoverable amount using valuation models which includes management's estimates of the future cashflows generated from these assets. |
We inspected corroborating external information sources including independent broker estimate values for both assets. |
| The carrying value of these assets are sensitive to management's assumptions on rate level for the rigs beyond the current contract period and expected levels of utilisation. During 2023, impairment reversals were recognised for Deepsea Stavanger (USD 92 million) and Deepsea Atlantic (USD 71 million). |
The inputs to and calculation of discount rate used by management was assessed by reference to market data. The key inputs included the risk-free rate, market risk premium and industry financing structures (gearing and cost of debt and equity). In testing these assumptions, we made use of KPMG valuation experts. |
| We tested the mathematical accuracy of the valuation models used to calculate the value in use. |
|
| We evaluated the adequacy and appropriateness of the disclosure in Note 10 Tangible fixed assets. |
2
The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors' report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors' report nor the other information accompanying the financial statements.
In connection with our audit of the financial statements, our responsibility is to read the Board of Directors' report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsistency between the Board of Directors' report and the other information accompanying the financial statements and the financial statements or our knowledge obtained in the audit, or whether the Board of Directors' report and the other information accompanying the financial statements otherwise appears to be materially misstated. We are required to report if there is a material misstatement in the Board of Directors' report or the other information accompanying the financial statements. We have nothing to report in this regard.
Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors' report
Our opinion on the Board of Director's report applies correspondingly to the statement- on Corporate Governance.
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's and the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
3
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
As part of the audit of the financial statements of Odfjell Drilling Ltd, we have performed an assurance engagement to obtain reasonable assurance about whether the financial statements included in the annual report, with the file name 529900M08ZU24JXMPB85-2023-12-31-en, have been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format, and iXBRL tagging of the consolidated financial statements.
In our opinion, the financial statements, included in the annual report, have been prepared, in all material respects, in compliance with the ESEF regulation.
Management is responsible for the preparation of the annual report in compliance with the ESEF regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary.
4
Our responsibility, based on audit evidence obtained, is to express an opinion on whether, in all material respects, the financial statements included in the annual report have been prepared in compliance with ESEF. We conduct our work in compliance with the International Standard for Assurance Engagements (ISAE) 3000 – "Assurance engagements other than audits or reviews of historical financial information". The standard requires us to plan and perform procedures to obtain reasonable assurance about whether the financial statements included in the annual report have been prepared in compliance with the ESEF Regulation.
As part of our work, we have performed procedures to obtain an understanding of the Company's processes for preparing the financial statements in compliance with the ESEF Regulation. We examine whether the financial statements are presented in XHTML-format. We evaluate the completeness and accuracy of the iXBRL tagging of the consolidated financial statements and assess management's use of judgement. Our procedures include reconciliation of the iXBRL tagged data with the audited financial statements in human-readable format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Bergen, 18 April 2024
KPMG AS
Ståle Christensen State Authorised Public Accountant (This document is signed electronically)
5
The Company's fair estimation of revenue in firm contracts and relevant optional periods for Own Fleet measured in USD - subject to variations in currency exchange rates. The calculation does not include anything on performance bonuses and fuel incentives.
Earnings before interest and taxes. Equal to Operating profit.
EBIT / Operating revenue
Earnings before depreciation, amortisation and impairment, interest and taxes.
EBITDA / Operating revenue
Total equity/total equity and liabilities
Financial utilisation is measured on a monthly basis and comprises the actual recognised revenue for all hours in a month, expressed as a percentage of the full day rate for all hours in a month. Financial utilisation is only measured for periods on charter. The calculation does not include any recognised incentive payments.
Non-current interest-bearing borrowings plus current interestbearing borrowings less cash and cash equivalents. Interest-bearing borrowings do not include lease liabilities.
Equal to Profit (loss) for the period
Net profit / number of outstanding shares
| 31.12.2023 | |||
|---|---|---|---|
| Non-current interest-bearing borrowings |
USD | 561.8 | million |
| Current interest-bearing borrowings |
USD | 149.6 | million |
| Non-current lease liabilities |
USD | 38.4 | million |
| Current lease liabilities |
USD | 24.9 | million |
| Adjustment for real estate lease liabilities |
USD | (26.9) | million |
| A ADJUSTED FINANCIAL INDEBTEDNESS |
USD | 747.8 | MILLION |
| Cash and cash equivalents |
USD | 129.2 | million |
| Adjustment for restricted cash and other cash not readily available |
USD | (18.4) | million |
| B ADJUSTED CASH AND CASH EQUIVALENTS |
USD | 110.8 | MILLION |
| A-B=C ADJUSTED NET INTEREST BEARING DEBT |
USD | 637.0 | MILLION |
| EBITDA last 12 months |
USD | 328.5 | million |
| Adjustment for effects of real estate leases |
USD | (4.8) | million |
| D ADJUSTED EBITDA |
USD | 323.7 | MILLION |
| C/D=E LEVERAGE RATIO |
2.0 |
| 1 | EU Taxonomy Tables 2023 |
127 |
|---|---|---|
| 2 | Stakeholder dialogue |
130 |
| 3 | Methodology Statement: GHG Emissions and Energy Consumption |
131 |
| 4 | Performance evaluation: Environmental Impact |
133 |
| 5 | Performance evaluation: Social Impact |
134 |
| 6 | Performance evaluation: Governance and Ethics |
138 |
See the website for information on the GRI 2021 reference index, TCFD report and SASB index.
The Taxonomy tables are prepared in accordance with the EU Taxonomy regulation (2020/852). Please refer to page 50 for more information about the evaluation of activities and basis of the reporting.
| Financial year 2023 | Year | Substantial Contribution Criteria DNSH criteria ('Does Not Significantly Harm') (h) |
Proportion of | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Economic Activities (1) | Code (a)(2) | Turnover (3) | Proportion of Turnover, year N (4) |
Climate change: Mitigation (5) |
Climate change: Adaptation (6) |
Water (7) Pollution (8) | Circular Economy (9) |
Biodiversity (10) |
Climate change: Mitigation (11) |
Climate change: Adaptation (12) |
Water (13) | Pollution (14) |
Circular Economy (15) |
Biodiversity (16) |
Minimum Safeguards (17) |
Taxonomy aligned (A.1.) or eligible (A.2.) Turnover, year N 1 (18) |
Category enabling activity (19) |
Category transitional activity (20) |
|
| USD million | % | Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y/N | Y/N | Y/N | Y/N | Y/N | Y/N | Y/N | % | E | T | ||
| A. TAXONOMY - ELIGIBLE ACTIVITIES |
|||||||||||||||||||
| A.1. Environmentally sustainable activities (Taxonomy-aligned) | |||||||||||||||||||
| N/EL | N/EL | ||||||||||||||||||
| Turnover of environmentally sustainable activities (taxonomy-aligned) (A.1) |
0 | 0% | |||||||||||||||||
| A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) | |||||||||||||||||||
| N/EL | N/EL | ||||||||||||||||||
| Turnover of Taxonomy-eligible Activities (A.1 + A.2) |
0 | 0% | |||||||||||||||||
| B. TAXONOMY NON-ELIGIBLE ACTIVITIES |
|||||||||||||||||||
| Turnover of Taxonomy Non-eligible activities |
732.5 | 100% | Y:Yes, N:No, EL:Taxonomy-eligible activity for the relevant objective, N/EL:Taxonomy-non-eligible activity for the relevant objective. | ||||||||||||||||
| Total | 732.5 | 100% |
| Proportion of turnover / Total turnover | |||||||
|---|---|---|---|---|---|---|---|
| Taxonomy-aligned per objective Taxonomy-eligible per objective | |||||||
| CCM | 0% | 0% | |||||
| CCA | 0% | 0% | |||||
| WTR | 0% | 0% | |||||
| CE | 0% | 0% | |||||
| PPC | 0% | 0% | |||||
| BIO | 0% | 0% |
CCM: Climate Change Mitigation, CCA: Climate Change Adaptation, WTR: Water and Marine Resources, CE: Circular Economy, PPC: Pollution Prevention and Control, BIO: Biodiversity and ecosystems
| Financial year 2023 | Year | Substantial Contribution Criteria | DNSH criteria ('Does Not Significantly Harm') (h) | Proportion of | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Economic Activities (1) | Code (a) (2) | CapEx (3) | Proportion of CapEx, year N (4) |
Climate change: Mitigation (5) |
Climate change: Adaptation (6) |
Water (7) Pollution (8) | Circular Economy (9) |
Biodiversity (10) |
Climate change: Mitigation (11) |
Climate change: Adaptation (12) |
Water (13) | Pollution (14) |
Circular Economy (15) |
Biodiversity (16) |
Minimum Safeguards (17) |
Taxonomy aligned (A.1.) or eligible (A.2.) CapEx, year N-1 (18) |
Category enabling activity (19) |
Category transitional activity (20) |
|
| USD million | % | Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y/N | Y/N | Y/N | Y/N | Y/N | Y/N | Y/N | % | E | T | ||
| A. TAXONOMY - ELIGIBLE ACTIVITIES |
|||||||||||||||||||
| A.1. Environmentally sustainable activities (Taxonomy-aligned) | |||||||||||||||||||
| N/EL | N/EL | ||||||||||||||||||
| Capex of environmentally sustainable activities (taxonomy-aligned) (A.1) |
0 | 0% | |||||||||||||||||
| A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) | |||||||||||||||||||
| N/EL | N/EL | ||||||||||||||||||
| Capex of Taxonomy-eligible Activities (A.1 + A.2) |
0 | 0% | |||||||||||||||||
| B. TAXONOMY NON-ELIGIBLE ACTIVITIES |
|||||||||||||||||||
| Capex of Taxonomy Non-eligible activities | 111.6 | 100% | Y:Yes, N:No, EL:Taxonomy-eligible activity for the relevant objective, N/EL:Taxonomy-non-eligible activity for the relevant objective. |
| Proportion of CapEx / Total CapEx | ||||||||
|---|---|---|---|---|---|---|---|---|
| Taxonomy-aligned per objective Taxonomy-eligible per objective | ||||||||
| CCM | 0% | 0% | ||||||
| CCA | 0% | 0% | ||||||
| WTR | 0% | 0% | ||||||
| CE | 0% | 0 | ||||||
| PPC | 0% | 0% | ||||||
| BIO | 0% | 0% |
Total 111.6 100%
CCM: Climate Change Mitigation, CCA: Climate Change Adaptation, WTR: Water and Marine Resources, CE: Circular Economy, PPC: Pollution Prevention and Control, BIO: Biodiversity and ecosystems
| Financial year 2023 | Year | Substantial Contribution Criteria | DNSH criteria ('Does Not Significantly Harm') (h) | Proportion of | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Economic Activities (1) | Code (a) (2) | OpEx (3) | Proportion of OpEx, year N (4) |
Climate change: Mitigation (5) |
Climate change: Adaptation (6) |
Water (7) Pollution (8) | Circular Economy (9) |
Biodiversity (10) |
Climate change: Mitigation (11) |
Climate change: Adaptation (12) |
Water (13) | Pollution (14) |
Circular Economy (15) |
Biodiversity (16) |
Minimum Safeguards (17) |
Taxonomy aligned (A.1.) or eligible (A.2.) OpEx, year N-1 (18) |
Category enabling activity (19) |
Category transitional activity (20) |
|
| USD million | % | Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y ; N ; N/EL (b) (c) |
Y/N | Y/N | Y/N | Y/N | Y/N | Y/N | Y/N | % | E | T | ||
| A. TAXONOMY - ELIGIBLE ACTIVITIES |
|||||||||||||||||||
| A.1. Environmentally sustainable activities (Taxonomy-aligned) | |||||||||||||||||||
| N/EL | N/EL | ||||||||||||||||||
| Opex of environmentally sustainable activities (taxonomy-aligned) (A.1) |
0 | 0% | |||||||||||||||||
| A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) | |||||||||||||||||||
| N/EL | N/EL | ||||||||||||||||||
| Opex of Taxonomy-eligible Activities (A.1 + A.2) |
0 | 0% | |||||||||||||||||
| B. TAXONOMY NON-ELIGIBLE ACTIVITIES |
|||||||||||||||||||
| Opex of Taxonomy Non-eligible activities | 33.6 | 100% | Y:Yes, N:No, EL:Taxonomy-eligible activity for the relevant objective, N/EL:Taxonomy-non-eligible activity for the relevant objective. | ||||||||||||||||
| Total | 33.6 | 100% |
| Proportion of OpEx / Total OpEx | ||||||||
|---|---|---|---|---|---|---|---|---|
| Taxonomy-aligned per objective Taxonomy-eligible per objective | ||||||||
| CCM | 0% | 0% | ||||||
| CCA | 0% | 0% | ||||||
| WTR | 0% | 0% | ||||||
| CE | 0% | 0% | ||||||
| PPC | 0% | 0% | ||||||
| BIO | 0% | 0% |
CCM: Climate Change Mitigation, CCA: Climate Change Adaptation, WTR: Water and Marine Resources, CE: Circular Economy, PPC: Pollution Prevention and Control, BIO: Biodiversity and ecosystems
Enhanced reporting practices, the CSRD and The UK Modern Slavery Act and the Norwegian Transparency Act has underscored the necessity and value of increased engagement with business partners, particularly within the supply chain. This highlights the importance of ensuring ethical and sustainable practices, not only within the Group, but also across the broader ecosystem of partners and suppliers.
Membership Organisations: Bergen Næringsråd, Bergens Rederiforening, HR Norge, Innkjøpsforeningen, International Association of Drilling Contractors (USA), International Association of Drilling Contractors (North Sea Chapter), Kranteknisk Forening, Lifting Equipment Engineer Association, Maritime CleanTech, NIMA Forbund, Norwegian Shipowners Association, Norwegian Business Travel Association - NBTA, Norwegian-British Chamber of Commerce, Næringsforeningen i Stavanger, Philippine Norway Business Council, UK Drilling Contractors Association, PSA Safety Forum.
| Key stakeholders |
Method | Outcome |
|---|---|---|
| • Regular financial reporting (quarterly/annual reports) |
• Increased investor confidence and transparency |
|
| Investors and financial institutions |
• Investor conferences and presentations |
• Better financial support and investments |
| • Direct communications through newsletters, emails, and updates |
• Strengthened market reputation |
|
| • Q&A sessions during investor conference calls |
||
| • Operational performance reports |
• Enhanced operational efficiencies and safety standards |
|
| • Regular meetings and updates on market trends |
• Strengthened partnerships and collaborations |
|
| Rig owners | • Joint ventures and strategic partnership discussions |
• Shared best practices and innovation |
| • Safety and environmental compliance updates |
||
| • Regular service performance reviews |
• Increased client satisfaction and loyalty |
|
| Clients | • Customised presentations on new services |
• Tailored solutions meeting client needs |
| • Feedback sessions to understand client needs and improve service |
• Long-term business relationships |
|
| • Supplier meetings and workshops |
• Stronger supply chain relationships |
|
| Suppliers | • Performance feedback and improvement plans |
• Enhanced product quality and innovation |
| • Collaboration on innovation and sustainability initiatives |
• Efficient and sustainable supply processes |
|
| • Regular communication on procurement policies and forecasts |
||
| • Regular town hall meetings and board participation |
• Improved employee morale and job satisfaction |
|
| • Engagement surveys and feedback mechanisms |
• Enhanced skills and productivity |
|
| Employees, including local unions and employee groups |
• Training and development programs |
• Stronger labour relations |
| • Negotiations and consultations with unions |
• Reduced turnover and sick leave rates |
|
| • Health, safety, and wellness programs |
||
| • Compliance and regulatory reporting |
• Compliance with legal and regulatory standards |
|
| Authorities | • Meetings and briefings on industry regulations |
• Positive community relations |
| • Participation in industry forums and committees |
• Contribution to industry standards and practices |
|
| • Community engagement and environmental stewardship programs |
||
This methodology statement provides an overview of Odfjell Drilling's data methodology for GHG emissions and other emissions to air. Our accounting and reporting is done in accordance with the GHG Protocol Corporate Accounting and Reporting Standard, complemented by the ISO 14064 standard.
The consolidation of GHG emissions is based on the Operational Control approach, in accordance with the ESRS guidelines.
Odfjell Drilling reports individual scope emissions in metric tons of CO2 equivalents (tCO2e). These emissions encompass all greenhouse gases recognised by the UNFCCC/Kyoto Protocol, aggregated and converted to CO2e emissions within our operations or value chain. The unit conversion aligns with fuel properties detailed in emissions factor databases and prevailing average values per fuel.
Fuel and electricity data are harvested locally either via meter readings at the sites or via invoicing of purchased electricity and fuels. Each location submits their environmental data monthly for the premises and activities controlled by Odfjell Drilling. The energy consumption is reported in gigajoule.
The days in operation of all rigs (owned and managed) is considered in calculating the intensity ratio, encompassing transits on contract, moored, and DP operations. Emission data is based on absolute (full-year) emissions.
Emission intensity per net revenue is calculated by dividing the total emissions (tonne CO2) from our owned fleet by the corresponding total operating net revenue for the year (MUSD). The emission is calculated from fuel consumption.
Fuel consumption comes from the consumption of MGO from the engines and boilers in the rig fleet and is logged in each rig's electronic logbook book. The density factor of MGO for converting from cubic meters to tonne MGO is based on the Norwegian Environment Agency's national standard factors density factor for MGO. Electricity consumption within the organisation is calculated based on consumption records from invoices or online databases where available from utility provider.
Energy intensity per net revenue is calculated by dividing the total energy consumption within the organisation (joules) from our fleet by the corresponding total operating net revenue for the year (MUSD). See methodology of energy consumption in the paragraph above.
Nitrogen oxide emissions (NOx) are calculated by using a rig specific conversion factor for tonne fuel per kilogramme NOx emission based on the Norwegian excise tax regulations. Sulphur oxide emissions (SOx) are calculated with a standard conversion factor between tonne fuel and kilo SOₓ based on the type of fuel used.
Previous scope 1 emissions are recalculated, with a portion now classified under scope 3 to report in accordance to updated reporting requirements and to clarify the roles of drilling contractors and operators. For more information, please see GHG emissions in the Sustainability Statement. The Group's CO₂ emissions within scope 1 are calculated based on fuel consumption from the combustion of MGO and HVO from the engines, boilers and thirdparty equipment on each rig.
The calculation is based on GHG protocol, both location-based and market-based method. The base year for calculation is 2019, the first year with available data. Odfjell Drilling did not purchase any Guarantees of origin (GO) in 2023. In accordance with ESRS, we initiated the recalculation of emissions from prior years using the market-based method.
Data from previous years were recalculated due to the change in emission factors.
The following table lists all the scope 3 categories that are included in the inventory, with a description on the calculation method, the exclusions in each category and the source of emissions factors. The categories that are not included are not relevant for Odfjell Drilling activities and business model.
Fleet specific: Due to great variations between operating years, we compare current emissions with those from operations when no emission reducing initiatives were implemented per rig, based on Poosmor ATA in anchored operational mode. This reflects rig technical specifications, and remove effects that wind, currents, waves, well conditions and drilling program have on emissions.
In the 2022 emissions calculations there was an update on the acetylene, biofuel blend and biofuel emissions factors to represent the emissions of the fuels used in the reporting year.
| Emissions Source | Main Calculations | Emissions Factor Source |
|---|---|---|
| Category 4 – Upstream transportation & distribution |
The data and the methodology are from frame agreement freight forwarder Logi Trans. Emissions are determined by evaluating pickup locations for goods and individual trip legs, utilising GPS data to calculate distances. The conversion factor between fuel type and CO₂ is then applied on a per kilometre basis for the |
EcoTransIT World methodology (EcoTransIT, 2020) European Standard EN 16258:2012 (Standard, 2012). |
| specific freight category (land, sea, or air). When transport is shared, the Group's emissions share is computed based on the relevant order's portion of the total transport vehicle capacity. N2O, NOx, particles, SO, and non-methane hydrocarbon (NMHC) are included in the calculations. |
WRI/World Business Council for Sustainable Distribution |
|
| The base year for this data is 2021, marking the initial year with available information. | Network for Transport Measures (NTM). |
|
| Category 6 – business travel | Group-level emission data for travel bookings, processed through our travel agent, follows the Thrust Carbon methodology. Calculations consider CO₂ emission factors per kilometre, varying factors like aircraft type, load, class, and cabin configuration. Emissions are categorised by standard CO₂ factors for each kilometre, distinguishing domestic, short haul, and long haul. The numbers in previous years were corrected by separating them into business travel and employee commuting. The base year is 2019. |
Thrust Carbon |
| Category 7 – employee commuting |
The category was introduced in 2023, and the numbers for previous years came from the separation between the data of business travel and employee commuting, reflecting flight emissions for offshore crew. Group-level travel emission data, processed through our travel agent, adheres to the Thrust Carbon methodology, considering conversion factors of CO₂ emissions per kilometre for the aircraft type, load factors, class of travel, cabin configuration, and radiative forcing. The increase in 2023 is tied to offshore commuting by the management fleet in Canada and Namibia, with 2019 as the base year. |
Thrust Carbon |
| Category 8 – Upstream leased assets |
Combustion of Marine Gas Oil (MGO) and Hydrotreated Vegetable Oil (HVO) by engines, boilers and third-party equipment on each rig. Fuel consumption is logged in each rig's electronic logbook in cubic metres of Marine Gas Oil (MGO) and Hydrotreated Vegetable Oil (HVO). |
NOROG044 v. 20 "Recommended guidelines for emission reporting" |
| EcoInvent v3.9. Conversion factor between MGO and CO₂, is retrieved from NOROG 044 v. 20 "Recommended guidelines for emission reporting". The density factor of MGO for converting cubic meters to tonne MGO is based on the Norwegian Environment Agency's national standard factors density factor for Marine Gas Oil (MGO). |
Norwegian Environment Agency "Utslippsfaktorer i klimagassregnskap for Norge" |
|
| emissions from fuel consumption is included.No biogenic CO₂ emissions are included. CO2 |
||
| Category 13 – Downstream leased assets |
Combustion of Marine Gas Oil (MGO) and Hydrotreated Vegetable Oil (HVO) by engines, boilers and third-party equipment on each rig. Fuel consumption is logged in each rig's electronic logbook in cubic metres of Marine Gas Oil (MGO) and Hydrotreated Vegetable Oil (HVO). |
NOROG044 v. 20 "Recommended guidelines for emission reporting" |
| EcoInvent v3.9. Conversion factor between MGO and CO₂, is retrieved from NOROG 044 v. 20 "Recommended guidelines for emission reporting". The density factor of MGO for converting cubic meters to tonne MGO is based on the Norwegian Environment Agency's national standard factors density factor for Marine Gas Oil (MGO). |
Norwegian Environment Agency "Utslippsfaktorer i klimagassregnskap for Norge" |
|
| CO2 emissions from fuel consumption is included. No biogenic CO₂ emissions are included. |
| Indicator | 2023 | 2022 | 2021 |
|---|---|---|---|
| TOTAL SPILLS TO SEA |
|||
| Significant spills |
0 | 0 | 0 |
| Moderate spills |
0 | 1 | 0 |
| Minor spills |
6 | 7 | 5 |
| WASTE* | |||
| Non-hazardous and hazardous waste (Tons) |
|||
| Non-hazardous waste generated |
79.04 | 28.35 | 346.83** |
| Hazardous waste generated |
14.43 | 2.03 | 2.45 |
| Total waste generated |
93.07 | 30.38 | 349.28 |
| Waste by disposal measurements (Tons)*** |
|||
| Waste diverted from disposal |
77.56 | ||
| Waste directed to disposal |
15.91 | ||
| Total | 93.07 |
* Onshore waste from Ågotnes central warehouse. Typical waste from our operations is wood, metal, chemicals, plastic, paper and cardboard, oily rags, food and general waste. Drill cuttings and waste drilling fluids are mainly generated by the drilling operations.
** High volume related to the recycling of Deepsea Bergen.
*** Data not available in 2021 and 2022 due to lack of information of waste disposal measurements.
| Year* | Location | Volume (m3) |
Type of spill |
|---|---|---|---|
| 2020 | Norway | 7.0 | Oil based mud |
| 2022 | Norway | 0.09 | Hydraulic oil |
* The environmental impact related to the moderate spills in 2020 and 2022 was assessed to be of low significance.
| NUMBER OF WORK-RELATED INJURIES Odfjell drilling personnel Fatalities 0 0 0 High-consequence injuries 0 0 0 Total recordable injuries 6 10 3 Non-Odfjell Drilling personnel Fatalities 0 0 0 High-consequence injuries 0 0 0 Total recordable injuries 13 5 1 FREQUENCIES OF WORK-RELATED INJURIES* Odfjell Drilling personnel Fatalities 0 0 0 |
|---|
| High-consequence injuries** 0 0 0 |
| Total recordable injuries** 2.2 5.5 2.1 |
| Working hours 2,730,783 1,825,099 1,449,600 |
| Non-Odfjell Drilling personnel |
| Fatalities 0 0 0 |
| High-consequence injuries** 0 0 0 |
| Total recordable injuries** 5.9 3.4 0.7 |
| Working hours 2,191,344 1,477,281 1,449,600 |
* Data from 2021 do not include onshore employees
** Frequency is the number of injuries per 1,000,000 working hours
Odfjell Drilling aims to employ full-time staff. However, we also accommodate requests for part-time work to meet the needs of our employees. The Group monitors this area through employee surveys and data management.
The majority of employees and contractors within our workforce work offshore and have contracts regulated by Norwegian labour law.
The Group conducts yearly in-depth management assessments of employment types. The analysis encompasses all employees who are permanently or temporarily employed directly by the Group, while contractors and consultants are considered on a case to case basis.
Odfjell Drilling uses contractors (e.g. hired-in resources) for full-time work or part-time and hourly assistance, for periodical work, to complement the resources directly employed by the Group. These are usually contractors with competence that we lack in our own workforce and portfolio, or short-term specialists required for projects like international assignments and yard stays. The use of contractors is also contingent on the requirement for local national content as part of international drilling operations. Contractors are also used to ensure enough resources in the competence pool (temporary pool of resources) for the offshore activities.
As a main rule, the Group sources contractors through frame agreements. These agreements are regulated through our supply chain processes. The terms and conditions applicable for the contractor and the agency are aligned with the terms and conditions for the regular employees within the legal entity for which they work.
Suppliers of contractors are audited through frame agreements to ensure compliance within areas like competence and certification, fair working terms and conditions, and non-retaliation or discrimination.
The Group closely monitors the use of temporary employees and has regular meetings with unions (and employee representatives where relevant) to evaluate the need for, and use of, temporary employment contracts.
| Indicator | 2023 | 2022 | 2021 | ||||
|---|---|---|---|---|---|---|---|
| NUMBER OF WORKFORCE INCLUDING CONTRACTORS |
|||||||
| Employees | 1,563 | 1,358 | 1,135 | ||||
| Contractors full time |
182 | 80 | 11 | ||||
| FTE* Contractors part-time |
106 | 67 | 23 | ||||
| Total number of workforce including contractors |
1,851 | 1,505 | 1,169 | ||||
| NUMBER OF PERMANENT AND TEMPORARY CONTRACT |
|||||||
| Permanent Female |
50 | 47 | 50 | ||||
| Permanent Male |
1,485 | 1,259 | 1,048 | ||||
| Temporary Female |
8 | 6 | 2 | ||||
| Temporary Male |
47 | 46 | 35 | ||||
| NUMBER OF FULL TIME AND PART-TIME CONTRACT |
|||||||
| Full time Female |
58 | 53 | 52 | ||||
| Full time Male |
1,501 | 1,300 | 1,080 | ||||
| Part-time (1-99%) Female |
0 | 0 | 0 | ||||
| Part-time (1-99%) Male |
4 | 5 | 3 | ||||
| Total number of contracts |
1,563 | 1,358 | 1,135 | ||||
| FEMALE REPRESENTATION % |
|||||||
| Offshore | 2.29% | 2.63% | 2.83% | ||||
| Onshore | 20.00% | 19.61% | 22.33% | ||||
| Total female representation % |
3.71% | 3.90% | 4.61% | ||||
| FEMALE REPRESENTATION VS. POSITION LEVEL - TOP |
MANAGEMENT | LEVELS ONLY % |
|||||
| CEO & GM (Level 1) |
50% | 50% | 50% | ||||
| Board of Directors |
33% | 33% | 50% | ||||
| Executive Management (Level 2) |
30% | 29% | 18% | ||||
| Business Area management (Level 3) |
33% | 27% | 29% |
* FTE: full time equivalent
Ensuring a good working environment and sickness absence management is an important part of the work carried out by the HR department in all our locations. By advocating for health in the workplace and fostering a secure work environment, we can effectively address health and well-being.
The Group has procedures for following up unacceptable behaviour and noncompliance in our CMS. All employees in Odfjell Drilling, safety delegates and union representatives have a responsibility to immediately notify and act if they see any bullying. Leaders have a special responsibility to prevent unacceptable behaviour.
The Sick Leave Preventive Measure Policy employs various tools to enhance workforce health, including Work Environment Surveys and Global Sick Leave Reports to identify and act on trends early. Highabsence departments are analysed further. We provide training, online courses, and health campaigns for all staff, alongside regular company doctor meetings. Health insurance supports employee return-to-work efforts, with formal follow-up plans aiding both parties. The policy also emphasizes healthy workplace practices through resource planning, workload monitoring, a zero-tolerance policy for bullying, and fostering open communication
Parental leave policies for all locations follow local legislation. All employees are entitled to parental leave. All data regarding parental leave taken during the regular work schedule are captured in our Enterprise Resource Planning ("ERP") system. The diversity in working schedules limits our reliable data collection to just the onshore population.
| Indicator | 2023 | 2022 | 2021 |
|---|---|---|---|
| SICK LEAVE PER CATEGORY % |
|||
| Onshore | 1.22% | 1.00% | 1.10% |
| Offshore | 5.09% | 5.50% | 4.60% |
| Total sick leave* |
4.71% | 5.10% | 5.10% |
| SICK LEAVE DISTRIBUTION % |
|||
| Short term |
2.92% | 3.40% | 3.80% |
| Long term |
1.79% | 1.70% | 1.30% |
* Total Includes Covid-19 related Sick-leave without Covid-19 was 4.4%, in 2021. Covid-19 preventive measures from 2020 were extended, focusing on promoting national vaccination programs.
In the event of redundancy processes within the Group, it is standard procedure that affected employees are offered transition assistance, skills assistance and employability assistance. In many cases the Group uses external providers with expertise and competence in the area of employment transition.
In advance of retirement, the Group offers and pays for individual financial advice provided by the pension fund provider. Monthly monitoring of the number of employees and turnover within each operational area, provides overview and opportunity to identify reasons for leaving, and preventing issues that may cause negative turnover.
| Indicator | 2023 | 2022 | 2021* |
|---|---|---|---|
| TURNOVER PER CATEGORY % |
|||
| Onshore | 0.90% | 4.78% | 4.69% |
| Offshore | 2.50% | 1.58% | 1.32% |
| Total turnover |
2.4% | 1.85% | 1.65% |
| TURNOVER BY REGION (WORK LOCATION COUNTRY) % |
|||
| Norway | 2.40% | 1.58% | |
| Namibia | 6.25% | ||
| United Kingdom |
0% | 40% | |
| TURNOVER PER GENDER CATEGORY % |
|||
| Female | 5.40% | 1.94% | |
| Male | 2.30% | 1.85% | |
| TURNOVER PER AGE GROUP % |
|||
| 0-19 | 0% | 0% | |
| 20-29 | 1.60% | 0.58% | |
| 30-39 | 2% | 3.24% | |
| 40-49 | 3.60% | 1.59% | |
| 50-59 | 1.90% | 1.55% | |
| 60-69 | 1.90% | 0% | |
| 70+ | 0% | 0% |
* Please refer to the 2021 sustainability report for numbers before the company split.
| Indicator | 2023 | 2022 | 2021* | |
|---|---|---|---|---|
| NUMBER OF DIRECTORS/EMPLOYEES IN |
GROUP GOVERNANCE |
BODIES | ||
| Board of Directors |
4 | 3 | 4 | |
| CEO & GM (Level 1) |
2 | 2 | 2 | |
| Executive Management (Level 2) |
10 | 7 | 8 | |
| Business Area Management(Level 3) |
12 | 11 | 10 | |
| REGIONAL REPRESENTATION IN THE GROUP |
% | |||
| Scandinavia | 89.30% | 96% | 99% | |
| Central/Western Europe |
6.10% | 3% | 1% | |
| Other | 4.60% | 1% | 0% | |
| NUMBER OF NATIONALITIES REPRESENTED |
IN GROUP |
GOVERNANCE | BODIES | |
| Board of Directors |
1 | 1 | 3 | |
| CEO & GM (Level 1) |
2 | 2 | 2 | |
| Executive Management (Level 2) |
2 | 2 | 3 | |
| Business Area Management (Level 3) |
2 | 2 | 4 | |
| NUMBER OF NATIONALITIES REPRESENTED |
IN GROUP |
GOVERNANCE | BODIES BY |
CITIZENSHIP |
| Board of Directors |
Norwegian | 4 | 4 | |
| CEO & GM (Level 1) |
Norwegian | 1 | 1 | |
| UK | 1 | 1 | ||
| Executive Management (level 2) |
Norwegian | 6 | 7 | |
| Danish | 2 | 1 | ||
| Business Area Management (Level 3) |
Norway | 11 | 9 | |
| UK | 1 | 1 | ||
| LOCAL REPRESENTATION IN SENIOR |
MANAGEMENT IN |
SIGNIFICANT | LOCATIONS %** |
| Norway | 86,4% | 91,3% |
|---|---|---|
* Please refer to the 2021 sustainability report for numbers before the company split.
** Significant location = more than 50 employees, Senior management = Level 1-3, Local = citizenship in the country of work location
| Indicator | 2023 | 2022 | 2021 | ||
|---|---|---|---|---|---|
| NUMBER OF NATIONALITIES REPRESENTED BY CATEGORY |
|||||
| Offshore | 25 | 16 | 11 | ||
| Onshore | 8 | 7 | 6 | ||
| LOCAL STAFF REPRESENTED BASED ON NATIONALITY IN |
EACH LOCATION |
% | |||
| UK | 100% | 100% | 100% | ||
| Norway | 97.40% | 97% | 97% | ||
| Namibia | 0% | 0% | 0% | ||
| UAE | 0% | 0% | 0% | ||
| NUMBER OF PERMANENT EMPLOYEES BY REGION |
|||||
| Central/Western Europe |
2 | 2 | 3 | ||
| Middle East |
2 | 2 | 2 | ||
| Scandinavia | 1,157 | 1,204 | 1,096 | ||
| Africa | 347 | 100 | 0 | ||
| NUMBER OF TEMPORARY EMPLOYEES BY REGION* |
|||||
| Central/Western Europe |
0 | 0 | 0 | ||
| Eastern Europe |
0 | 0 | 0 | ||
| Scandinavia | 55 | 50 | 34 |
* Temporary contracts: employees working temporarily for the Group, or employees with a permanent employment in the Group, but seconded to another Group company temporarily.
| Indicator | 2023 | 2022 | 2021 | |
|---|---|---|---|---|
| NUMBER OF KEY EMPLOYEES ENROLLED IN LEADERSHIP TRAINING* |
||||
| Onshore | 12 | 0 | 36 | |
| Offshore | 16 | 145 | 263 | |
| Total | 28 | 145 | 299 | |
| COMPLETED DEVELOPMENT REVIEWS PER CATEGORY %** |
||||
| Offshore female |
48% | 50% | 37% | |
| Offshore male |
48% | 30% | 46% | |
| Onshore female |
27% | 25% | 10% | |
| Onshore male |
26% | 17% | 10% | |
* The Group concluded a 3-year leadership training program 2020-2022 for offshore managers, including the topics "Ethics" and "Use of power" in leadership. Our leadership training strategy has reached 530 leaders in the 3-year period.
** Development talk completions are adjusted to reflect post split of the Company
| Indicator | 2023 | 2022 | 2021 | ||||
|---|---|---|---|---|---|---|---|
| Total | Average | Total | Average | Total | Average | ||
| NUMBER OF REQUIRED TRAINING HOURS* |
|||||||
| Offshore female |
673 | 20 | 807 | 31 | 916 | 19 | |
| Offshore male |
24,110 | 17 | 31,500 | 26 | 25,218 | 12 | |
| Onshore female |
280 | 11 | 126 | 2 | 795 | 3 | |
| Onshore male |
668 | 7 | 506 | 6 | 2,255 | 4 | |
| Total workforce |
25,732 | 16 | 32,939 | 24 | 29,184 | 11 | |
| NUMBER OF SELF DEVELOPMENT HOURS ** |
|||||||
| Total workforce |
1,014 | 0.6 | 1,140 | 1 | 1,912 | 0.7 | |
| NUMBER OF OIM LEADERSHIP TRAINING HOURS |
|||||||
| Total workforce |
1,280 | 80 |
* Number of required training hours in 2022 reflects the split of the company and increase related to operation of new rigs and new locations.
** Number of Self development hours 2022 are total hours by active users post split of the company
| TOTAL OF NEW EMPLOYEES 173 137 NUMBER OF NEW EMPLOYEES BY REGION Scandinavia 50 105 Africa 122 31 United Kingdom 0 1 Central/Western Europe 1 0 NUMBER OF NEW EMPLOYEES BY GENDER Female 8 12 Male 165 125 NUMBER OF NEW EMPLOYEES BY AGE GROUP 0-19 14 18 20-29 28 30 30-39 46 52 40-49 45 25 50-59 35 11 60-69 5 1 |
Indicator | 2023 | 2022 |
|---|---|---|---|
* Please refer to the 2021 sustainability report for numbers before the company split.
| Indicator | 2023 | 2022 | 2021* | |
|---|---|---|---|---|
| AGE DISTRIBUTION |
ONSHORE % |
|||
| Under 30 |
11.50% | 17.10% | 5% | |
| 30-50 | 61% | 61.10% | 46% | |
| over 50 |
27.60% | 21.90% | 49% | |
| AGE DISTRIBUTION |
OFFSHORE % |
|||
| Under 30 |
14% | 8.70% | 16% | |
| 30-50 | 56.60% | 54.80% | 61% | |
| Over 50 |
29.40% | 36.50% | 23% | |
| AGE DISTRIBUTION |
BY GOVERNANCE BODY % |
|||
| Under 30 |
Board of Directors |
0% | 0% | 0% |
| CEO & GM (Level 1) |
0% | 0% | 0% | |
| Executive Management (Level 2) |
0% | 0% | 0% | |
| Business Area Management (Vice Presidents - Level 3) |
0% | 0% | 0% | |
| 30-50 | Board of Directors |
0% | 0% | 0% |
| CEO & GM (Level 1) |
0% | 0% | 0% | |
| Executive Management (Level 2) |
30% | 30% | 18% | |
| Business Area Management (Vice Presidents - Level 3) |
58% | 55% | 61% | |
| Over 50 |
Board of Directors |
100% | 100% | 100% |
| CEO & GM (Level 1) |
100% | 100% | 100% | |
| Executive Management (Level 2) |
70% | 70% | 82% | |
| Business Area Management (Vice Presidents - Level 3) |
42% | 45% | 39% |
An updated COBC course, which is mandatory to all employees, was launched on 1 December 2021. The 2022 number includes all employees who have taken the updated COBC course from December 2021. The 2021 number include Odfjell Technology employees.
From 2023 the COBC training is mandatory only for new permanent employees. All employees are required to confirm that they have read, understood and complied with the COBC annually. Onshore employees in Odfjell Drilling completed a refresh course about conflict of interests in 2023. Internal awareness sessions are mainly related to Odfjell Drilling's operation
No significant risks related to corruption were identified in the Group's operations in 2023 based on integrity due diligence performed. One potential supplier was not approved due to suspicion of noncompliance with our COBC.
| Indicator | 2023 | 2022 | 2021 | ||
|---|---|---|---|---|---|
| NUMBER OF EMPLOYEES WHO HAVE UNDERGONE ANTI-CORRUPTION TRAINING |
|||||
| E-learning COBC |
128 | 1,178 | 1,716 | ||
| Refresh course – conflict of interests |
113 | N/A | N/A | ||
| Awareness sessions/work shops |
36 | 35 | 20 | ||
| EMPLOYEES CONFIRMED COMPLIANCE WITH COBC PER |
REGION %* |
||||
| Norway | 73% | 86% | |||
| UK | 100% | 50% | |||
| Malta | 100% | N/A | |||
| Namibia | 78% | N/A | |||
| NUMBER OF ANTI-CORRUPTION ASSESSMENTS OF HIGH RISK SUPPLIERS/THIRD PARTIES** |
|||||
| Internal | 6 | 3 | 5 | ||
| External | 2 | 1 | 0 | ||
| Total anti-corruption assessments of high risk suppliers/third parties |
8 | 4 | 5 | ||
| REPORTED CASES |
|||||
| Whistleblowing portal |
2 | 1 | 5 | ||
| Other Channels |
0 | 0 | 0 | ||
* Malta and Namibia are new locations from 2022. Confirming compliance is first relevant after completing the E-learning COBC and therefore not relevant for 2021.
** "Internal" assessments are carried out by Group personnel, and "external" assessments using external consultants*
For more information visit www.odfjelldrilling.com
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