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Aker BP Interim / Quarterly Report 2010
3528_rns_2010-11-05_0975dbbb-2bfe-4db6-ac47-3da973e93ab7.pdf
Interim / Quarterly Report
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DETNORSKE
Report Q3 2010
Trondheim, November 5, 2010
2
TRONDHEIM
Det norske oljeselskap ASA
www.detnor.no
Postal and office address:
Føniks
Munkegata 26
NO-7011 Trondheim
Telephone: +47 90 70 60 00
Fax: +47 73 54 05 00
STAVANGER
Det norske oljeselskap ASA
Postal and office address:
Næringslivets Hus
Haakon VIIIs gt. 8, NO-4005 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: Havnebygget
Rikard Kaarbøs gate 2, NO-9405 Harstad
Postal address: P.O. Box 854, NO-9488 Harstad
Telephone: +47 97 65 60 00
Table of contents
Important events ... 3
Key figures ... 3
Production ... 4
Fields in production and oil prices ... 4
Health, safety and the environment ... 4
Operated projects ... 4
Operated discoveries ... 4
Non-operated projects ... 4
Exploration activity ... 5
Business transactions ... 5
Events after the end of the quarter ... 6
Outlook ... 6
Financial Statements ... 9
Det norske is currently participating in two exploration wells: Stirby and Dalsnuten. The results of these wells are expected in the near future. The company has an active exploration programme for 2011 with planned participation in 11 exploration wells.
Det norske continues its work of preparing for the development of the Frøy and Draupne fields.
Important events
- Gas and condensate was discovered in the David prospect in PL 102C. Estimated recoverable volumes are between 15 and 20 million barrels of oil equivalents. Det norske has a 10% interest in the licence. The discovery is being considered for development.
- In August, Det norske started exploration drilling in the Stirby prospect, a gas and condensate prospect in PL 341. Det norske has a 30% interest in the licence.
-
In September, Shell started exploration drilling in the Dalsnuten gas prospect in PL 392 in the Norwegian Sea. Det norske is a partner and has a 10% interest in the licence.
-
The charter party for the Aker Barents drilling rig was extended from July 2012 until July 2014. This agreement secures drilling capacity in deep water and in the Barents Sea.
- Teitur Poulsen has accepted the role as Chief Financial Officer (CFO).
- The loss for the period was MNOK 80.1 compared with a loss of MNOK 71.6 for the same period last year. Exploration expenses for the period amounted to MNOK 209.1 (329.0).
Key figures
| Q3 10* | Q2 10* | Q1 10* | Q4 09* | Q3 09 | 2009 | 2008 | |
|---|---|---|---|---|---|---|---|
| Oil and gas production (barrels) | 171,203 | 187,377 | 218,191 | 179,542 | 155,035 | 673,603 | 661,732 |
| Oil price achieved (USD/barrel) | 77.8 | 79.9 | 76.0 | 73.4 | 67.0 | 59.7 | 87.6 |
| Operating revenues (MNOK) | 80.6 | 88.7 | 97.1 | 73.7 | 67.4 | 265.0 | 635.1 |
| Exploration expenses (MNOK) | 209.1 | 367.2 | 544.2 | 409.9 | 329.0 | 1,208.7 | 544.5 |
| Operating profit/loss (MNOK) | -253.1 | -409.3 | -574.7 | -626.2 | -330.2 | 1,435.5 | -572.0 |
| Profit/loss (MNOK) | -80.1 | -104.8 | -174.3 | -379.3 | -71.6 | 520.7 | 225.5 |
| Total exploration expenses (expensed and capitalised) | 447.0 | 911.6 | 793.9 | 592.8 | 511.3 | 1,804.3 | 153.3 |
| No. of employees | 192 | 188 | 181 | 176 | 146 | ||
| No. of licences (operatorships) | 72(35) | 71(35) | 74(37) | 67(34) | 52(28) |
MNOK= NOK million
- The group was established on 22 December 2009. Aker Exploration is included in the income statement as from that date.
4
Production
| Barrels of o.e. per day | Share in production | Q3 10 | Q2 10 | Q1 10 | Q4 09 | Q3 09 | 2009 | 2008 |
|---|---|---|---|---|---|---|---|---|
| Varg | 5% | 1,067.4 | 1,185.8 | 1,386.1 | 874.2 | 595.6 | 690.1 | 611.1 |
| Glitne | 10% | 437.3 | 433.6 | 542.9 | 587.3 | 566.7 | 618.9 | 866.0 |
| Enoch | 2% | 65.0 | 79.9 | 117.1 | 129.4 | 130.7 | 125.6 | 124.0 |
| Jotun Unit | 7% | 291.3 | 359.8 | 378.2 | 360.6 | 392.1 | 410.9 | 494.3 |
| Total production | 1,861 | 2,059 | 2,424 | 1,951 | 1,685 | 1,845 | 1,808 |
o.e = oil equivalents
Fields in production and oil prices
Production in the third quarter amounted to 171,203 (155,035) barrels of oil equivalents. This corresponds to an average of 1,860.9 (1,685.2) barrels a day. The oil was sold at an average price of USD 77.8 (67.0) per barrel.
Production from the Varg, Jotun and Glitne fields fell during the quarter, because of planned maintenance. The work was carried out in a safe and efficient manner. Moreover, challenges relating to the gas-lift system led to reduced production from the Enoch field during the third quarter.
Health, safety and the environment
There have been no serious incidents in connection with Det norske's operations during the quarter.
Operated projects
Frøy and nearby licenses
The partnership in PL 364 has decided to study the possibility of increasing recoverable volumes in Frøy through the combined use of gas and water injection rather than just gas injection. This work must be completed before a more detailed front-end engineering design (FEED) study can be carried out. This means that the partnership is planning to submit a Plan for development and operation (PDO) in mid-2011 at the earliest, with production start in mid-2014. Efforts are currently being made to secure financing. Frøy is a profitable prospect with a break-even price of just under USD 60/barrel based on a development solution that uses a wellhead platform and FPSO.
Draupne and nearby licenses
The plan is to make a decision concerning the development concept for Draupne in the course of the first quarter 2011, following a comprehensive evaluation of the data from the successful delineation wells 16/1-11 and 11A, and interpretation of new 3D seismic data. A combined development with the Luno discovery in PL338 will be evaluated before the partnership decides what concept to choose. Production is not expected to start before 2015, at the earliest.
Operated discoveries
PL 027D, 169C, 504 Jetta
Det norske finds the Jetta discovery commercially interesting and is negotiating commercial terms with the Jotun licence for a possible tie-in with the processing plant on Jotun.
PL 460 Storklakken
Preliminary technical and financial analyses confirm the presence of commercial volumes. The field can be tied in with Frøy, Vilje/Alvheim or Jotun.
Non-operated projects
The part of Dagny that extends into PL 029B
The Dagny discovery extends into PL 029B, in which Det norske has a 20% interest. The operator Statoil plans to submit the PDO for Dagny in 2012, with production start towards the end of 2015, at the earliest.
PL 362/035B Fulla
The operator Statoil has made good progress with the Fulla project. A number of tie-in alternatives are being evaluated, via Heimdal (possibly via satellites) or Bruce on the UK side.
PL 038D Grevling
The operator Talisman is making good progress with the Grevling project following the successful drilling of delineation wells 15/12-23 and 15/12-23A. The oil-water contact proved to be 83 meters deeper than in the discovery well and the
operator Talisman is evaluating various development options.
Exploration activity
APA 2010
Awards in pre-defined areas (APA) 2010 include the more mature areas of the Norwegian continental shelf, and Det norske made several applications both as operator and partner before the deadline on 15 September.
Twenty-first licensing round
In the third quarter, considerable resources were engaged with the 21st licensing round. The company has submitted applications for areas in both the Norwegian Sea and the Barents Sea.
PL 341 Stirby
On 16 August, the Songa Delta drilling rig started drilling exploration well 24/12-6S in the Stirby prospect. Stirby is a major gas and condensate prospect for which Det norske is operator. The drilling operation was planned and is being conducted as if the well was a high temperature and high pressure (HTHP) well.
PL 392 Dalsnuten
The Aker Barents drilling rig started drilling Dalsnuten on 6 September. The operation is conducted by Shell and is still ongoing. Dalsnuten is a large deep-water gas prospect in the Norwegian Sea, in which Det norske has a 10 percent interest.
PL 482 Skaugumsåsen
The licence has decided to drill a well in Skaugumsåsen and the planned drilling operation will be carried out by the Aker Barents drilling rig. Det norske owns a 65 percent interest in the licence.
PL 522 Gullris
The licence has decided to drill a well in the Gullris prospect and the management committee has agreed to use the Aker Barents for this operation. BG is operator for PL 522, in which Det norske owns a 20 percent interest.
PL 265 Aldous Major
In September, Lundin reported a major oil discovery with good production properties in the Avaldsnes prospect in PL 501. Det norske has no ownership interest in this discovery, but is of the opinion that the structure extends into PL 265, in which Det norske has a 20 percent interest. Statoil is operator for PL 265 and is planning to drill two exploration wells in 2011, in order to determine the resource potential.
Business transactions
Secured rig capacity after 2012
The charter party for the Aker Barents drilling rig has been extended by two years in direct continuation of the existing contract which expires in July 2012. The new contract has a variable rate structure. A rate of approximately USD 450,000 will apply when the rig is used at water depths of less than 500 metres, while the rate will be approximately USD 550,000 when the rig is used in deeper waters and in the Barents Sea. The company also has an option on the rig for another two years.
The market for rigs that can operate in the Barents Sea and in deep waters in the Norwegian Sea is very tight. The company believes that it is important to secure drilling capacity for exploration drilling and possible production drilling if discoveries are made in these areas.
PL 440S Clapton
In the third quarter, Det norske sold a 20% interest in PL 440S, which includes the Clapton prospect, to Faroe Petroleum. As consideration, Faroe Petroleum will cover Det norske's share of expenses relating to the next exploration well in the licence. Following the transaction, Det norske owns a 10 percent interest in the licence.
PL 468 Dovregubben
Det norske has sold 5 percent of PL 468 to GDF SUEZ. This licence contains the Dovregubben prospect, in which drilling is planned for 2011 using the Aker Barents drilling rig.
PL 256, PL 383 and PL 476
It has been decided to relinquish these licences.
Financials
Operating revenues in the third quarter amounted to MNOK 80.6 (67.5). The increase of 19% is due to an increase in production and higher oil prices compared with the third quarter of 2009. The company had an operating loss of MNOK 253.1 (compared with an operating loss of MNOK 330.2 during the same period last year). The loss can largely be attributed to exploration expenses of MNOK 209.1 (328.9).
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The loss for the period was MNOK 80.1 (compared with a loss of MNOK 71.6 during the same period last year) after a positive tax income of MNOK 228.7 (264.5).
The net cash flow from operational activities was MNOK -189.4 (-176.3). The net cash flow from investment activities was MNOK -282.9 (-214.7) in the third quarter. The negative cash flow was mainly a result of exploration expenses.
The group's liquid assets amounted to MNOK 1,100.7 (957.4) at the end of the quarter. Tax receivables for disbursement in 2010 have been recognised in the amount of MNOK 2,078.0 (213.2), while tax receivables for disbursement in 2011 have been recognised in the amount of MNOK 1,801.3 (985.6). The company continues to be financially strong with an equity ratio of 36 percent (63 percent) and good liquidity. Liquid assets and tax receivables, adjusted for the amount drawn on the credit facility for exploration and convertible loans, amounted to MNOK 1,612.0 (2,156.2) at the end of the period.
Total assets amounted to MNOK 9,790.3 (5,650.1) at 30 September. The increase was mainly a result of the merger between Det norske and Aker Exploration in the fourth quarter 2009. The group has a credit facility for exploration of MNOK 4,500.
Events after the end of the quarter
PL 102C David
Gas and condensate have been discovered through exploration well 25/5-7 in the David prospect in PL102C. Preliminary estimates show reserves of between 15 and 20 million barrels of oil equivalents. Total is operator and Det norske has a 10 percent interest. The discovery has good production properties and possible commercialisation with tie-in to Byggve/Skirne will be evaluated.
Outlook
The company is currently participating in two exploration wells that have significant potential – on Stirby in PL 341 and on Dalsnuten in PL 392. Det norske continues its work of preparing for the development of the Frøy and Draupne fields.
The company has submitted applications in the 21 st licensing round. Awards are expected early in 2011. The licenses applied for both in the Barents Sea and Norwegian Sea contain significant prospects.
Det norske oljeselskap - group
INCOME STATEMENT (Unaudited)
| (All figures in NOK 1,000) | Note | Q3 | 01.01. - 30.09. | ||
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | ||
| Petroleum revenues | 79 655 | 61 420 | 263 416 | 181 739 | |
| Other operating revenues | 988 | 5 997 | 3 036 | 9 564 | |
| Total operating revenues | 80 643 | 67 417 | 266 452 | 191 303 | |
| Exploration expenses | 1, 2 | 209 065 | 328 886 | 1 120 495 | 798 782 |
| Change in inventories | 660 | -283 | -1 859 | 4 343 | |
| Production costs | 35 845 | 35 848 | 116 709 | 108 836 | |
| Payroll and payroll-related expenses | 7 548 | 2 270 | 10 040 | 15 880 | |
| Depreciation | 3 | 41 749 | 13 583 | 136 641 | 36 881 |
| Write-downs | 3 | 24 442 | 73 185 | ||
| Other operating expenses | 1 | 14 447 | 17 343 | 48 349 | 35 890 |
| Total operating expenses | 333 756 | 397 647 | 1 503 561 | 1 000 613 | |
| Operating profit/loss | -253 113 | -330 231 | -1 237 109 | -809 309 | |
| Interest income | 13 294 | 10 372 | 41 365 | 40 224 | |
| Other financial income | 659 | 12 544 | 84 424 | 40 969 | |
| Interest expenses | 52 624 | 4 593 | 150 032 | 12 996 | |
| Other financial expenses | 17 025 | 24 132 | 94 258 | 37 712 | |
| Net financial items | 4 | -55 696 | -5 809 | -118 500 | 30 485 |
| Profit/loss before taxes | -308 808 | -336 040 | -1 355 609 | -778 825 | |
| Taxes (+)/tax income (-) | 5 | -228 684 | -264 454 | -996 352 | -637 434 |
| Net profit/loss | -80 123 | -71 586 | -359 257 | -141 391 | |
| Weighted average no. of shares outstanding | 111 111 | 64 925 | 111 111 | 64 925 | |
| Weighted average no. of shares fully diluted | 111 111 | 64 925 | 111 111 | 64 925 | |
| Earnings/(loss) after taxes per share (adjusted for split) | (0,72) | (1,10) | (3,23) | (2,18) | |
| Earnings/(loss) after taxes per share (adjusted for split) fully diluted | (0,72) | (1,10) | (3,23) | (2,18) |
The group was established from 22 December 2009. Aker Exploration is included in the income statement from this date.
TOTAL PROFIT/LOSS FOR THE PERIOD (Unaudited)
| (All figures in NOK 1,000) | Q3 | 01.01. - 30.09. | ||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Profit/loss for the period | -80 124 | -71 586 | -359 257 | -141 391 |
| Total profit/loss for the period | -80 124 | -71 586 | -359 257 | -141 391 |
| Break-down of total profit/loss: | ||||
| Majority interests | -80 124 | -71 586 | -359 257 | -141 391 |
| Total profit/loss for the period | -80 124 | -71 586 | -359 257 | -141 391 |
Det norske oljeselskap - group
STATEMENT OF FINANCIAL POSITION (Unaudited)
| (All figures in NOK 1,000) | Note | 30.09.2010 | 31.12.2009 | 30.09.2009 |
|---|---|---|---|---|
| ASSETS | ||||
| Intangible assets | ||||
| Goodwill | 3 | 666 470 | 697 938 | 864 339 |
| Capitalised exploration expenses | 3 | 1 935 335 | 893 467 | 682 835 |
| Other intangible assets | 3 | 1 218 467 | 1 320 484 | 1 318 139 |
| Tangible fixed assets | ||||
| Property, plant, and equipment | 3 | 408 998 | 447 553 | 308 181 |
| Financial fixed assets | ||||
| Calculated tax receivable | 5 | 1 801 278 | 985 602 | |
| Derivatives | 10 | 9 948 | ||
| Other financial fixed assets | 18 001 | 17 965 | 62 218 | |
| Long-term prepayments | 6 | 99 620 | 240 442 | |
| Total fixed assets | 6 158 116 | 3 617 849 | 4 221 315 | |
| Inventories | ||||
| Inventories | 17 633 | 14 655 | 15 654 | |
| Receivables | ||||
| Trade receivables | 25 709 | 30 414 | 33 334 | |
| Other short-term receivables | 7 | 388 111 | 393 669 | 189 814 |
| Market-based financial investments | 22 050 | 21 995 | 19 400 | |
| Calculated tax receivables | 2 077 992 | 2 060 124 | 213 225 | |
| Cash and cash equivalents | ||||
| Cash and cash equivalents | 8 | 1 100 663 | 1 574 287 | 957 352 |
| Total current assets | 3 632 158 | 4 095 144 | 1 428 779 | |
| TOTAL ASSETS | 9 790 274 | 7 712 992 | 5 650 094 |
Det norske oljeselskap - group
STATEMENT OF FINANCIAL POSITION (Unaudited)
| (All figures in NOK 1,000) | Note | 30.09.2010 | 31.12.2009 | 30.09.2009 |
|---|---|---|---|---|
| EQUITY AND LIABILITIES | ||||
| Paid-in capital | ||||
| Share capital | 9 | 111 111 | 111 111 | 12 985 |
| Share premium | 1 167 312 | 1 167 312 | ||
| Other paid-in equity | 21 652 | 33 463 | ||
| Total paid-in equity | 1 300 075 | 1 311 886 | 12 985 | |
| Earned equity | ||||
| Other equity | 2 191 192 | 2 538 638 | 3 536 843 | |
| Total Equity | 3 491 267 | 3 850 524 | 3 549 828 | |
| Provision for liabilities | ||||
| Pension liabilities | 24 293 | 19 914 | 22 326 | |
| Deferred taxes | 1 885 434 | 1 173 477 | 1 255 461 | |
| Provision for removal and decommissioning liabilities | 233 586 | 224 472 | 142 610 | |
| Other provisions for liabilities | 2 832 | 5 588 | 5 588 | |
| Long-term liabilities | ||||
| Derivatives | 10 | 21 805 | ||
| Bond loan | 13 | 413 901 | 390 600 | |
| Current liabilities | ||||
| Short-term loan | 11 | 2 953 988 | 1 090 258 | |
| Trade creditors | 118 187 | 261 940 | 76 771 | |
| Accrued public charges and indirect taxes | 11 744 | 22 618 | 8 742 | |
| Deferred income | 53 001 | 47 693 | ||
| Other current liabilities | 12 | 655 042 | 598 795 | 541 073 |
| Total liabilities | 6 299 007 | 3 862 468 | 2 100 266 | |
| TOTAL EQUITY AND LIABILITIES | 9 790 274 | 7 712 992 | 5 650 094 |
Det norske oljeselskap - group
STATEMENT OF CHANGES IN EQUITY (Unaudited)
| (All figures in NOK 1,000) | Share capital | Premium reserve | Other paid-in equity | Other equity | Total equity |
|---|---|---|---|---|---|
| Corrected equity as of 31/12/2008 | 12 985 | 3 519 597 | 158 637 | 3 691 219 | |
| Profit/loss for the periode | -141 391 | -141 391 | |||
| Reduction of premium reserve | -3 519 597 | 3 519 597 | |||
| Equity as of 30/09/2009 | 12 985 | 3 536 843 | 3 549 828 | ||
| Redemption of share capital | -12 985 | -12 985 | |||
| Equity capital / value of acquiring company | 20 000 | 1 167 312 | 33 463 | -618 901 | 601 874 |
| Share Issue 22/12/2009 | 91 111 | 91 111 | |||
| Total profit/loss for the period | -379 305 | -379 305 | |||
| Equity as of 31/12/2009 | 111 111 | 1 167 312 | 33 463 | 2 538 638 | 3 850 524 |
| Total profit/loss for the period | -11 811 | -347 446 | -359 257 | ||
| Equity as of 30/09/2010 | 111 111 | 1 167 312 | 21 652 | 2 191 192 | 3 491 267 |
Det norske oljeselskap - group
CASH FLOW STATEMENT (Unaudited)
| (All figures in NOK 1,000) | Note | Q3 | 01.01. - 30.09. | 01.01.- 31.12 | ||
|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2009 | ||
| Cash flow from operating activities | ||||||
| Income/loss before taxes | -308 808 | -336 040 | -1 355 609 | -778 825 | -1 399 855 | |
| Taxes paid during the period | -1 390 | -1 390 | -1 798 | |||
| Tax refund during the period | 199 710 | |||||
| Depreciation | 3 | 41 749 | 13 583 | 136 641 | 36 881 | 53 469 |
| Write-downs | 3 | 14 092 | 62 835 | 213 304 | ||
| Expensed excess/shortfall values | 10 350 | 101 905 | ||||
| Reversal of tax item related to shortfall value of purchase price allocation (PPA) | -26 853 | -26 853 | ||||
| Changes in derivatives | 4 | 17 773 | -31 753 | |||
| Amortisation of interest expenses | 7 767 | 23 301 | ||||
| Expensed dry wells, previous capitalised (*) | 2, 3 | 10 457 | 7 095 | 667 711 | 18 545 | 784 027 |
| Changes in abandonment liabilities | 3 078 | 2 718 | 9 114 | 7 999 | 10 514 | |
| Changes in inventories, accounts payable and receivable | -190 722 | 21 889 | -142 025 | 531 687 | 688 820 | |
| Changes in net current capital beyond the changes in inventories, accounts payable and receivables and other current balance sheet items | 233 105 | 114 448 | 86 472 | 230 935 | 18 546 | |
| NET CASH FLOW FROM OPERATING ACTIVITIES | -189 401 | -176 307 | -469 651 | 45 424 | 568 534 | |
| Cash flow from investment activities | ||||||
| Disbursements on investments in tangible fixed assets | 3 | -25 621 | -17 294 | -84 201 | -40 411 | -62 299 |
| Disbursements on investments in capitalised exploration expenses and other intangible assets | 3 | -257 306 | -197 699 | -1 724 469 | -510 268 | -1 442 455 |
| Sale of tangible fixed assets | 320 | 320 | 320 | |||
| NET CASH FLOW FROM INVESTMENT ACTIVITIES | -282 927 | -214 673 | -1 808 670 | -550 359 | -1 504 434 | |
| Cash flow from financing activities | ||||||
| Purchase of shares | -6 000 | -6 000 | ||||
| Repayment of loan | -549 290 | |||||
| Short-term debt | 1 134 300 | 2 353 988 | 600 000 | |||
| NET CASH FLOW FROM FINANCING ACTIVITIES | 1 134 300 | 1 804 698 | -6 000 | 594 000 | ||
| Net change in cash and cash equivalents | 661 971 | -390 980 | -473 624 | -510 934 | -341 900 | |
| Cash and cash equivalents at start of period | 438 692 | 1 348 332 | 1 574 287 | 1 468 287 | 1 468 287 | |
| Cash and cash equivalents in acquired company at the time of acquisition | 447 900 | |||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 1 100 663 | 957 352 | 1 100 663 | 957 353 | 1 574 287 | |
| Specification of cash and cash equivalents at end of period: | ||||||
| Bank deposits, etc. | 1 092 156 | 951 250 | 1 092 156 | 951 250 | 1 559 176 | |
| Restricted bank deposits | 8 507 | 6 102 | 8 507 | 6 102 | 15 087 | |
| Short-term placements | 24 | |||||
| Total cash and cash equivalents at end of period | 8 | 1 100 663 | 957 352 | 1 100 663 | 957 352 | 1 574 287 |
(*) Classification of "expensing of capitalized exploration wells this year" has changed in that it has moved from investment activities to operating activities.
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". The quarterly report is unaudited.
Note 1 Accounting principles
The accounting principles used for this interim report are in accordance with the principles used in the annual accounts for 2009. Note 1.37 to the annual accounts, stated that the company planned to implement some changes to the accounting standards as from 1 January 2010. Based on the company's activities, none of these changes are relevant as of 30/09/2010.
In relation to the comparative figures for 2009, area fees have been reclassified from exploration expenses to other operating expenses. In Q3 2009 this amounts to NOK 5 661 and for the first three quarters of 2009 this amounts to NOK 16 983.
Note 2 Exploration expenses
| Specification of exploration expenses: | Q3 | 01.01. - 30.09. | ||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Seismic costs, well data, field studies and other exploration expenses | 117 331 | 41 006 | 216 251 | 78 989 |
| Reversal of tax item related to shorfall value of purchase price allocation (PPA) | -26 853 | -26 853 | ||
| Share of exploration expenses from license participation incl. seismic | 81 030 | 32 812 | 226 881 | 187 533 |
| Expensed capitalised wells previous years | 7 095 | 9 819 | 18 545 | |
| Expensed capitalised wells this year | 10 457 | 233 108 | 657 892 | 455 555 |
| Share of payroll and other operating expenses reclassified as exploration expenses | 23 937 | 8 372 | 75 491 | 45 741 |
| Research and development costs related to exploration activities | 3 162 | 6 493 | 22 411 | 12 420 |
| Rig contract warranty recognised in the income statement | -61 397 | |||
| Total exploration expenses | 209 065 | 328 886 | 1 120 495 | 798 782 |
Note 3 Tangible assets and intangible assets
| TANGIBLE FIXED ASSETS: | Fields under development | Production plant, including wells | Fixtures and fittings, office machinery etc. | Total |
|---|---|---|---|---|
| Balance-sheet value 31/12/09 | 198 631 | 221 216 | 27 706 | 447 553 |
| Acquisition cost 31/12/2009 | 198 631 | 391 080 | 47 797 | 637 508 |
| Additions/reclassification | 36 726 | 9 638 | 12 215 | 58 579 |
| Acquisition cost 30/06/2010 | 235 357 | 400 718 | 60 013 | 696 087 |
| Accumulated depreciation and writedowns 30/06/2010 | 246 291 | 28 687 | 274 978 | |
| Balance-sheet value 30/06/2010 | 235 357 | 154 427 | 31 326 | 421 111 |
| Acquisition cost 30/06/2010 | 235 357 | 400 718 | 60 013 | 696 088 |
| Additions/reclassification | 9 261 | 679 | 15 681 | 25 621 |
| Acquisition cost 30/09/2010 | 244 618 | 401 397 | 75 694 | 721 710 |
| Accumulated depreciation and writedowns 30/09/2010 | 280 738 | 31 975 | 312 713 | |
| Balance-sheet value 30/09/2010 | 244 618 | 120 659 | 43 719 | 408 998 |
| Depreciation Q3 | 34 447 | 3 288 | 37 731 | |
| Depreciation in 2010 | 110 874 | 11 883 | 122 757 |
Det norske oljeselskap - group
Fields under development are depreciated from start of production. Production facilities, including wells, are depreciated in accordance with the Unit of Production Method. Office machinery, fixtures and fittings etc. are depreciated using the straight-line method over their useful life, i.e. 3-5 years. Removal and decommissioning costs for production facilities is included in the table on previous page.
| INTANGIBLE ASSETS: | Other intangible assets | Exploration expenses | Goodwill Goodwill | ||
|---|---|---|---|---|---|
| Licences | Software | Total | |||
| Balance-sheet value 31/12/09 | 1 310 961 | 9 523 | 1 320 484 | 893 467 | 697 938 |
| Acquisition cost 31/12/2009 | 1 862 555 | 32 942 | 1 895 497 | 893 467 | 1 131 716 |
| Additions/reclassification | 1 150 | 1 150 | 1 466 013 | ||
| Disposals/reclassification | 171 465 | 171 465 | 662 120 | 97 805 | |
| Acquisition cost 30/06/2010 | 1 691 090 | 34 091 | 1 725 181 | 1 697 360 | 1 033 911 |
| Accumulated depreciation and writedowns | |||||
| 30/06/2010 | 460 268 | 26 863 | 487 131 | 364 241 | |
| Balance-sheet value 30/06/2010 | 1 230 823 | 7 227 | 1 238 050 | 1 697 360 | 669 670 |
| Acquisition cost 30/06/2010 | 1 691 090 | 34 091 | 1 725 181 | 1 697 360 | 1 033 911 |
| Additions/reclassification | 8 228 | 647 | 8 875 | 248 431 | |
| Disposals/reclassification | 24 442 | 24 442 | 10 457 | 3 200 | |
| Acquisition cost 30/09/2010 | 1 674 876 | 34 738 | 1 709 614 | 1 935 335 | 1 030 711 |
| Accumulated depreciation and writedowns | |||||
| 30/09/2010 | 462 988 | 28 160 | 491 148 | 364 241 | |
| Balance-sheet value 30/09/2010 | 1 211 889 | 6 579 | 1 218 467 | 1 935 335 | 666 470 |
| Depreciation Q3 | 2 721 | 1 297 | |||
| Depreciation in 2010 | 9 143 | 4 741 | |||
| Write-downs in Q3 | 24 442 | ||||
| Write-downs in 2010 | 67 150 | 4 866 | 28 268 | ||
| Reconciliation of depreciation in the income statement: | Q3 | 01.01. - 30.09. | |||
| Depreciation of tangible fixed assets | 37 731 | 122 757 | |||
| Depreciation of intangible assets | 4 018 | 13 884 | |||
| Total depreciation in the income statement | 41 749 | 136 641 | |||
| Software is depreciated linearly over the software's lifetime, which is three years. | |||||
| Reconciliation of write-downs in the income statement: | Q3 | 01.01. - 30.09. | |||
| Write-downs of intangible assets | 24 442 | 100 284 | |||
| Write-down of deferred tax related to write-down of goodwill | -27 099 | ||||
| Total write-downs in the income statement | 24 442 | 73 185 |
There has been a derecognition related to licenses under relinquishment in the period. Disposal of goodwill in the period is related to relinquishment of a license the company acquired in the merge with Aker Exploration.
Det norske oljeselskap - group
Note 4 Financial items
| Q3 | 01.01. - 30.09. | |||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Interest income | 13 294 | 10 372 | 41 365 | 40 224 |
| Return on financial investments | 1 100 | 575 | 9 625 | |
| Currency gains | 15 653 | 11 444 | 46 905 | 31 344 |
| Change in value of derivatives | -14 994 | 36 944 | ||
| Total other financial income | 659 | 12 544 | 84 424 | 40 969 |
| Interest expenses | 47 511 | 4 191 | 134 695 | 11 790 |
| Amortisation of loan costs | 5 113 | 402 | 15 338 | 1 206 |
| Total interest expenses | 52 624 | 4 593 | 150 032 | 12 996 |
| Currency losses | 17 000 | 24 132 | 33 183 | 37 712 |
| Expensed excess value, identified in connection with acquisition | 60 555 | |||
| Decline in value of financial investments | 25 | 520 | ||
| Total other financial expenses | 17 025 | 24 132 | 94 258 | 37 712 |
| Net financial items | -55 696 | -5 809 | -118 500 | 30 485 |
Note 5 Taxes
| Taxes for the period appear as follows: | Q3 | 01.01. - 30.09. | ||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Calculated tax receivable due to exploration-related costs | -392 213 | -389 129 | -1 801 277 | -985 602 |
| Reversal of tax item related to shorfall value of purchase price allocation (PPA), accounted as exploration expenses | 26 853 | 26 853 | ||
| Changes in prior years tax returns | 1 390 | 1 390 | ||
| Change in deferred taxes | 135 286 | 124 675 | 817 817 | 348 168 |
| Tax on excess-/shortfall values expensed in the period | -41 135 | |||
| Total taxes (+) / tax income (-) | -228 684 | -264 454 | -996 352 | -637 434 |
A full tax calculation has been carried out in accordance with the accounting principles described in the annual report for 2009. The calculated tax receivable as a result of exploration activities in 2010 is recognised as a long-term item in the balance sheet. The tax refund for this items is expected to be paid in December 2011. 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.
16
Det norske oljeselskap - group
Note 6 Pre-payments and chartering of drilling rig - long term
| 30.09.2010 | 31.12.2009 | 30.09.2009 | |
|---|---|---|---|
| Pre-payments relating to upgrades, rig intake and mobilisation | 166 743 | 379 608 | |
| Shortfall value of rig charterparties in connection with acquisition | -67 122 | -140 689 | |
| Total pre-payments, Aker Barents | 99 620 | 238 919 | |
| Other pre-payments | 1 523 | ||
| Total pre-payments and chartering of drilling rigs | 99 620 | 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 the charter period by up to two years. The charter period started to run in July 2009. In Q3 the company signed a lease agreement for two years, with an option for an additional periode of two years. 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 on the contract date was USD 520,000 per day, including operating expenses of NOK 900,000, which will be adjusted for inflation during the charter period. Rig costs are charged to income on a running basis and reversed when invoicing the licences that use the rig. The group has split these costs into a long-term and a short-term component, according to when the licences will be invoiced. The long-term component is described in this Note, while the short-term component is described in Note 7.
Note 7 Other short-term receivables
| 30.09.2010 | 31.12.2009 | 30.09.2009 | |
|---|---|---|---|
| Pre-payments, including for rigs | 36 492 | 29 488 | 28 361 |
| VAT receivable | 20 362 | 17 809 | 12 105 |
| Underlift (earned income) | 20 723 | 5 205 | 5 190 |
| Deposit account - deferred income | 49 959 | ||
| Guarantee account, unsecured pension scheme | 5 825 | 5 015 | 4 463 |
| Other receivables, including in operator licences | 157 284 | 192 454 | 139 696 |
| Pre-payments relating to upgrades, rig intake and mobilisation | 246 758 | 154 105 | |
| Shortfall value of rig charterparties in connection with acquisition | -99 333 | -60 365 | |
| Total pre-payments, Aker Barents | 147 425 | 93 740 | |
| Total other short-term receivables | 388 111 | 393 669 | 189 814 |
Note 8 Cash and cash equivalents
The item 'Cash and cash equivalents' consists of bank accounts and short-term investments that constitute parts of the company's transaction liquidity.
| 30.09.2010 | 31.12.2009 | 30.09.2009 | |
|---|---|---|---|
| Cash | 20 | 20 | |
| Bank deposits | 1 092 136 | 1 559 156 | 951 250 |
| Restricted funds (tax withholdings) | 8 507 | 15 087 | 6 102 |
| Short-term placements | 24 | ||
| Total cash and cash equivalents | 1 100 663 | 1 574 287 | 957 352 |
| Unused revolving credit facility, exploration facility loan | 617 419 | 740 940 | 1 138 886 |
Det norske oljeselskap - group
Note 9 Share capital
| 30.09.2010 | 31.12.2009 | 30.09.2009 | |
|---|---|---|---|
| Share capital | 111 111 | 111 111 | 12 985 |
| Total number of shares | 111 111 | 111 111 | 64 925 |
| Nominal value per share in NOK | 1,00 | 1,00 | 0,20 |
Note 10 Derivatives
Det norske oljeselskap AS has entered into forward contracts to reduce its currency exposure in USD.
At 30 September 2010, the company had the following financial instruments:
| 30.09.2010 | 31.12.2009 | 30.09.2009 | |
|---|---|---|---|
| Structured forward contracts | 9 948 | -21 805 | |
| Estimated fair value | 9 948 | -21 805 |
Description of structured forward contracts:
As of 30 September 2010, Det norske oljeselskap AS has four structured forward contracts, each for an amount of USD 12 million, which fall due every three months. The first forward contract matures on 1st December 2010. These forward exchange contracts are structured so that if the NOK/USD spot exchange rate falls below 5.65 in the course of the last three months preceding the maturity date, the company is obliged to buy USD at a rate of NOK 6.145. If the USD exchange rate is between NOK 5.65 and NOK 6.145, the company pays the normal spot price, and if the exchange rate exceeds NOK 6.145, the rate paid by the company is NOK 6.145.
The company has also signed five forward contracts for the sale of USD, each for an amount of 6 million. These fall due at the same time as the above-mentioned outright purchase contracts. The average agreed NOK/USD rate is 6.65.
Note 11 Short-term loans
| 30.09.2010 | 31.12.2009 | 30.09.2009 | |
|---|---|---|---|
| Exploration facility in DnB NOR | 3 000 000 | 1 150 813 | |
| Accrued loan costs | -46 013 | ||
| Excess value of overdraft facility identified in connection with acquisition | -60 555 | ||
| 2 953 988 | 1 090 258 |
In January 2010, the group established a joint revolving credit facility of NOK 4,500,000,000 with a bank syndicate headed by DnB NOR BANK ASA. Maximum utilization including interest is limited to 95 percent of tax refunds related to the exploration expenses. The companies can draw on the facility until 31 December 2012 and the final repayment must take place in December 2013. All the group's exploration licences were pledged as security for the bank syndicate headed by DnB NOR as from 5 March 2010.
The interest rate on the revolving credit is 3 months' NIBOR + 2.5%, and the establishment fee for the facility was NOK 61.3 million. A commission of 1.35% is also paid on unused credit.
For information about the unused part of the credit facility for exploration purposes, see Note 8 - "Cash and cash equivalents"
18
Det norske oljeselskap - group
Note 12 Other current liabilities
| 30.09.2010 | 31.12.2009 | 30.09.2009 | |
|---|---|---|---|
| Current liabilities related to overcall in licences | 227 892 | 45 127 | 48 058 |
| Share of other current liabilities in licences | 178 984 | 364 642 | 379 973 |
| Other current liabilities | 248 166 | 189 026 | 113 042 |
| Total other current liabilities | 655 042 | 598 795 | 541 073 |
Note 13 Bond loan
| 30.09.2010 | 31.12.2009 | 30.09.2009 | |
|---|---|---|---|
| Principal, convertible loan Norsk Tillitsmann | 457 500 | 457 500 | |
| Equity part of convertible loan on initial inclusion | -98 991 | -98 991 | |
| Accumulated amortisation of equity part of convertible loan | 68 919 | 52 514 | |
| Excess value on acquisition | -13 527 | -20 423 | |
| 413 901 | 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 this period, the loan can be converted to shares (5,769,231 shares) at a price of NOK 79.30 per share. No security has been furnished for this loan. Det norske ASA has fulfilled all the loan conditions.
Note 14 Uncertain commitments
There is a disagreement between the partners in one of the company's operating licenses, related to the cost of drilling an exploration well. Det norske disagrees with the claim, and has not made provision in the accounts of this controversy.
During the normal course of its business Det norske oljeselskap will be involved in disputes, and there are currently some unresolved claims. The Group has provided accruals in its financial statements for probable liabilities related to litigation and claims based on the Group's best judgement. Det norske does not expect that the financial position, results of operations or cash flows will be materially affected by the resolution of these disputes.
19
Det norske oljeselskap - group
Note 15 Changes in the licence portfolio
| Comments | 30.09.2010 | 30.06.2010 | 31.03.2010 | 31.12.2009 | |
|---|---|---|---|---|---|
| PL 027D | 60,0 % | 60,0 % | 60,0 % | 35,0 % | |
| PL 028S | 40,0 % | 0,0 % | 0,0 % | 0,0 % | |
| PL 169C | 70,0 % | 70,0 % | 70,0 % | 57,5 % | |
| PL 259 | Relinquished | 0,0 % | 0,0 % | 0,0 % | 30,0 % |
| PL 321/321B | Relinquished | 0,0 % | 0,0 % | 60,0 % | 60,0 % |
| PL 369 | 60,0 % | 60,0 % | 60,0 % | 40,0 % | |
| PL 380 | Relinquished | 0,0 % | 0,0 % | 0,0 % | 70,0 % |
| PL 383 | Relinquished | 0,0 % | 55,0 % | 55,0 % | 55,0 % |
| PL 392 | 10,0 % | 0,0 % | 0,0 % | 0,0 % | |
| PL 432/432B | Relinquished | 0,0 % | 0,0 % | 0,0 % | 100,0 % |
| PL 447 | 80,0 % | 80,0 % | 30,0 % | 30,0 % | |
| PL 458 | Relinquished | 0,0 % | 0,0 % | 0,0 % | 30,0 % |
| PL 474 | Relinquished | 0,0 % | 30,0 % | 30,0 % | 30,0 % |
| In the annual licensing round APA 2009, Det norske was offered interests in the following licences: | |||||
| PL 497B | Operatorship | 35,0 % | 35,0 % | 35,0 % | |
| PL 504 BS | Operatorship | 58,5 % | 58,5 % | 58,5 % | |
| PL 542 | Operatorship | 60,0 % | 60,0 % | 60,0 % | |
| PL 548S | Operatorship | 40,0 % | 40,0 % | 40,0 % | |
| PL 549S | Operatorship | 35,0 % | 35,0 % | 35,0 % | |
| PL 553 | Operatorship | 40,0 % | 40,0 % | 40,0 % | |
| PL 554 | Partner-operate | 40,0 % | 40,0 % | 40,0 % | |
| PL 558 | Partner-operate | 20,0 % | 20,0 % | 20,0 % | |
| PL 561 | Partner-operate | 20,0 % | 20,0 % | 20,0 % | |
| PL 563 | Partner-operate | 30,0 % | 30,0 % | 30,0 % |
Det norske oljeselskap - group
Note 16 Results from previous interim reports
| 2010 | 2009 | 2008 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | |
| Operating revenues | 80 643 | 88 671 | 97 138 | 73 714 | 67 417 | 66 761 | 57 125 | 363 872 | 102 243 |
| Exploration expenses | 209 065 | 367 219 | 544 211 | 409 945 | 328 886 | 410 400 | 59 497 | 238 551 | 146 443 |
| Change in inventories | 660 | -1 571 | -948 | -219 | -283 | 665 | 3 961 | -1 266 | 70 |
| Production costs | 35 845 | 39 606 | 41 259 | 31 439 | 35 848 | 37 375 | 35 612 | 44 289 | 34 513 |
| Payroll and payroll-related expenses | 7 548 | 7 548 | 1 080 | -4 054 | 2 270 | 6 209 | 7 401 | 2 177 | 1 989 |
| Depreciation | 41 749 | 44 121 | 50 772 | 16 587 | 13 583 | 12 029 | 11 269 | 32 823 | 29 061 |
| Write-downs | 24 442 | 32 748 | 15 995 | 213 304 | 400 376 | ||||
| Other operating expenses | 14 447 | 14 476 | 19 426 | 32 903 | 17 343 | 10 674 | 7 873 | 8 282 | -1 517 |
| Operating expenses | 333 755 | 498 011 | 671 795 | 699 905 | 397 648 | 477 352 | 125 613 | 725 231 | 210 559 |
| Operating profit/loss | -253 112 | -409 340 | -574 657 | -626 193 | -330 231 | -410 591 | -68 488 | -361 359 | -108 317 |
| Net financial items | -55 696 | 7 952 | -70 757 | 5 164 | -5 809 | 9 905 | 26 388 | 132 571 | 32 233 |
| Pre-tax profit/loss | -308 808 | -401 387 | -645 414 | -621 029 | -336 040 | -400 685 | -42 100 | -228 788 | -76 083 |
| Taxes | -228 684 | -296 566 | -471 102 | -241 725 | -264 454 | -323 598 | -49 381 | -464 419 | -81 689 |
| Net profit/loss | -80 124 | -104 821 | -174 312 | -379 304 | -71 586 | -77 087 | 7 282 | 235 631 | 5 605 |
21
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