Centrica E&P Norway
20 ANNUAL REPORT
15
Contents About
04
Key figures
05
Senior Vice President’s comments
06
Corporate structure & management
08
2015 milestones
10
Centrica E&P Norway timeline
12
Contribution to local community
14
Focus on the environment
16
Business principles
18
Board of directors’ report
20
Financial statements
22
DESIGN Melvær&Co PHOTOGRAPHS Centrica photographic archive/Shutterstock/Anne Lise Norheim
CENTRICA E&P NORWAY
About Centrica E&P Norway is part of Centrica plc, an international energy company active at every stage in the energy chain from sourcing energy to saving it. Centrica E&P Norway was established in 2006 as part of Centrica’s strategy to increase its international involvement in oil and gas exploration and production. Since then, the Norwegian subsidiary has developed to become a key player in Centrica’s E&P portfolio. Following major acquisitions and several discoveries on the Norwegian Shelf, Centrica E&P Norway has created a business with the experience and expertise needed to make it one of Norway’s leading oil and gas companies.
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ANNUAL PRODUCTION
DAILY PRODUCTION
26
72,000
MILLION BARRELS OF OIL EQUIVALENTS
BARRELS OF OIL EQUIVALENTS
KEY FIGURES DEVELOPMENT PROJECTS BUTCH FOGELBERG MARIA (PARTNER)
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PRODUCING FIELDS STATFJORD STATFJORD NORD STATFJORD ØST SYGNA KVITEBJØRN VALEMON HEIMDAL VALE (OPERATED)
NUMBER OF LICENCES
44 (12) CENTRICA OPERATED
NUMBER OF EMPLOYEES AND CONTRACTORS
142 5
SENIOR VICE PRESIDENT’S COMMENTS
Tough adjustments, significant opportunities The low oil and gas prices weighed heavy on everyone’s minds in 2015. We cannot influence prices. This is why we have directed our efforts towards costs by working smarter and more efficiently. We are doing all this while paving the way for future activities – a challenging balancing act, but necessary and fully feasible. We have proven this over the past year. The development concept for the Butch field was selected during the autumn of 2015. The subsea tieback solution to the Ula field is innovative and takes advantage of existing infrastructure. The long-term partnerships we have
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established with experienced suppliers – the Strategic Partner Alliance – makes me confident that the Butch project will be delivered on time and budget. Innovation can contribute to reducing costs. Our pilot hole drilled on the Butch field is a prime example of this. As the first company in the world to use a new method of drilling shallow wells offshore, with coiled tubing from a well intervention vessel, we achieved safer operations at half the cost. Since its inception in 2006, Centrica E&P Norway has been one of the fastest growing companies on the
Norwegian Shelf, measured by production growth. We set new records in 2015 and increased total production from 23.5 mmboe in 2014 to 26 mmboe in 2015. Statfjord and Kvitebjørn made the largest contributions to achieving this. The start-up of the Valemon field marked yet another milestone for us. We have developed a robust portfolio over the course of the nine years that have passed since we were awarded our first licence on the Norwegian Shelf. Access to new attractive licences forms the foundation for our activities and continued growth. This is why we say yes and are happy to participate when
We have directed our efforts towards costs by working smarter and more efficiently.
DAG OMRE Senior Vice President,
Centrica E&P Norway
the authorities announce new licensing rounds. Our goal is to continue exploration activities even in challenging times, and to continue to develop commercial discoveries into new fields. Moreover, Centrica’s new strategy, presented in July 2015, confirms Norway as a priority area for exploration and production also in the future. Health and safety are fundamental to our business. By minimising hazards, we can keep our people safe and work more efficiently. A key priority across our activities is to prevent major incidents. We have a solid track record to date, but we can never be good enough on safety
– we have to work hard every day to achieve continuous improvement. 2016 will mark our 10-year anniversary in Norway. A glance at our history reveals a company with skilled and dedicated employees who have accomplished a lot in a short period of time. We have worked step by step to develop into a responsible and reliable operator on the Norwegian Shelf. While 2015 was a challenging year, and 2016 will also be demanding for the entire oil and gas industry, I am convinced that we are well-prepared for the future. The opportunities on the Norwegian Shelf are vast – and we will continue to seize them.
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CENTRICA E&P NORWAY
Corporate structure & management Corporate stucture
IAIN CONN Chief Executive
MARK HODGES Group Executive Director & Chief Executive, Energy Supply and Services, UK and Ireland
UK Home
UK Business
Ireland
BADAR KHAN Chief Executive, Energy Supply and Services, North America
NA Home
NA Business
MARK HANAFIN Group Executive Director & Chief Executive, Energy Production, Trading and Distributed Energy
Distributed Energy and Power
Energy Marketing and Trading Connected Home
Exploration and Production
Nuclear* * Our interest in nuclear is a financial investment
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GRANT DAWSON Group General Counsel & Company Secretary
Centrica Storage Ltd
Centrica E&P Norway’s management team SENIOR VICE PRESIDENT
Dag Omre
VP BUSINESS DEVELOPMENT & COMMERCIAL
VP PEOPLE & SUPPORT
VP EXPLORATION & SUBSURFACE
VP OPERATIONS
VP PROJECTS
HEAD OF FINANCE
Petter Myhre
Gro Kyllingstad
Steinar Meland
Rune Martinsen
Arne Bjørlo
Kari Holm
DAG OMRE Senior Vice President Dag has been responsible for establishing and developing Centrica E&P Norway’s organisation and licence portfolio. Dag has more than 25 years of experience from the Norwegian oil and gas industry, as well as management experience from Petoro and the Ministry of Petroleum and Energy.
GRO KYLLINGSTAD Vice President People & Support Gro took on responsibility for the newly-established position as VP for People & Support in 2015, and is in charge of HR, IT/IS, Facilities and Communication. Gro also has extensive exploration and subsurface experience from Mobil, ExxonMobil, Gaz de France and ConocoPhillips, and has acted as VP Exploration & Subsurface for Centrica E&P Norway.
RUNE MARTINSEN Vice President Operations Rune is responsible for operations on the Norwegian Shelf, including drilling, operation of the Vale field and management of our portfolio of partner-operated developments and producing fields. In the course of more than 20 years in the oil industry, Rune has held leading positions such as Chief Engineer, Resource Manager and Chief Operating Officer in companies such as BP and Noreco.
KARI HOLM Head of Finance Kari leads the finance department. Through her responsibility for all financial activity, she supports the Chief Executive in financial decisions. Kari has experience from management positions in accounting and finance with GDF SUEZ, Statoil and Ernst & Young.
PETTER MYHRE Vice President Business Development & Commercial Petter has more than 25 years of multi-disciplinary experience in the E&P sector, and has held senior positions such as Managing Director for BG Group in Norway and Asset- and Business Development Manager with Gaz de France in Norway. His latest assignment was as Managing Director of Kuwait Foreign Petroleum Exploration Company (KUFPEC) in Norway.
STEINAR MELAND Vice President Exploration & Subsurface Steinar has worked for ExxonMobil, DONG and Wood Group Technology and has more than 15 years of experience as a geologist and exploration manager on the Norwegian Shelf. As one of the first staff members at Centrica’s Norwegian office, Steinar has played a key role in developing the organisation and the licence portfolio.
ARNE BJØRLO Vice President Projects Arne joined Centrica E&P Norway from a position as Senior VP for Project Management in Aker Solutions. He has 30 years of experience from offshore oil and gas industry, covering all phases of the E&P value chain from conceptual studies, engineering and construction to platform installation. He has spent 20 years in various EPCI project management roles and four years as VP in Aker Solution’s MMO management team. Arne has international experience from Canada and Brunei, working with major oil companies such as BP, Mobil and Shell.
CHANGES to the Management Team in 2015: Håken Skogly: Vice President Business Development & Commercial until 15th of April Sirine Fodstad: Head of HR & Communication until 15th of May John Stevenson: VP Projects until 15th of June Gro Kyllingstad: VP Exploration & Subsurface until 15th of August
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MILESTONES FROM 2015
2015 milestones Valemon on stream JANUARY: The Valemon gas and condensate field in the North Sea was brought on stream. Valemon is the second field Centrica E&P Norway has brought on stream as a partner on the Norwegian Shelf. When in full production,
Valemon will contribute 7,500 barrels of oil equivalents net per day to Centrica E&P Norway’s production. Valemon will be the first platform that is remote-controlled from shore on the Norwegian Shelf when drilling on
the field is expected to be completed by mid-2017. The field is expected to produce for up to 30 years.
APA awards JANUARY: Centrica E&P Norway was awarded five licences in the APA licensing round (Awards in Predefined Areas) 2014, two as operator. Two of the licences are located in the North Sea and three in the Norwegian Sea. APA is an annual licensing round for mature acreage in specific parts of the North Sea, the Norwegian Sea and the Barents Sea. Centrica E&P Norway has applied for licences in every APA round since 2006.
The big move
Partner-operated drilling campaigns
MARCH: Centrica E&P Norway moved into a new office building in Bjergsted, Stavanger. The office space was designed by Arkidea and is classified as a BREEAM NOR construction. This label sets the standard for best practice in sustainable building design, construction and operation.
MARCH/APRIL/JUNE: Centrica E&P Norway partnered in three drilling campaigns. Hydrocarbons were encountered in two of the exploration
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wells, Skirne Ă˜st and Roald Rygg. At present, they are both considered technical discoveries. The high risk, high reward Zeppelin well was dry.
Butch pilot hole drilling – a world first
Approval for Maria SEPTEMBER: The Ministry of Petroleum and Energy approved the plan for development and operation (PDO) for the Maria field. The Maria field will be linked via subsea infrastructure to the Kristin, Heidrun and Åsgard B production platforms.
operation. The total investment is NOK 15.3 billion (£1.2 billion). Centrica E&P Norway has a 20 per cent ownership interest in Maria, while operator Wintershall Norway has 50 per cent, and Petoro holds the remaining 30 per cent.
SEPTEMBER: Centrica E&P Norway adopted a new drilling method that is believed never to have been used before in the oil and gas industry. Instead of using a rig for the job, a light well intervention vessel was chartered, and coiled tubing drilling (CTD) was employed. The solution used on the Butch field is both safer and considerably cheaper than traditional drilling with rigs. The method was first tested in a road construction project in Rogaland County, Norway, in 2014. The pilot hole was drilled in order to eliminate the risk of shallow gas at the planned drill centre location on the Butch field, and the operation was a success.
Production start-up is scheduled for 2018 with expectations of more than 25 years’
Butch development concept selected OCTOBER: Centrica E&P Norway took the Butch field through Concept Select (DG2). Butch will be developed as a subsea tieback to the Ula field. This is an innovative solution re-using the existing Oselvar infrastructure at the Ula field. With the selected subsea tieback concept, the Butch well stream will be routed to the
BP-operated Ula platform, where processing will take place. The Butch oil will be exported via the Ula oil export pipeline to Ekofisk and Norpipe to the Teesside terminal in England. The gas produced from Butch will be injected into the Ula field reservoir to improve oil recovery.
SPA agreement signed NOVEMBER: Centrica E&P Norway signed long-term partnership agreements – Strategic Partner Alliances (SPAs) – with Subsea 7, Aibel and DNV GL. The strategy behind the SPAs with selected suppliers is based on shared values and goals. The agreements have a firm duration of five years, with an option of five additional years.
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CENTRICA E&P NORWAY TIMELINE
Timeline 2015 2014 JANUARY: Awarded five licences in APA 2014, two operated
JANUARY: Awarded ten licences in APA 2013, three operated
JANUARY: Valemon on stream
APRIL: Discoveries in Valemon Nord and Solberg wells
MARCH: Moved into new offices in Bjergsted, Stavanger MARCH/APRIL/JUNE: Three partner operated drilling campaigns SEPTEMBER: PDO for the Maria field approved by the Ministry of Petroleum and Energy SEPTEMBER: First oil company world-wide to use coiled tubing drilling from a light intervention vessel on a pilot well OCTOBER: Butch DG2 passed – development concept selected NOVEMBER: Signed long-term partnership agreements with Subsea 7, Aibel and DNV GL
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JULY: Butch appraisal drilling campaign completed AUGUST: Won “Best stand award” at ONS 2014 DECEMBER: Ivory well completed at 1420 metres
2013 2012 2011 JANUARY: Awarded nine licences in APA 2012, three operated
JANUARY: Awarded seven licences in APA 2011
JANUARY: Awarded two licences in APA 2010, one operated
JANUARY: Rodriguez discovery, Centrica E&P Norway’s sixth discovery on the NCS as partner. Licence operated by Wintershall
MARCH: Closed agreement with ConocoPhillips to acquire interests in the Statfjord fields
APRIL: Awarded two licences in the 21st licensing round
JUNE: Awarded one operated licence in the Barents Sea in the 22nd licensing round
APRIL: Assumed operator responsibility for Vale, first production on the NCS operated by Centrica E&P Norway
SEPTEMBER: Commenced an ambitious 18 month drilling programme with seven exploration and appraisal wells in the North Sea and the Norwegian Sea. Three wells operated by Centrica E&P Norway: Butch Øst, Butch Sør-Øst and Ivory
MAY: Discovery in Maria Nord, part of the Maria discovery as of 2010
NOVEMBER: Sold licence interests in the Heimdal area to optimise portfolio
OCTOBER: Discovery in Butch Main, operated NOVEMBER: Entered into an agreement to purchase assets in the Heimdal, Kvitebjørn and Valemon area from Statoil for NOK 10 billion. Entered into a strategic partnership with Statoil on future application processes in Norway and the UK, as well as signing a ten-year gas purchase agreement between Statoil and Centrica plc
NOVEMBER: Concept selection for Maria development submitted to the NPD
2010 2009 2008 JANUARY: Awarded one operated licence in APA 2009
JANUARY: Awarded three licences in APA 2008, one operated
JANUARY: Awarded six licences in APA 2007, five operated
APRIL: Gas discovery in Fogelberg, the first discovery operated by Centrica E&P Norway on the NCS
APRIL: Awarded one licence in the 20th licensing round
OCTOBER: Entered into agreement to purchase assets in the Heimdal area and the Vale field from Marathon Oil
JULY: Maria discovery. Centrica E&P Norway has a 20 per cent ownership interest SEPTEMBER: Entered into agreement with Norske Shell A/S to purchase assets in the Statfjord fields
JUNE: Centrica E&P Norway established the Operators’ Association for Emergency Preparedness (Operatørenes Forening for Beredskap – OFFB) together with other operators on the NCS
OCTOBER: Atla discovery. Centrica E&P Norway is partner in the licence with 20 per cent interest. Total is the operator
2007 2006 2004 JANUARY: Awarded four licences in APA 2006, three operated
APRIL: Centrica established its company and office in Norway
DECEMBER: Centrica is pre-qualified as an operator on the NCS
JUNE: Purchased assets in production licences in the area around the licences that were awarded in APA 2006
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CONTRIBUTION TO LOCAL COMMUNITY
Contribution to the local community Centrica E&P Norway wants to improve and develop the way we do business and the impact we have on society. It is important to contribute and to play a part in our community through cooperation with local and regional initiatives.
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Employee sponsorships Centrica E&P Norway wants to take part in the employees’ local communities, and therefore support local initiatives that employees are engaged in. Every year, a large number of Centrica E&P Norway employees appreciate these initiatives and the opportunity to nominate local community projects.
3-Sjøersløpet Since 2008, Centrica E&P Norway has been the main sponsor of the local half marathon called 3-Sjøersløpet (the Three Lakes Run). Centrica E&P Norway has been instrumental in developing the run from a small, local event to a major,
well-known run in the greater Stavanger area. In 2015, a record 3000 people signed up for the race, with more than 1500 participants being first-time runners. Centrica E&P Norway was represented with 38 runners.
Tour des Fjords
Movember
Dalsnuten 323
During November each year, Centrica E&P Norway participates in the worldwide Movember campaign, raising awareness and money for the Movember Foundation, which is committed to improving the lives of men affected by prostate and testicular cancer. The Centrica E&P Norway Movember team initiates a variety of activities throughout the campaign period, drawing attention to men’s health. By growing their moustaches, our team raised almost NOK 30,000 in the 2015 campaign.
Centrica E&P Norway has been a sponsor of Dalsnuten 323 since 2009. This is an uphill run taking place in September. Fifteen employees together with ten family members participated in the 2015 race.
For the fourth year in a row, Centrica E&P Norway was one of the main sponsors of the Tour des Fjords cycling race, which took place from 27–31 May. The tour has become an important event in the region, attracting top professional cycling teams from around the world. The tour was broadcast by various European media, and the viewers could follow the professional cyclists on a scenic route from Bergen to Stavanger. Seventeen participants from Centrica E&P Norway cycled the non-professional 109 kilometre long Classic Race.
For more information about Centrica’s CSR reporting and activities, please go to Centrica’s web site: www.centrica.com/responsibility
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FOCUS ON ENVIRONMENT
Focus on the environment
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Centrica E&P Norway reports emissions to air and discharges to sea on an annual basis, in accordance with official requirements and guidelines. This concerns planned and officially approved emissions and discharges as well as those which occur accidentally. Detailed environmental data allow Centrica E&P Norway to monitor emission and discharge levels over time, and therefore enable us to pinpoint how to make further
improvements in our environmental performance. The table below provides a summary of Centrica E&P Norway’s emissions, discharges and waste during the period 2010–2015. Waste is divided into two categories, hazardous and non-hazardous, and is taken to shore for further handling.
was conducted in compliance with the discharge permit and relevant regulations, and without any incidental spills to the environment. Operations at our operated Vale field were conducted in compliance with our discharge permit and relevant regulations, without any incidental spills to the environment.
Centrica E&P Norway had one drilling operation during 2015. This operation
Historical overview of emissions and discharges 2010
2011
2012
2013
2014
2015
2
1
1
0
3
1
Metres drilled
7870
5494
5906
0
12221
354
Diesel consumption
1949
1373
2079
0
6329
62
CO2 emissions (1000 tons)
6.18
4.353
6.591
0
20.062
0.2
NOx emissions (tons)
136
96.1
146
0
386.5
4
SOx emissions (tons)
0.975
0.577
0.873
0
6.3
0.1
9.75
6.87
10.4
0
31.6
0.3
2
0
1
0
2
0
Green substances (tons)
992
184
508
0
3028
46
Yellow substances (tons)
14
4
7.13
0
52.22
0.02
Red substances (tons)
0
0
0.0009
0
0
0
Black substances (tons)
0
0
0
0
0
0
45
93
71
0
94
100
Industrial waste (tons)
65.3
140
124
0
138.8
1.9
Hazardous waste (tons)
1944
1088
4968
0
11423.8
0.1
Emissions
Operated wells
NMVOC emissions (tons)
Discharges
Acute spills
Waste
Waste segregation (%)
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BUSINESS PRINCIPLES
Business principles Our business principles and group policies determine how we operate. This is much more than a tick box for compliance. How we conduct business reflects our values and defines us in the eyes of our people, our customers and our stakeholders generally. Together, our eight business principles, which set out the operating standards we expect, and our group policies which support these business principles, are our commitment to good business.
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01
DEMONSTRATING INTEGRITY IN CORPORATE CONDUCT
02
ENSURING OPENNESS AND TRANSPARENCY
03
RESPECTING HUMAN RIGHTS
04
ENHANCING CUSTOMER EXPERIENCES AND BUSINESS PARTNERSHIPS
06
FOCUSING ON HEALTH, SAFETY AND SECURITY
08
INVESTING IN COMMUNITIES
05 07
VALUING OUR PEOPLE
PROTECTING THE ENVIRONMENT
To read more about these principles, please go to Centrica’s web site: www.centrica.com/about-us/peopleculture/business-principles
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BOARD OF DIRECTORS’ REPORT
Centrica Energi NUF
Board of Directors’ Report 2015 The main purpose of Centrica Energi NUF is to explore for, and to produce, gas on the Norwegian Continental Shelf. Centrica Energi NUF is a branch of Centrica Norway Limited, a company incorporated in the United Kingdom. The branch has no formal ownership of licences in Norway, but all licence obligations and operations are deferred to Centrica Norway Limited and the branch from Centrica Resources (Norge) AS. The branch was established in 2006 and its office address is in Stavanger. In 2015, Centrica had production from Vale, Kvitebjørn, Valemon and Statfjord fields. The after tax result for 2015 was a loss of NOK 2 766 317 712 compared to a loss of NOK 483 109 741 in 2014. The revenues in 2015 are lower compared with 2014 due to a significant decrease in market prices. Production in 2015 has been better than in 2014 mainly due to commencement of production from Valemon and higher production from the Statfjord Area. Although the activity in these fields has increased, operating cost, not including depreciation and impairment, is in line with last year. Total assets per 31st of December 2015 amounted to NOK 14 585 840 371 compared with NOK 19 195 835 517 at end of the year 2014. Equity per 31st of December 2015 amounted to NOK 570 587 377, or 3.9 percent of total assets (31st of December 2014: NOK 2 627 465 949, or 13.7 percent of total assets). The Cash Flow Statement shows that the company’s operational activities generated a positive cash flow of NOK 2 711 001 829
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in 2015 (2014: NOK 2 147 817 138). The company invested NOK 1 832 905 440 in 2015 compared to NOK 2 176 284 278 the year before. Investment in 2015 is mainly related to investment in tangible and intangible assets. The cash flow from financing activities amounted to outflow of NOK 1 155 651 983 (2014: inflow of NOK 124 771 147). The negative cash flow is connected to the net cash flow from operating activities and investing activities has been used to repay intercompany loan. The change in total cash flow was negative NOK 277 555 595, compared to a positive cash flow of NOK 96 304 008 in 2014. The total cash balance is considered satisfactory by the company. The cash flow from operational activities is higher than Operating Profit by NOK 4 584 579 899. This is explained primarily by depreciation and asset write-offs which have no cash effect, and taxes. Cash flow from operational activities in 2015, together with parent company loans, is considered to be adequate to finance expected investments in 2016. It is the opinion of the board that the annual accounts for 2015 is an accurate reflection of the branch’s financial position with respect to assets, liabilities, financial position and results at year end. At the end of the year the company had ownership in 44 production licences through the pass-through agreement with Centrica Resources (Norge) AS. During 2015 Centrica has been awarded five new licences in the APA 2014 licensing round, two as operator. Additionally, in 2016 Centrica was awarded six new licences in the APA 2015, one as operator. The company has licences in the explora-
tion phase, under development and in production. Since 2012, Centrica has been the operator of one producing field. The company has not recorded any Research and Development costs in addition to the costs charged from operators through licence contributions. Our health, safety and environmental principles are a core part of our business. All necessary resources are allocated to preventing incidents that may lead to personal injuries, loss of life, spills, other damage to the environment or financial loss. We are co-operating closely with licence partners, other operators, suppliers and governments to learn and contribute towards obtaining the best possible results with respect to health, safety and environment. The safety for own employees and those of our business partners has our highest priority. We are working actively to develop a strong HSE culture amongst our employees and offer training to ensure a high level of competency. In 2015, the company had no incidents that lead to serious personal injuries. Exploring for and producing oil and gas may have an environmental impact. We are therefore actively working to understand and to minimize the environmental impact of our activities as far as possible. Our operations in 2015 did not lead to any material pollution of the environment. Information about activities on our non-operated licences and fields is reported by the operator. The health and working environment of our employees is of major importance to the company. A number of activities have therefore been initiated in order to
further improve health and work environment, including promoting physical activity. Regular surveys are performed to monitor the quality of our work environment. The company has a diverse work force in terms of age, background and experience. Absence from work due to illness was very low (2.44 per cent) during 2015, and the work environment is perceived as very good. At year end, 51 women (40 per cent) and 77 men were employed by the company. The board is not aware of any activities in the branch which may be in violation of the laws regulating equal rights between the genders. Centrica have reported country to country reporting in accordance with the Norwegian Companies Act §3-5 and the report will be made public in The Brønnøysund Register Centre (www.brreg.no). Centrica expect production in the coming years will remain stable. The price is marked-driven but it may look like the bottom level is reached. Centrica therefore hope for a slight increase in the price of
our products going forward. In connection with the decline in the oil sector there is a strong cost focus in the industry. It is expected that there will eventually be some reduction in the cost base compared to last year’s cost. The company will have future high investment on the Norwegian Continental Shelf in the coming years, due to ongoing and planned developments of Maria and Butch. The Company’s financial results for 2016 are expected to be higher than 2015, due to production at today’s level and lower cost. In addition, it is not expected further large write downs of production assets in 2016. The company’s financial risk is primarily exposure to currency fluctuations. All sales are invoiced in pounds sterling, US dollars or Euro. Purchase of materials and services is in both Norwegian kroner and foreign currencies, primarily pounds sterling and US dollars. The company’s foreign currency strategy is managed by the parent company, which constantly monitors the need for currency hedging.
The company’s financing is supplied via a loan agreement with the parent company. Loan terms are based on the arm’s length principle. The company only has a few, but financially sound customers. Credit risk is deemed to be very low as well as the liquidity risk. The board and managing director confirm that the annual accounts are based on the going concern principle. Expectations of future economic results have been mentioned above, as has the company’s financial status. During 2015 the company’s result was impacted by relatively high impairment write downs based on changing market conditions, which has reduced the equity. To improve the equity share the parent company committed in April to convert NOK 1 750 000 000 of the loan into equity. After conversion of loan the equity is expected to be sustainable based on a consideration of risk and business activities. Though negative result for current year, the board and managing director believe the company has every opportunity to continue growing.
Stavanger, May 25th, 2016
Dag Halvard Omre Senior Vice President Norway
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CENTRICA E&P NORWAY
Centrica Energi NUF
Profit and Loss Account (Amounts in NOK)
Note
2015
2014
2
7 851 200 258
8 381 163 261
Revenue and operating expenses Revenues Other Income Total revenues and other income Exploration expenses
3
Production and shipping costs Payroll expenses Depreciation and write-down
10 041 213
28 691 406
7 861 241 472
8 409 854 667
238 128 423
222 055 914
2 624 954 216
2 707 709 888
5
207 666 255
128 174 953
6, 7
6 447 017 658
3 273 968 854
Amortisation of contracts
15
0
(29 094 359)
Other operating expenses
8, 4
217 052 989
228 282 243
9 734 819 542
6 531 097 492
(1 873 578 070)
1 878 757 174
4 612 566
31 047 981
(319 591 762)
(100 830 173)
352 280 129
388 329 775
Operating expenses Operating result Financial income and expenses Interest income Interest expenses Other financial income Other financial expenses Net financial income and expenses
23
Net profit / (loss) before tax Tax on ordinary result
11
(424 720 324)
(473 072 659)
(387 419 390)
(154 525 075)
(2 260 997 460)
1 724 232 099
(505 320 252)
(2 207 341 840)
Ordinary result after tax
(2 766 317 712)
(483 109 741)
Net profit / (loss) for the year
(2 766 317 712)
(483 109 741)
Net profit or loss for the year is allocated as follows: Allocated to equity
0
0
Loss carried forward
2 766 317 712
483 109 741
Total allocated
2 766 317 712
483 109 741
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Centrica Energi NUF
Balance sheet – Assets Balance sheet as of 31.12. (Amounts in NOK)
Assets
Note
2015
2014
11
811 995 696
0
Non current assets Intangible assets Deferred tax assets Goodwill
6
98 995 654
197 991 308
Capitalised exploration cost
6
1 373 647 320
3 015 931 292
Other intangible fixed assets
6
20 118 258
23 330 527
2 304 756 929
3 237 253 128
10 118 627 832
13 788 977 574
10 118 627 832
13 788 977 574
0
607 542
Other long term receivables
70 846 638
58 452 866
Total financial assets
70 846 638
59 060 408
12 494 231 399
17 085 291 109
255 379 121
286 372 259
Total Intangible assets Tangible assets Net property, plant and equipment
7
Total tangible assets Financial assets Loans to group companies
16
Total non current assets Current assets Spare parts and supplies
9
Accounts receivable Receivables – related parties
16
Other receivables
12
Total other current assets Cash and bank deposits Total current assets Total assets
10
219 772 252
38 773 743
561 329 858
511 272 571
955 089 830
896 532 329
1 991 571 061
1 732 950 903
100 037 911
377 593 505
2 091 608 972
2 110 544 408
14 585 840 371
19 195 835 517
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CENTRICA E&P NORWAY
Centrica Energi NUF
Balance sheet – Equity and liabilities Balance sheet as of 31.12. (Amounts in NOK)
Equity and liabilities
Note
2015
2014
14
4 994 999 998
4 294 999 998
4 994 999 998
4 294 999 998
(4 432 407 429)
(1 666 089 717)
Equity / Head office current account Contributed equity Total contributed equity Accumulated deficits Loss carried forward
14
Other equity
14
Total retained earnings Total Equity / Head office current account
7 994 808
(1 444 332)
(4 424 412 621)
(1 667 534 049)
570 587 377
2 627 465 949
Liabilities Provisions Deferred tax liabilities
11
0
1 000 365 853
Provision for decommissioning
17
4 552 261 590
5 517 484 032
Other provisions
15
Total provisions
0
140 000 000
4 552 261 590
6 657 849 885
5 000 000 000
6 855 651 983
5 000 000 000
6 855 651 983
99 962 468
120 122 711
Long term liabilities Long term debt – related parties
16
Total long term liabilities Current liabilities Trade creditors Creditors – related parties
16
867 077 784
115 390 777
Taxes payable
11
1 583 000 305
937 006 029
17 464 302
14 390 073
13
1 895 486 544
1 867 958 110
4 462 991 403
3 054 867 700
Total liabilities
14 015 252 994
16 568 369 568
Total equity and liabilities
14 585 840 371
19 195 835 517
Public duties payable Other short terms liabilities Total short term liabilities
Stavanger, May 25th, 2016
Dag Halvard Omre Senior Vice President Norway
24
Centrica Energi NUF
Statement of Cash flows (Amounts in NOK)
2015
2014
Profit/(loss) before tax
(2 260 997 460)
1 724 232 099
Tax paid
(1 671 690 024)
(3 065 627 767)
0
(29 094 359)
2 815 964 760
2 399 406 038
(8 346 849)
0
3 631 052 898
874 562 816
122 462 229
121 519 575
Amortisation of contracts Depreciation and amortisation (Gain)/loss divestments of licences Impairment of fixed assets Interest on amortisation (accretion) Change in spare parts and supplies
30 993 138
(18 762 478)
(180 998 508)
64 814 749
Change in trade payables
(20 160 242)
(84 566 127)
Net unrealised foreign currency (gain)/loss
(12 669 654)
(35 504 441)
Change in trade receivables
Change in other current balance sheet items Change in short term assets/liabilities to/from group companies Cost related to stock option plan Decommissioning cost Net cash flow from operating activities Sale of share in licences
(160 485 268)
639 831 098
701 629 719
(183 534 239)
8 165 634
0
(283 918 544)
(259 459 826)
2 711 001 829
2 147 817 138
36 391 324
(27 553 830)
(1 405 533 916)
(2 112 234 021)
(464 370 390)
(1 223 856 115)
607 542
1 187 359 688
Net cash flow from investing activities
(1 832 905 440)
(2 176 284 278)
Net change of long term loans
(1 855 651 983)
124 771 147
700 000 000
0
(1 155 651 983)
124 771 147
Purchase of tangible fixed assets Purchase of intangible fixed assets Loan to Group company
Conversion of debt to equity Net cash flow from financing activities Net cash in cash and cash equivalents
(277 555 595)
96 304 008
Cash and cash equivalents 01.01.
377 593 505
281 289 497
Cash and cash equivalents 31.12.
100 037 910
377 593 505
25
CENTRICA E&P NORWAY
Centrica Energi NUF
Notes to the accounts NOTE
1
ACCOUNTING PRINCIPLES
26
The financial statements have been prepared in accordance with Accounting Regulations and generally accepted accounting principles in Norway. Classification and valuation of balance sheet items Assets for long term ownership or use are classified as fixed assets. Other assets are classified as current assets. Receivables to be paid within one year are classified as current assets. Same principles have been applied for classification of short and long term liabilities. Fixed assets are held at cost less accumulated depreciation and any provisions for impairment. Current assets are valued at the lower of cost and market value. Short and long term liabilities are included in the balance sheet at nominal amount when established. Exploration, evaluation, development and production assets The Company uses the successful efforts method for accounting for exploration and evaluation expenditure. Exploration and evaluation expenditures associated with an exploration well resulting in a discovery of hydrocarbons, including acquisition costs related to exploration and evaluation activities, are capitalised initially as intangible assets. Certain expenditures such as geological and geophysical exploration costs are expensed. If the prospects are subsequently determined to be successful on completion of evaluation, the relevant expenditures including licence acquisition costs is transferred to PP&E and is subsequently depreciated on a unit of production basis. If the prospects are subsequently determined to be unsuccessful on completion of evaluation, the associated costs are expensed in the period in which that determination is made. All field development costs are capitalised as PP&E. Such costs relate to acquisition and installation of production facilities and include development drilling costs, project-related engineering and other technical service costs. PP&E, including rights and concessions related to production activities, are depreciated from the commencement of production in the fields concerned, using the unit of production method, based on all of the 2P reserves of those fields. Changes in these estimates are dealt with prospectively. Heimdal area is an exception to this rule and is depreciated on a straightline based on estimated remaining life of the field. The net carrying value of the fields in production and development is compared on a field-by-field basis with the likely discounted future net revenues to be derived from the remaining commercial reserves. An impairment loss is recognized where it is considered that recorded amounts are unlikely to be fully recovered from the net present value of future net revenues. Exploration assets are reviewed annually for indicators of impairment and production and development assets are tested annually for impairment. The impairment will be reversed if the conditions requiring the impairment is no longer applicable. Goodwill is depreciated on a straight line basis, based on calculated economical life estimated at 9 years. Participation in Joint Ventures (JV) The Company’s share in Joint Ventures licences on the Norwegian continental shelf are recognized in the income statement and balance sheet similar to using the gross method (proportionate consolidation) in accordance with underlying rights and obligations. Research & Development Costs are expensed when incurred. Decommissioning Costs Under the terms of the concessions of the licences in which the company participate the Norwegian State has at end of field life, or when the licence expire, the right to take over the permanent installations. If the State does not exercise this right, the Ministry may require the owners to partially and
fully remove the installations. The Ministry of Petroleum and Energy decides whether the installations shall be removed. Provisions are made for the net present value of the estimated costs of decommissioning the installations at the end of the producing lives of fields, based on price levels and technology at the balance sheet date. A decommissioning provision is recognized with a corresponding entry to property, plant and equipment. Changes in these estimates or changes to the discount rates, are dealt with prospectively and reflected as an adjustment to the provision and corresponding asset included within property, plant and equipment. Removal assets are depreciated in line with tangible assets as described above. Recharges to Operated licences Salary and operating costs are allocated to the company’s various activities. As appropriate, costs are recharged to the company’s partners in those licences where Centrica is the operator. For 2011 and onwards, costs which are recharged to the operated licences are presented as a reduction in salary costs and operating costs. Receivables Accounts receivables and other receivables are included in the balance sheet at nominal value with reduction for expected losses. Provision for the expected losses are based on an individual assessment of each receivable. Foreign exchange Cash equivalents denominated in foreign currencies are measured at the foreign currency rate at the balance sheet date. Foreign currency transactions are recorded applying the exchange rate at the date of the transaction. Spare parts and supplies Stock of spare parts and supplies is valued at the lower of cost using the FIFO principle and net realizable value. Obsolete spare parts and supplies are written off. Revenue and cost recognition Revenue is recognized in the profit and loss account when realized. Revenue is realized when ownership is transferred to the customer at the time of delivery. The company sells crude, condensate, gas and NGL. Costs are matched with and expensed in the same period as related income. Costs which cannot be matched directly to income are expensed in the period they are incurred. Taxes The Company’s income taxes are based on calculations and assumptions that are subject to examination by tax authorities. The company accrues for uncertain tax positions when it is more likely than not that the Company’s position will not be sustained or based on the latest resolution made by the tax authorities even if appealed by the company. Over/under lift Over lift of hydrocarbons is valued at marked price (estimated sales value deducted for cost of sales). Changes in over lift balances are accounted for as a decrease or increase in cost of sales. Changes in under lift balances are accounted for as a decrease or increase in revenue. Over lift is classified as other short term liabilities and under lift is classified as other receivables. Pensions The company has a contribution based pension arrangement were costs are expensed as incurred. The arrangement meet the requirement of mandatory pension arrangement “OTP”. Purchase and sale of licence shares For purchases or sales of licence shares (Farm-in / Farm-out agreements) during the exploration phase, where all or part of the consideration is tied to carry agreements, the cost is booked as incurred according to the appropriate accounting principles. Any consideration paid as part of the transfer is recorded as a reduction of the carrying value. Any consideration in excess of the carrying value is recorded to the income statement. Carry payment received from buyer is recorded as a reduction to cost.
27
CENTRICA E&P NORWAY
Ordinary purchases and sales of licence shares is considered fulfilled when official approval is received and agreement is closed. Statement of cash flows The statement of cash flows is presented using the indirect method. Cash and cash equivalents includes cash, bank deposits and other short term liquid investments with maturities of three months or less. Centrica Energi NUF – ownership Centrica Energi NUF is owned by Centrica Norway Ltd which is owned by Centrica Plc. Centrica Plc is registered in England and Wales. Office address: Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD, England Centrica NUF accounts are included in the Centrica Plc group accounts. Centrica Group Accounts can be requested from the Centrica PLC, or on Centrica PLC’s website: www.centrica.com.
NOTE
2
Income relates to sales of oil, NGL and gas production on Statfjord, Vale, Kvitebjørn and Valemon, in addition to processing and transport services provided by the Heimdal installation. All sales are within Europe.
OPERATING INCOME Sale of crude oil Sale of NGL products Sale of gas Transport and processing services Total
NOTE
3
Geology and geophysics
642 587 582
830 084 771
4 502 799 162
3 939 429 244
232 727 000
105 916 729
7 851 200 258
8 381 163 261
2015
2014
72 207 583
Special studies
5 939 593
2 579 990
Drilling
3 322 620
8 724 338
73 759 663
119 542 434
238 128 423
222 055 914
2015
2014
1 556 000
1 866 716
Audit fees expensed:
Statutory audit
AUDIT FEES
3 505 732 516
19 001 568
Total
4
2 473 086 515
23 151 980
Other exploration expenses
NOTE
2014
131 954 567
Seismic
EXPLORATION EXPENSES
2015
Tax compliance and advice Other compliance services "not statutory audit related"
40 000
29 510
1 427 576
613 475
Total 3 023 576 2 509 701 VAT is not included in audit fee.
28
NOTE
5
PAYROLL EXPENSES
Salaries
2015
2014
258 135 810
173 814 798
Social security costs
39 138 694
25 255 391
Pension costs
16 173 673
13 738 462
Other benefits
8 347 967
9 041 798
(114 129 888)
(93 675 496)
Charges to JV partners
Total 207 666 255 128 174 953 Average full time equivalent employees for 2015 was 124.0 (2014: 106.1). Remuneration to management:
Senior Vice President
Salary and pension
8 349 368
Other compensations
153 935
Total
8 503 303
The company has a contribution based pension arrangement were costs are expensed as incurred. The arrangement meet the requirement of mandatory pension arrangement “OTP”. The Senior Vice President takes part in Centrica’s Long Term Incentive Scheme (LTIS). Any awarded shares are released free of charge after a 3 year period, provided that a number of pre-defined conditions are met and that Senior Vice President is still employed by the Company. In addition some employees are invited to take part in the Share award Scheme (SAS) based on pre-defined conditions, which among others include conditions related to continued employment in the Company. The compensation expense is considered to be immaterial for the Income Statement. No other benefits, including ‘golden parachutes’, loans or security has been given to the Senior Vice President or members of the board.
NOTE
6
Cost as of 01.01
INTANGIBLE ASSETS
Goodwill
Other intangible assets
TOTAL
4 899 800 520 1 873 080 479
32 949 934
6 805 830 933
Capitalised exploration
Additions *)
472 077 632
0
(7 707 242)
464 370 390
Disposals
(31 472 915)
0
0
(31 472 915)
(362 311 279)
0
0
(362 311 279)
4 978 093 958 1 873 080 479
25 242 692
6 876 417 129
Transfer to Asset under construction Cost as of 31.12 Accumulated depreciation
754 084 825
14 276 009
768 360 834
Accumulated write-off
3 604 446 637 1 020 000 000
(9 151 575)
4 615 295 062
Book value 31.12
1 373 647 321
98 995 654
20 118 258
1 492 761 233
0
98 995 654
3 212 270
102 207 924
1 720 577 409
0
(7 707 242)
1 712 870 167
Annual depreciation Annual write-off *)
Depreciation method
0
Straight Line (9 years)
*) Additions and write-off on other intangible assets are related to capitalised hedge.
29
CENTRICA E&P NORWAY
The capitalised exploration costs are mainly related to PL602 Roald Rygg, PL405 Butch, PL 193A/B Kvitebjørn East, PL627 Skirne East, PL528 Ivory and PL734 Zeppelin. The write down of capitalised exploration costs in 2015 is related to dry wells PL627 Skirne East, PL734 Zeppelin, PL193 A/B Kvitebjørn East og PL602 Roald Rygg. In addition there is an impairment of exploration licences related to previous acquisitions. Goodwill is related to acquisition of Marathons share in the Heimdal area in 2008. Goodwill is depreciated over 9 years which is the weighted average expected economic life and remaining licence period for business acquired.
NOTE
7
TANGIBLE ASSETS
Cost as of 01.01
Assets under construction
Producing assets
Fixtures Office and fittings Equipment
3 303 436 480
17 616 212 681
9 740 551 53 446 233
20 982 835 945
22 056 153 15 229 845
1 405 533 916
Additions
TOTAL
438 790 519
929 457 399
Change in estimate for abandonment assets
0
(803 766 126)
Disposals
0
0
362 311 279
0
0
0
362 311 279
Transfer to producing assets
(3 174 592 257)
3 174 592 257
0
0
0
Cost as of 31.12
929 946 021
20 916 496 212
27 525 938 67 172 693
21 941 140 864
Accumulated depreciation 01.01
0
7 148 882 579
5 266 068 39 709 724
7 193 858 371
Accumulated write-off 01.01
0
0
0
0
0
Annual depreciation and write-off
0
4 618 140 804
4 050 194
9 748 570
4 631 939 568
Accumulated depreciation 31.12
0
9 848 840 652
9 316 262 49 458 294
9 907 615 208
Accumulated write-off 31.12
0
1 918 182 731
0
0
1 918 182 731
Disposals
0
0
(3 284 907)
0
(3 284 907)
929 946 021
9 149 472 829
21 494 584 17 714 399
10 118 627 832
Annual depreciation
0
2 699 958 073
4 050 194
9 748 570
2 713 756 837
Annual write-off **)
0
1 918 182 731
0
0
1 918 182 731
Transfer from other intangible assets
Book value 31.12
Depreciation method
UoP/Straight Line
Rate of depreciation
*)
0
(803 766 126)
(4 270 766) (1 503 385)
0
(5 774 151)
Straight Line Straight Line 5 - 10 years
3 years
*) All licences are depreciated according to UoP (Unit of Production) method with the exception of Heimdal which is depreciated straight-line over expected lifetime. **) Annual write-off in producing assets are mainly related to Kvitebjørn and Valemon. Capitalised interest cost for 2015 was NOK 10.0 mill and for 2014 NOK 116.9 mill.
30
Significant lease agreements The Company leased until April 2015 office space in Veritasveien 25 from Det Norske Veritas AS and DNV. The rent in 2015 amounted to NOK 4.2 million (2014 NOK 8.7 million). The company moved in March 2015 into new office space in Veritasveien 29 and the rent in 2015 was NOK 16.2 million. The office is leased from Rosenberggata 101 AS and the new lease agreement expires 10 years from handover date. The company has the option of extending the contract by 5+5 years. Significant transactions In 2012, the Company made two major acquisitions with an effective date as of May 1, 2012 for accounting purposes. The transactions included the acquisition of shares in several licences from Statoil ASA and a share in Statfjord licences from ConocoPhillips Skandinavia AS. Included in the investments was the purchase of producing assets for NOK 7 947 million and purchase of intangible assets for NOK 1 573 million. The Company have accounted for the acquisitions as asset purchases. As part of one of the transactions a production based contingent consideration was included in the agreement, where the remaining potential liability at December 31, 2015 amount to USD 0 million (31 December, 2014 USD 25 million). Terms of contingent consideration occurred in 2015 and the company have recorded a current liability of USD 25 million for 2015. See note 13 for short-term liabilities.
NOTE
8
2015
Consultancy Services supplied by related companies
OTHER OPERATING EXPENSES
Recruitment IT including software maintenance Travel expenses
963 710
7 509 300
13 360 466
11 965 113 5 717 196 121 162 778
(120 239 369)
(131 631 485)
217 052 989
228 282 243
2015
2014
Spare parts and supplies
255 379 121
286 372 259
Total
255 379 121
286 372 259
Total
NOTE
Spare parts and supplies relates primarly to non-operated licences. There is no information from the operator which indicate the existence of obsolete spare parts or supplies at year end.
NOTE
10
87 303 552 126 255 790
4 517 452
Charges to operated licences
SPARE PARTS AND SUPPLIES
61 929 759 128 270 455
128 250 516
Other costs
9
2014
2015
2014
Restricted cash included as part of cash and bank deposits
9 851 511
8 488 755
Total
9 851 511
8 488 755
CASH AND BANK DEPOSITS
31
CENTRICA E&P NORWAY
NOTE
11 INCOME TAXES
Taxes Payable/Basis for tax refund
2015
Net income before taxes
(2 260 997 460)
2014 1 724 232 099
Permanent differences
2 623 838 546
841 230 811
Changes in temporary differences
1 913 008 847
(423 539 247)
Basis for company tax before loss carried forward
2 275 849 933
2 141 923 663
Basis for company tax
2 275 849 933
2 141 923 663
176 712 936
91 141 605
Financing costs only subject to 28% tax Uplift
(414 552 516)
(407 696 219)
2 038 010 353
1 825 369 050
Company tax booked against sold assets
0
7 871 160
Special tax booked against sold assets
0
14 867 747
Total tax payable booked against sold assets
0
22 738 907
(622 350 642)
(586 190 549)
(1 054 253 027)
(945 805 962)
(319 952 130)
(374 517 271)
(1 996 555 799)
(1 906 513 782)
Basis for special tax
Company tax charged through Profit and Loss accounts Special tax charged through Profit and Loss accounts Provision for possible outstanding tax liability in previous years Tax payable charged to the income statement Total Company tax in balance sheet Total Special tax in balance sheet Term payments Provision for possible outstanding tax liability in previous years Tax payable /(receivable) in balance sheet
Specification of temporary differences – computation of deferred taxes
Fixed assets Other Fixed Assets Decommissioning – net
Changes (1 394 202 629)
622 350 642
578 319 389
1 054 253 027
930 938 215
(819 603 362)
(992 251 572)
726 000 000
420 000 000
1 583 000 307
937 006 032
2015 1 534 686 316
2014 2 928 888 945
795 229
(1 721 133)
(2 516 362)
(469 478 272)
(2 206 559 785)
(1 737 081 513)
Other Temporary differences
(50 123 175)
(330 731 671)
(280 608 496)
Net temporary differences
(1 913 008 847)
(1 004 326 273)
908 682 574
Basis for deferred tax – company tax
(1 913 008 847)
(1 004 326 273)
908 682 574
0
605 735
605 735
3 904 699
(54 608 008)
(58 512 707)
Fix assets related to hedging exempt from special tax Fix assets related to capitalised interest exempt from special tax
Basis for deferred tax – special tax (1 909 104 148) (1 058 328 546) 850 775 602
32
Income taxes charged to the income statement consist of:
Tax payable/Tax refund, exploration expenses Changes in deferred taxes Changes in deferred taxes – special tax Adjustment prior year periods Effect of change in the tax rate Total taxes charged to the income statement Effective tax rate reconciliation
Income before taxes Expected tax charge – 78% Permanent differences
2015
2014
(1 676 603 669)
(1 531 996 511)
516 512 389
(114 355 597)
973 643 115
(186 472 460)
(319 952 131)
(374 517 272)
1 080 045
0
(505 320 250)
(2 207 341 840)
2015
2014
(2 260 997 460)
1 724 232 099
1 763 578 019
(1 344 901 037)
(2 046 594 066)
(678 898 940)
Financial items net
(90 123 597)
(46 482 219)
Uplift
211 421 783
207 925 072
Deferred tax exempt from special tax Adjustment prior year periods Correction prior years Effect of change in the tax rate* Total taxes charged to the income statement
(1 991 396)
29 532 556
(319 952 131)
(374 517 272)
(22 738 907)
0
1 080 045
0
(505 320 250)
(2 207 341 840)
The tax rate on company tax is from fiscal year 2016 reduced to 25%. Deferred tax liability and deferred tax asset as of 31 December, 2015 has been calculated with a tax rate of 25% for company tax and special tax of 53%.
NOTE
12 OTHER RECEIVABLES
2015
2014
Prepaid expenses
25 743 672
21 053 127
Line-fill
30 738 745
30 738 745
Under lift producing fields
131 531 209
167 726 514
Accrued non-invoiced sales
389 971 720
384 307 323
Receivable non-operated licences Over/undercall Other receivables, short term Total
32 575 544
7 286 462
338 228 121
251 487 805
6 300 820
33 932 354
955 089 830
896 532 329
The company receivables due later than 1 year ahead is classified as non current assets.
33
CENTRICA E&P NORWAY
NOTE
13 OTHER SHORT TERM LIABILITIES
Other short term licence related liabilities
2015
2014
699 252 342
922 872 315
Accrued Holiday Pay
20 385 664
16 346 851
Over lift
28 621 146
6 564 378
Overcall operated licences
52 637 936
167 636 147
9 014 417
12 999 794
86 834 527
33 130 202
8 627 905
5 075 499
Deferred revenue Salary payable VAT Other accruals Total
990 112 607
703 332 924
1 895 486 544
1 867 958 110
The company has no debt with more than 5 years maturities. Other short term licence liabilities relates to both operated and not operated licences. Other accruals includes future payments related to contingent consideration, tariff costs and other miscellaneous short term liabilities.
NOTE
14 EQUITY/HEAD OFFICE ACCOUNT
Changes in equity during the year. Shareholder's equity
Equity/Head office current account 01.01 Hedge Share scheme cost Capital increase Loss carried forward Equity/Head office current account 31.12
Loss carried forward
Other equity
Total
4 294 999 998 (1 666 089 717)
(1 444 332)
2 627 465 949
0
0
1 273 505
1 273 505
0
0
8 165 634
8 165 634
700 000 000
0
0
700 000 000
0 (2 766 317 712) 4 994 999 998 (4 432 407 429)
0 (2 766 317 712) 7 994 808
570 587 377
The company is a branch (NUF) owned 100 % by the UK registered entity Centrica Norway Ltd which is owned by Centrica Plc, a FTSE 100 company. The Equity/Head office current account is deemed equity based on decision made by head office.
NOTE
15 OTHER PROVISIONS
2015
2014
Ending balance, net present value of the difference between contract price and the forward gas price curves
0
0
Contingent consideration
0
140 000 000
Sum
0
140 000 000
Ending balance, net present value of the difference between contract price and the forward gas price curves In connection with the acquisition of the Heimdal licence, the company aquired a contract for sales of gas from the Heimdal field. This contract included a pricing mechanism which was linked to the cost of running the Heimdal field. At the acquisition date the cost level was substantially lower than actual gas prices and the company have therefore posted a liability which equals the net present value of the difference between contract price and the forward gas price curves. The corresponding assets is included in note 7 as production assets and is depreciated equally with the Heimdal licence.
34
2015
2014
Opening balance, net present value of the difference between contract price and the forward gas price curves
0
29 094 359
Amortisation of liability
0
(29 094 359)
Ending balance, net present value of the difference between contract price and the forward gas price curves
0
0
Contingent consideration The company made an acquisition in 2012 of shares in several licences from Statoil ASA. Included in the investments there was an agreed contingent consideration related to production, where the remaining potential liability at December 31, 2015 was USD 0 million (December 31, 2014 USD 25 million). Terms of contingent consideration occurred in 2015 and the company has recorded a short term liability of USD 25 million for 2015. In 2014 the obligation for 2015 was deemed as probable and a long term liability of USD 18.7 million was recognised. Reference is made to note 7.
NOTE
16 BALANCES WITH RELATED PARTIES
Intercompany
Related parties
Long term loans to related parties
Centrica Plc
Total Short term loans to related parties
Centrica Overseas Holding Ltd *)
Total Receivable – related parties
Other related parties
Total Long term loan from related parties
Centrica Overseas Holding Ltd *)
Long term loan from related parties
Centrica International BV **)
Total Short term loan
Centrica International BV **)
Total Short term debt – related parties Total
Other related parties
2015
2014
0
607 542
0
607 542
91 791 142
0
91 791 142
0
469 538 716
511 272 571
469 538 716
511 272 571
0
855 651 983
5 000 000 000
6 000 000 000
5 000 000 000
6 855 651 983
750 000 000
0
750 000 000
0
117 077 784
115 390 777
117 077 784
115 390 777
*) Centrica Energi have a draw down funding facility on NOK 2 750 million with Centrica Overseas Holding Limited with expiry date September 28, 2016. **) Centrica Energi have three structural funding loan agreements of total NOK 5 750 million from Centrica International BV: NOK 750 million with expiry date September 26, 2016 NOK 1 000 million with expiry date September 25, 2017 NOK 4 000 million with expiry date September 24, 2018. The interest rate is supplied by Centrica Plc and added to the company loan. Reference is made to note 24 for transactions with related parties.
35
CENTRICA E&P NORWAY
NOTE
17
Asset retirement obligations at 01.01. Decommissioning cost in balance
PROVISION FOR DECOMMISSIONING
Decommissioning cost in profit and loss Revision in estimates Interest expenses
2015
2014
5 517 484 031
5 517 103 085
(253 430 903)
(287 847 959)
(30 487 641)
0
(803 766 126)
166 709 329
122 462 229
121 519 576
Asset retirement obligation at 31.12.
4 552 261 590
5 517 484 031
Assets related to removal and abandonment at 01.01.
3 689 612 946
3 999 613 760
Additional assets/revision in estimates
(803 766 126)
166 709 329
Depreciation
(589 483 412)
(476 710 143)
2 296 363 408
3 689 612 946
Assets related to removal and abandonment at 31.12.
The provision for future decommissioning of offshore installations is recognized at the net present value of the estimated cost at the end of the installation’s lifespan, based on the assumption of today’s technology and level of cost. Future decommissioning costs are then discounted using index based treasury bonds as the most appropriate risk free interest rate. As per 31 December, 2015 the interest used is 2.2% (31 December, 2014: 2.2%). Assets related to removal and abandonment is also included in note 7 under “Producing assets”. The accretion expense is classified as finance cost in the profit and loss account. Total obligation includes a short-term portion as per December 31, 2015 of 91 195 668 NOK (December 31, 2014 NOK 254 976 121 NOK).
NOTE
18 EXISTING DRILLING COMMITMENTS
NOTE
19 FINANCIAL AND MARKET RISKS
The company are committed together with JV partners to participate in drilling of wells in accordance to licence agreements. 2015
2014
Contractual obligations next year
161 034 360
341 462 638
Contractual obligations thereafter
293 858 400
171 643 040
Total
454 892 760
513 105 678
The main marked risks for Centrica Energi are fluctuations in oil and gas prices, and currency fluctuation between pound (GBP), dollar (USD) and kroner (NOK). The company have not hedged the financial risk associated with oil and gas prices. The company have in 2015 and 2014 hedged the currency exposure related to drilling expenses in USD. The company’s credit risk and liquidity risk is low as the company is financed by the parent company who holds a dominant position in the UK power market. Customer relationships are mostly with solid participant on the NCS, in addition to the parent company.
36
NOTE
20
The company has the following status as per December 31, 2015 related to share of licences:
Licence number
Share in %
Field/ discovery
Operator
Expiration of licence
LICENCE OWNERSHIP
PL036/PL249
50,0000 %
Vale
Centrica Energi
June – 2021
PL405
40,0000 %
Butch
Centrica Energi
Dec – 2016
PL433
50,0000 %
Fogelberg
Centrica Energi
Feb – 2016
PL442
30,0000 %
Frigg G/D
Centrica Energi
June – 2017
PL528
40,0000 %
Ivory
Centrica Energi
May – 2017
PL528 B
40,0000 %
Ivory
Centrica Energi
May – 2017
PL 719
50,0000 %
Scarecrow
Centrica Energi
June – 2019
PL749
40,0000 %
Seychelles
Centrica Energi
Feb – 2022
PL757
40,0000 %
Batur
Centrica Energi
Feb – 2021
PL792
50,0000 %
Slynge
Centrica Energi
Feb – 2022
PL 798
40,0000 %
Riesling
Centrica Energi
Feb – 2022
PL036 BS
28,7980 %
Heimdal
Statoil
June – 2021
PL037
23,1250 %
Statfjord area
Statoil
Aug – 2026
PL050 ES
13,0000 %
Valemon
Statoil
Sept – 2031
PL050 FS
13,0000 %
Valemon
Statoil
Sept – 2031
PL050 GS
13,0000 %
Valemon
Statoil
Sept – 2031
PL050 HS
13,0000 %
Valemon
Statoil
Sept – 2031
PL193
19,0000 %
Kvitebjørn
Statoil
Sept – 2031
PL193 B
13,0000 %
Kvitebjørn
Statoil
Sept – 2031
PL193 C
19,0000 %
Kvitebjørn
Statoil
Sept – 2031
PL193 D
13,0000 %
Kvitebjørn
Statoil
Sept – 2031
PL193 E
19,0000 %
Kvitebjørn
Statoil
Sept – 2031
PL 684
19,0000 %
Boursin South
Statoil
Feb – 2021
PL745 S
20,0000 %
Jesper
Statoil
Feb – 2022
PL 755
20,0000 %
Leppard
Statoil
Feb – 2021
PL475
20,0000 %
Solberg
Wintershall
Feb – 2017
PL475 BS
20,0000 %
Maria
Wintershall
Feb – 2016
PL475 CS
20,0000 %
Maria
Wintershall
Feb – 2016
475 D
20,0000 %
Solberg
Wintershall
Feb – 2016
PL655
20,0000 %
Gamma
Wintershall
Oct – 2021
PL734
30,0000 %
Zeppelin
Wintershall
Feb – 2021
PL 660
20,0000 %
Blackmore
Faroe Petroleum Norge
Dec – 2020
PL665S
20,0000 %
Caramello
Faroe Petroleum Norge
Feb – 2021
PL026
30,0000 %
Rind
Total
May – 2025
PL627
20,0000 %
Skirne East
Total
Feb – 2021
PL627 B
20,0000 %
Skirne East
Total
Feb – 2021
PL 795
20,0000 %
Ravenwood
Total
Feb – 2023
37
CENTRICA E&P NORWAY
Licence number
Share in %
Field/ discovery
Operator
Expiration of licence
PL 670
25,0000 %
Betula
Tullow Oil Norge
Feb – 2021
PL 670 B
25,0000 %
Betula
Tullow Oil Norge
Feb – 2021
PL026 B
30,0000 %
Langfjellet
Det Norske Oljeselskap May – 2025
PL644
20,0000 %
Hades
OMV (Norge)
Feb – 2020
PL 669
30,0000 %
Ula NE
Dong E&P Norge
Feb – 2021
PL 778
20,0000 %
Høvring
Lundin Norway
Feb – 2022
The licences on the Norwegian continental shelf are owned by Centrica Resources (Norge) AS. The rights to the licences is throught a pass through agreement transferred to Centrica NUF through Centrica Overseas Holding Ltd.
NOTE
21
Reserves as of December 31, 2015 are based on numbers from the fields’ respective operator. The Vale and Statfjord fields are adjusted based on company’s own evaluation of life cycle based on the operators production profiles. 2015
RESERVES (NOT AUDITED BY EXTERNAL AUDITOR) Licence
Heimdal
2014
Gas bfc
Liquid mmboe
Totalt mmboe
Gas bfc
Liquid mmboe
Totalt mmboe
6,51
0,20
1,29
-
-
-
Vale
20,68
2,08
5,52
19,00
2,70
5,87
Statfjord Unit
83,91
19,66
33,64
97,27
20,60
36,81
Statfjord Nord
1,29
5,39
5,61
1,29
5,01
5,23
Statfjord Øst
0,61
1,06
1,16
0,63
0,67
0,77
Sygna Maria Kvitebjørn Valemon Butch Total
-
0,98
0,98
-
0,98
0,98
12,34
27,19
29,25
14,28
26,28
28,66
285,32
10,46
58,02
314,44
12,38
64,79
78,34
4,06
17,12
98,58
5,02
21,45
5,51
16,29
17,21
9,83
18,90
20,54
494,52
87,38
169,80
555,32
92,54
185,10
Increase due to purchase
-
-
Increase in reserves of exploration fields
-2,74
-0,02
Increase in reserves in production fields
8,83
2,91
DeGolyer and MacNaughton conduct yearly an independent review of reserves to Centrica Plc. For the company has DeGolyer and MacNaughton conducted an independent review in 2015 of the licences PL405 Butch, PL193 Kvitebjørn, PL036 Vale and PL037 Statfjord area. 1 mill boe = 6 BCF
38
NOTE
22 FOREIGN EXCHANGE RATES USED AT YEAR END
Foreign exchange rates applied at year end are group given exchange rates. 2015
2014
13,0412
11,6672
US dollars (USD)
8,8515
7,4881
Euro (EUR)
9,6175
9,0606
Pounds (GBP)
NOTE
23
2015
Interest income Intercompany interest income
FINANCIAL ITEMS
Other interest income
A
Interest cost Intercompany interest expenses Capitalised interest Other interest expenses
B
Agio Hedging
2014
4 612 566
1 766 163
0
29 281 819
4 612 566
31 047 981
19 945 762
19 860 822
309 654 468
197 832 664
(10 008 468)
(116 863 313)
319 591 762
100 830 173
352 113 238
387 994 390
166 892
335 385
352 280 129
388 329 775
Disagio
301 035 243
349 521 822
Accretion expense asset retirement obligation
122 462 229
121 519 575
1 222 851
2 031 261
424 720 324
473 072 659
(387 419 390)
(154 525 075)
Net interest income
C
Other financial expenses Other financial expenses
D
Net financial income and expenses
A-B+C-D
39
CENTRICA E&P NORWAY
NOTE
24 TRANSACTIONS WITH RELATED PARTIES
Transaction with related parties: a) Sales of products and services
Intercompany
Sale of Crude Oil
Centrica Resources Ltd
Sale of Dry Gas
British Gas Trading
Sale of services
Centrica Resources Ltd
Interest income on loan to IC
Centrica Overseas Holdings Ltd
b) Purchase of products and services
Intercompany
Purchase of services from related parties Purchase of services from related parties Interest expenses on loan from related parties Interest expenses on loan from related parties
Centrica Finance Norway Ltd
Interest expenses on loan from related parties
Centrica International BV
2015
2014
415 835 963
374 444 012
4 502 656 192
3 926 104 889
9 885 205
7 961 090
0
29 281 819
2015
2014
British Gas Trading
123 199 668
104 791 433
Centrica Production Services Ltd
147 722 619
144 830 006
Centrica Overseas Holdings Ltd
43 654 057
1 302 467
0
191 493 813
266 000 411
5 036 384
The purchase of services from Centrica Production Services Ltd mainly relates to management fee and corporate charges. For remuneration to management, see note 5. For intercompany balances see note 16.
NOTE
25 SUBSEQUENT EVENTS
On the 19th of January 2016 as part of the APA 2015 Centrica has been awarded 6 new licences, 1 of them as operator. Centrica have in April 2016 signed an agreement of transfer working interest in three licences to Det norske. The agreement comprises 30 per cent ownership in Frigg Gamma Delta (PL 442/PL 026B) and Rind (PL 026). Centrica will have no remaining working interest in these licences after the transaction. The effective date of the transaction is 1st of January 2016. There have been no other subsequent events which have had impact on the financial information prepared by December 31, 2015.
40
To the Annual Shareholders' Meeting of Centrica Energi NUF
To the Annual Shareholders' Meeting of Centrica Energi NUF
Independent auditor’s report
Independent auditor’s report Report on the Financial Statements Report onaudited the Financial Statements We have the accompanying financial statements of Centrica Energi NUF, which comprise the
balance sheet as at 31 December 2015, and the income statement, showing a loss of NOK 2 766 317 712
cash flow statement, for the year financial then ended, and a summary of significant policies and the Weand have audited the accompanying statements of Centrica Energiaccounting NUF, which comprise other explanatory balance sheet as at information. 31 December 2014, ofof NOK 483 2013, and the income statement, showing a loss profit NOK 631109 216741 359 and cash flow statement, for the year then ended, and a summary of significant accounting policies and The Board of Directors and the Managing Director’s Responsibility for the Financial Statements other explanatory information. The Board of Directors and the Managing Director are responsible for the preparation and fair
The Board of Directors and the Managing Director’s Responsibility for the Financial Managing Responsibility foraccordance the Financial Statements presentation ofDirector’s these financial statements in with Norwegian Accounting Act and Statements accounting standards and practices generally accepted in Norway, and for such internal control as the
Board of Directors and and the Director determine necessary tofor enable the preparation of The Board of Directors the Managing are isresponsible the preparation and fair Managing Director areManaging responsible forDirector the preparation and fair presentation of these financial financial statements are free from material misstatement, whether due to fraud or error. presentation these that financial statements in accordance Norwegian Accounting Act practices and statements inofaccordance with Norwegian Accounting Actwith and accounting standards and accounting standards and practices generally accepted in Norway, and for such internal control asisthe generally accepted in Norway, and for such internal control as the Managing Director determine Auditor’s Board of Directors ManagingofDirector is that necessary to from enable the preparation of necessary toResponsibility enableand the the preparation financialdetermine statements are free material misstatement, financial statements are free from material misstatement, whether due to fraud or error. whether due to fraudthat or error. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices
Auditor’s generallyResponsibility accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
Our responsibility is to express an opinion on these financial statements based on our audit. We assurance about whether the financial statements are free from material misstatement. conducted our audit in accordance with laws, regulations, and auditing standards and practices An auditaccepted involves performing obtain audit evidence about amountsThose and disclosures generally in Norway,procedures includingto International Standards onthe Auditing. standards require in we the comply financialwith statements. procedures selected depend on the auditor’s judgment, including the that ethicalThe requirements and plan and perform the audit to obtain reasonable assessment of the risks of the material misstatement of the statements, due to fraud or assurance about whether financial statements arefinancial free from materialwhether misstatement. error. In making those risk assessments, the auditor considers internal control relevant to the branch’s preparation and fair presentation of the financial statements in order to design audit procedures that
Anare audit involvesinperforming procedures tofor obtain audit evidence about amounts appropriate the circumstances, but not the purpose of expressing anthe opinion on theand disclosures in the financialofstatements. The procedures judgment, including the selected depend onevaluating the auditor’s effectiveness the entity’s internal control. An audit also includes the appropriateness of assessment the risks material misstatement of the financial statements, whether dueas to fraud or accountingofpolicies usedofand the reasonableness of accounting estimates made by management, wellIn as making evaluating the overall presentation of financial statements. error. those risk assessments, thethe auditor considers internal control relevant to the branch’s company’s and fair presentation of the financial statements orderaudit to design audit that preparationpreparation and fair presentation of the financial statements in order to in design procedures believethat thatin the audit evidenceinwe have obtained is sufficient appropriate to of provide a on basis foropinion procedures are appropriate the circumstances, but notand forexpressing the purpose expressing an areWe appropriate the circumstances, but not for the purpose of an opinion the our opinion. on theaudit effectiveness of the entity’s Analso audit also includes evaluating the effectiveness of the entity’s internalinternal control.control. An audit includes evaluating the appropriateness of appropriateness of accounting policies used and the reasonableness of accounting estimates made accounting policies used and the reasonableness of accounting estimates made by management, asby Opinion management, as well evaluating the overall presentation of the statements. well as evaluating the as overall presentation of -the financial statements. Independent auditor's report 2015 - Centrica Energi NUF,financial page 2 In our opinion, the financial statements are prepared in accordance with the law and regulations and
Wegive believe we have obtained is sufficient andasappropriate to provide a basis for a truethat and the fair audit view ofevidence the financial position of Centrica Energi NUF at 31 December 2015, and ouritsaudit opinion. financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.
Opinion
Report on Other Legal and Regulatory Requirements
In our opinion, the financial statements are prepared in accordance with the law and regulations and Opinion thefair Board ofof Directors’ reportposition of Centrica Energi NUF as at 31 December 2014, give a trueon and view the financial 2013, and its financial performance and its cash flows for the year then ended in accordance with the Norwegian Based on our audit of the financial statements as described above, it is our opinion that the Accounting Act and accounting standards and practices generally accepted in Norway. PricewaterhouseCoopers AS, Kanalsletta 8, Postboks 8017, NO-4068 Stavanger information presented in the Board of Directors report concerning the financial statements and the T: 02316, org. no.: 987 009 713 MVA, www.pwc.no going concern assumption is consistent with the financial statements and complies with the law and Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap regulations. Opinion on Registration and Documentation Based on our audit of the financial statements as described above, and control procedures we have considered necessary inAS, accordance with8,the International StandardStavanger on Assurance Engagements ISAE PricewaterhouseCoopers Kanalsletta Postboks 8017, NO-4033 Engagements Other than Audits or Reviews of Historical Financial Information”, it is T: 3000 02316,“Assurance org. no.: 987 009 713 MVA, www.pwc.no our opinion that management has fulfilled itsnorske duty toRevisorforening produce a properog and clearly set out registration Statsautoriserte revisorer, medlemmer av Den autorisert regnskapsførerselskap and documentation of the branch’s accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.
Stavanger, 25 May 2016 PricewaterhouseCoopers AS
Gunnar Slettebø State Authorised Public Accountant (Norway) Note: This translation from Norwegian has been prepared for information purposes only.
41
Centrica E&P Norway | Visiting adress: Veritasveien 29, Stavanger Post adress: P.O. Box 520 Sentrum, 4003 Stavanger, Norway Telephone: +47 51 31 00 00 | E-mail: communication.stavanger@centrica.com Web adress: www. centrica.no
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