Annual report
OKEA ASA
2023
Table of contents Page 2
Table of contents
Letter from the CE O............................................................................................3
Board of director’s repor t.....................................................................................6
Corporate governance repor t.............................................................................. 34
Reporting on payments to governments............................................................... 51
Financial statements.......................................................................................... 55
Independent auditor’s repor t.............................................................................113
Letter from
the CEO
Annual report 2023
Letter from the CEO Page 4
Le t t er f r o m t he C E O
2023 was an eventful year for OKEA. Solid performance delivered by our operated
assets, Draugen and Brage, were key contributors towards a record high EBITDA of
NOK 5.8 billion for the year and a cash generation from operations equivalent to NOK 50
per share. Following thorough assessments, closing of the Statfjord transaction
were completed in December. The reduction in volume estimates from RNB 2023 to
RNB 2024 of 10-15% from the Statfjord area, a majority of which in the near term, was
the main driver for the significant goodwill impairment in the fourth quarter. Despite the
adverse volume update just before closing, we still believe in the potential at Statfjord. I
have confidence that, as a licence partner, our team will be able to contribute to realise
further value from the area. Unlocking the potential of Statfjord, in close collaboration
with operator, will be a key priority in 2024.
The Draugen asset has continued to perform well in 2023 under OKEA’s operatorship.
This is a result of an efficient organisation that knows the asset well combined with
assigning responsibilities at the right level in the organisation. The Hasselmus gas tie-
back project commenced production on 1 October, three months ahead of schedule and
within budgeted cost. Hasselmus was OKEA’s first field development project as operator
and demonstrates the organisation’s ability to also deliver on organic growth. In
December, the Ministry of Energy approved the plan for development and operation and
the plan for construction and operation to electrify the Draugen and Njord assets.
Electrification of Draugen is an important enabler in extending the field lifetime beyond
2040 and will result in a reduction of CO2 emissions from the Draugen field alone of
200,000 tonnes per year.
OKEA took over operatorship of the Brage asset in November 2022 with a focus on
revitalising the asset through drilling of development and infill wells, reducing production
expense per boe, and increasing production efficiency. In 2023, the first full year as
operator, OKEA delivered a production efficiency of 93% and a production increase from
Q4 2022 to Q4 2023 of 350% which represents an increase of 6,000 boepd net to OKEA.
Safeguarding the well-being of all personnel and the safety of OKEA’s assets will always be
a key priority for the organisation. Our objective is to ensure that all our activities are
carrie d ou t wit h zer o har m to peopl e and environment. Th e adverse trend noted o n safety
performance in 2023 is taken very seriously, and we are committed to continuously
improving HSE performance.
Th e recor d hig h EBITD A i n 202 3 resulte d i n stron g cas h flow s fro m operation s whic h were
partly used for acquisition of assets, organic investments, and dividends to our
shareholders.
Letter from the CEO Page 5
I n th e fal l of 2021, OKEA announce da revise d strateg y wit h a n ambitio n t o b e th e leading
mid- to late-life operator on the Norwegian continental shelf. Within two years, two
significant transactions have been completed that will increase production to 35,000 -
40,000 boepd in 2024, which is more than a doubling from the time of launching the
strategy. I consider the company well positioned to continue to execute on our growth
strategy and deliver value to our shareholders going forward.
I want t o than k our employees, shareholders,bondholder s and banks,suppliers,partners
and board of directors for all their efforts and for believing in and supporting our strategy
and ambitions.
Signed
Annual report 2023
Board of directors’
report
Board of directors’ report Page 7
T he b o ar d o f d i re c t o rs
Chaiwat Kovavisarach – chairman of the board
Non-executive
Chaiwat Kovavisarach (born 1966) has been the president and group CEO of Bangchak
Corporation Public Company Limited since 2015. He also serves on the board of several
listed and non-listed companies and is chairman of the Thai-Europe Business Council,
vice chairman of the Federation of Thai industries, executive chairman of the Board of
Trustees of the Asian Institute of Technology, director of the Government Pension Fund,
director of Bank of Thailand’s Credit Information Protection Committee and board of
truste e of KMITL. H e hold sa Maste r of Engineerin g fro m th e Asia n Institut e o f Technology
(AIT), an MBA from Thammasat University and a Bachelor of Engineering from King
Mongkut’s Institute of Technology Ladkrabang (KMITL).
Rune Olav Pedersen – board member
Independent, non-executive
Chair of the audit committee
Rune Olav Pedersen (born 1970) has been president and CEO of PGS ASA (“PGS”) since
2017.Prio r to 2017,M r Pederse n hel d th e positio n o f executiv e vic e presiden t an d general
counsel at PGS. Prior to joining PGS, he was partner in the oil and gas department of the
law firm Arntzen de Besche. Mr Pedersen has a law degree from the University of Oslo, a
post-graduate diploma in European competition law from Kings College London, and an
Executive MBA from London Business School.
Finn Haugan – board member
Independent, non-executive
Chair of people and organisation committee and member of audit committee
Finn Haugan (born 1953) was the CEO of SpareBank 1 SMN from 1991 to 2019. He was
deputy CEO of Fokus Bank (Danske Bank) from 1989 to 1991. Mr Haugan currently holds
various director roles including for listed companies Norbit ASA and SpareBank 1 Sørøst-
Norge as well as for Sinkaberg Hansen AS, Elekt AS, Folkeinvest AS, Borg Forvaltning AS
and Solon Eiendom AS. Mr Haugan holds a master’s degree in business administration
(MBA).
Board of directors’ report Page 8
Nicola Gordon – board member
Independent, non-executive
Chair of the sustainability and technical risk committee
Nicola Gordon (born 1957) has many years of experience from the energy industry. Her
35+ years of experience from the Royal Dutch Shell Group includes vice president for
Shell International, asset manager and board director at A/S Norske Shell and managing
director at Shell Denmark. Ms Gordon currently holds several board positions, among
others as chair of the audit & risk committee at the Scottish Environment Protection
Agency and trustee at the Scottish Ensemble and the Royal High School Preservation
Trust. She is a Chartered Engineer and Fellow of the Energy Institute and holds an MSc in
Petroleum Engineering from Heriot-Watt University and a BSc in Chemical Engineering
from University of Newcastle upon Tyne.
Mike Fischer – board member
Non-executive
Vice chair, member of the people and organisation committee and member of sustainability and
technical risk committee
Mike Fischer (born 1958) has nearly 40 years’ experience from various roles within the
oi l and ga s industry.D r Fische r ha s previousl y hel d senio r managemen t position s a t Ophir
Energy, OMV, Woodside Energy and BP and is currently an executive advisor to the
Natural Resources business unit of Bangchak Corporation Public Company Limited. He
holds a PhD from the University of Wales and a BSc from the University of Leeds.
Jon Arnt Jacobsen – board member
Independent, non-executive
Member of the audit committee and member of the people and organisation committee
Jon Arnt Jacobsen (born 1957) has extensive experience from the energy industry. He
has 24 years of executive management experience from Equinor ASA within corporate
finance, refining marketing and trading, procurement as well as internal audit and
corporate security. He also has 12 years experience from various management positions
from DnB ASA within corporate banking both for the oil & gas industry and Norwegian
corporates. Mr Jacobsen was also General manager for DnB´s Singapore branch from
1995 to 1998, and has previous experience as board member in Mesta AS, Storebrand
ASA an d Statoil Fuel &Retail ASA.He ha s a Busines s degree s fro m Agde r Regiona l College
(DH kandidat), Norwegian Business School (Bedriftsøkonomisk Inst., Dip.Øk.) and
University of Wisconsin (MBA).
Board of directors’ report Page 9
Phatpuree Chinkulkitnivat – board member
Non-executive
Member of the audit committee
Phatpuree Chinkulkitnivat (born 1974) is currently Group CFO at Bangchak Corporation
Public Company Limited, a leading energy company in Thailand. She had more than 20
years’ experience from the banking industry prior to joining Bangchak and held the
position of CFO at BCPG Public Company Limited, a flagship in the power generation
business of Bangchak Group. Phatpuree holds a Master of Business Administration (High
Distinction) from the University of Michigan, USA, and a Bachelor of Economics (First
Class Honors) from Chulalongkorn University.
Elizabeth (Liz) Williamson – board member
Independent, Non-executive
Member of the sustainability and technical risk committee
Liz Williamson (born 1984) is the Head of Energy for Rand Merchant Bank and is
responsible for M&A transactions in the renewable and oil & gas space across Africa. She
has led the growth of the bank’s international energy strategy since 2018 and is based in
London. Originally from Texas, Ms Williamson started her career in private equity,
focused on US upstream transactions. Thereafter she joined GMP Securities and
Canaccord where she advised international E&P companies on capital markets and M&A.
Ms Williamson holds an Honours degree from Davidson (North Carolina, USA) and a
Masters in Energy Finance from the City University London, Bayes Business School.
Sverre Nes – board member
Employee elected
Member of the sustainability and technical risk committee
Sverre Nes (born 1971) was employed in Hydro from 1991 to 2012. He is trained as
process technician and worked in various departments including a stationing in Qatar as
supervisor in 2009-2010. Mr Nes joined Wintershall DEA in 2013 and currently works
offshore at the Brage platform as discipline responsible for process.
Ragnhild Aas – board member
Employee elected
Member of the audit committee
Ragnhild Aas (born 1973) holds the position of VP technology & development in OKEA.
She has worked in OKEA since 2016 and previously held the position as VP operations.
Prior to joining OKEA she worked in Altera Infrastructure for 16 years where her last
position wa s FPS O Operation s Manager.M s Aa s hold s an MS c in Proces s Engineering from
Norwegian University of Science and Technology (NTNU).
Board of directors’ report Page 10
Per Magne Bjellvåg – board member
Employee elected
Member of the people and organisation committee
Per Magne Bjellvåg (born 1969) has nearly 30 years of experience in the oil and gas
industry from various positions within operations and maintenance of onshore and
offshore proces s plant s a s wel l a s underwate r installations.He currentl y hold s the position
of lead process engineer in OKEA and has worked for OKEA since 2018. He has previous
experience from Norske Shell and FieldTalk Solutions. Mr Bjellvåg holds a BSc in Process
Engineering from Høgskolen Stord Haugesund.
Board of directors’ report Page 11
B oa r d o f d i re c t o rs’ r e p o r t 2 02 3
(Amounts in parentheses refer to previous year)
Description of the company
OKEA is a leading mid- to late-life operator on the Norwegian continental shelf (NCS).
The company has a strong asset portfolio including the Draugen and Brage fields, which
are operated by OKEA, as well as partner shares in the Gjøa, Ivar Aasen, Nova, Yme and
Statfjord fields. In 2023, the portfolio produced 35,385 boepd including 10,799 boepd
from the Statfjord area which was acquired from Equinor in 2023. In addition to the
inorgani c growt h focus,OKEA also ha s activitie s in project s unde r development,including
Draugen power from shore and drilling of new infill targets. In addition, discoveries,
including Hamlet, Calypso and Brasse are under evaluation for development, and the
company’s portfolio further includes exploration licences with planned and possible wells in
the future.
OKEA is head quartered in Trondheim, with major operations centres in Kristiansund and
Bergen, and offices in Stavanger and Oslo.
As an operator on the NCS, OKEA carries out various activities related to production of
hydrocarbons from existing assets, as well as development of new oil and gas fields.
These activities take place at multiple locations both offshore and onshore. Each of the
business functions within OKEA contributes to this work in a highly collaborative team
effort, working closely with our third-party contractors and licence partners.
Environmental, social and governance (ESG) matters are of significant importance to the
board of directors. Continuous focus on securing safe and secure operations and efficient
use of existing infrastructure to reduce emissions is essential for the company’s licence
to operate as well as enabling long-term value creation for shareholders.
Completion of the Statfjord transaction
The transaction with Equinor for 28% working interest (WI) in PL037 (Statfjord area)
with effective date on 1 January 2023 was completed on 29 December. All transactions
and activities prior to completion were accounted for in the purchase price allocation
(PPA) and not included in the statement of comprehensive income and key figures. All
identifiable assets and liabilities were recognised in the financial statements at fair value
on completion date. The excess of consideration above the fair value of assets less
liabilities was recognised as ordinary goodwill which was impaired at date of completion.
The goodwill impairment was mainly a result of a reduction in estimated production and
Board of directors’ report Page 12
reserves from input to Revised National Budget (RNB) 2023 to RNB 2024. RNB 2024
indicated a 10-15% reduction in volumes over the lifetime of the acquired assets in
addition to an increase in costs. The decrease in volumes was most significant in the
near-term.
The agreement contains a contingent consideration structure based on profit sharing on
crude oil volumes sold at a realised price of 75–96 USD/bbl in 2023, 64–85 USD/bbl in
2024, and 53–72 USD/bbl in 2025, as well as on dry gas volumes sold at a realised price of
170-341 p/th in 2023, 125–248 p/th in 2024, and 37–75 p/th in 2025. The profit
sharing within these limits is 90% after tax to Equinor and 10% to OKEA. For realised
prices on crude oil above 96 USD/bbl in 2023 and 85 USD/bbl in 2024 and realised prices on
dry gas above 341 p/th in 2023 and 248 p/th in 2024 the profit sharing is on 50/50 after
tax basis. OKEA keeps 100% of realised oil prices above 72 USD/bbl and gas prices above
75 p/th in 2025. All numbers are stated in real 2023 and realised prices are based on
annual averages. There is no contingent payment structure for NGL. The Purchase Price
Allocation (PPA) includes estimated fair value of the contingent consideration which will be
revalued at each balance sheet date. Any changes in valuation will be recognised as
other operating income / loss(-).
For asset removal, an obligation estimated for the full working interest of OKEA was
recognised. As the sales and purchase agreement stipulates that Equinor shall cover all
costs for removal of Statfjord A, the fair value of the removal of Statfjord A was
recognised as an asset retirement reimbursement right.
Technical goodwill was recognised as an offset to deferred tax on oil and gas properties
and will be tested for impairment at each balance sheet date as part of the cash
generating unit. Any impairment of technical goodwill will not be reversed. In the PPA,
NOK 1,003 million was recognised as technical goodwill . Technical goodwill will be
impaired over the lifetime of the asset as the remaining recoverable amount from the
assets gradually reduces below the book value of the fixed asset recognised as an oil &
gas property. Reference is made to note 16 to the financial statements for further details on
the PPA.
Operational review
In 2023, OKEA participated in production from six fields: Draugen (44.56% and
operator),Brag e(35.2%and operator),Gjø a(12%),Iva r Aase n(9.2385%),Yme (15%),
and Nova (6%). Net production for the year averaged 24,586 (21,037) boepd, split
between liquids and gas by 75% and 25% respectively. In 2023, activities from the 28%
WI in Statfjord acquired from Equinor were not included in the statement of
comprehensive income and key figures prior to closing on 29 December 2023. If volumes
from Statfjord had been included in those figures from effective date on 1 January 2023,
production for OKEA would have been 10,799 boepd higher and totalling 35,385 boepd.
Net sold volumes for the year averaged 28,224 (16,252) boepd.
Board of directors’ report Page 13
Draugen (Operator, 44.56%)
The Draugen field is located in the southern part of the Norwegian sea at a water depth of
250 metres. Draugen was discovered by Shell in 1984, the plan for development and
operation (PDO) was approved in 1988, and production started in 1993. The field was
developed using a fixed concrete facility with integrated topside and production comes
from both platform and subsea wells. Oil is extracted from two formations. The main
reservoir is in sandstone of Late Jurassic age (the Rogn Formation) while the western
part of the field also produces from sandstone of Middle Jurassic age (the Garn
Formation). The reservoirs lie at a depth of 1,600 metres, are of excellent quality and are
relatively homogeneous across the field. Stabilised oil is stored in tanks at the base of
the facility and two pipelines connect the facility to a floating loading-buoy from where
it is offloaded and exported by tankers. Production of gas from the Hasselmus tie-back
commence d o n1 Octobe r whic h allowe d Drauge n t o us e it s ow n ga s fo r powe r generation
at the platform as well as export gas via Åsgard Transport. Hasselmus is expected to add a
total of gross 10.4 mmboe of natural gas and has also enabled restart of export NGL
from Draugen. Hasselmus was OKEA’s first development project as operator.
The Draugen field produced 6,487 (6,767) boepd net to OKEA in 2023. Production
efficiency
1
wa s 83% (94%).Th e lowe r production wa s mainly due to genera l field decline,
thre e week s planne d maintenanc e turnaroun d i n th e secon d quarter,and a planned shut-
in of subsea wells to instal new subsea pumps in July.
A licence extension progra m wa s launched in 2019 with the ai m o f extending the Draugen
licence and lifetime from 2024 to 2040. The comprehensive program involved several
disciplines across the organisation and included development of a new application to
document safe production and resource management towards 2040. Third-party analysis
and evaluations were used where relevant to document the conclusions and modification
requirements. The application was sent to the
Norwegian Ocean Industry Authority
and the
Norwegian Offshore Directorate in March 2023, which is one year prior to expiry of the
existing consent. The application was approved by the Norwegian Ocean Industry
Authority and the Norwegian Offshore Directorate on 8 March 2024.
The drilling campaign of the two observation wells in Springmus East and Garn West
South was completed in July from the Transocean Endurance rig. The well in Springmus
East proved an 8 meter hydrocarbon column present in the structure and Garn West
South proved an 11.5 meter hydrocarbon column. Post well evaluations are now
completed. The base case volumes look attractive and the volumes uncertainties are
1
Production efficiency = actual production / (actual production + unscheduled deferment+ unscheduled
deferment)
Deferment is the reduction in production caused by a reduction in available production capacity due to an
activity, an unscheduled event, poor equipment performance or sub-optimum settings.
Board of directors’ report Page 14
currently being assessed along with planning of further maturation towards potential
development.
An investment decision for the Power from shore project was made and a revised PDO
was submitted to the Ministry of Energy in the fourth quarter of 2022. The revised PDO
was approved in December 2023. The project is expected to result in average annual
reductions of CO2 emissions of 200,000 tonnes from Draugen and 130,000 tonnes from
Njord as well as average annual reductions of NOX emissions of 1,250 tonnes from
Draugen and 520 tonnes from Njord. The project will result in reduced production
expense and extend the economic lifetime of the Draugen field.
Brage (Operator, 35.2%)
Brage is an oil and gas field located in the northern North Sea, 125 kilometres west of
Bergen. The water depth is 137 metres. Brage was discovered in 1980, and the PDO was
approved in 1990. Production started in 1993. Brage has been developed as a fixed
integrated production, drilling and accommodation facility with a steel jacket. Brage
produces oil from sandstone of the Early Jurassic age in the Statfjord Group, and
sandstone of the Middle Jurassic age in the Brent Group and the Fensfjord Formation.
The reservoirs lie at a depth of 2,000-2,300 metres. The main drainage strategy is water
injection, with gas lift utilised in most wells. Brage oil is exported via the Oseberg
Transport System (OTS) to the Sture terminal. The gas is exported via pipeline to Kårstø
for processing and further export into the dry gas area of Gassled and the NGL are lifted by
vessels from Kårstø.
The Brage field produced 4,856 (2,568) boepd net to OKEA in 2023. Production efficiency
was 93%.
Production drilling on the Brage platform is expected to continue in the coming years,
targetin g infil l well s an d development of ne w resources. Production fro m the Taliske r East
well commenced in May. A Sognefjord gas producer commenced production in the third
quarter. The Cook and Fensfjord wells commenced production in the fourth quarter.
Drilling of the Talisker East water injector started in December and start-up commenced in
February 2024. The next planned well is an oil producer from the Brent formation in the
southern part of Talisker East. This development well is followed by an infill oil
producer in the northern part of the Fensfjord formation. The newly established
Sognefjord East project is being matured to target a producer in the already proven
resources (Kim-area) and further map the full area potential.
Gjøa (Partner, 12%)
The Gjøa field, operated by Neptune Energy Norge AS, was discovered in 1989, and the
PD O wa s approve d b y th e Norwegia n authoritie s i n 2007.Productio n starte d i n 2010.The
field was developed using a semi-submersible production facility with five subsea
templates tied back to the facility for processing and export. Oil is exported by pipeline
to Mongstad, and gas is exported by pipeline to St. Fergus in the UK. The semi-
submersible Gjøa production unit is partly electrified by power from shore.
Board of directors’ report Page 15
The Gjøa P1 segment, located in the northern part of the field, was developed as a tie-
back to the main subsea facility via a 5 km oil pipeline and a 2 km gas pipeline at a water
depth of 340 metres. Production from the P1 well started in February 2021.
The Gjøa field, produced 5,812 (6,932) boepd net to OKEA in 2023. Production efficiency
was 94% (90%). The reduced production was mainly driven by general field decline. The
Gjøa partners started receiving compensation for the deferred production related to the
Duva tie-in scope in 2021 and related to the Nova tie-in scope from July 2022.
Compensation volumes received amounted to 567 (596) boepd in 2023.
During 2023, 83% of the produced volumes was replaced by maturing of resources and
improved reservoir performance. Contingent resources have also increased significantly
during the year. IOR (Increased Oil Recovery) targets are under evaluation utilising new
reprocessed seismic data.
Ivar Aasen (Partner, 9.2385%)
The Ivar Aasen field, operated by Aker BP ASA, was discovered in 2008 and is located at
Utsira High in the North Sea. First oil from the field was produced on 24 December 2016,
four years after the PDO was submitted. The field is a coordinated development with the
Edvard Grieg field, which is located ten kilometres southeast of Ivar Aasen. Oil and gas
are transported to the Edvard Greig platform for final processing. From there, oil is
exported to the Grane oil pipeline and on to the Sture terminal.
The Ivar Aasen field produced 3,009 (2,998) boepd net to OKEA in 2023. Production
efficiency was 92% (82%). A well intervention campaign was successfully completed in
th e fourt h quarter. Additiona l campaign s are planned in 2024 aiming to reduce production
decline. Recompletion of the D-8 well to a water injection was completed in the fourth
quarter.
Preparations for the IOR 2026 campaign started during the fourth quarter with potential
new wells being considered.
Yme (Partner, 15%)
The Yme field is an oil field located in the southeastern part of the Norwegian sector of the
North Sea at a water depth of 77-93 metres. The field was discovered by Statoil in 1987
and started production in 1996. Low oil prices led to abandonment of the field in 2001.
OKEA acquired a 15% ownership interest in Yme in 2016 and started preparing a new
PDO. Yme started producing again on 25 October 2021 with Repsol Norge AS as
operator. The field comprises two separate main structures, Gamma and Beta, which
are 12 kilometres apart. The Gamma and Beta structures comprise six deposits. The
reservoirs are in sandstone of Middle Jurassic age in the Sandnes Formation, at a depth of
3,150 metres. They are heterogeneous and have variable reservoir properties. The
fiel d i s producing fro m a leased jack-up rig equipped wit h drilling and production facilities.
Board of directors’ report Page 16
Oil is transported with tankers and associated gas is used for power consumption or
reinjected in the reservoir.
The Yme field produced 2,809 (1,429) boepd net to OKEA in 2023. Production efficiency
was 73% (21%).
The Beta North drilling campaign, employing the Valaris Viking drilling rig, was finalized
i n January. Beta Nort h i sa subse a tie-back to Yme and include s two ne w production wells
and one injector well. In the Yme Gamma campaign two producer wells were drilled and
came on stream during the third quarter. A new injector was drilled in the beginning of
October and the last producer is currently scheduled to come on stream in the first half of
2024.
The license is assessing a multilateral well solution for the planned C-3 sidetrack. An
investment decision is expected in the first quarter of 2024.
Nova (Partner, 6%)
The Nova field, operated by Wintershall Dea Norge AS, was discovered in 2012 and is
located 120 kilometres northwest of Bergen and 17 kilometres southwest of Gjøa at a
water depth around 370 metres. The PDO was approved in 2018, and the field started
production in July 2022. The field consists of two subsea templates, one with three oil
producers and one with three water injectors, tied back to the Gjøa platform. The host
platform provides gas lift and water injection to the field and receives the Nova
hydrocarbons.
The Nova field produced 1,612 (345) boepd net to OKEA in 2023. Production efficiency
was 98% (81%).
A side-track drilling operation to improve location of one of the injector wells was
successfully completed in the second quarter which resulted in improved water injection
and increased production. Production at Nova remains somewhat limited by reduced
effectiveness of the water injectors. A rig has been secured to drill a fourth water injector
well in the second half of 2024 which will enable the operator to target the best location for
the fourth water injector and further improve the water injection at the field.
Development of a new well for production is currently being evaluated by the licence.
Statfjord area (Partner, 28%)
On 29 December 2023, OKEA announced completion of the Statfjord transaction with
Equinor Energy AS, acquiring 28% WI in PL037 (Statfjord area) with effective date 1
January 2023.
The acquired portfolio comprises 23.93123% WI in Statfjord Unit, 28% WI in Statfjord
Nord, 14% WI in Statfjord Øst Unit and 15.4% WI in Sygna Unit. The Statfjord assets
provide a significant increase in total production and reserves to OKEA and enhances
Board of directors’ report Page 17
diversification and portfolio robustness. Net production to OKEA from Statfjord area was
10,799 boepd in 2023.
A new power solution will be implemented on Statfjord C which will reduce emissions. A
steam turbine will produce electricity based on surplus heat from two gas compressors
with scheduled start-up in 2026. The project is expected to reduce annual CO2 emissions
by 95,000 tonnes, and will also reduce production expense which will be an important
contribution to extend the field`s life to 2040.
Production start for the Statfjord Øst project was in August 2023. A pipeline from
Statfjord C to Statfjord Øst was installed and four new wells drilled from existing subsea
templates in 2023. The final well will be finalized in 2024. The Statfjord Øst project
contributes with 26 million boe reserves (gross) and also contributes to extending the life of
Statfjord C to 2040.
OKEA’s main focus as a licence partner will be to enhance operational deliveries from the
Statfjord area. A strong and productive collaboration with Equinor’s FLX organisation and
the broader partnership has already commenced and OKEA will actively pursue
opportunities for improvement.
Nevertheless, it is imperative for the company to fulfil its duty to its owners and other
stakeholders by thoroughly examining the circumstances surrounding the transaction.
Considering this responsibility, OKEA has decided to initiate legal actions against Equinor
Energy AS as a time-barring action in accordance with the SPA regulations. This step is
essential to safeguard the company’s legal position and to investigate the basis for any
potentia l breache s o f the SPA.A t thi s stage,no concrete o r defined clai m ha s been made,
as further investigations are necessary to determine the facts.
Development projects
Draugen power from shore (Operator, 44.56%)
OKEA and Equinor in collaboration with the licence partners have established a joint
project to electrify the Draugen and Njord A platforms.
OKEA is responsible for developing the power infrastructure from shore to Draugen
including modifications on Draugen. Equinor is responsible for the cable from Draugen to
Njord including modifications on Njord A. Draugen and Njord will be connected to the
power grid at Tensio’s transformer station at Straum in Åfjord municipality, where
Statnet t assesse s th e connectio n a s operationall y soun d withou ta nee d fo r reinforcement
of the power grid.
The PDO and PIO were approved by the Ministry of Energy in December 2023. The
Ministry of Energy also awarded OKEA and Tensio TS concession to build, own and
operate facilities to provide the Draugen and Njord installations with power from shore.
Board of directors’ report Page 18
The project will result in average annual reductions of CO2 emissions of 200,000 tonnes
from Draugen and 130,000 tonnes from Njord as well as average annual reductions of
NOX emissions of 1,250 tonnes from Draugen and 520 tonnes from Njord. The project
will result in reduced production expense and extend the economic lifetime of the
Draugen field and is expected completed in 2027.
Brasse (Operator, 39.2788%)
In December 2022, OKEA entered into an SPA with DNO Norge AS for 50% WI in the
Brass e licenc e(PL740)wit h effectiv e dat e1 Januar y 2023.Th e transactio n wa s concluded
at zero cost to OKEA.
To reduce cost and maximise the synergies with Brage, the operatorship of Brasse was
transferred from DNO to OKEA on 1 September 2023. Commercial terms for the tie-in of
Brasse to Brage are being negotiated with the Brage licence where OKEA is the operator
and holds a 35.2% WI.
In order to improve alignment of ownership in the Brage and Brasse licences, OKEA
entered into an SPA with M Vest Energy AS to divest 4.4424%WI in Brasse with effective
date 1 January 2023. OKEA also entered into an SPA with Lime Petroleum AS to divest
6.2792 %W I in Brasse with effective date 1 July 2023. Bot h transaction s wer e completed
in the fourth quarter.
The target for the new partnership is to undertake a fast-track, low-cost review to assess
whether a value accretive development concept can be established for the estimated
27.64 mmboe gross recoverable Brasse volumes. The project is currently being matured
as a tie-in to Brage concept with a plan to submit a PDO in the second quarter of 2024.
Exploration licences
In November 2022, the Neptune Energy-operated Calypso exploration well (6407/8-8 S)
i n PL93 8 wa s drille d an d a discovery wa s made.The wel l i s locate d i n th e greate r Draugen
area and was drilled to a vertical depth of 3,496 metre. An estimated 8 metres thick gas
column and 33 metres thick oil column in a 132 metres thick Garn Formation sandstone
reservoir of good to very good quality was encountered. Estimated recoverable volume
range are of 11-19 mmboe. OKEA is working with the operator Neptune Energy and
partners in the PL938 Calypso license to mature the discovery further towards a feasible
development option.
In the third quarter 2022, OKEA entered into a licence swap agreement with Equinor
Energy AS (Equinor) to acquire a 20% WI in the Equinor-operated PL1014 exploration
licence, containing the Arkenstone project, in exchange for a 10% working interest in the
OKEA-operated PL1119 licence, including the Mistral prospect. The agreement included
transfer of operatorship of the licence from OKEA to Equinor. The agreement was
approved by the authorities in November 2022. The PL1014 Arkenstone and PL1119
Board of directors’ report Page 19
Mistral exploration wells are currently in the planning phase. Both licenses are operated
by Equinor, and drilling is planned for both wells in the third quarter of 2024.
Located 23 kilometres north of Gjøa, in a neighbouring licence which OKEA is not part of,
Ofelia will be considered for development as a tie-back to Gjøa. OKEA, together with the
other license owners will also evaluate if the oil and gas discovery Gjøa Nord (Hamlet)
can be developed jointly with Ofelia to optimise cost synergies.
I n Januar y 2024, OKE A wa s awarde d thre e ne w licence s i n th e 202 3 Award s i n Predefined
Areas (APA). PL1223 in the Norwegian Sea is OKEA operated and holds the Galtvort
discovery which will be considered developed towards the Draugen hub. The other two
licences are located east of Statfjord East (PL1214) and south of Njord and Draugen hubs
(PL1222).
Reserves and resources
2P reserves increased by 38% from 60.2 million boe to 83.2 million boe during 2023.
The reduction of production in 2023 was 8.9 million boe. The main increased of reserves
are driven by the acquisition of interests in the Statfjord area from Equinor, which
contributed with 32 million boe. The positive contributions of 4.4 million boe fro m organic
maturation (Gjøa, Brage and Draugen) were offset by downward revision of 4.6 million
boe mainly driven on Yme.
Contingent resources (2C) increased by 50% from 43.2 million boe to 64.6 million boe
during 2023, mainly due to the acquisition of working interests in the Statfjord area and
Brasse.
Strategy
The board annually evaluates the company’s financial status, strategy and goals. In the
fall of 2021, OKEA launched a refreshed strategy based on the vision of being the leading
mid-to-late-life operator on the NCS which the company still is committed to.
OKEA has a clear ambition to deliver competitive shareholder returns driven by solid
growth, value creation and capital discipline and the strategy is centred around three
growth levers:
· actively pursue further value creation in current portfolio,
· pursuing mergers and acquisitions to add new legs to the portfolio, and
· considering organic projects either adjacent to existing hubs or pursuing new hubs,
dependent on financial headroom and attractive risk-reward.
Board of directors’ report Page 20
The strategy also includes a clear capital allocation prioritisation with an overall aim to
maximise shareholder return and a target to maintain a clear and credible ESG position.
OKEA shall maintain a competent organisation fit for growth with direct management
engagement and involvement in key projects and use risk-cost-benefit evaluations in all
phases of the company’s business activities.
The financial statements
OKEA prepares its financial statements in accordance with IFRS
®
accounting standards
(IFRS) as adopted by the European Union (EU) and additional requirements following the
Norwegian Accounting Act. New standards and amendments to standards and
interpretations effective from 1 January 2023 did not have any significant impact on the
company’s financial statements and hence the accounting principles are in all material
respects the same as in the financial statements for 2022.
Statement of comprehensive income
The financial results for 2023 were significantly influenced by increased volumes of sold
petroleum products during the year. This increase was due to solid operational
performance on key assets and full year contribution from the assets purchased from
Wintershall Dea completed in the fourth quarter of 2022. Sold volumes of liquids (oil and
natural gas liquids) amounted to 7.9 (3.8) million boe, while sold volumes of gas
amounted to 2.4 (2.0) million boe. The average realised price for liquids was USD 80.1
(98.4) per boe, while average realised gas price was USD 82.2 (138.5) per boe.
Total operating income amounted to NOK 8,885 (6,653) million. Sold volumes were 10.3
(5.9) million of barrels of oil equivalents (boe).
Other operating income amounted to NOK 146 (254) million consisting of tariff income
at Gjøa of NOK 127 (132) million, loss on commodity hedging of NOK 6 (gain of 72)
million, income from joint utilisation of logistics resources of NOK 22 (38) million and loss
on change in fair value of contingent consideration of NOK -11 (gain of 12) million.
Produce d volum e wa s 8.9 7(6.11)millio n boe and productio n expense s amounte d t o NOK
2,084 (1,616) million. The increase in production and production expense compared to
previous year was mainly due to 2023 being the first full year with production and
expense s fro m Brag e an d Nov a being recognised in profi t and loss, a s wel l a s a n increased
working interest in Ivar Aasen following the transaction with Wintershall Dea. Production
expenses amounted to NOK 215 (237) per boe. The decrease in unit cost was mainly due to
the increased production. Reference is made to note 6 to the financial statements for
further details.
Board of directors’ report Page 21
Exploration and evaluation expenses amounted to NOK 203 (328) million and mainly
related to seismic purchases of NOK 78 (87) million and costs for geological and
geophysical studies of NOK 30 (25) million. Other exploration and evaluation expenses
relate d t o activitie s i n exploration licences, mainl y fo r drillin g o f th e Ki m prospec t i n PL055
Brage. Reference is made to note 7 to the financial statements for further details.
Depreciation amounted to NOK 1,695 (769) million. The increase was due to higher
produced volumes as well as the first full year with depreciation on assets acquired from
Wintershall Dea in 2022.
Impairments amounted to NOK 2,745 (498) million. NOK 1,382 (498) million related to
the Yme asset with an offsetting change in deferred tax of NOK 1,078 (388) million. The
impairments were mainly a result of revision of reserves and lower forward prices for oil.
Previous year’s impairment related to revision of reserves and revised phasing of
production. NOK 1,363 (0) million related to a goodwill impairment in relation to
acquisition of Statfjord area assets from Equinor, with no associated tax income The
goodwill impairment was mainly a result of a reduction in estimated production and
reserves. Reference is made to note 9 to the financial statements for further details.
General and administrative expenses amounted to NOK 157 (213) million and represent
OKEA’s shar e of costs after allocatio n t o licenc e activities. The lower expense in 202 3 was
mainly due to transition activities related to the transfer of operatorship of the Brage
asset in addition to corporate expenses related to the acquisition of assets from
Wintershall Dea in 2022.
Net financial income/expenses (-) amounted to NOK -217 (-311) million and mainly
comprise expensed interest of NOK -163 (-178) million and NOK -151 (-103) million in
net exchange rate loss largely relating to USD denominated bond loans. In addition, call
premium on early voluntary redemption of the OKEA03 (OKEA02) bond loan amounted
to NOK -28 (-24) million. Other financial expenses amounted to NOK -21 (-17) million.
These effects were partly offset by interest income on bank deposits of NOK 91 (22)
million. Reference is made to note 12 to the financial statements for further details.
Profit/loss (-) before income tax amounted to NOK 1,099 (3,215) million. Tax expense
amounted to NOK 2,034 (2,545) million, whereof tax payable amounted to NOK 2,815
(2,109) million and decrease in deferred tax liability were NOK 781 (increase of 436)
million.Th e effectiv e ta x rat e of 185% (79%)deviate s from th e standar d ta x rat e of 78%
mainly due to impairment of goodwill not being tax deductible.
Net profit/loss (-) was NOK -935 (670) million and total comprehensive income/loss (-)
was NOK -937 (670) million.
Board of directors’ report Page 22
Statement of financial position
Total assets as per 31 December 2023 amounted to NOK 18,499 (15,621) million. The
increase mainly related to the PPA following the completion of the Statfjord transaction on
29 December 2023. The transaction was recognised in the financial statements on fair
value basis from this date. As the effective date of the transaction was 1 January 2023, all
transactions and activities in the period until completion were reflected as part of the PPA
in the statement of financial position. Reference is made to note 16 in the financial
statements for further details on the PPA.
Goodwill amounted to NOK 2,295 (1,297) million whereof ordinary goodwill amounted to
NOK 163 (163) million and technical goodwill amounted to NOK 2,132 (1,133) million.
The increase in technical goodwill of NOK 999 million is mainly related to the Statfjord
transaction. Reference is made to note 16 and 17 to the financial statements for further
details.
Oil & gas properties amounted to NOK 7,199 (6,556) million. The increase from previous
year related to asset additions through business combinations of NOK 1,619 (1,958)
million and investments in fields in production and under development of NOK 1,996
(1,080) million. The increase was partly offset by asset impairment at Yme of NOK 1,382
(498) million and unit of production depreciation of NOK 1,650 (742) million.
Right-of-use assets amounted to NOK 200 (233) million and mainly related to logistical
resources on operated assets and lease of offices. Addition of new office leases in Bergen
and Stavanger was offset by depreciation of lease contracts during the year.
Total asset retirement reimbursement right amounted to NOK 4,163 (3,662) million and
relates to Shell, Wintershall Dea and Equinor’s obligations to cover decommissioning
costs for Draugen/Gjøa, Brage and Statfjord respectively. The increase mainly relates to
the Statfjord transaction with Equinor. NOK 4,079 (3,662) million was classified as non-
current assets and NOK 83 (0) million as current assets. Reference is made to note 19 to
the financial statements for further details.
Trade and other receivables amounted to NOK 1,211 (1,744) million, mainly comprising
o f accrued revenue,working capita l fro m join t venture licence s and underlif t o f petroleum
products.
Cash and cash equivalent s amounted to NOK 2,30 1(1,104) million. Cash generation from
operations was NOK 5,188 (3,344) million for the year after accounting for tax payments of
NOK 1,253 (2,289) million.
Spare parts, equipment and inventory was NOK 864 (800) million. The increase mainly
related to spare parts and equipment at Statfjord.
Board of directors’ report Page 23
Total provisions for asset retirement obligations amounted to NOK 9,535 (5,915),
whereof the non-current portion amounted to NOK 9,431 (5,915) million and the current
portion amounted to NOK 104 (0) million. There is a corresponding receivable to the
obligation, as described above in asset retirement reimbursement right. Reference is
made to note 24 to the financial statements for further details.
Deferred tax liabilities amounted to NOK 888 (2,835) million. The decrease was mainly
due to effects from the PPA as the difference between the accounting and tax value
represent a significant deferred tax asset. The main driver for the deferred tax asset is
the asset retirement obligation for Statfjord. Reference is made to note 13 and 16 to the
financial statements for further details.
Interest-bearing bond loans amounted to NOK 1,246 (1,179) million consisting of the
OKEA04 (OKEA03) bond. In the third quarter a successful refinancing was completed,
calling the USD 120 million OKEA03 bond in full at a premium of 3.2% while issuing a
US D 12 5 millio n senio r secure d bon d(OKEA04). A s par t o f th e refinancing,a supe r senior
revolving credit facility (RCF) of USD 25 million was established, which provides an
additional liquidity source for the company at relatively low cost. As per balance sheet
date, no drawdowns were made under the RCF.
Total other interest-bearing liabilities amounted to NOK 477 (508) million, whereof the
non-current share was NOK 427 (462) million and the current share was NOK 50 (46)
million. The amount represents OKEA’s share of the net present value of the future
obligations under the bareboat charter (BBC) agreement for the Inspirer rig.
Trade and other payables amounted to NOK 2,997 (2,220) million mainly relating to
working capital from joint venture licences of NOK 1,311 (1,061) million, accrued net
consideration payable from acquisitions of NOK 545 (0) million, payment quantity
agreements of NOK 276 (507) million and other accrued expenses of NOK 170 (295)
million. In addition, the current portion of provision for contingent consideration payable to
Equinor and Wintershall Dea amounted to NOK 128 (30) million.
Income tax payable amounted to NOK 2,141 (477) million and mainly comprise accrued
tax payable for 2023.
At balance sheet date, OKEA had issued a total of 103,910,350 (103,910,350) ordinary
shares. Each ordinary share has one vote at general meetings. There is 0 (0) warrants
outstanding.
Share capital amounted to NOK 10 (10) million and total equity amounted to NOK 726
(2,078) million, corresponding to an equity ratio of 4% (13%). Total liabilities amounted to
NOK 17,774 (13,543) million.
Board of directors’ report Page 24
Statement of cash flows
Ne t cas h flow s fro m operatin g activitie s amounte d t o NOK 5,18 8(3,344) million, including
net taxes paid of NOK 1,253 (2,289) million. The increase in cash flow from operations
was mainly a result of strong performance at key assets resulting in high sold volumes
during the year.
Net cash flows used in investing activities amounted to NOK 3,206 (2,434) million. NOK
1,217 (1,240) million related to cash paid for the acquisition of 28% working interest in
the Statfjord area (acquisition of working interests in Brage, Ivar Aasen and Nova). In
addition, NOK 1,919 (1,052) million was invested in oil and gas properties and NOK 32
(316) million was used for exploration and evaluation assets.
Net cash flows used in financing activities amounted to NOK 649 (1,969) million and
related to interest paid of NOK 131 (194) million, dividend payments of NOK 416 (301)
million and payments of lease arrangements of NOK 33 (31) million. Net cash flow from
the refinancing amounted to NOK 20 (1,401) million. The high refinancing cost previous
year relates to deleveraging through buy-back of the OKEA02 bond.
Net increase/decrease (-) in cash and cash equivalents, including exchange rate effects
on cash held, amounted to NOK 1,197 (-935) million.
Going concern and liquidity
Pursuant to §3-3 of the Norwegian Accounting Act, the board confirms that conditions for
continued operation as a going concern are present and the annual financial statements
for 2023 have been prepared under this assumption.
OKEA’s current financial position and liquidity is considered adequate, and the company is
positioned to continue to execute on its growth strategy. Cash flows, available liquidity and
financial flexibility, are expected to be sufficient to finance the company’s
commitments in 2024.
In the board’s view, the annual accounts give a true and fair view of OKEA’s assets and
liabilities, financial position and results. The board is not aware of any factors that
materially affect the assessment of OKEA’s financial position as of 31 December 2023, or
the result for 2023, other than those presented in the board of directors’ report or that
otherwise follow from the financial statements.
Board of directors’ report Page 25
Allocation of loss for the year
Total comprehensive loss for 2023 amounted to NOK 937 million. The board proposes
the following allocation:
Loss amounting to NOK 937 million for the year is transferred from retained earnings/loss.
Retained earnings/ loss (-) as of 31 December 2023 amounted to NOK -723 million.
Risks related to OKEA’s business and industry
Comprehensive, transparent, and dynamic risk management, supported by necessary
framework, tools, and practice, is of great importance for OKEA’s ability to deliver on its
strategy and stated goals. The overall purpose of risk management in OKEA is to ensure
the balance between creating value and avoiding accidents, damages and losses. As a
result, the company is continuously undertaking risk management activities, embedded in
the company’s management system and operational practices, at all levels of the
organisation. Both senior management and the board of directors regularly review major
risks and mitigating actions.
The company’s business, results of operations, value of assets, reserves, cash flows,
financial condition, and access to capital may be adversely affected by, strategic,
operationa l a s wel l a s financia l risk factors. Measure s and action s to manage and mitigate
risks are identified, implemented and reported on a continuous basis. Assurance and
verification of the company’s management practice and structures are governed by risk-
based and dynamic audit and verification plans.
OKEA currently has production from seven assets: Draugen, Brage, Gjøa, Nova, Yme,
Ivar Aasen and Statfjord. The addition of a 28% WI in the four fields in the Statfjord area
(acquired from Equinor) during 2023 improved asset diversification. Operational issues
affecting availability and reliability of production from any of the fields in the portfolio
may still have a material impact on the company. In addition, risks related to estimated
reserves and reservoir potential is inherent in all oil and gas properties in the current
portfolio as well as in potential future acquired properties .
Organic and inorganic growth and diversification in the company’s production portfolio
will seek to further mitigate this risk, in combination with robust due diligence processes,
operational follow-up and management of both operated and partner-operated assets.
Creating value through near-field exploration, production optimisation and extension of
field life is a key factor in OKEA’s strategy. Maturing well targets and development
projects, utilising new technology and innovation, and sanctioning profitable volumes is
therefore of significant importance. The company’s exploration and project portfolios
Board of directors’ report Page 26
(operated and partner-operated) carry technical, geological and operational uncertainty.
The company, together wit h licence partners, continuously strives to mitigate exploration
and project risks and ensure progress to meet defined targets and milestones. However,
the inherent complexity of projects may result in delays, cancellations and/or cost
increases.
Changes in national and/or international framework conditions, (e.g. changes in
regulation s relate d t o ESG,QHSSE o r taxation)ca n lead to increased costs,reduced value
of the company’s asset base, and can potentially impact feasibility of new development
projects. Unfavourable changes to governmental regulations for the petroleum industry,
such as potential lack of new exploration areas granted, reduced production permits or
failur e t o exten d productio n permit s ma y hav e considerabl e impact s t o OKEA’s business.
Activities throughout the company value chain (exploration, development, production,
and decommissioning) within the oil and gas industry have considerable inherent
environmental and safety risks. In case of incidents, these risks can result in significant
losses and cost increases. OKEA is continuously working to assess such risks and to
implemen t measure s bot h t o eliminat e th e probabilit y of occurrenc e as wel l as t o mitigate
any adverse consequences. This includes ensuring the robustness of the company
emergency preparedness framework and organisation. Identifying, managing and
controlling all material issues related to ESG is important to OKEA and ESG is therefore
embedded in the business and all operational activities This includes assessing financial
risk exposure imposed by climate related risk as further outlined in the ESG report for
2023.
Sufficient organisational capabilities, high employee engagement and a good working
environment are essential factors for realising the corporate growth strategy as well as
improvement initiatives and synergies. Evaluating organisational robustness,
competenc e an d capacity considering expected scenarios is therefore important t o OKEA.
Not being able to hire, retain or replace key members of the organisation, or lack of
short- or long-term access to competent staff, may result in an inability to realise the
company’s strategy and further expand the business.
In addition, OKEA has several key partners and suppliers and relies on these for
successful execution of the company’s strategy and roadmap. OKEA foresees a high
activity level in the industry in the coming years, with potential capacity and competence
constraints as well as cost inflation. Any adverse events or conditions impacting our key
suppliers’ ability to deliver as agreed may impact the company’s performance, lead to
increased cost, operational disruptions and/or project delays. In addition, the company is
dependent on alignment with, and endorsement from, licence partners for operated
assets. For partner-operated assets, OKEA exercises it’s “see-to-duty” diligently through
regular partner meetings and other means as required. However, the company is
dependent on the various operators’ management and performance and the voting
arrangements in each joint venture.
Board of directors’ report Page 27
Information security events (e.g. cyber-attacks) may threaten the confidentiality,
integrity and availability of company data and information which, in turn, coul d adversely
impact the company’s business activities.
The invasion of Ukraine in late February 2022 and other geopolitical risks have the
potential to significantly impact global stability, national security and business continuity.
In response, OKEA has enforced control mechanisms to manage the elevated security
threats imposed to the industry and maintain a close dialogue with Offshore Norway and
relevant authorities. OKEA is monitoring international sanctions and trade control
legislation to mitigate the potential impact on the company’s operation particularly in
respect of potential interruptions of supply chains and third-party services.
Financial risk factors
OKEA i s expose d t o a variet y o f financia l ris k factors.Oi l an d ga s price s ar e highl y volatile,
and the company regularly enters into derivative contracts in order to hedge portions of
it s oil an d ga s productio n t o manag e marke t pric e risk.Reserve s an d contingen t resources
are by their nature uncertain with respect to inferred volumes which are also sensitive to oil
and gas prices. OKEA will continue to manage these risks in accordance with a defined risk
management policy.
OKEA is exposed to foreign exchange rate risk as revenues are denominated in USD for oil
sales and in GBP and EUR for gas sales, whilst operational and development costs are
mainly denominated in NOK, and all income taxes are denominated in NOK. OKEA
manages currency risk by making frequent currency exchanges and utilising hedging
instruments when deemed appropriate. However, fluctuations in exchange rates may
adversely affect the financial performance of the company. The outstanding bond debt
was issued in USD, the same currency as the major revenue streams, which limits
currency risk. A successful refinancing was completed in September 2023. The USD 120
million OKEA03 bond was called in full, and a new USD 125 million senior secured bond
OKEA04 was issued at a fixed coupon of 9.125% and maturity in September 2026. Cash
and cash equivalents exceed interest bearing debt, which limits refinancing risk.
OKEA also has an interest-bearing liability in USD which represents OKEA’s share of the
net present value of future obligations under the bareboat charter (BBC) agreement
between the Yme licence and Havila Sirius AS for the Inspirer rig. This liability will be
repaid quarterly until October 2031.
OKE A currentl y ha s no majo r exposure to interes t rate risk.The company ha s no interest-
bearing deb t with floating interes t rate,a s the OKEA0 4 bond loan and the Inspire r liability
both carry fixed interest rates. However, any new debt financing will be subject to the
prevailing market environment.
Board of directors’ report Page 28
The OKEA04 bond agreement may limit OKEA’s ability to enter into new financing
arrangements. The key financial covenants comprise Leverage Ratio (net debt divided by
12-month EBITDA) and Liquidity of USD 25 million.
Operating in a capital-intensive industry, OKEA is exposed to liquidity risk and has taken
mitigating actions to ensure that sufficient liquidity is secured under normal as well as
extraordinary circumstances. The company conducts detailed cash flow forecasting,
including sensitivity analysis on key variables, to assure it can meet financial liabilities as
they fall due without incurring unacceptable losses or risking damage to the company’s
reputation. The company has USD 25 million in a revolving credit facility (“RCF”)
available. No amounts were drawn under the RCF at balance sheet date.
OKEA’s exposure to credit risk for counterparties to default on their payment obligations is
considered limited, as sales agreements and derivative contracts are only entered into with
reputable counterparties.
Financial risk is managed by the finance department under policies approved by the
board.OKE A managemen t continuously monitor s the risk picture and report s to the board
regularly.Th e overal l ris k managemen t polic y seek s t o minimis e potentia l advers e effects
on financial performance from unpredictable fluctuations in financial and commodity
markets.
The fiscal regime for the Norwegian petroleum sector has generally been stable and
supportive of the industry. Changes in the petroleum tax regulation were implemented by
the Norwegian Parliament in 2022, introducing immediate expensing of investments in
the special tax regime (cash flow tax) with effect from 1 January 2022. The change in tax
regime results in a lower tax shield with an earlier utilization. The changes made in 2022
has not significantly impacted the financial position and solidity of OKEA.
OKEA is listed on Oslo Stock Exchange (ticker “OKEA”) and the market valuation of, and
active trading in, OKEA’s shares and bonds may impact the company’s ability to obtain
funding at favourable terms.
Environmental, social and governance (ESG)
topics
ESG is about how OKEA handles risk related to climate change and environmental
challenges, how the company deals with people and social conditions, and how corporate
governance is practised.
The effect of OKEA’s operations on people, society and the environment is presented in
a separate ESG report, which has been approved by the board of directors. The report is
Board of directors’ report Page 29
available at
www.okea.no/investor/reports/
.
The report includes information regarding
OKEA’s due diligence assessment, as required in the Transparency act.
OKEA aims to be an attractive employer and a preferred business partner, as well as a
respected corporate citizen. OKEA’s most important contribution to society is to create
value and develop a future-oriented company that operates in a sustainable, ethical and
socially responsible manner. Profitability is a prerequisite for achieving these goals.
OKEA continuously works towards more efficient exploitation of petroleum reserves,
including implementation of new and innovative technology. OKEA participated in 10
Research & Development project in 2023, whereof all have the target to enhance
performance at the NCS.
OKEA’s analysis of the EU Taxonomy Regulations shows that no revenue or expenditure
is eligible under the regulations.
Quality, health, safety, security and environment (QHSSE)
Safe production with adherence to the highest standards within health, safety and
environmental (HSE) performance and continuous focus on reducing emissions are
essential factors for the company’s licence to operate as well as enablers of long-term
value creation for the company’s shareholders. OKEA considers its employees and
contractors as its key assets and is focused on motivating employee participation,
innovation, and experience transfer to create and sustain a company culture which
fosters efficient and cost-effective collaboration and solutions and best practice QHSSE,
operational and financial performance.
OKEA had one serious incident in its activities in 2023. Actual and potential serious
incidents frequency (SIF) and total recordable injuries frequency (TRIF) increased from
1.47 to 2.39 and from 5.13 to 8.98 respectively. Improving safety performance remain a
top priority for OKEA and targeted measures will be implemented going forward. A more
detailed reporting on QHSSE matters is included in the ESG report for 2023.
Organisation and equal opportunities
OKEA promotes a healthy working environment for all employees, vendors and
contractors involved in its activities. OKEA has established a working environment
committee covering all locations, offshore and onshore. Absence due to sickness in the
year was 4.6% (2.1%).
The company strives to maintain a working environment with equal opportunities for all
based on qualifications, irrespective of race, gender, age, disability, sexual orientation,
religion, political views, national or ethnic origin ethnicity or any other characteristic that
may compromise the principle of equality. The company’s code of conduct contains
Board of directors’ report Page 30
principles and standards for promoting equality and preventing discrimination and
harassment, including sexual harassment. There is no tolerance for unlawful unequal
treatment, exclusion or discrimination of colleagues or others working for OKEA.
A large part of our workforce work within engineering and technology, including offshore
work, which are disciplines that have traditionally attracted most male applicants. This is
reflected in the workforce demographics, which as of end of the year consisted of 26%
female and 74% male employees. At the end of 2023, the senior management team
consisted of four females (40%) and six males (60%). The board of directors consisted of
eleven members, four of whom are female, with three deputy members, of whom two are
female.
The working environment in OKEA during 2023 was considered “very good” by the
employees as demonstrated by the yearly employee satisfaction survey which was
conducte d durin g th e autum n o f 2023.The employee engagemen t index wa s above 85%,
which places OKEA amongst the leading companies across a range of industries. The
response rate was also excellent with a total of 95% and 89% participation amongst
onshore and offshore employees respectively.
Pursuant to section 3-3a and 3-3c of the Norwegian Accounting Act and section 26a of
the Norwegian Act on Gender Equality and Prohibition of Discrimination, the board of
directors has provided a more detailed reporting on organisation and equal opportunities
matters in the ESG Report for 2023.
Corporate governance
The company is committed to create sustained shareholder value and respecting the
company’s various stakeholders. To achieve this, the company remains committed to
maintaining a high standard of corporate governance. The company has established
policies and guidelines that lay out how business shall be conducted, including clearly
defining the roles and responsibilities of the board and the senior management, as well as
the relationship between them. Corporate governance principles, as well as the
implementation of those principles, are subject to annual reviews by the board of
directors.
Pursuant to section 3-3b of the Norwegian Accounting Act the 2023 statement on
corporat e governanc e is provide d i na separat e sectio n o f th e annua l report.Th e company
complies wit h relevan t rules an d regulations fo r corporat e governance,includin g th e most
recent version of the Norwegian Code of Practice for Corporate Governance, published on
14 October 2021.
Board of directors’ report Page 31
Reporting of payments to governments
OKEA has prepared a report of government payments in accordance with the Norwegian
Accounting Act §3-3d and the Norwegian Securities Trading Act §5-5a. These regulations
state that companies engaged in activities within the extractive industries shall on an
annual basis prepare and publish a report containing information about their payments to
governments at country and project level. The report is provided in a separate section of
the annual report.
Insurance for board members and chief
executive officer
The company has an insurance policy for the board members and the chief executive
officer for potential liability to the company and third parties. The board considers the
coverage to be reasonable.
Subsequent events
APA 2023 licence awards
In January 2024, OKEA was offered interests in three new production licences on the
Norwegian continental shelf, through the Awards in Pre-Defined Areas (APA) for 2023.
Draugen license extension granted
On 11 March 2024, the Ministry of Energy granted a license extension on Draugen from
2024 to 2040.
Outlook
OKEA launched a dividend plan in the second quarter of 2022 and has since paid a total of
NOK 7.90 per share through quarterly distributions. Following the significant goodwill
impairment related to the Statfjord area in the fourth quarter of 2023, and due to
dividend restrictions in the OKEA04 bond tied to net profit after tax, the board has not
proposed any dividend for distribution in 2024. OKEA’s capital allocation principles
comprise maintaining financial flexibility, ensuring a robust portfolio, and having a
healthy balance between growth and dividends.
Following the closing of the Statfjord transaction, the asset is a top priority for OKEA and
close collaboration with the operator is ongoing with a target to unlock the asset’s
potential. The improvement plan focuses on increasing production efficiency, maturing
Board of directors’ report Page 32
well targets and drilling performance and revisiting drainage strategy to increase liquid
offtake and maximize recoverable resources.
The company’s strategy is centred around three growth levers:
·actively pursue further value creation in current portfolio,
·pursue mergers and acquisitions to add new legs to the portfolio, and
· consider organic projects either adjacent to existing hubs or pursue new hubs,
dependent on financial headroom and attractive risk-reward.
The board of directors considers that the company is well positioned to continue to
execute on the strategy and deliver value to shareholders going forward.
Board of directors’ report
Page 33
Board of directors, Trondheim, 4 April 2024
Chaiwat Kovavisarach
Chairman of the board
Phatpuree Chinkulkitnivat
Board member
Mike Fischer
Vice chair of the board
Elizabeth Anne Williamson-Holland
Board member
Nicola Carol Gordon
Board member
Rune Olav Pedersen
Board member
Finn Haugan
Board member
Per Magne Bjellvåg
Board member
Sverre Nes
Board member
Ragnhild Aas
Board member
Jon-Arnt Jacobsen
Board member
Svein J. Liknes
CEO