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Aker BP Interim / Quarterly Report 2009

Feb 19, 2010

3528_rns_2010-02-19_96dba4e2-1f6e-42ba-bdec-8f5359923773.pdf

Interim / Quarterly Report

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DETNORSKE
Report Q4 2009
Trondheim, 19 February 2010

DETNORSKE
www.detnor.no
Det norske innholdsliste


2

TRONDHEIM

Det norske oljeselskap ASA
www.detnor.no

Postal and office address:
Nedre Bakklandet 58 C
NO-7014 Trondheim

Telephone: +47 90 70 60 00
Fax: +47 73 54 05 00

STAVANGER

Det norske oljeselskap ASA
Det norske oljeselskap AS

Postal and office address:
Haakon VII's gt. 9, NO-4008 Stavanger

Telephone: +47 90 70 60 00

OSLO

Det norske oljeselskap ASA
Office address: Støperigata 2
Aker Brygge NO-0250 Oslo

Postal address: P.O. Box 2070,
Vika NO-0125 Oslo

Telephone: +47 95 44 60 00

HARSTAD

Det norske oljeselskap ASA
Office address: Forsikringsgården AS
Richard Kaarbøes plass 3B, 9405 Harstad

Postal address: P.O. Box 854, NO-9488 Harstad

Telephone: +47 97 65 60 00

Table of contents

Important events in the fourth quarter ... 3
Key figures ... 3
Production ... 4
Production licences ... 4
Health, safety and the environment ... 4
Discoveries ... 4
Exploration activity ... 5
Financial considerations ... 6
Events after the end of the quarter ... 6
Outlook ... 6


The fourth quarter of 2009 saw the merger of Det norske oljeselskap ASA and Aker Exploration ASA. The merger creates a dynamic oil company with a broader and more balanced licence portfolio on the Norwegian continental shelf. The licence portfolio provides a good basis for growth in the years ahead.

Important events in the 4th quarter

  • Det norske oljeselskap ASA merged with Aker Exploration ASA on 22 December 2009. The merger created a company with 67 production licences, including 34 operatorships.
  • Operator Statoil, discovered oil in the East Frigg Delta prospect in PL 442. Following this discovery the resource estimate is increased to between 60 and 190 million barrels of oil. Det norske has a 20% interest in PL 442.
  • Production from the Varg field in PL 038 increased to 26,800 barrels a day in December after successful start-up of a new production well. The field is expected to produce around 18,000 bpd in 2010. Det norske has a 5% interest in PL 038.

  • Drilling of the Geitfjellet prospect in PL 321 using the rig Aker Barents was completed in the fourth quarter, without discovering hydrocarbons. Det norske also drilled a dry exploration well in Skardkollen in PL 408, using the rig Bredford Dolphin.

  • Det norske drilled the Jetta prospect in PL 027D for ExxonMobil, the licence operator. One small oil discovery was made. Det norske is in charge of work on behalf of PL 027D, PL 169C and PL 504 to evaluate the potential commerciality of the discovery, possibly in combination with other prospects in the area.
  • The loss for the period was MNOK 379.3 (compared with a profit of MNOK 235.6 during the same period last year). The company's cash position was MNOK 1,574.3 (1,468.3) at the end of the quarter.

Key figures

Q4 2009 Q3 2009 Q2 2009 Q1 2009 Q4 2008 2009 2008
Oil and gas production (barrels) 179,542 155,035 162,576 176,450 195,799 673,603 661,732
Oil price achieved (USD/barrel) 73.4 67.0 58.8 42.9 45.8 59.7 87.6
Operating revenues (MNOK) 73.7 67.4 66.8 57.1 363.9 265.0 635.1
Exploration expenses (MNOK) 393.0 334.5 416.1 65.2 238.6 1,208.7 544.5
Operating profit/loss (MNOK) -626.2 -330.2 -410.6 -68.5 -361.4 -1,435.5 -572.0
Profit/loss for the period (MNOK) -379.3 -71.6 -77.1 7.3 235.6 -520.7 225.5
No of employees 176 146 140 135 127
No of licences (operatorship) 67(34) 52(28) 51(28) 48(27) 42(23)

4

Production

Barrels of o.e. per day Share in production Q4 2009 Q3 2009 Q2 2009 Q1 2009 Q4 2008 2009 2008
PL 038 Varg 5 % 874.2 595.6 619.9 669.6 737.0 690.1 611.1
PL 048B Glitne 10 % 587.3 566.7 629.0 694.2 745.3 618.9 866.0
PL 048D Enoch 2 % 129.4 130.7 104.3 138.0 142.6 125.6 124.0
PL 103B Jotun Unit 7 % 360.6 392.1 433.4 458.7 503.3 410.9 494.3
Total production 1,951.5 1,685.2 1,786.5 1,960.6 2,128.2 1,845.5 1,808.0

o.e. = oil equivalents

Production licences

Det norske's fourth quarter production amounted to 179,542 barrels of oil equivalents (boe), compared with 195,799 boe during the same period last year. This works out at an average of 1,951.5 (2,128.2) barrels per day. The oil was sold at an average price of USD 73.4 (45.8) per barrel.

Based on today's oil prices, all fields generate a positive cash flow.

PL 038 Varg

The drilling of production well A-10A led to positive results. Production from Varg was doubled in December and Det norske had a net production from the field of 1,341 bpd in December.

PL 048B Glitne

The planned shutdown of the Glitne field has been postponed until February 2011, at the earliest. The partnership has decided to drill a new well during the summer of 2010, which could extend the field's life by two or three years.

PL 048D Enoch

The production from Enoch has been as expected in the fourth quarter.

PL 103B and Jotun Unit

Production from Jotun has been regular and stable throughout the period, with the exception of a few days' production loss in November.

Health, safety and the environment

Det norske had two rigs in operation during the fourth quarter. Det norske was operator for the first drilling assignment for the newly built Aker Barents rig. Some undesirable incidents have been registered. Together with Aker Drilling, Det norske has implemented a number of measures to improve the HSE standards on board the rig.

Shallow gas was discovered during the drilling of Skardkollen, using Bredford Dolphin. Plans had been prepared in case this happened, and the shallow gas was handled in a safe and satisfactory manner.

Development projects

PL 364 Frøy and nearby licences

Det norske and its partner Premier Oil, have through 2009 worked to reduce the costs related to a development of Frøy. The companies are aiming to submit the Plan for development and operation (PDO) in 2010. Det norske has initiated several study projects with subcontractors.

PL 001B – PL 028B Draupne Hanz

Work is in progress to mature the basis for selecting a development concept for Draupne and Hanz. The evaluations confirm the resource estimates used as basis for the declaration of commerciality in April 2009. An appraisal well on Draupne is planned for the first quarter 2010. Results from this well will be important in connection with further work.

Discoveries

PL 442 East Frigg Gamma Delta

The discovery of oil in East Frigg Delta through well 25/2-17 is being evaluated by the operator Statoil. According to the preliminary estimates, well 25/2-17 proved resources of between 19 and 35 million barrels of oil. The operator believes that the licence as a whole could contain between 60 and 190 million barrels of oil. Det norske has a 20% interest in PL 442.


5

PL 038D Grevling

Operator Talisman and partners collaborate closely on evaluating the Grevling discovery, both in terms of production properties and development concept. The drilling of an appraisal well is planned for the second quarter of 2010. A provisional project sanction is expected in the third quarter of 2010.

PL 265 – Ragnarrock

Further drilling in this licence has been postponed to 2011. The most relevant drilling targets are an appraisal well in the bedrock reservoir or an exploration well in the Skårasalen prospect.

PL 029B – Ermintrude and Freke

In mid-November, the operatorship in PL 029B was transferred from ExxonMobil to Statoil. The licence contains some of the resources in the Dagny- and Ermintrude discoveries, where the partners have supported a declaration of commerciality.

PL 362/035B – Fulla

The operator Statoil is about to complete the evaluation of the gas and condensate discovery in Fulla (wells 30/11-7 and 30/11-7A). The process to commercialise Fulla is being discussed in the license.

PL 027D, 169C, 504 Jetta

On 15 November, Det norske completed drilling of exploration wells 25/8-17 and 25/8-17A in the Jetta prospect about 4 km south of the Jotun field. Det norske drilled these wells on behalf of the operator ExxonMobil. A thin oil column was encountered in the Heimdal formation in well 25/8-17, and the discovery was appraised by well 25/8-17 A.

The proven oil volume was smaller than expected, estimated at between 5 and 15 million barrels. Even though the volumes are small, the development of Jetta might prove profitable due to the short distance to existing installations on the Jotun field. Det norske has initiated a project in collaboration with partners Dana, Bridge and Petoro, to evaluate whether or not Jetta can be profitably developed. The project plans to make a decision on development in 2010.

After drilling of the Jetta wells was completed, Det norske has acquired the operatorship from ExxonMobil in PL 027D. Det norske is now operator for all the licences in the immediate vicinity of the Jotun field. Det norske has also taken over ExxonMobil's remaining interests in PL 027D and PL 169C, and now has an owning interest of approximately 65% in the Jetta discovery.

Exploration activity

The North Sea

PL 408 Skardkollen

Exploration well 15/9-23 in Skardkollen proved to be dry. The well was drilled down to 3200 metres, ending in the Skagerak formation.

PL 414 Skatollet

The partnership in PL 414 has decided to undertake one drilling commitment. The well has to be drilled before the end of 2011.

The Norwegian Sea

PL 321/PL 321B – Geitfjellet

The Aker Barents drilling rig finished drilling exploration well 6306/6-2 in the fourth quarter. No hydrocarbons were proven by the well.

PL 469 Pumbaa

Exploration well 6407/12-2 in the Pumbaa prospect was dry. The well encountered reservoir-type rocks of lower thickness and poorer reservoir quality than expected. The drilling of Pumbaa was completed before the merger date, and is therefore not reflected in the income statement.

The Barents Sea

PL 533

In the 20th licensing round, Det norske was awarded a 20% interest in PL 533 on the southwestern flank of Lopphøgda. During the quarter, 3D seismic data was collected.

Seismic

In the North Sea, 3D seismic surveys have been conducted of licences PL 462S and PL 508S. The data collected is now being processed. In the Norwegian Sea, 3D seismic surveys have been carried out of licences PL 512, PL 522 and PL 523.


In addition, we are planning to conduct a 3D seismic survey of PL 538.

Financial considerations

Revenues from petroleum activities in the fourth quarter amounted to MNOK 73.4 (60.8). The increase can largely be ascribed to higher oil prices. Production dropped slightly compared to same period last year. Operating revenues totalled MNOK 73.7 (363.9). Operating revenues for 2008 included revenues from the sale of Goliat and Yme. The company had an operating loss of MNOK 626.2 (compared with an operating loss of MNOK 361.4 during the same period last year). The loss was primarily due to net write-downs of previously capitalised licenses of MNOK 213.3 (400.4) and MNOK 393.0 (238.6) in exploration costs. The loss for the period was MNOK 379.3 (compared with a profit of MNOK 235.6 during the same period last year after a positive tax expense of MNOK 241.7 (464.4)).

Cash flow from operating activities amounted to MNOK 67.6 (473.4) and included a tax refund of MNOK 199.7 and payments related to the dry Skardkollen and Geitfjellet exploration wells. Net cash flow from investment activities in the fourth quarter amounted to MNOK -498.5 (1,162.9). The group's liquid assets amounted to MNOK 1,574.3 (1,468.3) at the end of the quarter. Tax receivables for disbursement in 2010 have been recognised in the amount of MNOK 2,060.1 (206.8).

The company is financially strong with an equity ratio of 50% (71%) and cash, cash equivalents and tax receivables amounting to MNOK 3,634.4 (1,675.1) at the end of the period.

Total assets amounted to MNOK 7,679.4 (5,218.1) at 31 December 2009. The group had total interest bearing debt of MNOK 1,480.9 (0.0). This item consists of a credit facility for exploration with DnB NOR Bank, and a convertible bond loan.

Events after the end of the quarter

Satisfactory licence awards in predefined areas – APA 2009

In the annual licensing round, APA 2009, Det norske was offered 11 licence shares in 10 licenses. The company was very satisfied with the licence awards, which included an offer of operatorship in six of the ten licences. Following the above licence awards, the return of some licence areas and some licence swaps around the turn of the year, the company now has 77 licences and is operator for 37 of them.

PL 476 Frusalen

No hydrocarbons were discovered through the drilling of well 6507/11-10 Frusalen. The well will be plugged and abandoned. The well was drilled using the Songa Delta rig. The well head was removed by boat instead of the rig by a new cost efficient method.

PL 460 Storklakken

Det norske started drilling in Storklakken on 31 December 2009. The rig Aker Barents was moved to Ølen for repair of the DAT cylinders and will return to Storklakken to finish drilling the well.

Outlook

Det norske has intensified its work to get the development of the Frøy field going. For the Draupne and Hanz project, an appraisal well planned to be spudded in the first quarter, will be important for further work.

Det norske will maintain a high level of exploration activities in the years ahead. In mature areas, as in the North Sea, the company has a substantial exploration portfolio and the objective in this area is to make new discoveries every year. In addition, the company has a portfolio of licenses in more immature areas, such as deepwater areas in the Norwegian Sea and the Barents Sea. In these areas, Det norske will hunt for substantially larger prospects, but where the probability of success is lower.

Det norske will continue to play an active role in the licence market.



Det norske oljeselskap - group

| Income Statement
(All figures in NOK 1,000) | Note | Q4 | | 01.01. - 31.12. | |
| --- | --- | --- | --- | --- | --- |
| | | 2009 | 2008 | 2009 | 2008 |
| Petroleum revenues | | 73 396 | 60 764 | 255 135 | 326 756 |
| Other operating revenues | | 317 | 303 109 | 9 882 | 308 314 |
| Total operating revenues | | 73 714 | 363 872 | 265 017 | 635 070 |
| Exploration expenses | 3 | 392 962 | 238 551 | 1 208 728 | 544 529 |
| Change in inventories | | -219 | -1 266 | 4 124 | -3 037 |
| Production costs | | 31 439 | 44 289 | 140 275 | 125 657 |
| Payroll and payroll-related expenses | | -4 054 | 2 177 | 11 827 | 12 634 |
| Depreciation and amortisation | 8 | 16 587 | 32 823 | 53 469 | 111 357 |
| Write-downs | 4,8 | 213 304 | 400 376 | 213 304 | 400 376 |
| Other operating expenses | | 49 886 | 8 282 | 68 794 | 15 569 |
| Total operating expenses | | 699 906 | 725 231 | 1 700 520 | 1 207 084 |
| Operating profit/loss | | -626 193 | -361 359 | -1 435 503 | -572 014 |
| Interest income | | 9 365 | 107 624 | 49 589 | 144 698 |
| Other financial income | | 16 648 | 43 062 | 57 618 | 82 214 |
| Interest expenses | | 9 548 | 13 427 | 22 544 | 44 935 |
| Other financial expenses | | 11 302 | 4 688 | 49 014 | 26 109 |
| Net financial items | 5 | 5 164 | 132 571 | 35 648 | 155 869 |
| Profit/loss before taxes | | -621 029 | -228 788 | -1 399 855 | -416 145 |
| Taxes (+)/tax income (-) on ordinary profit/loss | 6 | -241 725 | -464 419 | -879 159 | -641 640 |
| Net profit/loss | | -379 304 | 235 631 | -520 696 | 225 494 |
| Weighted average no. of shares outstanding | | 69 443 225 | 64 925 020 | 66 063 855 | 64 925 020 |
| Weighted average no. of shares fully diluted | | 69 443 225 | 64 925 020 | 66 063 855 | 64 925 020 |
| Earnings/loss after taxes per share (adjusted for split) | | -5.46 | 3.63 | -7.88 | 3.47 |
| Earnings/loss after taxes per share (adjusted for split) fully diluted | | -5.46 | 3.63 | -7.88 | 3.47 |

The group was established from 22 December 2009. Aker Exploration is included in the income statement from this date.


Det norske oljeselskap - group

Balance Sheet

(All figures in NOK 1,000)

(All figures in NOK 1,000) Note 31.12.2009 31.12.2008 *) 30.09.2009
ASSETS
Intangible assets
Goodwill 4, 8 697 938 864 339 864 339
Capitalised exploration expenditures 4, 8 893 467 251 544 682 835
Other intangible assets 4, 8 1 320 484 1 264 624 1 318 139
Tangible fixed assets
Property, plant, and equipment 4, 8 413 922 298 054 308 181
Financial fixed assets
Calculated tax receivable 985 602
Other financial fixed assets 17 965 48 447 17 713
Longterm prepayments 7 240 442
Total fixed assets 3 584 218 2 727 010 4 176 809
Inventories
Inventories 14 655 14 727 15 654
Receivables
Trade receivables 30 414 583 463 33 334
Other receivables 9 393 669 200 447 234 319
Short-term deposits 21 995 17 400 19 400
Calculated tax receivables 2 060 124 206 774 213 225
Cash and cash equivalents
Cash and cash equivalents 10 1 574 287 1 468 287 957 352
Total current assets 4 095 144 2 491 098 1 473 285
TOTAL ASSETS 7 679 361 5 218 108 5 650 094

*) Adjusted balance sheet as shown in note 6


Det norske oljeselskap - group

Balance Sheet
(All figures in NOK 1,000)

(All figures in NOK 1,000) Note 31.12.2009 31.12.2008 *) 30.09.2009
EQUITY AND LIABILITIES
Paid-in capital
Share capital 11 111 111 12 985 12 985
Share premium 3 519 597
Retained earnings
Other equity 3 739 413 158 637 3 536 843
Total Equity 3 850 524 3 691 219 3 549 828
Provisions
Pension obligations 19 914 16 164 22 326
Deferred taxes 4 1 173 477 907 293 1 255 461
Abandonment provision 190 841 134 612 142 610
Deferred income and provisions for commitments 15 5 588 45 132 5 588
Total provisions 1 389 820 1 103 201 1 425 986
Long term liabilities
Derivatives 12 21 805
Bond loan 16 390 600
Total long term liabilities 412 405
Current liabilities
Short-term loan 13 1 090 258
Trade creditors 261 940 94 287 76 771
Taxes withheld and public duties payable 22 618 12 160 8 742
Deferred income 15 53 001 47 693
Other current liabilities 14 598 795 317 241 541 073
Total current liabilities 2 026 613 423 688 674 280
Total liabilities 3 828 837 1 526 889 2 100 266
TOTAL EQUITY AND LIABILITIES 7 679 361 5 218 108 5 650 094

*) Adjusted balance sheet as shown in note 6

10


Det norske oljeselskap - group

Consolidated statement of changes in equity

(All figures in NOK 1,000)

Note Share capital Share premium reserve Minority interest Other equity Total equity
Equity as at 31.12.2007 12 985 3 519 597 30 725 3 563 307
Forced redemption of minority shareholders -30 704 -30 704
Profit/loss for the period -21 225 516 225 494
Equity as of 31.12.2008 in the annual accounts 12 985 3 519 597 225 516 3 758 098
Correction of previous year 6 -66 879 -66 879
Corrected equity as of 31.12.2008 12 985 3 519 597 158 637 3 691 219
Reduction of share premium -3 519 597 3 519 597
Share issue 22.12.2009 98 126 581 874 680 000
Total profit/loss for the period -520 696 -520 696
Equity as of 31.12.2009 111 111 3 739 413 3 850 524

Total profit/loss for the period

(All figures in NOK 1,000) Q4 01.01. - 31.12.
2009 2008 2009 2008
Profit/loss for the period -379 304 235 631 -520 696 225 494
Total profit/loss for the period -379 304 235 631 -520 696 225 494
Break-down of total profit/loss:
Majority interests -379 304 235 631 -520 696 225 515
Minority interests -21
Total profit/loss for the period -379 304 235 631 -520 696 225 494

Det norske oljeselskap - group

| Cash Flow Statement
(All figures in NOK 1,000) | Q4 | | 01.01.- 31.12. | |
| --- | --- | --- | --- | --- |
| | 2009 | 2008 | 2009 | 2008 |
| Cash flow from operating activities | | | | |
| Profit/loss before taxes | -621 029 | -228 788 | -1 399 855 | -416 145 |
| Taxes paid | 1 798 | -1 841 | | -1 841 |
| Tax refund | 199 710 | 610 858 | 199 710 | 610 858 |
| Depreciation and amortisation expenses | 16 587 | 32 823 | 53 469 | 111 357 |
| Write-downs | 213 304 | 400 376 | 213 304 | 400 376 |
| Expensed dry wells | 309 927 | 124 887 | 784 027 | 124 887 |
| Changes in abandonment liabilities | 2 515 | 2 414 | 10 514 | 7 665 |
| Changes in inventories, accounts payable and receivable | 157 133 | -533 935 | 688 820 | -485 876 |
| Changes in net current capital and in other current balance sheet items | -212 391 | 66 557 | 18 546 | -122 371 |
| NET CASH FLOW FROM OPERATING ACTIVITIES | 67 555 | 473 351 | 568 534 | 228 909 |
| Cash flow from investment activities | | | | |
| Purchase of property, plant, and equipment | -21 888 | -258 113 | -62 299 | -487 012 |
| Payment related to compulsory acquisition of shares | | | | -75 810 |
| Purchase of intangible assets | -476 632 | -68 942 | -1 442 455 | -144 302 |
| Price obtained on selling property, plant and equipment | | | 320 | |
| Price obtained on selling licences | | 1 490 000 | | 1 490 000 |
| NET CASH FLOW FROM INVESTMENT ACTIVITIES | -498 520 | 1 162 945 | -1 504 433 | 782 875 |
| Cash flow from financing activities | | | | |
| Payment of shares | | | -6 000 | |
| Payment of loan | | -494 638 | | -128 625 |
| Short-term loan | 600 000 | | 600 000 | |
| NET CASH FLOW FROM FINANCING ACTIVITIES | 600 000 | -494 638 | 594 000 | -128 625 |
| Net change in cash and cash equivalents | 169 035 | 1 141 658 | -341 900 | 883 160 |
| Cash and cash equivalents at start of period | 957 352 | 326 627 | 1 468 287 | 585 127 |
| Cash in merging company | 447 900 | | 447 900 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 1 574 287 | 1 468 286 | 1 574 287 | 1 468 287 |
| Specification of cash and cash equivalents at end of period | | | | |
| Bank deposits, etc. | 1 559 200 | 1 460 176 | 1 559 200 | 1 460 176 |
| Restricted bank deposits | 15 087 | 8 110 | 15 087 | 8 110 |
| Other financial investments | | | | |
| Total cash and cash equivalents at end of period | 1 574 287 | 1 468 287 | 1 574 287 | 1 468 287 |


Det norske oljeselskap - group

Notes

(All figures in NOK 1,000)

This interim report has been prepared in accordance with international standards for financial reporting (IFRS), issued by the board of IAS, and in accordance with IAS 34 "Interim financial reporting".

Note 1: Accounting principles, changes to accounting standards and implementation of these changes

The accounting principles used for this report are in accordance with the principles used in the annual accounts for 2008. In addition, the company has introduced some new principles. These are described in the following:

IFRS 8 - Operating segments

Based on the company's activities and the existing follow-up and reporting, it is still deemed to be expedient to report the whole business as one segment.

IAS 1 - Presentation of financial accounts

The revised standard entails changes in the presentation of equity. This is now divided between "Changes in equity" and "Total profit/loss".

IFRS 3R

Revised standard. Among other things, the revised standard allows us to choose whether to assign goodwill to minorities or not. In addition, goodwill in connection with stepwise acquisitions shall only be measured at the time a controlling interest is taken over. Conditional compensation shall be recognised at fair value and acquisition costs shall be charged to income.

Group accounts and consolidation

Subsidiaries

Det norske oljeselskap's group accounts for the 2009 financial year comprise the financial accounts of the parent company Det norske oljeselskap ASA and the subsidiary Det norske oljeselskap AS. Subsidiaries are enterprises in which Det norske oljeselskap ASA, directly or indirectly, owns more than 50% of the voting rights or otherwise has a controlling interest in the enterprise's operational and financial management. When considering whether or not an enterprise is controlled, account is taken of potential voting rights that can be exercised at the present time. Where necessary, the subsidiary's principles for preparation of the accounts have been adjusted to ensure that they are in accordance with the group's accounting principles.

Eliminations

All intra-group transactions, receivables, commitments, unrealised income and expenses are eliminated when preparing the group accounts.

Convertible loans

Loans that can be converted into share capital pursuant to an option granted to the lender, and where the number of shares issued does not change in the event that the fair value changes, are treated as hybrid financial instruments. Transaction costs relating to the issuing of a hybrid financial instrument are allocated between the commitment and equity in the same proportion as the proceeds. The equity component of convertible bonds is calculated as that part of the proceeds of the issue that exceeds the present value of future interest and instalment payments, discounted by the market interest rate for similar commitments without conversion rights. The interest expenses to be included in the income statement are calculated using the effective interest rate method.

Derivatives other than hedging instruments

Financial derivatives not recognised as hedging instruments in the accounts are valued at fair value. Changes in fair value are recognised in the income statement as they arise.

13


Det norske oljeselskap - group

Note 2 Acquisition of companies

Det norske oljeselskap ASA (in the following called "Det norske") merged with Aker Exploration ASA (in the following called "AkX") on 22 December 2009. Aker Exploration ASA owned 100% of the subsidiary Aker Exploration AS. Aker Exploration was engaged in exploration for petroleum resources on the Norwegian continental shelf. For legal and financial reasons, AkX was legally the acquiring party in the merger. Det norske is clearly the biggest party to the merger and must be regarded as the acquiring party pursuant to IFRS 3R B13 - B19. For accounting purposes, the transaction date is set to the date on which the merger became legally effective, i.e. 22 December 2009. For tax purposes the transaction date was 1 January 2009. In legal terms, the merger was effected by Det norske oljeselskap ASA transferring all its assets, rights and commitments to Aker Exploration ASA in return for which Det norske's shareholders received shares in AkX based on a conversion ratio of 82:18 between the companies in Det norske's favour. Det norske's shareholders who received consideration shares in AkX were registered in AkX's share register as shareholders from the effective date of the merger. From that date, the new shares conferred rights, including dividend rights. A total of 91,111,111 new shares were issued in Aker Exploration ASA, each with a nominal value of NOK 1. The fair value of these shares was NOK 39.35416 per share, based on the listed price of AkX (Oslo Axess) on the transaction date. There are no shareholders with special rights etc. The merged company will operate under Det norske's name, logo and profile. The subsidiary Aker Exploration AS has changed its name to Det norske oljeselskap AS.

The total effect of the acquisition on the accounts is as follows:

All figures in NOK 1,000 Capitalised value 22 Dec 2009 Exess- / less value Acquisition value
Seismic 31 000 31 000
Rig contract -201 054 -201 054
Capitalised exploration expenditures 70 674 233 581 304 255
Property, plant, and equipment 2 032 2 032
Pre-paid mobilisation expenses rig / rig expenses 533 713 533 713
Other receivables 1 523 1 523
Deferred tax benefit 52 997 52 997
Trade receivables 45 953 45 953
Calculated tax receivables 659 617 659 617
Cash 447 900 447 900
Convertible bond loan -411 023 20 423 -390 600
Longterm debt -550 813 60 555 -490 258
Financial instruments -15 550 -15 550
Trade creditors -300 459 -300 459
Accrued interest -1 068 -1 068
Net assets and debt 535 495 144 505 680 000
Calculation of goodwill:
Purchase price 680 000
Net book value equity 535 495
Total value adjustments 144 505
Basis:
Deferred tax 28 % 80 978 22 674
Deferred tax 78 % 63 527 49 551
Total deferred tax 72 225
Goodwill 72 225
Total 752 225 752 225
Reconciliation of goodwill
Goodwill as a result of deferred tax 72 225
Total 72 225
Capital increase 680 000

Goodwill is the result of the transaction being treated in accordance with IFRS 3 'Business Combinations'. The change in deferred tax is the result of the difference between the fair value and tax value of assets on the acquisition date. The valuation at fair value of licences under development or licences in production is based on cash flows after tax. This is because these licences are only sold in a market after tax based on decisions made by the Ministry of Finance pursuant to the Petroleum Taxation Act section 10. In accordance with IAS 12 sections 15 and 19, a provision is made for deferred tax corresponding to the difference between the acquisition cost and the acquired depreciation base for tax purposes. The offsetting entry to this deferred tax is goodwill. Hence, goodwill arises as a technical effect of deferred tax.


Det norske oljeselskap - group

The acquired company contributed NOK 0 to the group's sales and a loss of MNOK 11.6 to the group's result before tax between the date of acquisition (22 December 2009) and the balance-sheet date.

If the acquisition had been effected on 1 January 2009, the group's total sales for the period would have been MNOK 265.0, and the corresponding profit/loss before taxes would have been MNOK - 2,521.6

Note 3 Exploration expenses

Specification of exploration expenses: Q4 01.01.-31.12.
2009 2008 2009 2008
Seismic costs, well data, field studies and other exploration expenses 904 18 769 79 892 82 419
Share of exploration expenses from license participation 58 006 85 761 262 522 236 019
Expensed capitalised wells previous years 5 144 124 887 23 689 124 887
Expensed capitalised wells this year 304 784 211 760 338 16 912
Share of payroll and other operating expenses reclassified as exploration 10 718 8 188 56 458 75 527
Research and development costs related to exploration activities 13 408 736 25 828 8 766
Total exploration expenses 392 962 238 551 1 208 728 544 529

Note 4 Writedown

A write-down test of goodwill and pertaining licences was carried out in the fourth quarter in accordance with the company's accounting principles. The test was carried out as of 31.12.2009. Goodwill is capitalised as a consequence of the requirement in IFRS 3 to make provision for deferred tax in connection with the acquisition of enterprises, even if the transactions are made on an "after-tax" basis as a result of a section 10 decision in line with applicable petroleum taxation. The offsetting entry to deferred tax is goodwill.

From 2008 goodwill is allocated to every license, and every license is regarded as a cash generating unit with respect to goodwill.

The value per licence for licences that are still in the exploration phase, is determined by looking at the risked resources and estimating a value per barrel. In order to arrive at a value per barrel, the company has used the average of several analysts' valuations as a basis. The value used is slightly below this average.

For producing licenses and licenses in the development phase, recoverable amount is estimated based on discounted future after tax cash flows. Input to the calculations are reports form operators to the Revised National Budget 2010 (RNB). Future cash flows are calculated in the various licenses on the basis of expected production profiles and estimated proven and probable remaining reserves. The discount rate applied is 10.7 percent nominal after tax, which corresponds to a pre-tax discount rate of 48.6 percent. The company have used a long term inflationary expectation of 2.5 percent, and a long term exchange rate expectation of NOK/USD 6.00.

The following oil price assumptions are applied:

Year Average USD
2010 80,9
2011 85,8
2012 88,0
2013 89,5
2014 91,3
2015 93,4
2016 96,3
2017 99,0

Oil prices are based on forward curve, source: ICE Brent Crude 31.12.2009.

Some of last years writedowns on producing licenses is reversed as of 31 December 2009. Reversing of earlier years write downs are mainly due to lower oil prices and new reserve and resource estimates.


Det norske oljeselskap - group

Based on the above mentioned evaluations, the following writedowns/revers of earlier years writedowns have been accounted for in 2009:

Q4 01.01. - 31.12.
2009 2008 2009 2008
Writedown/reversing of earlier years writedowns of tangible fixed assets -50 225 50 225 -50 225 50 225
Writedown/reversing of earlier years writedowns of other intangible assets/licence rights -48 900 48 900 -48 900 48 900
Writedown other intangible assets/licence rights 335 468 288 925 335 468 288 925
Writedown goodwill 238 626 265 324 238 626 265 324
Writedown deferred tax -261 665 -252 998 -261 665 -252 998
213 304 400 376 213 304 400 376

When a license is sold and the company previously has accounted for deferred taxes and goodwill from a business combination, both goodwill and deferred taxes will be included in the calculation of gains and losses. In assessing a potential writedown due to impairment, a similar assumption is made and goodwill and deferred taxes are evaluated together with the value of the corresponding license.

Note 5 Financial items

Q4 01.01. - 31.12.
2009 2008 2009 2008
Interest income 9 365 107 624 49 589 144 698
Increased value of financial investments 2 595 12 220
Currency gain 13 941 43 062 45 285 82 214
Other financial income 112 112
Total interest income and other financial income 26 013 150 686 107 206 226 912
Interest costs 9 488 13 025 21 278 43 795
Amortised borrowing costs 3 619 402 4 826 1 140
Currency loss 1 488 3 088 39 200 19 929
Loss on derivatives 6 254 6 254
Decrease in value of financial investments 1 600 6 180
Total interest costs and other financial expenses 20 850 18 115 71 558 71 043
Net financial items 5 164 132 571 35 648 155 869

Note 6 Taxes

Taxes for the period appear as follows: Q4 01.01. - 31.12.
2009 2008 2009 2008
Calculated tax receivable due to exploration-related costs -402 178 -40 834 -1 387 780 -225 587
Change in deferred taxes 160 453 -423 585 508 621 -416 053
Total taxes (+) / tax income (-) -241 725 -464 419 -879 159 -641 640

A full tax calculation has been carried out in accordance with the accounting principles described in the annual report for 2008. The calculated tax receivable as a result of exploration activities in 2009 is recognised as a current asset, and the refund is expected in December 2010.

An error was detected in the tax calculation for 2008. The error has been corrected in the opening balance for 2009 as follows:

Closing Correction Corrected
Calculated tax receivable 213 982 -7 208 206 774
Total correction assets -7 208
Deferred tax 847 622 59 671 907 293
Other equity 225 516 -66 879 158 637
Total correction debt and equity -7 208

Det norske oljeselskap - group

Note 7 Prepayments and chartering of drilling rig(s)

31.12.2009 31.12.2008 30.09.2009
Prepayments related to upgrading, rig intake and mobilisation of Aker Barents 379 608
Less value - rig contract acquisition -140 689
Sum prepayment Aker Barents 238 919
Other prepayment 1 523
240 442

Det norske oljeselskap AS has signed a charterparty for a sixth generation drilling rig (Aker Barents) for a fixed period of three years with an option to extend by up to two years. The charter period started to run in August 2009. The charterparty is classified as an operational lease.

Pre-paid mobilisation expenses and investments in the rig will be amortised over the three-year charter period. The agreed rig rate per day is USD 520,000, including operating expenses of NOK 900,000, which will be adjusted for inflation during the charter period. Rig expenses will be charged to income and subsequently reversed when invoicing for use of the rig. The group has devided these costs in a long term and a short term part, according to when invoicing will take place.

Note 8 Tangible assets/intangible assets

Tangible fixed assets Fields under development Production facilities, including wells Machinery and equipment, etc Total
Balance sheet value 31.12.2008 190 430 88 459 19 165 298 054
Procurement cost 31.12.2008 190 430 276 099 27 566 494 096
Additions/reclassifications 4 795 14 257 21 359 40 411
Disposals/reclassifications 320 320
Procurement cost 30.09.2009 195 225 290 356 48 605 534 186
Accumulated depreciation and write-downs 30.09.2009 209 573 16 433 226 005
Balance sheet value 30.09.2009 195 225 80 784 32 173 308 181
Procurement cost 30.09.2009 195 225 290 356 48 605 534 186
Additions acquisition of company 2 087 2 087
Additions/reclassifications 3 406 68 652 4 245 76 302
Disposals/reclassifications 1 559 7 139 8 698
Procurement cost 31.12.2009 198 631 357 449 47 797 603 877
Accumulated depreciation and write-downs 31.12.2009 169 864 20 091 189 955
Balance sheet value 31.12.2009 198 631 187 585 27 706 413 922
Depreciation Q4 10 516 3 659 14 175
Depreciation in 2009 32 449 11 690 44 139
Write-downs in 2009 -50 225 -50 225

Production facilities under development are depreciated from production start-up. Production facilities, wells included, are depreciated in accordance with the production of unit method. Machinery, equipment, etc. are depreciated linearly over their lifetime, 3-5 years. Abandonment assets are included as part of the procurement cost on production installations in the table above.

17


Det norske oljeselskap - group

Intangible assets Other intangible assets Software Exploration assets Goodwill Total
Balance sheet value 31.12.2008 1 251 637 12 987 251 544 864 339 2 380 507
Procurement cost 31.12.2008 1 613 468 28 768 251 544 1 129 556 3 023 337
Additions/reclassifications 56 873 3 559 976 117 1 036 549
Disposals/reclassifications 544 826 544 826
Procurement cost 30.09.2009 1 670 341 32 327 682 835 1 129 556 3 515 060
Accumulated depreciation and write-downs 30.09.2009 363 032 21 498 265 217 649 747
Balance sheet value 30.09.2009 1 307 309 10 829 682 835 864 339 2 865 313
Procurement cost 30.09.2009 1 670 341 32 327 682 835 1 129 556 3 515 060
Additions acquisition of company 288 723 46 533 72 225 407 480
Additions/reclassifications 1 991 615 243 898 246 504
Disposals/reclassifications 98 500 79 799 70 065 248 364
Procurement cost 31.12.2009 1 862 555 32 942 893 467 1 131 716 3 920 680
Accumulated depreciation and write-downs 31.12.2009 551 594 23 419 433 778 1 008 791
Balance sheet value 31.12.2009 1 310 960 9 523 893 467 697 938 2 911 889
Depreciation Q4 495 1 921 2 415
Depreciation in 2009 1 695 7 638 9 333
Write-downs in 2009 286 568 238 626 525 194
Reconciliation of depreciation in the income statement:
Depreciation of tangible fixed assets 14 175
Depreciation of intangible assets 2 415
Total depreciation in the income statement 16 587
Reconciliation of depreciation in the income statement:
(-)Reversals/write-downs of tangible fixed assets -50 225
Write-downs of intangible assets 525 194
Write-downs of deferred tax -261 665
Total write-downs in the income statement 213 304

Software is depreciated linearly over the software's lifetime, which is three years.

Fields under development include an amount of EUR 13.5 million relating to Frøy. There is a dispute in the licence concerning whether this expense should be covered by Det norske oljeselskap in its entirety or divided between the partners in the license. For further information, see note 17.

Note 9 Other short-term receivables

31.12.2009 31.12.2008 30.09.2009
Prepayments, including rig prepayments 29 488 86 079 28 361
VAT refund 17 809 7 839 12 105
Underlift (retained earnings) 5 205 4 242 5 190
Deposit account - deferred income 49 959
Garantee account, unsecured pension scheme 5 015 3 653 4 463
Other receivables, including receivables in operator licenses 192 454 98 634 139 696
Prepayments related to upgrading, rig intake and mobilisation of Aker Barents 154 105
Less value - rig contract acquisition -60 365
Sum prepayment Aker Barents 93 740
Total other short-term receivables 393 669 200 447 189 814

Det norske oljeselskap - group

Note 10 Cash and cash equivalents

The item "Cash and cash equivalents" comprises bank deposits and short-term placements which are a part of the company's transaction liquidity.

Spesifikasjon av betalingsmidler 31.12.2009 31.12.2008 30.09.2009
Cash 20
Bank deposits 1 559 156 1 460 176 951 250
Restricted bank deposits 15 087 8 110 6 102
Current investments 24
Total cash and cash equivalents 1 574 287 1 468 287 957 352

Unused overdraft facility, exploration facility loan

740 940 203 283 1 138 886

Note 11 Share capital

31.12.2009 31.12.2008 30.09.2009
Share capital 111 111 12 985 12 985
Total number of shares 111 111 64 925 64 925
Nominal value per share in NOK 1.00 0.20 0.20

Note 12 Derivatives

Det norske oljeselskap AS has entered into forward contracts to reduce its currency exposure in USD.

At 31 December 2009, the company had the following financial instruments:

31.12.2009 31.12.2008 30.09.2009
Structured forward contracts 21 805 - -
Estimated real value 21 805 - -

Note 13 Current liabilities

31.12.2009 31.12.2008 30.09.2009
Exploration facility DnB NOR 1 150 813
Excess value - exploration facility by acquisition (note 2) -60 555
1 090 258

Det norske oljeselskap ASA has a revolving exploration facility of 1,500,000 in DnB NOR BANK ASA. The maximum amount is limited to 95 percent of the tax refund related to exploration costs. The company can utilise on the loan up to 31 December 2010 and the final repayment will take place in December 2011.

Det norske oljeselskap AS has a revolving exploration facility of 1,819,770 in DnB NOR BANK ASA. The maximum amount is limited to 95 percent of the tax refund related to exploration costs. The company can utilise on the loan up to 31 December 2012 and the final repayment will take place in December 2013.

Fore more information about unused overdraft facility, exploration facility loan, see note 10 - "cash and cash equivalents"


Det norske oljeselskap - group

Note 14 Other current liabilities

31.12.2009 31.12.2008 30.09.2009
Short-term debt related to license cash calls 45 127 32 910 48 058
Share of other current liabilities from licenses 364 642 154 750 379 973
Other current liabilities 189 026 129 582 113 042
Total current liabilities 598 795 317 241 541 073

Note 15 Deferred income and other obligations

Together with five other oil companies, Det norske is part of a consortium which has secured a three-year rig contract for the drilling rig Bredford Dolphin (1,095 days). Together, the companies have undertaken to employ the rig for 945 days. In co-operation with another company, Det norske has guaranteed for the commitment pertaining to the remaining 150 days. As compensation for this liability, Det norske will receive a payment of USD 10,000 per day for the first 945 days of drilling. The amount is paid into an Escrow Account and serves as security for the obligations under the rig contract. The revenue will be taken to income when it is no longer probable that Det norske has such an obligation. In Q3, this entry is reclassified from long-term liabilities to short-term liabilities.

31.12.2009 31.12.2008 30.09.2009
Deferred income - long-term 38 669
Deferred income - short-term 53 001 47 693
Other obligations 6 463
53 001 45 132 47 693

Note 16 Bond loan

31.12.2009 31.12.2008 30.09.2009
Principal convertibel bond Norsk Tillitsmann 457 500
Equity share convertibel bond initial recognition -98 991
Accumulated amortisation equity share 52 514
Excess value acquisition -20 423
390 600

The loan runs from 18 December 2006 to 16 December 2011 at a fixed rate of interest of 6%. The principal falls due on 16 December 2011 and interest is paid on an annual basis (16 December). Throughout the loan period, the loan can be converted into shares at NOK 79.30 per share (5,769,231 shares). No security has been furnished for this loan. Det norske ASA has fulfilled all the loan conditions.

Note 17 Uncertain commitments

In order to secure progress in the Frey Project (PL 364), Det norske accepted commitments in relation to the engineering services contractor and other commitments relating to the contractor's subcontractors during the period before 1 October 2008. There is a dispute in the licence concerning whether this expense should be covered by Det norske in its entirety or divided between the licensees, Premier Oil Norge AS and Det norske. The disputed amount totals EUR 13.5 million. It is included under "Tangible fixed assets - Fields under development".

In addition to the above-mentioned amount of EUR 13.5 million, there is a dispute between Det norske and the contractor concerning coverage of contract overruns totalling EUR 3.2 million. The company has not made any provision for this possible liability.

The company is involved in an ongoing dispute with rig contractors relating to the application of rates. Det norske's share of the disputed amount is MNOK 20. The accounts include provision of MNOK 6 to cover this.

20


Det norske oljeselskap - group

Note 18: Investments in common controlled assets

Investments in common controlled assets are calculated by gross method (proportionately consolidation), based on the assets.

Investments in licenses on the Norwegian continental shelf as of 31.12.2009:

Operatorships: Partner-operated:
License 31.12.2009 31.12.2008 License 31.12.2009 31.12.2008
PL 001B 35 % 35 % PL 029B 20 % 20 %
PL 027D* 35 % 10 % PL 035 25 % 25 %
PL 028B 35 % 35 % PL 035B 15 % 15 %
PL 103B 70 % 70 % PL 038 5 % 5 %
PL 169C 57 % 0 % PL 038D 30 % 0 %
PL 242 35 % 35 % PL 048B 10 % 10 %
PL 256 55 % 0 % PL 048D 10 % 10 %
PL 321 60 % 25 % PL 102C 10 % 0 %
PL 321B 60 % 25 % PL 265 20 % 30 %
PL 337 45 % 45 % PL 272 25 % 25 %
PL 341 30 % 30 % PL 283 25 % 0 %
PL 356 100 % 100 % PL 304 30 % 0 %
PL 364 50 % 50 % PL 332 40 % 40 %
PL 369** 60 % 20 % PL 362 15 % 15 %
PL 380 70 % 70 % PL 387 0 % 30 %
PL 383 55 % 55 % PL 416 15 % 0 %
PL 408 100 % 70 % PL 442 20 % 20 %
PL 414 40 % 40 % PL 451 40 % 40 %
PL 432 100 % 100 % PL 453S 25 % 25 %
PL 432B 100 % 0 % PL 458 30 % 30 %
PL 440S 30 % 30 % PL 462S 30 % 0 %
PL 447 30 % 30 % PL 469 25 % 0 %
PL 450 75 % 75 % PL 474 30 % 0 %
PL 460 100 % 52,5 % PL 485 15 % 15 %
PL 463S 100 % 70 % PL 490 30 % 20 %
PL 468 100 % 0 % PL 492 30 % 30 %
PL 476 40 % 40 % PL 494 30 % 0 %
PL 482 65 % 65 % PL 502 22,2 % 0 %
PL 483S 40 % 40 % PL 508S 30 % 0 %
PL 491 50 % 40 % PL 522 20 % 0 %
PL 497 35 % 0 % PL 523 20 % 0 %
PL 500 35 % 0 % PL 533 20 % 0 %
PL 504 58,5 % 0 % PL 535 20 % 0 %
PL 512 30 % 0 % PL 538 30 % 0 %
Number 34 Number 33
  • Compared with status as of 31.12.2008, Det norske has acquired the operatorship from ExxonMobil.
    ** Det norske has acquired Talisman's share and operatorship.

In the annual licensing round, APA 2009, Det norske was offered operatorships in PL 497B (35 percent), PL 504BS (58.5 percent), PL 542 (60 percent), PL 548S (40 percent), PL 549S (35 percent) og PL 553 (40 percent). As partner, Det norske has been awarded interests in PL 554 (40 percent), PL 558 (20 percent), PL 561 (20 percent) og PL 563 (30 percent). The formal transaction took place in January 2010.


Det norske oljeselskap - group

Note 19 Results from previous interim reports

2009 2008 2007 Q4
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Operating revenues 73 714 67 417 66 761 57 125 363 872 102 243 89 471 79 483 55 625
Exploration expenses 392 962 334 547 416 061 65 158 238 551 146 443 102 572 56 907 122 836
Change in inventories -219 -283 665 3 961 -1 266 70 -1 499 -343 2 498
Production costs 31 439 35 848 37 375 35 612 44 289 34 513 23 486 23 369 9 747
Payroll and payroll-related expenses -4 054 2 270 6 209 7 401 2 177 1 989 1 549 6 919 10 281
Depreciation and amortisation 16 587 13 583 12 029 11 269 32 823 29 061 24 217 25 255 17 488
Write-downs 213 304 400 376
Other operating expenses 49 886 11 682 5 013 2 212 8 282 -1 517 4 160 4 658 4 978
Operating expenses 699 906 397 648 477 352 125 613 725 231 210 559 154 484 116 766 167 829
Operating profit/loss -626 193 -330 231 -410 591 -68 488 -361 359 -108 317 -65 013 -37 283 -112 203
Net financial items 5 164 -5 809 9 905 26 388 132 571 32 233 -1 427 -7 508 -4 480
Pre-tax profit/loss -621 029 -336 040 -400 685 -42 100 -228 788 -76 083 -66 440 -44 791 -116 684
Taxes -241 725 -264 454 -323 598 -49 381 -464 419 -81 689 -59 705 -35 827 -97 316
Net profit/loss -379 304 -71 586 -77 087 7 282 235 631 5 605 -6 735 -8 964 -19 368

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