E ype_gradient_BLUE_CMYK /2015
hschild - 92288 Suresnes - FRANCE 0 / Fax : +33 (0)1 57 32 87 87 com
RÉFÉRENCES COULEUR
Zone de protection 1 C100%
Zone de protection 2 Zone de protection 3
Annual report 2015
Year 2015 Contents
03
08
09
10
11
22
Board of Directors’ Report 2015
Cash flow statement
Income statement
Notes
Balance sheet
Auditor’s report
Year 2015 Board of Directors’ report
Board of Directors’ Report 2015 ENGIE E&P Norge AS (“the Company”) is engaged in the exploration for and production of oil and gas on the Norwegian Continental Shelf (NCS). The Company’s head office is located in Sandnes. At the end of 2015 the Company portfolio contained 46 licences on the NCS, including shares in the Njord, Fram, Snøhvit, Gjøa, Vega, Gudrun, Hyme and H-North fields. The Company is the operator of the Gjøa field (PL153 and PL153B) which started producing in November 2010, and of the exploration licences PL610 Kimbe, PL612 Nemo, PL636 Cara, PL722, PL723 and PL786.
Exploration In January 2016, the Company was awarded a 50% share and the operatorship in a new licence by the Ministry of Petroleum and Energy in the Awards for Predefined Areas (APA) 2015. The licence awarded is PL817 in the North Sea, west of the Gudrun field.
Drilling The Company participated in 2 exploration wells as partner in 2015: PL348C – Bister well 6407/8-7 In Q2 2015, the Company participated in the drilling of exploration well 6407/8-7. The Bister prospect was located 4 km northeast of the Snilehorn discovery and 18 km northeast of the Njord Field. Drilling operations were carried out by the Aker Spitsbergen drilling rig. The exploration target for the well was to prove hydrocarbons in known Jurassic Ile, Tilje and Åre formations. The well encountered reservoir sands in all three reservoir targets, with no signs of hydrocarbons. A side-track was drilled encountering the Tilje and Åre formations, containing no hydrocarbons. Both wells were classified as dry. PL700B – Lorry/Broker well 6407/10-4 In Q4 2015, the Company participated in the drilling of exploration well 6407/10-4, which continued until January 2016. The Lorry prospect was located 15 km southwest
of the Njord Field. Drilling operations were carried out by the Island Innovator drilling rig. The exploration target for the well was to prove hydrocarbons in Upper Jurassic Røgn formation sands. A secondary target was Permian carbonates. The well failed to encounter either of the reservoir targets. Instead, the well encountered a very thick package of what is believed to be Triassic and possibly Permian conglomerates. Hydrocarbon shows were observed in the upper-most layers as seen on core. The well was classified as dry, with minor hydrocarbon shows.
Development Njord Future Project The Njord Future Project is established to decide the optimum future development of the Njord Area and to address the further structural upgrade requirements on the platform. This redevelopment project encompasses the Njord field and the Hyme field which is tied into Njord A. Additional studies have been undertaken for tying-in other discoveries in the area, such as Snilehorn. Sanction of the project is planned to be in November 2016. Snilehorn Development Project The Snilehorn discovery is located approximately 15 km North-East of the Njord Field in the Norwegian Sea. The discovery was made in late 2013 and is most likely to be developed as a tie in to Njord A.
03
Year 2015 Board of Directors’ report
Operations Gjøa Net production from the Gjøa field in 2015 was 12.6 million barrels of oil equivalent (boe) corresponding to 34,413 boe/ day. This represents 36% of the Company’s total production. Production from the Gjøa field has increased compared to 2014, due to excellent regularity and utilisation of Vega spare capacity. Njord Net production from the Njord field in 2015 was 4.5 million boe corresponding to 12,193 boe/day. The field is expected to remain on production until May 2016, before the production platform is towed to shore for the structural upgrade. During this time, no drilling activities will be undertaken. Fram Net production from the Fram field in 2015 was 2.1 million boe corresponding to 5,860 boe/day. The performance of the Fram reservoir has been good and the decline rate is as expected. Fram C-East development was sanctioned Q4 2015. Snøhvit Net production from the Snøhvit field in 2015 was 5.8 million boe corresponding to 15,862 boe/day. 2015 was a strong performing year for Snøhvit with a total regularity of 93% and an average design capacity of 102.5%. The Snøhvit infill well F-1H and the Snøhvit Nord development were sanctioned. The Company lifted 8 LNG cargoes in 2015. Vega Unit Net production from the Vega Unit in 2015 was 0.6 million boe corresponding to 1,621 boe/day. Vega is a subsea tie-back to Gjøa. Hyme Net production from the Hyme field in 2015 was 1.3 million boe corresponding to 3,692 boe/day. The Hyme field is a subsea tie-back to Njord, with one production well and one water injection well. Production will be shut down during the redevelopment of the Njord platform. Gudrun Net production from the Gudrun field in 2015 was 8 million boe corresponding to 21,803 boe/day. The development drilling program (7 production wells) was completed in September 2015. Regularity was affected by a condensate leak in February and helideck integrity issues in March. The West Epsilon drilling rig has been used as helideck for Gudrun since, with the repair of the helideck expected to be completed in April 2016. Despite the leak incident, which caused some 45 days of lost production, regularity for the rest of the year was good, resulting in an average 80% uptime for the year.
H-North Net production from the H-North field in 2015 was 0.2 million boe corresponding to 529 boe/day. Production has been stable from H-North, although at a lower level than expected as one branch of the two-branch producer well has been shut in.
Going concern In accordance with the Accounting Act § 3-3a, the Board of Directors confirms that the financial statements have been prepared under the assumption of going concern. This assumption is based on profit forecasts for the year 2016 and the Company’s long-term strategic forecasts. For the purposes of this rule, the Company’s economic and financial position is sound.
Working environment At year end the Company had 284 employees. In accordance with applicable laws and regulations the Company registers its employees’ absence due to illness. During 2015 absence due to illness has been 1.78% (2.15% in 2014). The Company conducts a periodic working environment survey that includes all employees and consultants. The survey covers a wide range of factors impacting the working environment. The results from the survey form the basis for an annual update of activity plans aimed at maintaining a good working environment. The results from the last survey show that the working environment and general welfare in the workplace is very good. The survey had very high participation at 94% of employees. Over the years, the results have been very good and stable, and any changes this year have been minor. Compared to the Oil and Gas Industry benchmarks, our employee satisfaction is above average. In 2015 the Company had no serious incidents. There were 2 minor injuries, one of them led to a lost time incident (LTI).
Gender equality The Board of Directors is attentive to society’s expectations and the legal requirements with which the Company is expected to comply in order to promote gender equality and prevent differential treatment of women and men. There is a continuous effort to adhere to these requirements. At the year end, 84 of the Company’s 284 employees were women. The management team consists of 9 persons of whom 2 are women. Three of nine members of the Board of Directors are women. A total of 17 new employees were recruited in 2015, of which 5 are women and 12 men. All salaries are established without prejudice. A total of 5 employees work part-time, of which 2 are men. There are no differences in the working hour regulations for women and men.
04
Year 2015 Board of Directors’ report
Discrimination
Financial market, credit and liquidity risks
The Discrimination Act’s objective is to promote gender equality, ensure equal opportunities and rights, and to prevent discrimination due to ethnicity, national origin, descent, skin color, language, religion and faith. The Company is working actively, with determination and systematics to promote the act’s purpose within its business. Included in the activities are recruiting, salary and working conditions, promotion, development opportunities and protection against harassment. The Company aims to be a workplace with no discrimination due to reduced functional ability and is working actively to design and implement the physical conditions in such a manner that as many as possible may utilize the various functions within the workplace. Individual adjustments of workplace and responsibility are made for employees or new applicants with reduced functional ability.
As of 31 December 2015, current and other long-term liabilities amounted to NOK 6,330 million and NOK 10,219 million respectively.
Environment
The Company regards its credit risk as low since the majority of its sales are to companies within the larger ENGIE group and/or to other large corporations. The Company has not realised losses on receivables during the preceding years.
Gjøa field The Gjøa facilities are designed to cause as little environmental impact as possible. Electricity from shore is the main source of power for the Gjøa installation, and there is a single fuel low Nitrous Oxide (NOx) turbine operating the gas export compressor. In addition, a waste heat recovery unit is installed. Closed flaring during regular operations also contributes to a reduction of environmental impact. The emissions and discharges to the environment from operations at Gjøa will be reported to the environmental authorities according to current regulations. 91% of chemicals discharged to sea were green chemicals and are not expected to cause any environmental impact. The company emphasises the use of environmentally friendly chemicals. There was a discharge of yellow chemicals of 140 tons, which exceeded the existing permit (110 tonnes per year), and an update of the permit has therefore been submitted to the Norwegian Environment Agency. In addition, the submitted application provides for the discharge of red and black chemicals related to the leakage of lubricating oil from the submerged electrical pumps and the reclassification of a flocculent from yellow to red category. There were two accidental spills to sea during 2015, both were spills of the green chemical MEG. The Gjøa field generated 84 tons of normal waste and 3,111 tons of hazardous waste in 2015. The key environmental indicators of emissions to air were: Flaring Fuel gas consumption Diesel consumption CO2 emissions NOx emissions
0.3 million standard cubic meters (Sm3) 54 million Sm3 124 tons 125,766 tons 70 tons
The financial position of the Company is good. The financial situation will always be influenced by fluctuations in the price of crude oil and gas and in currency exchange rates. The Company has reimbursed its long term loan. The Company has guidelines for entering into derivative contracts in order to manage the commodity price risk. The Company enters into commodity based derivative contracts consisting of market swaps for oil and gas products to reduce the market exposure. The Company’s financial position means that it would be able to withstand reduced oil prices and fluctuations in exchange rates for an extended period.
The total exposure related to currency, interest and price fluctuations is monitored and evaluated as a part of the overall evaluation of ENGIE’s total exposure. Possible actions are implemented in accordance with existing ENGIE procedures. The pre-tax rate of return (operating profit/average total assets) in 2015 was 23 per cent, compared with 22 per cent in 2014. The rate of return after tax was 9 per cent in 2015, compared with 5 per cent in 2014. The differences between pre-tax income and cash flow from operations are due to differences in the timing of tax expenditures and depreciation.
Financial aspects The Company produced 35.0 million boe in 2015, which is an increase compared to the 2014 level. Total sales in 2015 amounted to 34.4 million boe, giving total revenues of NOK 11,890 million. Out of the total 34.4 million boe sold, 11.2 million barrels (bbls) consisted of crude oil and condensate. Revenues from crude oil and condensate sales were NOK 4,595 million compared to NOK 5,298 million in 2014. The Company sold 2.7 billion Sm3 of gas including Snøhvit LNG in 2015. Revenues from gas and LNG amounted to NOK 5,228 million compared to NOK 4,349 million in 2014. The revenue from sale of Natural Gas Liquid (NGL) and Liquified Petroleum Gas (LPG) mix amounted to NOK 1,318 million in 2015 compared to NOK 1,590 million
05
Year 2015 Board of Directors’ report
in 2014. A total of 5.4 million boe of these products were sold in 2015, compared to 4.4 million boe sold in 2014. Net cash flow from operating activities in 2015 was NOK 5,884 million, compared to NOK 3,827 million in 2014. Capital investments in 2015 amounted to NOK 711 million, compared to NOK 1,243 million in 2014. The majority of the investments were made in the completion of the Gudrun facility along with operating investments on Njord and Snøhvit. The Company’s inter-company debt with ENGIE at the end of 2015 had been fully reimbursed, compared to a balance of NOK 4,067 million at the end of 2014.
of significance that could impact the Company’s result and financial position as at 31 December 2015 which have not been reflected in these accounts. The Company’s fully owned subsidiary, GDF SUEZ E&P Greenland AS, had no revenues in 2015 and incurred costs of NOK 14 million. The Company provided a group contribution to the subsidiary equal to NOK 5.2 million. The Company impaired NOK 18 million of its investment in the subsidiary in 2015. The value of shares in GDF SUEZ E&P Greenland AS as of 31st December 2015 was NOK 53 million.
Allocation of net income
The Company’s net income for 2015 was NOK 457 million higher than 2014. The ordinary pre-tax profit for 2015 was NOK 4,426 million, compared to NOK 5,234 million in 2014. After NOK 4,620 million for current tax expenditures and NOK 1,768 million for deferred tax income, net income amounted to NOK 1,574 million for 2015 compared to NOK 1,117 million in 2014. The accounts have been prepared on a going concern basis. The Board of Directors confirms the basis for this in accordance with section 3-3 of the Norwegian Accounting Act. The Board of Directors is not aware of any conditions
The Board of Directors, having no knowledge of any matters not disclosed that could be of significance when evaluating the Company’s position, recommends the following allocation of net income: Net result 2015 From Retained Earnings Dividend
NOK 1,574,837,110 NOK 759,912,890 NOK 2,334,750,000
If the General Assembly follows the Board of Directors’ recommendation regarding distribution of dividend, total equity after allocation of dividend will be NOK 1,971 million, giving an equity ratio of 10.6%.
8th of March 2016
Maria Moræus Hanssen Chairman of the Board
Didier Holleaux Board Member
Meriem Mokrani Board Member
Rolf Erik Rolfsen Board Member
Benoit Mignard Board Member
Pierre Chareyre Board Member
Mailin Seldal Board Member Employees’ Representative
Trond Myklebust Board Member Employees’ Representative
Arne Bekkeheien Board Member Employees’ Representative
Cedric Osterrieth Managing Director
06
07
Year 2015 Annual accounts
Income statement Note
2015
2014
3, 5
11 742 503 726
11 412 339 733
OPERATING INCOME Sales of oil and gas Tariff income
5
87 959 375
99 405 127
Other Income
5
59 322 543
0
11 889 785 644
11 511 744 859
2 094 393 390
2 057 616 484
Total operating income OPERATING EXPENSES Operating expenses Exploration expenses
378 018 250
626 319 858
6,7
119 960 683
114 688 980
Depreciation
9
3 901 621 355
2 980 153 293
Impairment
9
978 612 961
471 037 054
10
233 422 303
157 004 904
Total operating expenses
7 706 028 941
6 406 820 574
Operating profit
4 183 756 703
5 104 924 285
595 624
943 998
1 105 158 258
1 248 898 481
13 042 000
7 011 812
Payroll expenses
Other operating expenses
FINANCIAL INCOME AND EXPENSES Interest income Foreign currency exchange gain Interest income from group companies Other financial income
11 3
Foreign currency exchange loss Interest expenses to group companies
11
Other interest expenses Net financial (-income) Operating profit before tax Tax expenses
13
Net income
33 280 385
0
847 176 633
1 000 103 738
57 356 000
114 250 046
4 951 701
13 275 238
-242 591 932
-129 225 271
4 426 348 634
5 234 149 556
2 851 511 523
4 116 383 218
1 574 837 110
1 117 766 338
2 334 750 000
1 337 175 000
-759 912 890
-219 408 662
1 574 837 110
1 117 766 338
Allocated as follows: Proposed dividend Transfer (-from) other equity Total allocations
08
14
Year 2015 Annual accounts
Balance sheet NON-CURRENT ASSETS Tangible fixed assets Property, plant & equipment Shares in subsidiary Other financial investments Total non-current assets CURRENT ASSETS Drilling equipment and spare parts
Receivables Accounts receivable from operators Trade accounts receivable Financial instruments Other receivables Total receivables Cash and cash equivalents Total current assets
Note
2015
2014
9
16 006 355 556
20 276 997 749
16
52 974 356
67 567 700
12
Retained earnings Other equity Total equity LIABILITIES Provisions Pension liability Deferred tax Other provisions Total provisions
Current liabilities Loan from parent company Trade accounts payable Public duties payable Accounts payable to operator Dividend Tax payable Other short term liabilities Total current liabilities Total liabilities Total equity and liabilities
188 000
16 059 517 912
20 344 753 449
44 239 473
67 340 200
164 207 824
0
32 168 822
872 461 859
3
954 531 000
445 756 000
11
1 243 797 384
1 839 825 738
2 394 705 031
3 158 043 597
4
Total assets EQUITY AND LIABILITIES EQUITY Paid-in capital Share capital Share premium reserve Total paid-in capital
188 000
22 189 992
254 178 311
2 461 134 496
3 479 562 108
18 520 652 408
23 824 315 557
14,15
141 500 000
141 500 000
14
1 273 500 000
1 273 500 000
1 415 000 000
1 415 000 000
3,14
556 387 986
957 961 366
1 971 387 986
2 372 961 366
7
130 894 114
192 250 109
13
6 114 675 461
7 733 145 594
10
11
3 973 617 374
4 180 150 339
10 219 186 949
12 105 546 043
0
4 067 000 000
83 094 811
164 384 783
49 321 745
137 996 827
307 800 105
886 820 543
14
2 334 750 000
1 337 175 000
13
2 310 620 526
2 039 244 794
8,10
1 244 490 286
713 186 201
6 330 077 473
9 345 808 148
16 549 264 422
21 451 354 191
18 520 652 408
23 824 315 557
09
Year 2015 Annual accounts
Cash flow statement 2015
Operating profit before tax Payment of tax Depreciation, impairments and changes in net present value Changes in accounts receivable and accounts receivable operators Changes in accounts payable and accounts payable operators
4 426 348 634
5 234 149 556
-4 346 595 916
-4 665 262 892
4 910 135 871
3 556 098 817
676 085 213
-643 784 697
-660 310 409
-107 376 034
Difference between pension cost and amounts paid into pension scheme
-32 948 434
17 816 637
Changes in other balance sheet items
911 033 995
435 211 048
5 883 748 953
3 826 852 436
-726 155 617
-1 607 371 378
Net cash flow from operating activities Acquired tangible fixed assets Shares in subsidiary
14 593 345
363 471 739
-711 562 272
-1 243 899 638
Payment of long-term borrowings
-4 067 000 000
-1 000 000 000
Dividend paid
-1 337 175 000
-1 698 000 000
Net cash flow from financing activities
-5 404 175 000
-2 698 000 000
-231 988 319
-115 047 202
254 178 311
369 225 513
22 189 992
254 178 310
Net cash flow from investing activities
Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
10
2014
Year 2015 Notes
Notes 01. Accounting policies The annual accounts have been prepared in accordance with the Norwegian Accounting Act of 1998 and Norwegian generally accepted accounting principles.
Exploration costs production asset’s consumption of benefits Geological studies and analysis are over its useful life. expensed as incurred. Exploration drilling costs are temporarily capitalised until Property, plant and equipment is potential oil and gas reserves have been capitalised and depreciated linearly Revenues evaluated (the successful efforts method). over its estimated useful life. Costs for The sale of crude oil and gas is recognised When new reserves are discovered, maintenance are expensed as incurred, through the sales method. For crude oil the fully developed and put into production, whereas costs for improving and upgrading point of delivery is at the offshore loading the exploration drilling costs will be property, plant and equipment are added point or at shipment from the terminal. depreciated based on the unit-of-sales to the acquisition cost and depreciated The point of delivery for gas is at the gas method. Drilling costs related to dry or with the related asset. receiving terminal onshore. non-commercial wells are expensed. Subsidiaries and investment in associates Expenses Property, plant and equipment Subsidiaries and investments in associates Expenses are expensed as incurred in All costs related to the development of are valued at cost in the Company accounts. accordance with the matching principle, commercial oil or gas fields are capitalised The investment is valued as the cost of either along with the revenues they have as a part of the installation. Capital the shares in the subsidiary, less any generated or identified as a periodical expenditures on fields in production impairment losses. Consolidated financial expense. are capitalised based on information statements are not prepared as the from the operator. Company and its subsidiaries are included Estimates in the consolidated financial statements In accordance with Norwegian generally Individual assets or groups of assets, clasof the parent company in France. accepted accounting principles, the sified as cash-generating units (CGUs), are management of the company is responsible tested for impairment when indicators of Assets liabilities and expenses related for estimates and assumptions that affect impairment are identified. When assessing to participating interests in exploration the valuation of assets and liabilities in whether an asset is impaired, the asset's and production licences (joint ventures) the balance sheet and depreciation in the carrying value is compared to the recoThe Company’s participating interests in income statement. The final realisable verable amount. The recoverable amount exploration and production licences on the values may deviate from these estimates. is the higher of the asset's fair value less Norwegian Continental Shelf are accounted cost to sell and the asset's value in use. for in the income statement and balance Classification and assessment of items An impairment loss is recognised when the sheet in accordance with the proportional in the balance sheet recoverable amount is below the carrying consolidation method. Current assets and current liabilities amount and if the decline in recoverable include items due within one year and amount is not considered temporary. If the Transfer of joint ventures shares items related to ordinary working capital. assets are decided to be impaired, the Transfers of interests in petroleum licences All other items are classified as fixed carrying amount is written down to the on The Norwegian Continental Shelf assets or long-term liabilities. recoverable amount and the reduction in require approval from the Norwegian asset value is recognised as an expense. Government. Under such transactions the Current assets are valued at the lower sale price is generally considered to be on of cost and fair value. Short-term debt Depreciation of production assets an "after tax" basis (after-tax transaction) is valued at the historical nominal value. The depreciation of producing assets, as the consideration is not taxable for the including site rehabilitation costs, commen- seller and not deductable for the buyer Fixed assets are valued at cost, but written ces when the oil or gas field is brought into through depreciation. down to fair value if the decline in value is production. Depreciation is calculated not expected to be temporary. Long-term according to the unit of sales method. When acquiring licences that yield rights to loans are stated at the historical nominal According to this method, the depletion exploration for and production of oil and value. rate is equal (since 1 January 2014) to gas, it will be assessed if the acquisition the ratio of oil and gas sales for the period should be classified as a business Foreign currency to proved and probable reserves. Before combination or an asset acquisition. Monetary balance sheet items in foreign this date, the ratio was based on proved Acquisitions of individual licences which currency are converted at the exchange developed reserves. The future capex do not meet the definition of business rate on the closing balance date. linked to the 2P reserves are included combination will be classified as the in the calculation of the depreciation rate. acquisition of an individual asset. All foreign currency transactions are converted to NOK in accordance with the This change of estimate has been decided Oil and gas producing licences Company’s monthly book-keeping currency in view of the evolution of the Group’s For oil and gas producing ownership interexchange rates, which approximate market portfolio of production assets. This change ests, as well as licences in the development rates. aims to improve the economic vision of the phase, the acquisition cost will be allocated
11
Year 2015 Notes
between exploration costs, licence rights, production facilities and deferred taxes. In connection with agreements for acquisitions or trade of interests, the parties will establish a completion date for the acquisition of the net cash flow since the effective date (often set on 1 January of the calendar year). In the period between the effective date and the completion date, the seller will include the acquired interest in the seller’s accounts. In accordance with the acquisition agreement, there will be a settlement with the seller of net cash flow from the ownership interest during the period from the effective date to implementation date (Pro&Contra settlement). The Pro&Contra settlement will be adjusted against the income statement and against the acquisition cost, as the settlement (after reduction for taxes) is regarded as part of the payment for the transaction. Going forward from the implementation date, revenue and costs are included in the buyer’s financial statements. As regards taxes, the buyer will include for taxation net cash flow (Pro&Contra) and any other revenue and costs as of the effective date. Allocations will not be made for deferred taxes in connection with acquisition of licences that are defined as acquisition of assets. Farm-in agreements Farm-in agreements are usually made during the exploration and development phases, and are characterised by the seller deferring future financial advantages, in the form of reserves, to reduce future financing obligations. One example can be that a licence interest is acquired and covered by the seller’s share of the drillingrelated costs. During the exploration phase, the company will normally enter farm-in agreements based on historical costs, as actual value often is difficult to determine. However, during the development phase, farm-in agreements are entered as acquisitions at actual cost when the company is selling shares of oil and gas interests. Fair value is determined by the costs that the buyer has agreed to carry. Swap/Unitisation A swap of ownership interest is measured at the fair value of the interest to be swapped, unless the transaction lacks commercial substance or if the fair value of the swapped interest is not measurable. During the exploration phase where it is often difficult to determine fair value, the Company will normally account for swaps based on historical cost.
12
Spare parts and drilling equipment Spare parts and drilling equipment are valued at the lower of cost or market value. Cost is estimated using the First In First Out (FIFO) method. Capital spare parts are capitalised and presented in the financial statements together with the investment. Over/under lift and petroleum in stock Obligations arising as a result of lifted quantities of crude oil that are larger than the Company’s participating interests in a licence are valued at production cost. Receivables arising as a result of lifted quantities of crude oil that are less than the Company’s share in a licence, are valued at the lower of production cost and sales price. Petroleum in stock which has not passed the Norm Price-point, is valued at production cost, less depreciation.
in pension schemes are amortised over the remaining vesting period. Estimated deviations are continuously charged to equity. Social security tax is included in the pension cost and liability. Accounting for licence cost The Company's accounts reflects the net cost after charging partners their share of licence costs for permits the Company operates. Cash flow statement The cash flow statement is presented using the indirect method. Cash and cash equivalents include bank deposits.
Leasing The Company has signed only operating lease agreements, and as such the related cost is charged to the income statement Uncertain obligations as incurred. The Company will, through its activities, be involved in conflicts and disputes. Financial Instruments The Company will accrue for obligations The Company enters into commodity based in connection with such unresolved issues derivative contracts consisting of market based on the best estimate, when it is pro- swaps for oil and gas products. bable that an outflow of economic benefits will be required to settle the obligation. Hedging The Company applies the principals of Accounts receivables NRS18 and uses the following criteria for Trade accounts receivables and other classifying a derivative or another financial receivables are recorded at face value less instrument as a hedging instrument: (1) the a provision for any anticipated losses. hedging instrument is expected to be highly effective in offsetting changes in Asset retirement obligation the fair value of the cash flow of an identiWhen the retirement obligation is incurred, fied object – the hedging effectiveness is the liability is recognised as a long term expected to be between 80-125%, (2) the provision and the corresponding amount is hedging effectiveness can be measured capitalised as part of the producing asset. reliably, (3) satisfactory documentation is The asset is expensed through depreciation established before entering into the hedging over the remaining useful life of the asset. instrument, showing among other things Future changes in asset retirement that the hedging relationship is effective, obligation estimates are capitalised as (4) for cash flow hedges, that the future part of the asset and charged to profit transaction is considered to be highly and loss prospectively over the remaining probable, and (5) the hedging relationship useful life of the asset. is evaluated regularly with quantitative analysis and is considered to be effective. Tax expense Tax expense reflects both taxes on current Cash flow hedges taxable income and changes in deferred The efficient part of changes in the fair income taxes. Deferred tax is calculated value of a hedging instrument is recognised based on net temporary differences in equity. The inefficient part of the hedging between the book and tax values at year instrument is reported in the income stateend. The calculation has taken into account ment. When a hedging instrument has tax losses carried carry forward and uplift matured, or is sold, exercised or terminated, on capitalised expenditures. or the ENGIE Group discontinues the hedging relationship, even though the Uplift on capitalised expenditures reduces hedged transaction is still expected to the special petroleum tax. Earned uplift occur, the accumulated gains and losses from capitalised expenditures has been at this point will remain in comprehensive fully reflected in the deferred tax income, and will be recognised in the calculation. income statement when the transaction occurs. If the hedged trans-action is no Pensions longer expected to occur, the accumulated Accounting for pensions is based on a unrealised gains or losses on the hedging linear vested principle and on expected instrument will be recognised in the salaries at the point of retirement. Changes income statement immediately.
Year 2015 Notes
02. Financial market risk The Company’s financial result is affected by fluctuations in crude oil and gas prices and foreign currency exchange rates (mainly USD, GBP and EUR). The Company’s loans are stated in NOK and are subject to floating interest rates. Consequently, the Company will be affected also by changes in the interest rate market.
03. Financial Instruments The Company enters into commodity based derivative contracts consisting of market swaps for oil and gas products. Swap contracts for oil are hedged towards Brent Blend; swap contracts for gas are hedged towards National Balancing Point (NBP) and Title Transfer Facility (TTF) prices. The realised value on swap contracts for the year 2015 is a gain of NOK 665 607 697. The realised gain or loss is booked in revenue and financial income/expense where 95% is recognised in revenue and 5% is recognised in financial income/expense. NOK
2015
2014
Total Gas hedging revenue (-loss)
391 937 531
179 728 306
Total Liquids hedging revenue (-loss)
240 389 781
-4 209 160
Total hedging revenues (-loss)
632 329 327
175 519 146
Financial Income from hedging Total hedging income (-loss)
33 280 385
0
665 609 712
175 519 146
The below table shows an overview of the Market to Market (MtM) Asset value as at 31.12.2015, totalling NOK 954 530 292. NOK Cash flow hedge commodities assets Cash flow hedge commodities reserves equity MtM inefficient portion
Booked
31.12.2015
Due
2016
2017
2018
Asset
954 531 000
632 259 109
280 079 279
42 192 612
Equity
680 103 338
450 484 445
199 556 634
30 062 258
Accumulated gain
47 727 000
31 613 242
14 004 106
2 109 652
04. Bank deposits Restricted funds relating to withholding taxes
31.12.15
31.12.14
-
19 491 505
2015 TOTAL
2014 TOTAL
NOK amount During 2015, the Company has issued a bank guarantee towards the tax authorities of 25 000 000 NOK, replacing the cash deposit for withholding taxes.
05. Operating revenues Sales of the Company’s production has derived the following revenues: NOK Crude oil
Norway
UK
Germany
4 360 459 732
4 897 896 084 1 589 785 067
5 227 661 136
4 348 714 305
187 353 118
187 353 118
400 425 129
87 959 375
87 959 375
99 405 127
632 327 312
175 519 146
59 322 543
0
11 889 785 644
11 511 744 858
Gas
496 314 635
Condensate
1 661 844 883 36 438 555
777 361 526 1 317 841 858
Hedging of oil and gas
Total
Netherlands
1 334 702 427
520 902 347
Other income
France
2 698 614 849
NGL
Gas infrastructure
Italy
3 009 252 861
404 251 782
632 327 312 59 322 543
4 050 466 867
36 438 555
1 950 169 170
1 661 844 883
3 786 614 387
404 251 782
13
Year 2015 Notes
06. Salaries and fees NOK Salaries
2015
2014
344 183 546
337 484 906
Social security tax
59 113 770
53 538 296
Pension costs
30 613 542
59 501 185
Other employee benefits
51 130 418
48 151 244
Total salary
485 041 276
498 675 631
Salaries recharged to licences *
365 080 594
383 986 651
Total net salary
119 960 683
114 688 980
281.4
270.7
Number of full-time equivalent employees in fiscal year
* The recharged salary for 2014 has been adjusted compared to previous year's financial statement, to only include recharged salary to operated licences and 3rd parties.
Remuneration for Managing Director The Managing Director position has been shared between Maria Moræus Hanssen and Cedric Osterrieth in 2015. The total salary, bonus and other fringe benefits paid to the Managing Directors are NOK 5 596 448, of which NOK 4 643 980 is salary and NOK 952 468 is other benefits. Remuneration of the Board Payments of remuneration to the Board for the year 2015 totalled NOK 90 000. Share options The General assembly of ENGIE SA has elected to issue restricted share plans and share subscription option plans. The restricted plan is subject to certain conditions, such as remaining in the Company for a certain period. Some employees of the Company were invited to participate in the plans. These plans have no material impact on the financial statements of the Company. Audit fees The fees paid to Ernst & Young during the year 2015 are comprised of the following amounts: NOK
2015
Audit decreed by law
1 233 000
Other attestation services
203 000
Technical VAT and tax services
180 900
Total
1 616 900
07. Pensions The Company is required to have an occupational pension scheme in accordance with the the Norwegian law on required occupational pension ("lov om obligatorisk tjenestepensjon"). The Company's pension scheme meets the requirements of that law. The Company has a retirement benefit plan for all permanent staff. This benefit plan gives the employees the right to receive defined future pensions. The value of these is mainly dependent on the number of years in service and the level of compensation at retirement. The obligation up to 12G is financed through an insurance company, the remainder is financed through normal operation. NOK Pension rights earned during the year Interest expense on earned pension rights Effect of implementation of new pension scheme * Net pension cost
14
2015
2014
64 753 237
54 617 792
4 855 108
4 391 341
-38 994 803
0
30 613 542
59 009 133
Year 2015 Notes
Assets/obligations
2015
Pension benefit obligations Plan assets Change in estimate during the period Effect of implementation of new pension scheme * Net pension liability
2014
369 536 806
272 459 592
-174 627 396
-149 907 304
-25 020 493
69 697 822
-38 994 803
0
130 894 114
192 250 110
Financial assumptions
2015
2014
Discount rate Expected increase in salaries Expected increase in pensions Expected increase of social security base amount (G) Expected return on plan assets
2.50%
2.30%
2.50%
2.75%
0.00%
0.00%
2.25%
2.50%
2.50%
2.30%
* The Company decided to change the pension scheme for the employees from a defined benefit plan to a defined contribution plan, as of 01.01.2016. The new pension scheme will be mandatory for all employees having more than 15 years remaining until retirement age. A reduction of the net pension liability of NOK 38 994 803 has been included in the accounts as of 31.12.2015, to reflect the impact of the change in the pension scheme. This is a best estimate provided by the Company's actuary from Storebrand Pensjonstjenester AS.
08. Related party transactions
Related Party
Company
Value of Transactions 2015
Value of Transactions 2014
Nature of transactions
Other Comments
ENGIE SA
Ultimate parent company
14 083 000
42 649 000
Transportation cost of gas
Income statement
ENGIE SA
Ultimate parent company
1 224 412 000
1 753 141 000
Sales of gas
Income statement
Associated company
26 800 000
18 414 000
Operating and IT expenses
Income statement
ENGIE E&P International SA
Parent company
84 131 000
78 023 000
Operating and support expenses
Income statement
ENGIE E&P International SA
Parent company
13 042 000
7 011 817
Interest & financial income group account
Income statement
GDF SUEZ Trading
Associated company
665 607 697
175 519 146
Settlement of commodities contracts
Income statement
ENGIE CC Division J
Associated company
57 356 000
114 250 046
Interest & financial cost long-term loan
Income statement
GDF SUEZ E&P Greenland AS
Subsidiary
294 462
2 717 348
Salaries and travel expenses
Income statement
GDF SUEZ E&P Greenland AS
Subsidiary
54 366 106
67 474 573
Operating expenses/ Group Contributions
Balance sheet
Parent company
1 337 175 000
1 696 000 000
Dividend paid
Balance sheet
Associated company
15 155 000
6 382 000
Operating and IT expenses
Balance sheet
Ultimate parent company
148 646 000
34 386 000
Accrued gas sales
Balance sheet
Associated company
4 067 000 000
1 000 000 000
Repayment of loan
Balance sheet
Parent company
56 790 000
50 450 000
Cost accruals
Balance sheet
GDF SUEZ Trading
Associated company
943 805 000
222 680 000
Margin call
Balance sheet
GDF SUEZ Trading
Associated company
148 155 000
Accrued settlement commodities contracts
Balance sheet
GDF SUEZ DEXpro
ENGIE E&P International SA GDF SUEZ DEXpro ENGIE SA ENGIE CC Division J ENGIE E&P International SA
15
Year 2015 Notes
09. Tangible fixed assets NOK Acquisition cost at 01.01.2015 Acquisitions during the year Disposal I) II) Impairment during the year III)
Assets in Production
Assets under development
Equipment Capitalised etc. exploration cost
TOTAL
34 980 563 409
41 519 433
509 760 959
402 532 803
591 970 219
45 343 406
29 703 687
68 932 106
34 934 376 603 735 949 418
-5 427 855
0
0
-142 885 844
-148 313 699 -960 241 072
-938 190 000
0
0
-22 051 072
3 512 542
10 592 437
-4 512 542
-9 592 437
0
Acquisition cost at 31.12.2015
34 632 428 315
97 455 275
534 952 104
296 935 557
35 561 771 252
Less accumulated depreciation at 31.12.2015
-19 139 267 677
0
-416 148 018
0
-19 555 415 695
15 493 160 638
97 455 275
118 804 086
296 935 557
16 006 355 557
3 837 225 976
0
64 395 378
0
3 901 621 355
Reclassification
Book value as at 31.12.2015 Current year depreciation Estimated useful life
3-8 years
I) Disposal of capitalised exploration cost mainly represents the sale of a 5% share in the licences PL107B, PL107D and 348C to Core Energy. The consideration was USD 30 000 000. The total asset value in the balance sheet corresponding to the 20% equity share has been booked against the disposal line in the profit & loss. II) Capitalised exploration drilling costs from previous years are evaluated as non-commercial discoveries. III) During the course of the income year 2015, indicators of impairment were identified (such as changes in price levels and changes in recoverable reserves) which triggered an impairment assessment. The impairment assessment for 2015 is based on value in use. The economic assumptions applied for the impairment assessment, such as commodity price trends, reserve estimates, exchange rates and discount rates are determined and approved at ENGIE group level. The discount rate used for determining the value in use as the recoverable amount, is based on the ENGIE group's weighted average cost of capital (WACC). The base discount rate for value in use calculations is 6.5% nominal, after tax. Discount rates used in the impairment assessments reflect the current market assessment of time value of money and risks specific to the liability concerned. Production profiles applied in the calculation are based on estimated proven and probable recoverable reserves and price levels applied in the calculation are based on observable market prices and management's estimates (dated 30.12.2015). Price levels used in value in use calculation for the first 3 years are based on observable market prices for commodities, starting from the valuation date. The projections used for commodity prices beyond the liquidity period are in line with the consensus drawn up on the basis of several external studies.
10. Other provisions and obligations NOK
2015
2014
Asset retirement obligation
3 707 512 476
3 789 682 424
Other long-term provisions
266 104 898
390 467 915
3 973 617 374
4 180 150 339
Other provisions
Other long-term provisions Other long term provisions are the Company's net liability related to the Gjøa liability to the Vega licences. This long term debt relates to capex pre-payments from the Vega licences to the Gjøa development project. The Gjøa liability is reduced according to units of production, based on the throughput of hydrocarbons from the Vega licences in the Gjøa processing facility. Asset retirement obligation In accordance with the concession terms of the Production licences which the Company holds, the Norwegian State can assume ownership of licence installations without charge when the production ends or when the licence expires. Alternatively the State can require the installations to be removed. In addition to provisions for future abandonment cost, provisions have been made for future costs of plugging and securing production wells. The accretion expense is classified as an operating expense.
16
Year 2015 Notes
2015
2014
Asset retirement obligations at January 1
3 789 682 424
3 232 871 087
Liabilities incurred / revision in estimates
-175 886 035
448 972 781
Accretion expense
93 716 087
107 838 556
Asset retirement obligations at December 31
3 707 512 476
3 789 682 424
Long-term assets related to removal and abandonment at January 1
1 943 979 784
1 823 427 165
Additional assets / revision in estimates
-175 886 035
451 902 887
Depreciation
-506 617 621
-331 350 268
1 261 476 128
1 943 979 784
Long-term assets related to removal and abandonment at December 31
Assets related to removal and abandonment are also included within tangible fixed assets described in note 9. Drilling commitments The Company, together with its licence partners, is committed to taking part in the drilling of wells in accordance with its licence agreements. Contractual obligations Obligations committed NOK
2016
Thereafter
Total
1 813 706 000
1 572 618 000
3 386 324 000
The contractual obligations are related to the acquisition and construction of assets in licences where the Company has ownership interests.
11. Inter-company balances Receivables Trade accounts receivable from inter-company Short-term receivables from parent company Interest income Liability Loan Interest expenses Margin Call
31.12.15
31.12.14
296 801 000
275 995 110
3 243 000
170 092 000
13 042 000
7 011 812
31.12.15
31.12.14
-
4 067 000 000
57 356 000
113 327 000
943 805 000
222 680 000
Interest expense on the loans in 2015 totalled NOK 57 356 000, of which none was capitalised. The loan was reimbursed at maturity during 2015.
12. Drilling equipment Spare parts and drilling equipment are valued at the lower of cost or market value. Cost is estimated using the First In First Out (FIFO) method. Capital spare parts are capitalised and presented in the financial statements together with the investment. 2015
2014
Drilling and well equipment
44 239 473
67 340 200
Total Inventories
44 239 473
67 340 200
17
Year 2015 Notes
13. Taxes 2015
2014
-1 738 631 204
-285 176 787
Specification of the tax expense for the year: Change in deferred tax before adjustment in tax rates Deferred tax charge effect from new tax rates, 25% and 53% * Current tax payable Adjustment for tax provision in prior years Total tax expense
-29 855 917
0
4 630 646 633
4 471 879 092
-10 647 989
-70 319 087
2 851 511 523
4 116 383 218
4 426 348 634
5 234 149 557
4 428 931
549 412 299
Specification of the tax basis for the year: Ordinary profit before tax Permanent differences Change in temporary differences
2 416 931 300
598 321 818
Basis ordinary income tax
6 847 708 865
6 381 883 674
Financial expenses not subject to special petroleum tax
-234 050 613
-164 842 002
Income from onshore activities
-674 550 233
-186 494 792
Uplift on capitalised expenditures
-484 666 374
-640 800 802
5 454 441 646
5 389 746 078
Basis special petroleum tax Tax payable: Tax payable - ordinary income tax 27%
1 848 881 394
1 723 108 592
Tax payable - special petroleum tax 51%
2 781 765 239
2 748 770 500
Total tax payable
4 630 646 633
4 471 879 092
11 659 779 070
14 463 484 466
-130 894 114
-192 250 109
Specification of basis for deferred tax: Net differences: Fixed assets Pension liability Crude oil inventory Gain and loss account Hedging Asset Price review Asset retirement obligations Basis ordinary income tax Limited capitalisation of interest on development projects Hedging Asset Unused uplift Basis special petroleum tax
2 381 327
12 318 740
36 422 339
34 434 174
954 712 441
445 936 403
0
-248 503 750
-3 668 737 918
-3 750 907 867
8 853 663 146
10 764 512 057
-81 489 401
-95 049 754
-954 712 441
-445 936 403
-456 593 994
-759 355 723
7 360 867 310
9 464 170 177
Deferred Tax Liability: Ordinary income tax (27%)
2 390 489 049
2 906 418 255
Special petroleum tax (51%)
3 754 042 328
4 826 726 790
Deferred tax liability effect from new tax rates, 25% and 53% Total deferred tax Of which booked against equity
18
-29 855 917
0
6 114 675 461
7 733 145 046
-190 374 110
-72 268 655
Year 2015 Notes
2015
2014
4 630 646 633
4 471 879 092
Tax payable: Ordinary income tax Tax effect of acquisition cost Tax effect of group contribution Prior year adjustments Tax paid in advance Total tax payable in balance sheet
0
-3 859 733
1 401 567
-27 102 331
-2 661 675
-13 622 233
-2 318 766 000
-2 388 050 001
2 310 620 525
2 039 244 794
Reconciliation of tax expense and calculated tax expense Ordinary profit before tax
4 426 348 634
5 234 149 557
Marginal tax at 78%
3 452 551 935
4 082 636 654
-94 045 362
-163 743 100
-339 459 925
-89 514 765
Uplift on capitalised expenditures Hedging Permanent difference §10
122 930 789
95 702 359
Impairment/proceeds on sale
-111 163 054
367 408 902
-7 633 159
-26 471 289
Other permanent differences Financial items not subject to special petroleum tax Adjustments from prior years Effect of changing tax rates to 25% and 53% Tax expense
-131 165 796
-79 316 456
-10 647 989
-70 319 087
-29 855 917
0
2 851 511 523
4 116 383 218
* The corporate tax rate and the special petroleum tax rate will change to 25% and 53% respectively to be effective from income year 2016 (changing from 27% and 51% respectively in 2015).
14. Equity
Equity at 31.12.14
Share capital
Share premium reserve
141 500 000
1 273 500 000
Current year net income Pension actuarial valuation Hedging MTM Dividend 2015 Equity at 31.12.15
141 500 000
1 273 500 000
Other equity
Total
957 961 366
2 372 961 366
1 574 837 111
1 574 837 111
5 504 508
5 504 508
352 835 000
352 835 000
-2 334 750 000
-2 334 750 000
556 387 985
1 971 387 985
15. Share capital and shareholder information The share capital of the Company consists of 141 500 shares with a nominal value of NOK 1 000 per share. All shares are held by the parent company, ENGIE E&P International SA. The parent company (ENGIE E&P International SA, with head-office located in Paris) issues consolidated statements which include ENGIE E&P Norge AS and GDF SUEZ E&P Greenland AS.
19
Year 2015 Notes
16. Investment in subsidiaries Investments in subsidiaries are valued at cost in the accounts of the Company. Company
Business office
Share
Stavanger
100%
GDF SUEZ E&P Greenland AS
In 2015 the Company made a group contribution to the subsidiary of NOK 5 176 089. The Company impaired NOK 18 371 889 of its investment in the subsidiary in 2015.
17. Reserves (not audited) According to the reserves information published by the Norwegian Oil Directorate, the Company`s share of remaining reserves at 31.12.2015 are: NGL (million tonnes)
Condensate (mill Sm3)
3.40
0.96
0.00
1.08
0.09
0.00
0.03
0.00
0.00
0.00
01.10.35
0.00
22.69
0.71
2.46
08.07.28
1.02
5.85
1.56
0.00
0.15
0.45
0.20
0.00
0.52
0.08
0.02
0.00
1.00
0.25
0.00
Licence duration
Oil (mill Sm3)
Gas (bill Sm3)
Njord
10.04.23
1.20
Fram
09.03.24
0.95
Fram H-North
09.03.24
Snøhvit Gjøa Vega
09.03.24
Hyme
17.12.29
Gudrun
31.12.28
1.93
31st of December 2015 / 8th March 2016
Maria Moræus Hanssen Chairman of the Board
Didier Holleaux Board Member
Meriem Mokrani Board Member
Rolf Erik Rolfsen Board Member
Benoit Mignard Board Member
Pierre Chareyre Board Member
Mailin Seldal Board Member Employees’ Representative
Trond Myklebust Board Member Employees’ Representative
Arne Bekkeheien Board Member Employees’ Representative
Cedric Osterrieth Managing Director
20
21
Year 2015 Auditor’s report
Auditor’s report
22
Year 2015 Auditor’s report
23
Foto: Jan Inge Haga
hschild - 92288 Suresnes - FRANCE 0 / Fax : +33 (0)1 57 32 87 87
07
E ype_gradient_WHITE /2015
ENGIE E&P Norge AS Vestre Svanholmen 6, Sandnes. Postboks 242, 4066 Stavanger. T +47 52 03 10 00. post@no-epi.engie.com www.engie-ep.no
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