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Petrolia SE
Annual Report • Apr 25, 2024
9922_10-k_2023-12-31_9b3b57d1-6426-4623-9d96-c4e29c6ed6f2.pdf
Annual Report
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Annual report 2023
We believe collaboration is key to exploration success.
Petrolia NOCO AS is an independent exploration and production company leveraging new technologies and innovative collaboration models to discover and develop oil and gas resources on the Norwegian continental shelf. The company´s goal is profitable growth and value creation for shareholders, employees and society through smart reinvestment of cash flow from producing fields into new licenses through exploration, field development and acquisitions. Our strategic focus is on exploring areas near existing infrastructure for swift tie-backs while challenging traditional perspectives to revitalize legacy assets or discover new plays. The company also takes a proactive approach towards reducing emissions through participation in carbon capture and storage and is also supporting all lower emission initiatives on Brage and other assets.
Petrolia NOCO has 657 shareholders as of 31.12.2023. Its shares are registered in the Norwegian Central Securities Depository (Verdipapirsentralen, VPS) with ISIN: NO0010844301. The shares are registered with the ticker PNO on the NOTC (www.notc.no), a marketplace for unlisted shares. The LEI code is 549300OTY8HENWE3AL33.
petrolianoco.no
Annual report 2023
Board of directors
Dr. Robert Arnott Executive Chairman
Experienced geologist and board director with specialist competence within mature oil and gas provinces – an area he is recognised for his research into. Has held board-level positions at numerous E&P companies including Hurricane Energy plc, Rocksource ASA, Core Energy AS, Spring Energy AS and DNO ASA. Started his career with Royal Dutch Shell before becoming an oil and gas equity analyst at Goldman Sachs and Morgan Stanley.
Sjur Storaas Board Director
Executive who has held numerous board-level positions at various oil and gas organisations and been managing director of several companies within oil and gas such as CCB, the largest oil service base in Norway, and HOG, the main oil and gas interest organization in oil and gas in Hordaland county, Norway. Is today a partner at engineering and consulting company Head Energy Consulting AS and director of the board of Petrolia SE.
Brede Bjøvad Larsen Board Director
Professional investor with broad industry and international experience. Has been a board director at Petrolia NOCO AS since 2016. Also holds board-level positions at oil services company Independent Oil Tools AS, plus several private board roles. He holds a masters degree in global management from RBS London, UK.
Executive Management
Morten Stenhaug Chief Executive Officer
Morten has over 30 years of broad technical and business management experience. After 15 years with Norsk Hydro and Statoil/Equinor in Norway he joined SLB as VP Production to build SLB's Integrated Field Development and Subsea division, setting up businesses in all the major hubs globally through organic growth and acquisitions. After 14 years based out of Singapore, Paris and Houston, he returned to Norway and Norwegian Energy Partners before joining Petrolia SE as EVP and Petrolia Noco as CCO, taking on the role of CEO on December 1st 2022.
Erik von Krogh Chief Financial Officer
Erik is an experienced finance professional with background from both the financial service industry and as CFO for several companies. Prior to joining Petrolia Noco in 2022 he held the position as CFO for the two listed companies Seabird Exploration Plc and Green Minerals AS. Prior to this he was leading the finance division of the ship management company Myklebusthaug Management AS. His previous experience also includes corporate banking from Nordea's shipping division and investment banking from Fearnley Securities. He holds a Cand.merc./ MSc from the Norwegian School of Economics (NHH).
Trond Halvorsen Wierød SVP Exploration & Production
Trond is an experienced manager and discipline professional with a demonstrated history of value creation. He has 20 years' experience from exploration, field development and production from Aker BP, PGNiG and Equinor. He has a proven track record in business development and he is passionate about improving ways of working, using technology and by putting people first. Trond is also active in developing Ensemble modelling & Ensemle QC tools.
Annual Report & Accounts
Directors' Report PETROLIA NOCO AS 2023
Nature of Business and Business Locations
Petrolia NOCO AS (PNO) was incorporated on 3rd June 2011.
The company is registered in Bergen.
The Ministry of Petroleum and Energy approved PNO as a NCS licensee on the 7th of February 2012 and in November 2016 the company was prequalified as an operator on the Norwegian Continental Shelf (NCS).
PNO is an Exploration and Production company with the Norwegian Continental Shelf (NCS) as its focus.
Financial Result
The financial statement of PNO is prepared in accordance with International Financial Reporting Standards.
The company recorded a net loss in 2023 of NOK 34.4 million compared to a net loss of NOK 38.4 million in 2022. The net loss was transferred to retained earnings.
Revenues were NOK 9.8 million, down from NOK 34.2 million the previous year. The revenues in 2023 were negatively affected by the shutdown of Flyndre and low production from Enoch caused by technical problems with the well in the second half of 2023.
Exploration expenses were NOK 59.0 million, down from NOK 78.2 million a year ago,reflecting somewhat lower activity in the licenses than in 2022.
The operating result (EBIT) was NOK -92.1 million compared with NOK -105.9 million in 2022.
Revenues and expenses related to Brage has not been recognized in the 2023 financial statement.
Total assets were NOK 1093.4 million on 31 December 2023
compared to NOK 321.6 million a year ago. The significant increase is a result of the Brage transaction.
Goodwill as of 31 December 2023 is NOK 146.2 million and is based on the Purchase Price Allocation (PPA) related to the Brage acquisition. The goodwill consists of NOK 215.8 million of technical goodwill and negative ordinary goodwill of NOK 69.6 million.
Cash and cash equivalents on 31 December 2023 were NOK 29.9 million,down from NOK 55.4 million at the end of 2022.
Book equity at the end of 2023 was NOK -3.6 million compared with NOK 10.8 million in 2022.
Interest-bearing debt on 31 December 2023 was NOK 281.7 million, consisting of loans from shareholders of NOK 205.8 million and a 1st priority loan from external lenders of NOK 75.9 million.
Brage Transaction
In October 2023, PNO signed an agreement with Vår Energi ASA to acquire its 12.26% interest in the Brage Field. The transaction was completed on 29 December 2023. The consideration related to the transaction was NOK 137 million. including the acquisition of the seller's tax balance, valued at NOK 62 million. The effective date for the transaction with respect to tax is 1 January 2023, while the acquisition date with respect to accounting is 29 December 2023. The License Portfolio
Petrolia NOCO holds interest in 10 licenses in the North Sea and the Norwegian Sea. including two operatorships.
Norwegian Sea licenses:
| • PL 1013 | (20%) |
|---|---|
| • PL 1013 B | (20%) |
| • PL 935 | (20%) |
| • PL 1221 | (40%) |
North Sea licenses:
- PL 882 (20%)
- PL 055 Brage Unit (12.3%) • PL 1210 (20%) • PL 1181 (60%)
- PL 018 C (11.65%)
- PL 048 D (21.8%)
Operational developments
Brage (12.26%)
PNO acquired a 12.26% interest in Brage with effective date 1 January 2023. Net production to PNO in 2023 was 1691 boe per day. Throughout the year, production increased from 753 boe per day in Q1 to 2798 boe per day in Q4, boosted by the Talisker East well that started to produce in May and two additional wells that came on stream during 2H 2023.
Enoch (4.36%)
The Enoch Field is an oil and gas producing field in the central part of the North Sea on the border to the British sector, 10 km northwest of the Gina Krogh field. The field is operated by Repsol Sinopec North Sea Limited.
The net production to Petrolia NOCO AS from the Enoch Field averaged at 16 boe per day in 2023. Due to technical problems the well was temporary shut most of 2H 2023 but has come back on stream in 2024.
Flyndre (0.825%)
The Flyndre Field is an oil and gas producing field on the border between the Norwegian and UK sectors of the North Sea, 35 km northwest of the Ekofisk Field. The field is operated by Petrogas NEO UK Limited. The Flyndre field did not have any production during 2023. Following an unsuccessful attempt to restart production, the field was shut down permanently in July 2023.
PL882 (20%)
PL 882 was awarded as part of the APA 2016 round, where Petrolia recognised that the blocks to the west of Snorre Field were under-explored and the area would be better imaged with a new broadband data.
The strong partnership led to a de-risking of the Dugong prospect which was spudded towards the end of Q2 2020 and was subsequently announced as a commercial discovery. The recoverable resources are estimated to be between 29 - 84 million barrels of oil equivalent.
The PL 882 license partnership is working on several field
development solutions scenarios. First oil is now expected in 2029.
PL 1013 (20%)
In 1H 2022 the Company farmed down 40% of its interest in the license to Equinor. The license has taken a drill decision and an exploration well is planned for Q3 2024. The Løvmeis prospect is located close to existing facilities, and if successful, the partnership plans a fast-track development with production commencing in early 2026.
PL 935 (10%)
The Bounty prospect in the PL 935 license was drilled in 2022 and determined as a dry well with shows. The operator and partners are now evaluating the data obtained to consider if additional wells shall be drilled. Interpretation of the well results are positive and are de-risking the up-flank "high impact" prospect. It is located in the Frøya High area. A well will be drilled in the neighbouring license in Q4 2024 that could prove up the Bounty reserves.
PL 1181 (Operator 60%)
The license was awarded under the APA 2022. The license is located in the northern part of the North Sea in the Tampen area.
PL 1221 (Operator 40%)
The license was awarded under the APA 2023. The license is located in the Norwegian Sea.
PL 1210 (30%)
The license was awarded under the APA 2023. The license is located in the North Sea.
Financial Risk
The main financial risk factors for Petrolia NOCO AS are related to fluctuations in oil prices, exchange rates and interest levels and the need of capital funding.
Going concern
Pursuant to the Norwegian Accounting Act section 3-3a, the Board confirms that the requirements of the going concern assumption are met and that the annual accounts have been prepared on that basis. The Company is committed to further exploration activities in 2024. The financial position and the liquidity of the company are considered to be manageable in relation to planned activity level, through a combination of cash flow from producing assets, funds covered by existing loan facilities (refer to note 20) and available liquidity from main shareholders. Loans from shareholders of NOK 206
Annual Report & Accounts
million and external loans of NOK 76 million matures in December 2024 and needs to be refinanced or extended. The Company expects that it will be able to refinance the external loans, and the main shareholders have expressed willingness and documented capacity to provide funding if required.
As of 31 December 2023, the Company had a negative equity. However, the Company's evaluation of its main assets, including Brage and Dugong, indicate that the fair value of the equity is considerably higher than the book value. The Company expects to strengthen its equity with retained earnings.
Our approach to ESG
Our approach to sustainability is to create value in a robust and sustainable way through cross-organisation collaboration on the NCS. We aim to discover every time we drill through safe and efficient operations. We collaborate with the strongest operators on the NCS who have a documented track record of delivering operations with low-carbon emissions.
People & Organisation
We believe that robust and healthy employees make better decisions and act safer both at work and at home. Health and well-being is a key focus in the team and embedded in all we do. Our team is diverse and dedicated. Currently 36 % of the organisation are women. The company pays equal salaries and gives equal compensation for women and men in positions at the same level. As of 31.12.2023. the company had 14 full time employees, in addition to 3 temporary staff.
Responsible operations
Petrolia NOCO AS, in close collaboration with partners and contractors, have successfully performed planned operations without any incidents, nor harm to the environment. There were no injuries or accidents in 2023.
Petrolia NOCO AS confirms that the annual statement of accounts for 2023 and to our best conviction has been prepared in accordance with the prevailing accounting standards, and that the information gives a true picture of the business and corporations assets, debt, financial position and results as a whole.
Subsequent events
In January 2024, the company was awarded interest in two licenses in the Norwegian Awards in Predefined Areas (APA 2023). License PL 1221 will be operated by Petrolia NOCO AS with a 40% working interest. License partner is Equinor with 60% working interest. License PL 1210 will be operated by Wintershall Dea (40% working interest) with PNO and Equinor as license partners. both with 30% working interest.
After careful evaluation of the resource potential in the licenses. the license groups have decided to relinquish the following licenses: PL 882 B, PL 992, PL 994, PL 1106, PL 1107 and PL 1150 S.
Robert John Arnott Chairman of the Board
Bergen, 25 April 2024
Sjur Storaas Board Member
Brede Bjøvad Larsen Board Member
INCOME STATEMENT
| (Amounts in TNOK) | Note | 2023 | 2022 |
|---|---|---|---|
| OPERATING INCOME | 4 | 9 810 | 34 187 |
| Production cost | 5 | -1 473 | -3 469 |
| Change in over-/underlift position | 5,14 | -1 400 | -10 117 |
| Exploration expenses | 6 | -58 964 | -78 169 |
| Payroll and related cost | 7 | -18 657 | -22 884 |
| Depreciation and amortisation | 11,12,13 | -1 152 | -1 547 |
| Other operating expenses | 8 | -20 220 | -23 917 |
| Operating profit (loss) | -92 057 | -105 916 | |
| Finance income | 9 | 2 554 | 102 |
| FINANCE COSTS | 9 | -20 723 | -16 697 |
| Net financial items | -18 169 | -16 595 | |
| Profit (loss) before income tax | -110 225 | -122 511 | |
| Calculated refund tax value of exploration costs | 69 457 | 88 020 | |
| Change deferred tax | 6 392 | -1 919 | |
| Possible income tax adjustment | - | -2 000 | |
| Net Income tax credit | 10 | 75 849 | 84 101 |
| Profit (loss) for the year | -34 376 | -38 410 |
STATEMENT OF COMPREHENSIVE INCOME
| (Amounts in TNOK) | Note | 2023 | 2022 |
|---|---|---|---|
| Profit (loss) for the year | -34 376 | -38 410 | |
| Other comprehensive income, net of tax: | - | - | |
| Total other comprehensive income, net of tax | - | - | |
| Total comprehensive income for the year | -34 376 | -38 410 | |
| Earnings per share | 18 | ||
| Basic, profit for the year attributable to ordinary equity holders of the parent |
-0.21 | -0.26 | |
| Diluted, profit for the year attributable to ordinary equity holders of the parent |
-0.21 | -0.26 |
STATEMENT OF CHANGES IN EQUITY
| Premium | Uncovered | |||
|---|---|---|---|---|
| (Amounts in TNOK) | Share capital |
paid-in capital |
loss/Other capital |
Total equity |
| Equity at 1st of January 2022 | 14 500 | 4 710 | - | 19 210 |
| Profit (loss) for the year | -38 410 | -38 410 | ||
| Other comprehensive income for the year | - | - | ||
| Total comprehensive income for the year | -38 410 | -38 410 | ||
| Shares issued in 2022 | 1 500 | 28 500 | - | 30 000 |
| Transferred | -33 210 | 33 210 | - | |
| Equity at 31st of December 2022 | 16 000 | - | -5 200 | 10 800 |
| Equity at 1st of January 2023 | 16 000 | - | -5 200 | 10 800 |
| Profit (loss) for the year | -34 376 | -34 376 | ||
| Other comprehensive income for the year | - | - | ||
| Total comprehensive income for the year | -34 376 | -34 376 | ||
| Shares issued in 2023 | 1 000 | 19 000 | - | 20 000 |
| Transferred | -19 000 | 19 000 | - | |
| Equity at 31st of December 2023 | 17 000 | - | -20 576 | -3 576 |
BALANCE SHEET
| (Amounts in TNOK) | Note | 31.12.2023 | 31.12.2022 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Goodwill | 11,28 | 146 227 | - |
| Deferred tax asset | 10,28 | 187 830 | - |
| Exploration and evaluation assets | 11 | 151 539 | 149 033 |
| Oil and gas properties | 12,28 | 337 221 | 637 |
| Property. plant and equipment | 12 | 2 375 | 66 |
| Right-of-use assets | 13 | 2 053 | 2 965 |
| Non-current receivables | 28 | 77 216 | - |
| Total non-current assets | 904 460 | 152 702 | |
| Current assets | |||
| Inventory | 14 | 70 370 | 1 528 |
| Prepayments and other receivables | 15 | 40 227 | 23 930 |
| Tax receivable refund tax value exploration expenses | 10 | 48 411 | 88 020 |
| Cash and cash equivalents | 16 | 29 893 | 55 403 |
| Total current assets | 188 901 | 168 881 | |
| Total assets | 1 093 362 | 321 583 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 17 | 17 000 | 16 000 |
| Premium paid-in capital | - | - | |
| Other reserves/Uncovered loss | -20 576 | -5 200 | |
| Total equity | -3 576 | 10 800 | |
| Liabilities | |||
| Deferred taxes | 10 | - | 99 041 |
| Decommissioning provision | 19 | 675 297 | 9 923 |
| Lease liability | 13 | 1 112 | 1 956 |
| Borrowings | 20,21,22 | - | 80 750 |
| Total non-current liabilities | 676 409 | 191 671 | |
| Current liabilities | |||
| Borrowings | 22 | 281 650 | 67 500 |
| Trade creditors | 21 | 8 629 | 23 541 |
| Lease liability - current | 13 | 1 110 | 1 110 |
| Payable tax | 10 | 6 500 | 6 500 |
| Other current liabilities | 23 | 122 639 | 20 461 |
| Total current liabilities | 420 529 | 119 112 | |
| Total liabilities | 1 096 938 | 310 783 | |
| Total equity and liabilities | 1 093 362 | 321 583 |
Bergen, 25 April 2024
Robert John Arnott Chairman of the Board
Brede Bjøvad Larsen Board Member
Sjur Storaas Board Member
Morten Stenhaug Chief Executive Officer
Annual Report & Accounts
CASH FLOW STATEMENT
| (Amounts in TNOK) | Note | 2023 | 2022 |
|---|---|---|---|
| Cash flow from operating activities | |||
| Profit (loss) before income tax | -110 225 | -122 511 | |
| Adjustments: | |||
| Tax refunded | 25 | 88 020 | -29 593 |
| Depreciation and amortisation | 12,13 | 1 152 | 1 547 |
| Gain/loss on disposal of PP&E and exploration assets | 4,11 | -17 | -414 |
| Changes in trade creditors | -14 911 | 10 436 | |
| Changes in other accruals | 11 708 | 28 336 | |
| Net cash flow from operating activities | -24 273 | -112 199 | |
| Cash flow from investing activities | |||
| Investment in exploration and evaluation assets | 11 | -2 506 | - |
| Net cash paid in business combination | 28 | -148 581 | - |
| Investment in oil and gas properties | 12 | -3 | - |
| Purchase of property, plant and equipment | 12 | -50 | -269 |
| Purchase of intangible asset (software) | 12 | -2 386 | - |
| Proceeds from sale of PP&E and Exploration assets | 13 | - | - |
| Net cash flow from investing activities | -153 526 | -269 | |
| Cash flow from financing activities | |||
| Funds drawn non-current borrowings | 22 | 145 000 | 5 000 |
| Funds drawn current borrowings | 22 | 22 400 | 67 500 |
| Repayments of non-current borrowings | 22 | -20 000 | -15 000 |
| Repayments of current borrowings | 22 | -14 000 | - |
| Repayment of lease liabilities | 13 | -1 110 | -1 743 |
| Proceeds from share issues | 20 000 | 30 000 | |
| Net cash flow from financing activities | 152 290 | 85 757 | |
| Net change in cash and cash equivalents | -25 510 | -26 712 | |
| Cash and cash equivalents at 1st January | 55 403 | 82 115 | |
| Cash and cash equivalents at 31st of December | 29 893 | 55 403 |
General information
The Financial statements of Petrolia NOCO AS for 2023 were approved by the Board of Directors and CEO on 25 April 2024.
Petrolia NOCO AS is a private limited company incorporated and domiciled in Norway. with its main office in Bergen. The company was incorporated 3 June 2011.
The company's business segments are exploration for and production of oil and gas on the Norwegian continental shelf.
NOTE 2
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
Basis for preparation
The financial statements have been prepared in accordance with IFRS Accounting Policies as adopted by the EU and in accordance with the additional requirements following the Norwegian Accounting Act.
The financial statements have been prepared on a historical cost basis and on a going concern assumption.
The Board is of the opinion that the financial statements are to be prepared on a going concern basis. It is expected that the cash flow from operation will be sufficient to cover the company's planned actitivties for 2024. Loans from shareholders of NOK 206 million and a loan from external lenders of NOK 76 million matures in December 2024 and needs to be refinanced or extended. The main shareholders have expressed willingness and documented capacity to provide funding if required.
The Board expects that the challenges will continue but remains confident that the company will obtain sufficient financial resources to enable it to continue as a going concern in the foreseeable future.
Business combinations and acquisition of non-controlling interests
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination. the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
Contingent consideration, resulting from business combination, is valued at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or loss.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Company re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date.
If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred. then the gain is recognised in profit or loss.
Annual Report & Accounts
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing. goodwill acquired in a business combination is. from the acquisition date. allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognised in accordance with the requirements for provisions in IAS 37 Provisions. Contingent Liabilities and Contingent Assets or the amount initially recognised less (when appropriate) cumulative amortisation recognised in accordance with the requirements for revenue recognition.
Foreign currency
Functional currency and presentation currency
The company's functional and presentation currency is Norwegian kroner (NOK).
Transactions in foreign currency
Foreign currency transactions are translated into NOK using the exchange rates at the transaction date. Monetary balances in foreign currencies are translated into NOK at the exchange rates on the date of the balance sheet. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Property, plant and equipment including Oil and Gas Properties
Property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment charges. Depreciation of other assets than oil and gas properties are calculated on a straight line basis over the assets expected useful life and adjusted for any impairment charges. Expected useful lives of long-lived assets are reviewed annually and where they differ from previous estimates. depreciation periods are changed accordingly.
Property, plant and equipment are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount.
Depreciation of Oil and Gas Properties
Capitalised costs for oil & gas fields in production are depreciated individually (on a field level) using the unit-of-production method. The depreciation is calculated based on proved and probable reserves. The rate of depreciation is equal to the ratio of oil and gas production for the period over the estimated remaining proved and probable reserves expected to be recovered at the beginning of the period. The rate of depreciation is multiplied with the carrying value including estimated future investments. Any changes in the reserves estimate that affect unit-of-production calculations, are accounted for prospectively over the revised remaining reserves.
Exploration costs for oil and gas properties
The Company uses the successful efforts method to account for exploration costs. All exploration costs, with the exception of acquisition costs of licenses and drilling costs of exploration wells, are expensed as incurred. Costs of acquiring licenses are capitalised as intangible assets.
Drilling cost for exploration wells are temporarily capitalised pending the evaluation of potential discoveries of oil and gas reserves. If no reserves are discovered. or if recovery of the reserves is not considered technically or commercially viable, expenses relating to the drilling of exploration wells are charged to income statement. Such costs can remain capitalised for more than one year. The main criteria are that there must be definite plans for future drilling in the licence or that a development decision is expected in the near future.
Joint operations and similar arrangements, joint ventures and associates
A joint arrangement is present where The Company holds a long-term interest which is jointly controlled by The Company and one or more other companies under a contractual arrangement in which decisions about the relevant activities require the unanimous consent of the parties sharing control. Such joint arrangements are classified as either joint operations or joint ventures.
The parties to a joint operation have rights to the assets and obligations for the liabilities, relating to their respective share of the jointarrangement. In determining whether the terms of contractual arrangements and other facts and circumstances lead to a classificationas joint operations. The Company considers the nature of products and markets of the arrangements and whether the
substance of their agreements is that the parties involved have rights to substantially all the arrangement's assets. The Company accounts for its share of assets, liabilities, revenues and expenses in joint operations in accordance with the principles applicable to those particular assets, liabilities. revenues and expenses. Acquisition of ownership shares in joint operations in which the activity constitutes a business, are accounted for in accordance with the requirements applicable to business combinations.
Those of The Company's exploration and production licence activities that are within the scope of IFRS 11 Joint Arrangements have been classified as joint operations.
The Company as operator of joint operations and similar arrangements
Indirect operating expenses such as personnel expenses are accumulated in cost pools. These costs are allocated on an hours' incurred basis to The Company operated joint operations under IFRS 11.Costs allocated to the other partners' share of operated joint operations and similar arrangements reduce the costs in the Statement of income. Only The Company's share related to joint operations and similar arrangements are reflected in the Statement of income and the Balance sheet. The Company holds currently no lease contracts under IFRS 16 in joint operations.
Leases (as lessee)
Until 2018, leases in which most of the risks and rewards of ownership were retained by the lessor were classified as operating leases. Payments made under operating leases were charged to the income statement on a straight-line basis over the period of the lease.
The company adopted IFRS 16 – Leases from 1 January 2019. IFRS 16 sets out the principles for recognition. measurement, presentation and disclosures of leases and replaces IAS 17 and other previous guidance on lease accounting within IFRS. IFRS 16 defines a lease as a contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. For each contract that meets this definition. IFRS 16 requires lessees to recognize a right-of-use asset and a lease liability in the balance sheet with certain exemptions for short term and low value leases. Lease payments are to be reflected as interest expense and a reduction of lease liabilities, while the right-of-use assets are to be depreciated over the shorter of the lease term and the assets' useful life. Lease liabilities are measured at the present value of remaining lease payments, discounted using the company's calculated borrowing rate. Right-of-use assets are measured at an amount equal to the lease liability.
Financial assets and financial liabilities
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition. as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Company's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component are measured at the transaction price determined under IFRS 15. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Company's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date. i.e.,the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Financial assets at amortised cost (debt instruments)
- Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
- Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
- Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Company. The Company measures financial assets at amortised cost if both of the following conditions are met:
Annual Report & Accounts
• The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised. modified or impaired.
The Company's financial assets at amortised cost includes trade receivables.
Financial assets at fair value through OCI (debt instruments)
- The Company measures debt instruments at fair value through OCI if both of the following conditions are met:
- the financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.
The Company does not have any debt instruments at fair value through OCI.
Financial assets designated at fair value through OCI (equity instruments)
Upon initial recognition, the Company can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32.
Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrumentby-instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case. such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.
The Company does not have equity instruments designated at fair value through OCI.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading. financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives. including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss. irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates. or significantly reduces, an accounting mismatch. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.
The Company does not have assets at fair value through profit or loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e., removed from the Company's statement of financial position) when:
• the rights to receive cash flows from the asset have expired; or
• the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Impairment of financial assets
Further disclosures relating to impairment of financial assets are also provided in the following notes:
- Critical accounting judgements, estimates and assumptions (Note 3)
- Financial risk management. Credit risk (Note 3)
The Company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition. ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure. irrespective of the timing of the default (a lifetime ECL).
For trade receivables, the Company applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk. but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Company considers a financial asset in default when contractual payments are 90 days past due. However, in certain case, the Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings. payables or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and. in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company's financial liabilities include trade and other payables, loans and borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied.
The Company has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings
This is the category most relevant to the Company. After initial recognition. interestbearing loans are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to Borrowings. For more information, refer to note 18.
Derecognition
A financial liability is derecognised 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 derecognition 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.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Cash and cash equivalents
Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short- term deposits. as defined above. net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management.
Taxes
Income taxes for the period comprise tax payable, refundable tax from refund tax value petroleum expenses and changes in 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.
Deferred tax assets and liabilities are calculated on the basis of existing temporary differences between the carrying amounts of assets and liabilities in the financial statement and their tax bases, together with tax losses carried forward at the balance sheet date. Deferred tax assets and liabilities are calculated based on the tax rates and tax legislation that are expected to exist when the assets are realised or the liabilities are settled, based on the tax rates and tax legislation that have been enacted or substantially enacted on the balance sheet date. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that is no longer probable that the deferred tax asset can be utilised. Deferred tax assets and liabilities are not discounted. Deferred 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 taxes assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
Uplift
Uplift is a special allowance in the basis for petroleum surtax in Norway. The uplift is computed on the basis of the original capitalised cost of offshore production installations. and amount to 5.2% of the investment per. The uplift may be deducted from taxable income for a period of four years (i.e. totals 20.8% over four years), starting in the year in which the capital expenditures are incurred. Uplift benefit is recorded when the deduction is included in the current year tax return and impacts taxes payable. Unused uplift may be carried forward indefinitely.
Provisions and Contingent Liabilities
General
A provision is recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. The amount of the provision is the present value of the risk adjusted expenditures expected to be required to settle the obligation, determined using the estimated risk-free interest rate as discount rate. Where discounting is used, the carrying amount of provision increases in each period to reflect the unwinding of the discount by the passage of time. This increase is recognised as finance cost.
Contingent liabilities are not recognised apart from contingent liabilities which are acquired through a business combination. Significant contingent liabilities are disclosed, with the exception of contingent liabilities where the probability of the liability occurring is remote.
Asset Retirement Obligations
The Company recognises the estimated fair value of asset retirement obligations in the period in which it is incurred.
The amount recognised is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. This cost includes the cost of dismantlement or removal of oil and gas installations. The present value of the obligations is recognised when the assets are constructed and ready for production. or at the later date when the obligation is incurred.
Related asset retirement costs are capitalised as part of the carrying value of the tangible fixed asset and are depreciated over the useful life of the asset, i.e. unit-of-production method. The liability is accreted for the change in its present value each reporting period. Accretion expense related to the time value of money is classified as part of financial expense.
The provision and the discount rate are reviewed at each balance sheet date. Contingent liabilities are not recognised in the financial statements. Significant contingent liabilities are disclosed, with the exception of contingent liabilities where the probability of the liability occurring is remote.
Segment reporting
The company has one business segment. Exploration for and production of oil and gas on the Norwegian continental shelf and therefore no segment note is presented. This is in accordance with management's reporting.
Cost of equity transactions
Transaction costs directly linked to an equity transaction are recognised directly in equity, net after deducting tax.
Revenue recognition
Revenues from sales of services are recorded when the service has been performed.
Revenue from the sale of petroleum products is recognised when the Company's contractual performance obligation has been fulfilled; at delivery. The lifting schedule will vary with the production. The cash receipt from oil sales is normally within a month of delivery. These sales are also to large international oil companies with investment grading. The pricing of the sales of petroleum products is based on current market terms for each product.
There is no significant judgement related to applying IFRS 15 to the Company's contracts.
Over-underlift of petroleum products
Due to the physical nature of lifting of oil, it is often more efficient for each licence partner to lift a full tanker-load at a time. Thus, at the balance sheet date, the amount of oil lifted by the Company may differ from its ownership share in the respective field. Oil sales exceeding (falling below) the Company's ownership share of production is booked as overlift (underlift). Underlift is booked as an asset in the balance sheet as it represents the right to receive additional oil from future production without an obligation to fund the production of that additional oil. Vice versa, overlift is booked as a liability in the balance sheet as it is an obligation to redeliver according to the entity's share of future production. Overlift and underlift on the statement of financial position date are valued at production costs.
Earnings per share
The calculation of basic earnings per share is based on the profit attributable to the owners of ordinary shares of the company using the weighted average number of ordinary shares outstanding during the year after deduction of the average number of treasury shares held over the period.
The calculation of diluted earnings per share is consistent with the calculation of the basic earnings per share, but gives at the same time effect to all dilutive potential ordinary shares that were outstanding during the period, by adjusting the profit/loss and the weighted average number of shares outstanding for the effects of all dilutive potential shares, i.e.:
- The profit/loss for the period is adjusted for changes in profit/loss that would result from the conversion of the dilutive potential ordinary shares.
- The weighted average number of ordinary shares is increased by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
Cash flow statement
The cash flow statement is prepared by using the indirect method.
Events after the balance sheet date
The financial statements are adjusted to reflect events after the balance sheet date that provide evidence of conditions that existed at the balance sheet date (adjusting events). The financial statements are not adjusted to reflect events after the balance sheet date that are indicative of conditions that arose after the balance sheet date (non-adjusting events). Non-adjusting events are disclosed if significant.
Changes in accounting policies and disclosures
New and amended standards and interpretations adopted by the Company
New standards and amendments to standards and interpretations effective from 1 January 2023 did not have any significant impact on the financial statements.
Financial risk management
Financial risks
Exploration for oil and gas involves a high degree of risk. and the company is subject to the general risk factors pertaining to this business, such as (i) volatility of oil and gas prices, (ii) uncertainty pertaining to estimated oil and gas reserves, (iii) operational risk related to oil and gas exploration and (iv) volatility in exchange rates. Furthermore, only few prospects that are explored are ultimately developed into production.
Furthermore. the company is exposed to certain types of financial risks. Management involves receivables, loans, accounts payable and drawing rights to financial institutions. The business activities of the company involve exposure to credit risk, interest rate risk. liquidity risk and currency risk.
Critical accounting estimates and judgements
The preparation of the financial statements in accordance with IFRS requires management to make judgements. use estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are considered to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis.
Estimates and assumptions which represent a considerable risk for material changes in carrying amounts of assets and liabilities during the next fiscal year, are presented below.
Tax receivable from refund tax value exploration expenses:
The Norwegian taxation authorities may have a different understanding than the Company regarding the definition of exploration expenses according to the Norwegian Petroleum Tax Act. See note 10.
Reserves:
The cost of Fields in production is amortised using the unit of production method. A change in the estimated reseves can materially affect the amortisation and/or trigger an impairment. Estimating Reserves is based on several uncertain factors.
Business combination:
Transactions determined to constitue a business combination is followed by and based on purchase price allocation (PPA), which identifies assets and liabilities and measures these at fair value at acquisition date in accordance with the requirements of IFRS 3. A change in the fair value measurment can materially affect the net value of the acquisition. There is also a risk that not all assets nor liabilities are identified through the PPA.
Management has made judgements also in the process of applying the company's accounting policies. Such judgements with the most significant effect on the amounts recognised in the financial statements are presented in the following:
Accounting policy for exploration expenses:
The Company uses the successful efforts method to account for exploration costs. All exploration costs, with the exception of acquisition costs of licenses and drilling costs of exploration wells, are expensed as incurred.
Asset Retirement Obligations
Production of oil and gas is subject to statutory requirements relating to decommissioning and removal once Production has ceased. Provisions to cover these future asset retirement obligations must be accrued for at the time the statutory requirement arises. The ultimate asset retirement obligations are uncertain and cost estimates can vary in response to many factors including changes to relevant legal requirements. the emergence of new restoration techniques or experience at other production sites. The expected timing and amount of expenditure can also change. for example, in response the changes in reserves or changes in laws and regulations or their interpretation.
Impairment
At each reporting date, the Company assesses whether there is an indication that an asset may be impaired. An asset is written down to its recoverable amount when the recoverable amount is lower than the carrying value of the asset. The recoverable amount is the higher of fair value less expected cost to sell and value in use (present value based on the future use of the asset). All impairment assessments require a high degree of estimation, including assessments of expected future cash flows from the cash generating unit and the estimation of applicable discount rates. Impairment testing requires long-term assumptions to be made
concerning a number of economic factors. such as future production levels, market conditions, production expense, discount rates and political risk among others. There is a high degree of reasoned judgement involved in establishing these assumptions and in determining other relevant factors.
NOTE 4
Operating income
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Sale of oil | 9 768 | 33 729 |
| Sale of gas | 25 | 44 |
| Other income | 17 | - |
| Gain sale of assets (1) | - | 414 |
| Total operating income | 9 810 | 34 187 |
(1) Gain from sale of assets relates to sale of 40% of the Company's 60% interest in PL 1013 to Equinor Energy AS.
NOTE 5
Production cost and changes in over-/underlift position
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Production costs, excl. DD&A: | ||
| From licences | 2 728 | 3 331 |
| Other production costs (insurance, transport) | 63 | 137 |
| Change in ARO estimate | -1 317 | - |
| Total production costs | 1 473 | 3 469 |
| Production costs per Barrels of oil equivalents (boe): | ||
| Production costs | 2 791 | 3 469 |
| Produced volumes (boe) | 7 353 | 16 105 |
| Production costs per boe | 380 | 215 |
(1) Barrels of oil equivalents (=boe)
| Changes in over-/underlift positions: | ||
|---|---|---|
| (Volumes in boe) | ||
| Over-/underlift. opening balance | 3 965 | 23 021 |
| Produced volumes | 7 353 | 16 105 |
| Acquisition through business combination | 26 246 | - |
| Adjustments | -272 | - |
| Net sold volumes | -11 175 | -35 162 |
| Over-/underlift, closing balance | 26 116 | 3 965 |
Exploration Expenses
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Share of exploration expenses from participation in licences | 36 366 | 26 399 |
| Other direct seismic costs and field evaluation | 3 750 | 30 642 |
| Exploration costs expensed, capitalised in previous year | -590 | 5 660 |
| Other exploration expenses | 19 438 | 15 468 |
| Total exploration expenses | 58 964 | 78 169 |
NOTE 7
Payroll and related cost
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Salaries | 15 448 | 19 731 |
| Payroll tax | 3 122 | 3 073 |
| Pension costs | 3 423 | 1 837 |
| Other employee related expenses | 862 | 736 |
| Invoiced to operated licenses | -4 198 | -2 492 |
| Total | 18 657 | 22 884 |
| Number of FTS's | 14 | 18 |
Remuneration to board of directors and management:
See information in note 20 "Related party desclosure" regarding remuneration of key management.
Pensions
The Company has a defined contribution pension plan which satisfies the statutory requirements in the Norwegian law on required occupational pension ("lov om obligatorisk tjenestepensjon").
Other operating expenses
Other operating expenses include:
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Office costs | 1 250 | 1 411 |
| It costs | 1 237 | 1 621 |
| Accounting-, audit- and legal services | 5 035 | 4 464 |
| Consulting services | 8 553 | 11 682 |
| Consulting services, related party | 580 | 719 |
| Travel costs | 1 718 | 1 084 |
| Other costs | 1 847 | 2 936 |
| Total (1) | 20 220 | 23 917 |
(1) Other operating expenses includes payments to related parties. See note 20 for further information.
Remuneration to auditor is allocated as specified below:
| Statutory audit | 530 | 175 |
|---|---|---|
| Audit-related services | 60 | - |
| Other assistance | 213 | - |
| Total, excl. VAT | 803 | 175 |
Finance income and costs
Finance income:
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Interest income | 2 313 | 102 |
| Net foreign exchange effects | 241 | - |
| Total finance income | 2 554 | 102 |
Finance costs:
| Interest expense. related party | 9 064 | 10 527 |
|---|---|---|
| Other interest expense | 7 996 | 1 825 |
| Net foreign exchange effects | - | 1 539 |
| Accretion IFRS 16 | 266 | 189 |
| Accretion ARO | 262 | 318 |
| Other finance costs | 3 135 | 2 299 |
| Total finance costs | 20 723 | 16 697 |
NOTE 10
Tax
Specification of income tax:
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Tax value of eligible exploration costs and refund of tax losses | 69 457 | 64 667 |
| Changes in deferred tax | 6 392 | -1 919 |
| Tax refund for previous years due to change in tax rules in 2022 | - | 23 354 |
| Possible income tax adjustment | - | -2 000 |
| Total income tax credit | 75 849 | 84 101 |
Profit from oil and gas operations on the Norwegian Continental Shelf is taxed in accordance with the Norwegian Petroleum Tax Act. A special 56.004% surtax is levied in addition to the ordinary 22% corporate tax. The taxpayer may claim payment from the government for the tax value of direct and indirect expenses (with the exception of financing expenses) for petroleum activities, provided that the sum does not exceed the year's loss on, respectively, ordinary income in the shelf tax district and the basis for surtax.
Specification of tax effects on temporary differences. tax losses carried forward and deferred tax:
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Property, plant and equipment | -215 828 | -2 126 |
| Capitalised exploration and license costs | -118 206 | -116 252 |
| Decommissioning provision | 526 759 | 7 741 |
| Right of use assets, IFRS 16 | 132 | 2 392 |
| Over-/Under-lift, Stock value | -25 706 | 94 |
| Tax loss carried forward, onshore | 1 448 | 1 448 |
| Tax loss carried forward, offshore | 20 680 | 9 109 |
| Deferred tax liability (-) / tax asset (+) | 189 278 | -97 593 |
| Not capitalised deferred tax asset (valuation allowance) | -1 448 | -1 448 |
| Deferred tax liability (-) / tax asset (+) in balance | 187 830 | -99 041 |
Deferred tax is calculated based on tax rates applicable on the balance sheet date. Ordinary income tax is 22%, to which is added a special tax for oil and gas companies at the rate of 56.004%, giving a total tax rate of 78.004%.
Reconciliation of effective tax rate:
| Profit (loss) before tax | -110 225 | -122 511 |
|---|---|---|
| Expected income tax at tax rate 78.004% | 85 980 | 95 564 |
| Adjusted for tax effects (22% - 78%) of the following items: | ||
| Permanent differences | -305 | -624 |
| Finance items, 22% | -9 826 | -8 996 |
| Adjustments previous years | - | 156 |
| Possible income tax adjustment | - | -2 000 |
| Uplift, earned this year | - | 2 |
| Total income tax credit | 75 849 | 84 101 |
Reconciliation of tax receivable:
| Tax recievable, opening balance | 88 020 | - |
|---|---|---|
| Tax refund, calculated in Profit & Loss, this year | 69 457 | 64 667 |
| Tax cost, booked as acquisition cost | -21 046 | - |
| Tax refund for previous years due to change in tax rules in 2022 | - | - |
| Installment recieved | - | 23 354 |
| Tax receivable/-liabilities, closing balance | -88 020 | - |
| Tax receivable/-liabilities. closing balance | 48 411 | 88 020 |
Change in deferred taxes
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Deferred taxes recorded in income statement | 6 392 | -1 919 |
| Deferred taxes recorded in balance sheet on acquisition of licences | 280 479 | - |
| Tax refund for previous years due to change in tax rules in 2022 | - | -23 354 |
| Total change in deferred taxes | 286 871 | -25 273 |
| Specification of income tax payable: | ||
| Possible income tax adjustment | 6 500 | 6 500 |
| Total income tax payable | 6 500 | 6 500 |
NOTE 11
Goodwill, exploration and evaluation assets
| (Amounts in TNOK) | Goodwill (1) | Exploration & evaluation assets |
Total intangible assets |
|---|---|---|---|
| 2023 | |||
| Cost: | |||
| At 1 January 2023 | 1 845 | 149 033 | 150 878 |
| Additions (1) | 146 227 | 2 506 | 148 733 |
| Disposals | - | - | - |
| Cost at 31 December 2023 | 148 072 | 151 539 | 299 611 |
| Amortisation and impairment: | |||
| At 1 January 2023 | 1 845 | - | 1 845 |
| Impairment this year | - | - | - |
| Disposals | - | - | - |
| Accumulated amortisation and impairment at 31 December 2023 | 1 845 | - | 1 845 |
| Carrying amount at 31 December 2023 | 146 227 | 151 539 | 297 766 |
(1) C.f. note 27 Business combinations.
| (Amounts in TNOK) | Goodwill | Exploration & evaluation assets |
Total |
|---|---|---|---|
| 2022 | |||
| Cost: | |||
| At 1 January 2022 | 1 845 | 164 347 | 166 192 |
| Additions | - | - | - |
| Disposals (1) | - | -15 313 | -15 313 |
| Cost at 31 December 2022 | 1 845 | 149 033 | 150 878 |
| Amortisation and impairment: | |||
| At 1 January 2022 | 1 845 | 0 | 1 845 |
| Impairment this year | 0 | 0 | 0 |
| Disposals | 0 | 0 | 0 |
| Accumulated amortisation and impairment at 31 December 2022 | 1 845 | 0 | 1 845 |
| Carrying amount at 31 December 2022 | 0 | 149 033 | 149 033 |
( 1) Disposals relates partly to sale of respecitvely 10% of the Company's 20% interest in PL 935 and 40% of the Company's 60% interest in PL1013. to Equinor Energy AS. and partly from cost reductions in PL882.
| License portfolio Exploration assets | 31.12.2023 Share |
31.12.2022 Share |
|---|---|---|
| PL 882 | 20.00% | 20.00% |
| PL 882B | 20.00% | 20.00% |
| PL 935 | 10.00% | 10.00% |
| PL 992 | 30.00% | 30.00% |
| PL 994 | 30.00% | 30.00% |
| PL 1013 | 20.00% | 20.00% |
| PL 1106 | 20.00% | 20.00% |
| PL 1107 | 30.00% | 30.00% |
| PL 1150S | 30.00% | 30.00% |
| PL 1181 (Petrolia NOCO is operator) | 60.00% | 0.00% |
Oil and gas properties, furniture, fixtures and office machines
Finance income:
| (Amounts in TNOK) | Fields in production |
Furniture, fixtures and office machines |
Total |
|---|---|---|---|
| 2023 | |||
| Cost: | |||
| At 1 January 2023 | 13 115 | 9 803 | 22 918 |
| Additions (1) | 337 140 | 2 433 | 339 573 |
| Change in ARO estimate, see note 19 | -1 317 | - | -1 317 |
| Disposals | -441 | -1 170 | -1 611 |
| Cost at 31 December 2023 | 348 496 | 11 066 | 359 563 |
| Depreciation, amortisation and impairment: | |||
| At 1 January 2023 | 12 478 | 9 737 | 22 214 |
| Depreciation this year | 115 | 124 | 239 |
| Impairment this year (1) | - | - | - |
| Disposals | -1 317 | -1 170 | -2 487 |
| Accumulated depreciation, amortisation and impairment at 31 December 2023 |
11 275 | 8 691 | 19 967 |
| Carrying amount at 31 December 2023 | 337 221 | 2 375 | 339 595 |
| (1) C.f. note 27 Business combinations. | |||
| 2022 | |||
| Cost: | |||
| At 1 January 2022 | 15 308 | 9 803 | 25 110 |
| Additions | 269 | - | 269 |
| Change in ARO estimate, see note 19 | -2 462 | - | -2 462 |
| Disposals | - | - | - |
| Cost at 31 December 2022 | 13 115 | 9 803 | 22 918 |
| Depreciation. amortisation and impairment: | |||
| At 1 January 2022 | 11 975 | 9 626 | 21 601 |
| Depreciation this year | 502 | 111 | 613 |
| Impairment this year | - | - | - |
| Disposals | - | - | - |
| Accumulated depreciation, amortisation and impairment at 31 December 2022 |
12 478 | 9 737 | 22 214 |
| Carrying amount at 31 December 2022 | 637 | 66 | 703 |
| Economic life | 3-5 years | ||
| Depreciation method | Unit of production | linear |
Impairment testing
At each reporting date, the Company assesses whether there is an indication that an asset may be impaired. An assessment of the recoverable amount is made when an impairment indicator exists. Impairment is recognized when the carrying amount of an asset or a CGU, including associated goodwill, exceeds the recoverable amount. The recoverable amount is the higher of the asset's fair value less cost to sell and the value in use. For both the value in use and fair value, the impairment testing is performed based on discounted cash flows. The impairment assessment at end of 2023 was based on the value in use approach. The expected future cash flows are discounted to the net present value by applying a discount rate before tax.
Cash flows are projected for the estimated lifetime of the fields or license, which for Enoch field is estimated to 2024-2025 (Cease of Production in 2025), and a removal period from 2025-2027. For the Dugong discovery, the impairment test is based on operator's estimates. For Brage, a purchase price assessment has been made by an external company.Below is an overview of the key assumptions applied for impairment assessment purposes as of 31 December 2023.
Oil and gas prices and currency rates
Forecasted oil and gas prices and currency rates are based on management's estimates and market data (forward prices). The nominal oil and gas price assumptions applied for impairment assessments at yearend 2023 were USD 80/bbl. The assumption for future currency rates are USD/NOK 10.5.
Discount rate
The discount rate used in the calculation of net present value is 10%. Based on assesment performed, no impairment is identified for 2023.
| License portfolio Production assets | 31.12.2023 Share |
31.12.2022 Share |
|---|---|---|
| PL018C | 11.65% | 11.65% |
| PL048D | 21.80% | 21.80% |
| PL053B, PL055, PL055B, PL055D, PL055E, PL185 (Brage Unit) | 12.26% | 0.00% |
Leases
Right-of-use assets:
The Company leases office facilities and parking. The Company's right-of-use assets are categorised and presented in the table below:
| Office facilities, | ||
|---|---|---|
| (Amounts in TNOK) | parking | Total |
| 2023 | ||
| Acquisition cost at 1 January 2023 | 6 775 | 6 775 |
| Addition of right-of-use assets (new lease contracts) | - | - |
| Disposal of right-of-use assets | - | - |
| Acquisition cost 31 December 2023 | 6 775 | 6 775 |
| Accumulated depreciation and impairment 1 January 2023 | -3 810 | -3 810 |
| Depreciation | -912 | -912 |
| Impairment | - | - |
| Disposal | - | - |
| Accumulated depreciation and impairment 31 December 2023 | -4 722 | -4 722 |
| Carrying amount of right-of-use assets 31 December 2023 | 2 053 | 2 053 |
| 2022 | ||
| Acquisition cost at 1 January 2022 | 4 125 | 4 125 |
| Addition of right-of-use assets (new lease contracts) | 2 650 | 2 650 |
| Disposal of right-of-use assets | - | - |
| Acquisition cost 31 December 2022 | 6 775 | 6 775 |
| Accumulated depreciation and impairment 1 January 2022 | -2 876 | -2 876 |
| Depreciation | -934 | -934 |
| Impairment | - | - |
| Disposal | - | - |
| Accumulated depreciation and impairment 31 December 2022 | -3 810 | -3 810 |
| Carrying amount of right-of-use assets 31 December 2022 | 2 965 | 2 965 |
| Lower of remaining lease term or economic life | 5 years | |
| Depreciation method | Linear |
Leasing liabilities:
| Total |
|---|
| 3 067 |
| - |
| - |
| 266 |
| -1 110 |
| 2 222 |
| 2022 | |
|---|---|
| Lease liabilities at 1 January 2022 | 1 338 |
| Additions (new lease contracts) | 2 650 |
| Disposal (buy out of lease contracts) | - |
| Accretion lease liabilities | 189 |
| Payments of lease liabilities | -1 110 |
| Total leasing liabilities 31 December 2022 | 3 067 |
Break down of lease debt:
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Short-term | 1 110 | 1 110 |
| Long-term | 1 112 | 1 956 |
| Total lease debt | 2 222 | 3 067 |
Maturity of future undiscounted lease payments under non-cancellable lease agreements:
| 31.12.2023 | 31.12.2022 | |
|---|---|---|
| Within 1 year | 1 110 | 1 110 |
| 1 to 5 years | 1 388 | 2 499 |
| After 5 years | - | - |
| Total | 2 499 | 3 609 |
The weighted average incremental borrowing rate used when calculating lease liabilities at 1 April 2022 was 10.0%. The leases do not impose any restrictions on the Company's dividend policy or financing opportunities.
Inventory
Finance income:
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Spareparts | 50 424 | 194 |
| Underlift | 19 946 | 1 334 |
| Total | 70 370 | 1 528 |
NOTE 15
Prepayments and other receivables
Prepayments and other receivables include:
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Prepaid expenses | 5 435 | 2 113 |
| VAT receivables | 1 888 | 4 681 |
| Working capital and overcall, joint venture | 32 512 | 16 566 |
| Receivable from share capital increase not registered | - | - |
| Other short term receivables | 392 | 570 |
| Total | 40 227 | 23 930 |
NOTE 16
Cash and cash equivalents
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Bank deposits | 29 893 | 55 403 |
| Total cash and cash equivalents | 29 893 | 55 403 |
| Of this: | ||
| Restricted cash for withheld taxes from employees salaries | 1 081 | 1 416 |
Share capital and shareholder information
Movements in share capital
| (Amounts in NOK) | Number of shares |
Share capital (NOK thousands) |
|---|---|---|
| Issued at 1 January 2022 | 145 000 000 | 14 500 000 |
| Capital increase in 2022 | 15 000 000 | 1 500 000 |
| Closing balance at 31 December 2022 | 160 000 000 | 16 000 000 |
| Capital increase in 2023 | 10 000 000 | 1 000 000 |
| Closing balance at 31 December 2023 | 170 000 000 | 17 000 000 |
The par value at 31 December 2022 is NOK 0.10 per share.
| Shareholders as of 31 December 2023 | Shares | Ownership |
|---|---|---|
| PETROLIA AS | 66 792 558 | 39.29% |
| NOCO (UK) Ltd | 24 842 496 | 14.61% |
| PETROLIA SE | 18 032 000 | 10.61% |
| INCREASED OIL RECOVERY AS | 16 144 165 | 9.50% |
| INDEPENDENT OIL & RESOURCES PLC | 13 780 097 | 8.11% |
| NOCO OIL & RESOURCES LTD | 13 475 000 | 7.93% |
| LARSEN OIL & GAS AS | 5 537 595 | 3.26% |
| TIME CRITICAL PETROLEUM RESOURCES | 5 461 346 | 3.21% |
| TOKALA AS | 1 205 075 | 0.71% |
| SELACO AS | 316 554 | 0.19% |
| ASKAS AS | 314 070 | 0.18% |
| EGD CAPITAL AS | 302 847 | 0.18% |
| SVENDSEN. GEIR ARILD | 272 116 | 0.16% |
| NILSEN, SØLVE | 244 828 | 0.14% |
| JANEM AS | 175 000 | 0.10% |
| SILVERCOIN INDUSTRIES AS | 167 122 | 0.10% |
| HAVLI AS | 164 889 | 0.10% |
| DAHLE, BJØRN | 153 936 | 0.09% |
| MILLYEN AS | 141 613 | 0.08% |
| SKARET INVEST AS | 138 615 | 0.08% |
| OTHER | 2 338 078 | 1.38% |
| Total number of shares | 170 000 000 | 100% |
Earnings per share
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Profit attributable to ordinary equity holders | -34 376 | -38 410 |
| Profit attributable to ordinary equity holders for basic earnings | -34 376 | -38 410 |
| Interest on convertible preference shares | - | - |
| Profit attributable to ordinary equity holders adjusted for the effect of dilution" | -34 376 | -38 410 |
| Number of shares: | ||
| Weighted average number of ordinary shares for basic EPS | 165 287 671 | 147 136 986 |
| Effects of dilution from: | ||
| Share options | - | - |
| Convertible preference shares | - | - |
| Weighted average number of ordinary shares adjusted for the effect of dilution | 165 287 671 | 147 136 986 |
As Petrolia NOCO AS does not have any share options or convertible preference shares as of 31 December 2023, there are no differences between basic and diluted EPS.
NOTE 19
Decommissioning provision
Decommissioning provisions:
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Provision at 1 January | 9 923 | 12 068 |
| Additions through business combination | 667 113 | - |
| Changes in estimate | -1 317 | -2 462 |
| Unwinding of discount | 262 | 318 |
| Amounts used | -684 | - |
| Unused reversed | - | - |
| Total provisions at 31 December 2023 | 675 297 | 9 923 |
The provision is an estimate based on available information from the Operator. The net present value of the estimated obligation is calculated using a discount rate of 3.25% (2022: 3.2%).
Related party disclosure
a) Purchases from and sales to related parties
| Purchase of services, interest on loan and sales to related parties |
Description of services | 2023 | 2022 |
|---|---|---|---|
| (Amounts in TNOK) | |||
| Petrolia NUF | Consulting services. purchase | 580 | 3 286 |
| Petrolia SE | Interest on loan | 3 814 | 5 131 |
| Independent Oil Resources PLC | Interest on loan | 2 528 | 1 641 |
| NOCO Oil & Resourches Ltd | Interest on loan | 701 | 1 098 |
| Rigloan Yields Ltd | Interest on loan | 750 | 732 |
| Larsen Oil&Gas AS | Interest on loan | 1 312 | 1 281 |
| Larsen Oil & Gas AS | Legal consulting services. purchase | 105 | 165 |
b) Balances with related parties (trade payables/loan)
| Related party | Description | 2023 | 2022 |
|---|---|---|---|
| Petrolia SE | Interest bearing loan | 61 780 | 41 750 |
| Independent Oil & Resources | Interest bearing loan | 143 970 | 5 000 |
| NOCO Oil & Resourches Ltd | Interest bearing loan | - | 12 000 |
| Rigloan Yields Ltd | Interest bearing loan | - | 8 000 |
| Larsen Oil & Gas AS | Interest bearing loan | - | 14 000 |
c) Compensation to key management
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Position | Salary/ Board fee |
Pension | Total | Salary/ Board fee |
Pension | Total |
| Linn Katrine Høie, CEO (1) | - | - | - | 2 722 | 77 | 2 799 |
| Morten Stenhaug, CEO (3) | 2 522 | 189 | 2 711 | 220 | 15 | 235 |
| Robert John Arnott, Chairman/CEO (1.2) | 100 | 100 | 100 | 100 | ||
| Sjur Storaas, Board member | 100 | 100 | 100 | 100 | ||
| Brede Bjøvad Larsen, Board member | - | - | - | - |
(1) Linn Katrine Høie was employd up to 31 May 2022 and was followed by Robert John Arnott who again was followed by Morten Stenhaug from 1 December 2022.
(2) Robert John Arnott, Chairman, has invoiced consulting fees of NOK 5.4 million in 2023 (NOK 5.6 million in 2022).
(3) Morten Stenhaug has been CEO from 1 December 2022.
As at 31 December 2023 there is no agreement of bonus or any other future compensation to the key management.
Loans and guarantees related to key management
The Company has as at 31 December 2023 not issued any loans or guarantees in favour of any employees, members of the Board or the shareholder.
Annual Report & Accounts
NOTE 21
Financial instruments by category
Financial instruments by category (Amounts in TNOK)
| At 31 December 2023 | ||
|---|---|---|
| Financial assets | Loans and receivables | Total carrying amount |
| Other financial assets, deposits | - | - |
| Receivables, related parties | - | - |
| Other receivables 1) | 83 203 | 83 203 |
| Cash and cash equivalents | 29 893 | 29 893 |
| Total | 113 096 | 113 096 |
1) Prepayments are not included.
| Financial liabilities | Amortised cost | Total carrying amount |
|---|---|---|
| Borrowings | - | - |
| Trade creditors | 8 629 | 8 629 |
| Other current liabilities | 122 639 | 122 639 |
| Total | 131 269 | 131 269 |
| At 31 December 2022 | ||
|---|---|---|
| Financial assets | Loans and receivables | Total carrying amount |
| Other financial assets. deposits | - | - |
| Receivables, related parties | - | - |
| Other receivables 1) | 109 837 | 109 837 |
| Cash and cash equivalents | 55 403 | 55 403 |
| Total | 165 240 | 165 240 |
1) Prepayments are not included.
| Financial liabilities | Amortised cost | Total carrying amount |
|---|---|---|
| Borrowings | 80 750 | 80 750 |
| Trade creditors | 23 541 | 23 541 |
| Other current liabilities | 20 461 | 20 461 |
| Total | 124 751 | 124 751 |
Fair value of financial instruments
It is assessed that the carrying amounts of financial instruments recognised at amortised cost in the financial statements approximate their fair values.
Financial risk management
Overview
The Company has some exposure to risks from its use of financial instruments, including credit risk, liquidity risk, interest rate risk and currency risk. This note presents information about the Company's exposure to each of the above mentioned risks, and the Company's objectives, policies and processes for managing such risks. At the end of this note, information regarding the Company's capital management is provided.
Market risk from financial instruments
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: market risk (e.g. interest rate risk and currency risk), commodity price risk and other price risk. The Company's financial instruments are mainly exposed to interest rate and currency risks.
a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's interest risk arises from long-term borrowings. Borrowings issued at variable rates expose it to cash flow risk. Borrowings issued at fixed rates expose it to fair value interest rate risk.
Interest rate sensitivity
The following table demonstrates the sensitivity to a possible change in interests rates, with all other variables held constant, on the Company's profit before tax:
| Increase/ decrease in basis points |
Effects on profit before tax (TNOK) |
Effects on equity (TNOK) |
|
|---|---|---|---|
| 31 December 2023 | +/-100 | +/- 1 759 | +/- 1 372 |
| 31 December 2022 | +/-100 | +/- 92 | +/- 724 |
Foreign currency risk
b) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is primarily exposed to foreign exchange risk arising from various currency exposures with respect to the USD, EUR and GBP in relation to its debt obligations as well as from certain commercial transactions.
Credit risk
The carrying amounts of financial assets represents the Company's maximum credit exposure. The counterparty to the cash and cash equivalents and other financial assets are large banks with solid credit ratings. The Company monitors the credit ratings of its main counterparties on a regular basis.
Liquidity risk
Liquidity risk is the risk of being unable to pay financial liabilities as they fall due. The Company's approach to managing liquidity risk is to ensure that it will always have sufficient liquidity to meet its financial liabilities as they fall due, under normal as well as extraordinary circumstances. without incurring unacceptable losses or risking damage to the Company's reputation. Prudent liquidity risk management implies maintaining sufficient cash and the availability of appropriate funding.
The following table details the contractual maturities for the Company's financial liabilities. The tables includes amounts for both principal and interest payments. The contractual amounts were estimated based on closing exchange rate at balance sheet date.
Per 31 December 2023
| (Amounts in TNOK) | Less than 3 months |
3 to 12 months |
1 to 5 months |
Total |
|---|---|---|---|---|
| Borrowings, long term | - | - | - | - |
| Trade creditors and other short term liabilities | 122 667 | 8 602 | - | 131 269 |
| Total liabilities | 122 667 | 8 602 | - | 131 269 |
Per 31 December 2022
| (Amounts in TNOK) | Less than 3 months |
3 to 12 months |
1 to 5 months |
Total |
|---|---|---|---|---|
| Borrowings, long term | 1 346 | 6 729 | 121 125 | 129 200 |
| Trade creditors and other short term liabilities | 37 530 | 6 471 | 0 | 44 001 |
| Total liabilities | 38 876 | 13 201 | 121 125 | 173 201 |
Capital management
A key objective in relation to capital management is to ensure that the Company maintains a sufficient capital structure in order to support its business development and to maintain a strong credit rating. The Company evaluates its capital structure in light of current and projected cash flows. potential new business opportunities and the Company's financial commitments. In order to maintain or adjust the capital structure, the Company may issue new shares or obtain new loans.
NOTE 22
Interest-bearing loans and borrowings
Changes in liabilities arising from financing activities split on cash and non-cash changes
| (Amounts in TNOK) | OB 2023 | Cash flows | Amortization | Acquisition | Changed to current |
CB 2023 |
|---|---|---|---|---|---|---|
| Borrowings non-current | 80 750 | - | - | - | -80 750 | - |
| Borrowings current | 67 500 | 133 400 | - | - | 80 750 | 281 650 |
| Total | 148 250 | 133 400 | - | - | 281 650 |
| (Amounts in TNOK) | OB 2022 | Cash flows | Amortization | Acquisition | CB 2022 |
|---|---|---|---|---|---|
| Borrowings non-current | 80 750 | - | - | - | 80 750 |
| Borrowings current | - | 67 500 | - | - | 67 500 |
| Total | 80 750 | 67 500 | - | - | 148 250 |
The company has entered into a loan agreement with a Security Agent with the following main terms:
• Three tranches: 1st priority secured, 2nd priority secured and 3rd priority secured
• 2nd pri and 3rd pri loans from related parties and 1st pri loan from external lenders
• Secured by mortgage over Brage licenses, pledged accounts, tax refunds and factoring agreement
• Guarantee from Petrolia SE and Independent Oil & Resources Plc
• Maturity in Dec 2024.
• Interests are 13.2% (1st and 2nd pri loan) and 10% (3rd pri loan) per annum, payable quarterly.
NOTE 23
Other current liabilities
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Public duties payable | 2 096 | 2 299 |
| Salary and vacation payable | 1 721 | 1 728 |
| Working capital and undercall, joint venture | 91 867 | 12 100 |
| Other accruals for incurred costs (1) | 26 955 | 4 334 |
| Total | 122 639 | 20 461 |
(1) Includes TNOK 21 466 to Vår Energi ASA based on an updated pro & contra, c.f. note 28 Business combination.
Contingent liabilities
The company has not been involved in any legal or financial disputes in 2023 where adversely outcome is considered more likely than remote.
NOTE 25
Payments to and refund from the Norwegian Government
In accordance with the Norwegian Accounting Act Section § 3-3 d), companies engaged in activities within the extractive industries shall annually prepare and publish information about their payments to governments at country and project level. The Company has only activity on the Norwegian Continental Shelf and taxes in Norway are levied on company basis and not project basis. The table set out below, shows the payments to and refund from the Norwegian Government, related to tax and other fees, derived from the Company's business on the Norwegian Continental Shelf. Payments from Joint Venture where the Company participate, are done by the operator, and are not included in the payments below.
| (Amounts in TNOK) | 2023 | 2022 |
|---|---|---|
| Tax refund received (+) / paid (-) | 88 020 | -29 593 |
| Interest on Tax refund. received (+) / paid (-) | 2 215 | -1 108 |
| Payments of other fees | -1 296 | -940 |
| Total payments/refund to/from the Norwegian Government | -31 641 |
NOTE 26
Shares in licenses and obligations
The Company`s obligations for 2024 related to the license portfolio as at year end are estimated to a total of NOK 370 million. This forecast is based on the approved license budgets and parts of the optional budgets.
Reserves (un-audited)
The following table reflects the Company's net entitlement proven and probable reserves (after royalty)
| Boe | Flyndre | Enoch | Brage | Total reserves |
|---|---|---|---|---|
| Opening balance 1 January 2023 | 10 | 13 | - | 23 |
| Aqusitions or sales | - | - | 2 500 | 2 500 |
| Production | -0 | -7 | - | -7 |
| Revisions | -10 | - | - | -10 |
| Increased oil recovery | - | - | - | - |
| Discoveries | - | - | - | - |
| 31 December 2023 | -0 | 5 | 2 500 | 2 505 |
| Opening balance 1 January 2022 | 14 | 25 | - | 39 |
| Aqusitions or sales | - | - | - | - |
| Production | -4 | -12 | - | -16 |
| Revisions | - | - | - | - |
| Increased oil recovery | - | - | - | - |
| Discoveries | - | - | - | - |
| 31 December 2022 | 10 | 13 | - | 23 |
As commented in the accounting principles estimation of oil and gas reserves and resources involves uncertainty. The figures above represent management's best judgment of the most likely quantity of economically recoverable oil and gas estimated at year-end 2023, given the information at the time of reporting. The estimates have a large spread especially for fields for which there is limited data available. The uncertainty will be reduced as more information becomes available through production history and reservoir appraisal. In addition, for fields in the decline phase with limited remaining volumes, fluctuations in oil prices will have a significant impact on the profitability and hence the economic cut-off for production.
On 4th of August 2020 the Company reported a commercial discovery of oil at the Dugong well in the Norwegian sector of the North Sea. As of latest results the recoverable resources are estimated to be between 29 – 84 million barrels of oil equivalent.
Submission of a field development plan was originally planned towards end 2022. The PL 882 partnership is currently contemplating new field development solutions and studies towards Snorre facilities, with the aim of delivering a PDO in 2024.
NOTE 28
Acquisitions in 2023
Acquisition of a 12.2575% interest in Brage Unit
On 29 December 2023, Petrolia Noco AS completed the acquisition of a 12.2575 per cent working interest in the licenses PL053B, PL055, PL055B, PL055D, PL055E and PL185 constituting the oil producing Brage Unit from Vår Energi ASA. Brage is a joint operation and is accounted for in accordance with IFRS 11 Joint Arrangements.
The acquisition was financed through Second Secured loan from related parties (c.f. note 20), in addition to received tax refund from the Norwegian Government.
The transaction has been determined to constitute a business combination and has been accounted for using the acquisition method of accounting as required by IFRS 3. The economic date of the transaction, which will be used for tax purposes, is 1 January 2023. The acquisition date for accounting purposes (transfer of control) has been determined to be 29 December 2023.
A purchase price allocation (PPA) has been performed and all identified assets and liabilities have been measured at their acquisition date fair values in accordance with the requirements of IFRS 3. The agreed purchase price is NOK 137.0 million. Adjusted for interim period adjustments, working capital and an Adjustment Consideration to the seller, the total cash consideration is estimated to NOK 170.0 million, whereas NOK 148.6 was paid 29 December 2023. The Company does not expect any material changes in the agreed cash consideration
The acquired licences did not contribute to any income or profit before tax in 2023. The legal cost related to the Brage transaction of NOK 1.9 million is expensed as Other operating expenses in 2023. An estimation of the impact from the transaction indicates that if the acquisition had taken place at the beginning of the year, total revenues for the year would have been approximately NOK 636.4 million higher and would have given a positive contribution to the EBITDA of approximately NOK 431.0.
The fair values of the identifiable assets and liabilities in the transaction as at the date of the acquisition have been estimated as follows:
| (Amounts in TNOK) | |
|---|---|
| Assets | |
| Oil and gas properties in production | 337 |
| Deferred tax asset | 316 |
| Receivable on seller (1) | 77 |
| Underlift | 20 |
| Over-/undercall | 15 |
| Total assets | 766 |
| Liabilities | |
| Asset retirement obligation | 667 |
| Tax payable | 57 |
| Net working capital | 18 |
| Total liabilities | 742 |
| Total identifiable net assets at fair value | 24 |
| Total consideration | 170 |
| Goodwill (residual) (2) | 146 |
| "Ordinary" goodwill | -70 |
| "Technical" goodwill | 216 |
(1) The parties have agreed that the buyer shall cover the costs for decommissiong, plugging and abandonment of the acquired oilfields at the time of cease of production. According to the Petroleum Act, the seller has a subsidiary liability to cover such costs, why the buyer has paid to seller a posttax Adjustment Consideration of NOK 95 million as security for sellers liability. The buyer will receive an annual interest rate of the average of the 3 months NIBOR plus 1 percentage point. The buyer expect to receive the Adjustment Consideration in 2034. The discount rate for the receivable is equivalent to the risk free interest rate plus the estimated credit spread for Vår Energi ASA.
(2) The ordinary goodwill consists largely of elements from the existing business plan and expected future development of the acquired oilfield. Technical goodwill arising from the special tax rules for oilfields. The capitalised goodwill is not deductible for tax purposes.
NOTE 29
Events after the balance sheet date
On 16 January 2024, Petrolia NOCO was awarded two licenses by the Norwegian Ministry of Petroleum and Energy, including one operatorship. License PL 1221 will be operated by PNO with a 40% working interest. License partner is Equinor with 60% working interest. License PL 1210 will be operated by Wintershall Dea (40% working interest) with PNO and Equinor as license partners, both with 30% working interest.
Annual Report & Accounts
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