centrica norway / centrica energi nuf 20 annual … · schedule and below budget. in 2016, centrica...
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2016ANNUAL REPORTCentrica Norway / Centrica Energi NUF
DESIGN Melvær&CoPHOTOGRAPHS Centrica photographic archive/Shutterstock/Anne Lise Norheim
Contents 04About Centrica
Norway
08Corporate structure
and management
14Contribution
to the local
community
20Financial
statements
05Key figures
10Timeline &
milestones
16Business
principles
06Asset Director
Norway’s comments
12Environmental
performance
18Board of
director’s report
4
CENTRICA NORWAY
3DEVELOPMENT PROJECTS
ODAFOGELBERGMARIA (PARTNER)
NUMBER OF EMPLOYEES AND CONTRACTORS
KEY FIGURES
AboutCentrica Norway is part of Centrica plc, an international energy company active at every stage in the energy chain from sourcing energy to saving it. Centrica Norway was established in 2006 as part of Centrica’s strategy to increase its international involvement in oil and gas exploration and production.
Since then, the Norwegian subsidiary has developed to become a key player in Centrica’s E&P portfolio. Following major acquisitions and several discoveries on the Norwegian Shelf, Centrica Norway has created a business with the experience and expertise needed to make it one of Norway’s leading oil and gas companies.
130
41 (12)CENTRICA OPERATED
NUMBER OF LICENCES
28.5*
ANNUAL PRODUCTION
MILLION BARRELS OF OIL EQUIVALENTS
*INCLUDING STATFJORD UK
BARRELS OF OIL EQUIVALENTS
*INCLUDING STATFJORD UK
78,000*
DAILY PRODUCTION
PRODUCING FIELDS
VALESTATFJORDSTATFJORD NORTHSTATFJORD EASTSYGNAKVITEBJØRNVALEMONHEIMDAL
6 7
SENIOR VICE PRESIDENT’S COMMENTSSENIOR VICE PRESIDENT’S COMMENTS
2016 has undoubtedly been a difficult year for everyone involved in oil and gas exploration and production. As it is obvious that we are in a ‘lower for longer’ world, it has been essential to cut costs to ensure that we can be successful in this new reality. Both as an industry and as a company, we had become com-placent – life was easy when oil and gas prices were high. It’s therefore satisfying to note that our focused efforts have paid off and that in 2016 we delivered strong financial results despite low commodity prices. Reduced costs combined with a record high production of almost 78,000 barrels of oil equivalent per day paved the way for a free cash flow of 1.26 billion Norwegian kroner – an impressive achievement in a tough environment.
In November, the submission of the Plan for Development and Operation of the Oda field marked a milestone for us. Oda is Centrica’s first operated development project in Norway, and has become one of the most robust on the Norwegian Self. Scheduled to come on stream in 2019, Oda is proof that Centrica is committed to investing in Norway. However, in the shorter term we are already looking ahead to new production coming on stream in 2018 from the partner operated Maria field. I am delighted to say that Maria is a well-run project, currently ahead of schedule and below budget.
In 2016, Centrica reorganised its E&P business. This also affected the Norwegian organisation, reducing duplication and moving us one step closer to becoming an agile and sustainable European oil and gas business.
The health and safety of colleagues and our contractors are at the core of everything we do and our aim is that people will be safe while working at Centrica. A key priority across our activities is to prevent major incidents. We had no serious incidents in 2016 and our track record to date is solid, but we can never relax on safety – we have to work hard every day to achieve continuous improvement.
A decade has passed since we estab-lished Centrica in Norway. Over the past ten years we have invested billions of kroner annually and grown to become a substantial player on the Norwegian Shelf. The ambition is to continue to strengthen our position as a reliable and professional operator through the skills of dedicated employees and partners. Norway has been identified as a growth area for Centrica’s E&P business and next few years will undoubtedly be excit-ing for us, laying the groundwork for new exploration, developments and maximis-ing the output of our existing assets.
Strong results in a tough environment
Oda has become one of the most robust development projects on the Norwegian Shelf.
”
DAG OMRE Asset Director Norway,
8 9
CENTRICA NORWAY
Dag has been responsible for establishing and developing Centrica E&P Norway’s organisation and licence portfolio. Dag has more than 25 years of experience from the Norwegian oil and gas industry, as well as management experience from Petoro and the Ministry of Petroleum and Energy.
DAG OMRE
Asset Director Norway
Arne joined Centrica E&P Norway from a position as Senior VP for Project Management in Aker Solutions. He has 30 years of experience from offshore oil and gas industry, covering all phases of the E&P value chain from conceptual studies, engineering and construction to platform installa-tion. He has spent 20 years in various EPCI project management roles and four years as VP in Aker Solution’s MMO management team. Arne has international experience from Canada and Brunei, working with major oil companies such as BP, Mobil and Shell.
ARNE BJØRLO
Asset Manager Developments
Steinar has worked for ExxonMobil, DONG and Wood Group Technology and has more than 15 years of experience as a geologist and exploration manager on the Norwegian Shelf. As one of the first staff members at Centrica’s Norwegian office, Steinar has played a key role in developing the organisation and the licence portfolio.
Gro took on responsibility for the newly-established position as VP for People & Support in 2015, and is in charge of HR, IT/IS, Facilities and Commu-nication. Gro also has extensive exploration and subsurface experience from Mobil, ExxonMobil, Gaz de France and ConocoPhillips, and has acted as VP Exploration & Subsurface for Centrica E&P Norway.
GRO KYLLINGSTAD
Subsurface Development and Production Manager / Vice President People & Support
STEINAR MELAND
Director Subsurface and Exploration
Rune is responsible for operations on the Norwegian Shelf, including drilling, operation of the Vale field and management of our portfolio of partner-operated developments and producing fields. In the course of more than 20 years in the oil industry, Rune has held leading positions such as Chief Engineer, Resource Manager and Chief Operating Officer in companies such as BP and Noreco.
RUNE MARTINSEN
Asset Manager Producing Fields
Petter has more than 25 years of multi-disciplinary experience in the E&P sector, and has held senior positions such as Managing Director for BG Group in Norway and Asset- and Business Development Manager with Gaz de France in Norway. His latest assignment was as Managing Director of Kuwait Foreign Petroleum Exploration Company (KUFPEC) in Norway.
PETTER MYHRE
Commercial Manager
Steinar Meland: Vice President Exploration and Subsurface (until 1 October) Siri Nesbø: Head of HSES (from 1 October) Viggo Tjensvoll: Exploration Manager Norway & UK (from 1 October) Ragnhild Erga: Subsurface Manager (from 1 October to 1 February 2017)
Kari leads the finance department. Through her responsibility for all financial activity, she supports the Chief Executive in financial decisions. Kari has experience from management positions in accounting and finance with GDF SUEZ, Statoil and Ernst & Young.
KARI HOLM
Director Finance
CHANGES to the Management Team in 2016:
Centrica Norway’s management team 2016
Corporate stucture
Corporate structure &management
COMMERCIAL MANAGER
Petter Myhre
SUBSURFACE DEVELOPMENT AND PRODUCTION MANAGER/
VICE PRESIDENT PEOPLE & SUPPORT
Gro Kyllingstad
ASSET MANAGER PRODUCING FIELDS
Rune Martinsen
ASSET MANAGER DEVELOPMENTS
Arne Bjørlo
DIRECTOR FINANCE
Kari Holm
ASSET DIRECTOR NORWAY
Dag Omre
MARK HODGES Chief Executive, Centrica Consumer
IAIN CONNChief Executive
MARK HANAFINChief Executive,
Centrica Business
GRANT DAWSONGroup General
Counsel & Company Secretary
UK Home
Connected Home
UK Business Centrica Storage
NA Business
Distributed Energy & Power
Energy Marketing & Trading
Central Power Generation
NA Home Ireland
CHRIS COXManaging Director,
Exploration & Production
Exploration & Production
DIRECTOR SUBSURFACE AND
EXPLORATION
Steinar Meland
10 11
CENTRICA NORWAY TIMELINE
JANUARY: Awarded nine licences in APA 2012, three operated
JANUARY: Rodriguez discovery, Centrica Norway’s sixth discovery on the NCS as partner. Licence operated by Wintershall
JUNE: Awarded one operated licence in the Barents Sea in the 22nd licensing round
SEPTEMBER: Commenced an ambitious 18 month drilling programme with seven exploration and appraisal wells in the North Sea and the Norwegian Sea. Three wells operated by Centrica Norway: Butch Øst, Butch Sør-Øst and Ivory
NOVEMBER: Sold licence interests in the Heimdal area to optimise portfolio
NOVEMBER: Concept selection for Maria development submitted to the NPD
JANUARY: Awarded five licences in APA 2014, two operated
JANUARY: Valemon on stream
MARCH: Moved into new offices in Bjergsted, Stavanger
MARCH/APRIL/JUNE: Three partner operated drilling campaigns
SEPTEMBER: PDO for the Maria field approved by the Ministry of Petroleum and Energy
SEPTEMBER: First oil company world-wide to use coiled tubing drilling from a light intervention vessel on a pilot well
OCTOBER: Butch DG2 passed – development concept selected
NOVEMBER: Signed long-term partnership agreements with Subsea 7, Aibel and DNV GL
JANUARY: Awarded six new exploration licenses in the Awards in Predefined Areas (APA) 2015 round, one as operator
AUGUST: Won the “2016 ONS Innovation Award” for the Butch pilot hole drilling project
OCTOBER: Reorganisation and new structure of Centrica Norway in place
NOVEMBER: Centrica submitted the Plan for Development and Operation (PDO) of Oda to the Ministry of Petroleum and Energy. Oda is Centrica’s first operated development project on the Norwegian Shelf
JANUARY: Awarded seven licences in APA 2011
MARCH: Closed agreement with Conoco-Phillips to acquire interests in the Statfjord fields
APRIL: Assumed operator responsibility for Vale, first production on the NCS operated by Centrica Norway
MAY: Discovery in Maria Nord, part of the Maria discovery as of 2010
JANUARY: Awarded ten licences in APA 2013, three operated
APRIL: Discoveries in Valemon Nord and Solberg wells
JULY: Butch appraisal drilling campaign completed
AUGUST: Won “Best stand award” at ONS 2014
DECEMBER: Ivory well completed at 1420 metres
DECEMBER: Centrica is pre-qualified as an operator on the NCS
APRIL: Centrica established its company and office in Norway
JANUARY: Awarded two licences in APA 2010, one operated
APRIL: Awarded two licences in the 21st licensing round
OCTOBER: Discovery in Butch Main, operated
NOVEMBER: Entered into an agreement to purchase assets in the Heimdal, Kvitebjørn and Valemon area from Statoil for NOK 10 billion. Entered into a strategic partnership with Statoil on future application processes in Norway and the UK, as well as signing a ten-year gas purchase agreement between Statoil and Centrica plc
JANUARY: Awarded four licences in APA 2006, three operated
JUNE: Purchased assets in production licences in the area around the licences that were awarded in APA 2006
JANUARY: Awarded one operated licence in APA 2009
APRIL: Gas discovery in Fogelberg, the first discovery operated by Centrica Norway on the NCS
JULY: Maria discovery. Centrica Norway has a 20 per cent ownership interest
SEPTEMBER: Entered into agreement with Norske Shell A/S to purchase assets in the Statfjord fields
OCTOBER: Atla discovery. Centrica Norway is partner in the licence with 20 per cent interest. Total is the operator
JANUARY: Awarded six licences in APA 2007, five operated
OCTOBER: Entered into agreement to purchase assets in the Heimdal area and the Vale field from Marathon Oil
JANUARY: Awarded three licences in APA 2008, one operated
APRIL: Awarded one licence in the 20th licensing round
JUNE: Centrica Norway established the Operators’ Association for Emergency Preparedness (Operatørenes Forening for Beredskap – OFFB) together with other operators on the NCS
20152016 2014
2013
2010
2007
2012
2009
2006
2011
2008
2004
Timeline & milestones
12 13
FOCUS ON ENVIRONMENTFOCUS ON ENVIRONMENT
Centrica Norway reports emissions to air and discharges to sea from operated activity on an annual basis, in accordance with official requirements and guide-lines. This concern planned and officially approved emissions and discharges as well as those which occur accidentally.
Detailed environmental data allow Centrica Norway to monitor emission and discharge
levels over time, and therefore enable us to pinpoint how to make further improve-ments in our environmental performance.
Operations at our operated Vale field were conducted in compliance with our discharge permit and relevant regulations, without any incidental spills to the environment.
The table below provides a summary of Centrica Norway’s emissions, discharges and waste during the period 2011–2016. Waste is divided into two categories, hazardous and non-hazardous, and is taken to shore for further handling.
Centrica Norway did not have drilling operations in 2013 and 2016.
Focus on the environment
2011 2012 2013 2014 2015 2016
Operated wells 1 1 0 3 1 0
Metres drilled 5494 5906 0 12221 354 0
Em
issi
ons
Diesel consumption 1373 2079 0 6329 62 0
CO2 emissions (1000 tons) 4.353 6.591 0 20.062 0.2 0
NOx emissions (tons) 96.1 146 0 386.5 4 0
SOx emissions (tons) 0.577 0.873 0 6.3 0.1 0
NMVOC emissions (tons) 6.87 10.4 0 31.6 0.3 0
Dis
char
ges
Acute spills 0 1 0 2 0 0
Green substances (tons) 184 508 0 3028 46 0
Yellow substances (tons) 4 7.13 0 52.22 0.02 0
Red substances (tons) 0 0.0009 0 0 0 0
Black substances (tons) 0 0 0 0 0 0
Was
te
Waste segregation (%) 93 71 0 94 100 0
Industrial waste (tons) 140 124 0 138.8 1.9 0
Hazardous waste (tons) 1088 4968 0 11423.8 0.1 0
Historical overview of offshore emissions and discharges
14 15
CONTRIBUTION TO LOCAL COMMUNITY
For more information about
Centrica’s CSR reporting and
activities, please go to Centrica’s web
site: www.centrica.com/responsibility
Since 2008, Centrica Norway has been the main sponsor of the local half mara-thon called 3-Sjøersløpet (the Three Lakes Run). Centrica E&P Norway has been instrumental in developing the run from
a small, local event to a major, well-known run attracting the national elite and international participation. Around 3000 runners annually sign up for the race.
3-Sjøersløpet
Contribution to the local communityCentrica Norway wants to improve and develop the way we do business and the impact we have on society. It is important to contribute and to play a part in our community through cooperation with local and regional initiatives.
16 17
BUSINESS PRINCIPLES
Business principlesOur Business Principles and Group Policies provide the foundation for how we operate. This is much more than a tick box for compliance, how we conduct business reflects our values and defines us in the eyes of our people, our customers and our wider stakeholders.
Together, our eight Business Principles, which set out the operating standards we expect, and our Group Policies, which support these Business Principles, are our commitment to good business.
To read more about these principles,
please go to Centrica’s web site:
www.centrica.com/about-us/people-
culture/business-principles
Demonstrating integrity in corporate conduct
Valuing our people
Respecting human rights
Protecting the environment
Ensuring openness and transparency
Focusing on health, safety and security
Enhancing customer experiences and business partnerships
Investing in communities
18 19
CENTRICA NORWAY
Centrica Energi NUFFinancial Statements 2016
20
CENTRICA ENERGI NUF
21
Operations and locationsThe main purpose of Centrica Energi NUF is to explore and to produce oil and gas on the Norwegian Continental Shelf. Centrica Energi NUF is a branch of Centrica Norway Limited, a company incorporated in the United Kingdom. The formal ownership of licences in Norway are held by Centrica Resources (Norge) AS. All obligations and operations are deferred to Centrica Norway Limited and to the branch through pass-through agreements.
The branch was established in 2006 and its office address is in Stavanger.
In 2016, Centrica had production from Vale, Heimdal, Kvitebjørn, Valemon and Statfjord fields. Production of oil, NGL and gas for 2016 amounted to net 23.0 million barrels of oil equivalents (2015 net 21.2 million barrels). In 2016 the production performance was the highest achieved since Centrica Energi NUF started producing oil and gas in Norway, with a daily average production of more than 78 000 barrels. Higher production in year are coming from increased recovery from Statfjord field and stabilized performance from Valemon field which started producing last quarter of 2014.
Comments related to the financial statements
Income statementThe revenues in 2016 was NOK 6 871 241 356 compared to 7 851 200 258 in 2015. Decrease in revenue is mainly due to lower gas prices than last year which is in line with market conditions.
The good production performance in year has not increased operating cost. In accordance with last year’s expectation operating cost, not including depreciation and impairment, has decreased due to the strong cost focus and cost-cutting in the industry.
Exploration expenses amounted to NOK 140 937 544 in 2016 mainly relates to seismic and general exploration.
Depreciation not including goodwill in year amounted to NOK 2 214 527 800 (2015 NOK 2 716 969 106), which corresponds to a depreciation per barrel of NOK 96 (2015 NOK 128). Decrease in
depreciation rate is due to last year write down after impairment evaluations. Impairment evaluations in 2016 have resulted in a partial reversal of last year impairment.
Operating profit for 2016 was NOK 2 309 189 349 (loss in 2015 NOK 1 873 578 070).
Profit before tax was NOK 2 016 495 474 (2015 loss NOK 2 260 997 460). Income tax expense in year was NOK 2 080 087 182 (2015 NOK 505 320 252) resulting in after tax result loss in 2016 of NOK 63 591 708 (2015 loss NOK 2 766 317 712). Reference is made to note 11 for more information on income tax.
BalanceTotal assets per 31st of December 2016 amounts to NOK 15 761 938 365 compared with NOK 14 585 840 371 end of the year 2015.
Equity per 31st of December 2016 amounts to NOK 2 249 000 861, or 14.3 percent of total assets (31st of December 2015: NOK 570 587 377, or 3.9 percent of total assets). The company performed and equity contribution in 2016 for settlement of structural funding loan to improve the equity share.
Cash flow and liquidityThe Cash Flow Statement shows that the company’s operational activities generated a positive cash flow of NOK 2 920 851 843 in 2016 (2015: NOK 1 943 882 313). The company invested NOK 2 212 934 389 in 2016 compared to NOK 1 833 512 982 the year before. Investment in 2016 and 2015 is mainly related to investment in tangible and intangible assets. The cash flow from financing activities amounted to outflow of NOK 617 923 682 (2015: outflow of NOK 405 044 441). The negative cash flow is connected to use of net cash flow from operating activities and investing activities for down payment of intercompany loan. The change in total cash flow was positive of NOK 84 645 818, compared to a negative cash flow of NOK 277 555 595 in 2015. The total cash balance is considered satisfac-tory by the company. The cash flow from operational activities is higher than operating profit by NOK 611 662 494. This is explained
primarily by depreciation and reversal of prior year asset impairment which have no cash effect, taxes and interest on loan balance included in operated cash flow.
Cash flow from operational activities in 2016, together with parent company loans, is con-sidered to be adequate to finance expected investments in 2017.
It is the opinion of the board that the annual accounts for 2016 is an accurate reflection of the branch’s financial position with respect to assets, liabilities, financial position and results at year end.
At the end of the year the company had own-ership in 37 licences through a pass-through agreement with Centrica Resources (Norge) AS. During 2016 Centrica was awarded six new licences in the APA2015 licencing round, five as partner and one as operator. Addition-ally, in 2017 Centrica was awarded four new licences in the APA 2016 licencing round, all as a partner.
The company has licences in the exploration phase, under development and in production. Since 2012, Centrica has been the operator of one field in production, Vale. The company has not recorded any Research and Development costs in addition to the costs charged from operators through license contributions.
EnvironmentalOur health, safety and environmental principles are a core part of our business. All necessary resources are allocated to preventing incidents that may lead to personal injuries, loss of life, spills, other damage to the environment or financial loss. We are co-operating closely with license partners, other operators, suppliers and governments to learn and contribute towards obtaining the best possible results with respect to health, safety and the environment.
The safety for own employees and those of our business partners has our highest priority. We are working actively to develop a strong HSE culture amongst our employees and offer training to ensure a high level of competency. In 2016, the company had no incidents that lead to serious personal injuries.
Centrica Energi NUF
Board of Directors´ Report for 2016
Exploring for and producing oil and gas may have an environmental impact. We are therefore actively working to understand and to minimize the environmental impact of our activities as far as possible. Our operations in 2016 did not lead to any material pollution of the environment. Information about activities on our non-operated licenses and fields is reported by the operator.
The health and working environment of our employees is of major importance to the company. A number of activities have therefore been initiated in order to further improve health and work environment, including promot-ing physical activity. Regular surveys are performed to monitor the quality of our work environment. The company has a diverse work force in terms of age, background and experience. Absence from work due to illness was very low (1.88 percent) in 2016. The work environment is perceived as good, however negatively impacted by the re-organization and downsizing of the organization in 2016.
At year end, 51 women (40 percent) and 77 men were employed by the company. The board is not aware of any activities in the branch which may be in violation of the laws regulating equal rights between the genders.
Country to country reportingCentrica has reported country to country reporting in accordance with the Norwegian
Companies Act §3-5 and report will be made public in The Brønnøysund Register Centre (www.brreg.no).
Market developments and outlookThe E&P business and Centrica has gone through some challenging times which has resulted in a more prepared business for changed market conditions. We believe we have a sustainable and robust organization which is compatible in the new market environ-ment with lower prices. Centrica is optimistic for the future and plan to replace decline in production profiles from current licence portfo-lio with new opportunities.
The company will in the coming years have high investments on the Norwegian Continen-tal Shelf. Through partner investments in the Maria development which is planned to start with production in 2018, and operated invest-ments in the Oda field development.
The Company’s financial results for 2017 are expected to be in line with 2016.
Financial riskThe company’s financial risk is primarily exposure to currency fluctuations. Revenue are invoiced in pounds sterling, US dollars or Euro. Purchase of materials and services are in Norwegian kroner and foreign currencies (primarily pounds sterling and US dollars). The company’s foreign currency strategy is
managed by the parent company, and parent company continuously monitors and initiate financial risk instruments.
The company’s financing is supplied via a loan agreement with related parties. The loan agreements consist of one short-term revolver credit facility and one long-term credit facility.
The company only has a few, but financially sound customers. Credit risk is deemed to be very low as well as the liquidity risk.
Going concernThe board and Asset Director Norway confirm that the annual accounts are based on the going concern principle in accordance with the Accounting Act § 3-3a. Expectations of future economic results have been mentioned above, as the company’s financial status. During 2016 the result has been affected by cost in rela-tion to reorganization process and provision for uncertain tax liability previous years. The equity was increased in 2016 by conversion of loan to equity, and the equity is considered to cover the size and risk profile for the company. Though negative result for current year, the board and Asset Director Norway believe the company has every opportunity to continue growing.
Stavanger, April 27th, 2017
Dag Halvard Omre Asset Director Norway
22 23
CENTRICA ENERGI NUF
Note 2016 2015
Revenues 2 6 871 241 356 7 851 200 258
Other income 7 741 168 10 041 213
Total revenues and other income 6 878 982 524 7 861 241 472
Production costs 2 040 668 587 2 624 954 216
Payroll expenses 5 153 591 469 207 666 255
Depreciation, amortisation and impairment 6, 7 2 051 920 211 6 447 017 658
Other operating expenses 8, 4 182 675 365 217 052 989
Exploration expenses 3 140 937 544 238 128 423
Total operating costs 4 569 793 175 9 734 819 542
Operating (loss)/profit 2 309 189 349 (1 873 578 070)
Interest income 24 424 323 4 612 566
Interest expenses (202 728 696) (319 591 762)
Other financial income 112 941 037 352 280 129
Other financial cost (227 330 539) (424 720 324)
Net financial income and cost 22 (292 693 875) (387 419 390)
Profit/(loss) before tax 2 016 495 474 (2 260 997 460)
Income tax 11 (2 080 087 182) (505 320 252)
Net profit / (loss) for the year (63 591 708) (2 766 317 712)
Net profit or loss for the year is allocated as follows:
Allocated to equity 0 0
Loss carried forward 63 591 708 2 766 317 712
Total allocated 63 591 708 2 766 317 712
Centrica Energi NUF Income Statement(Amounts in NOK)
Assets Note 2016 2015
Deferred tax assets 11 817 372 044 811 995 696
Goodwill 6 0 98 995 654
Capitalised exploration cost 6 379 898 806 1 373 647 320
Other intangible assets 6 14 249 754 20 118 258
Total intangible assets 1 211 520 604 2 304 756 929
Property, plant and equipment 7 11 910 676 764 10 118 627 832
Total tangible assets 11 910 676 764 10 118 627 832
Other long term receivables 6 546 638 70 846 638
Total financial assets 6 546 638 70 846 638
Spare parts and supplies 9 236 410 566 255 379 121
Trade receivables 33 925 504 219 772 252
Receivables - related parties 15 1 176 567 407 561 329 858
Other receivables 12 1 001 607 152 955 089 830
Cash and cash equivalents 10 184 683 729 100 037 911
Total current assets 2 633 194 359 2 091 608 971
Total assets 15 761 938 365 14 585 840 371
Centrica Energi NUF Balance sheet – AssetsBalance sheet at 31 December (Amounts in NOK)
24 25
CENTRICA ENERGI NUF
Equity and liabilities Note 2016 2015
Contributed equity 6 744 999 998 4 994 999 998
Total contributed equity 6 744 999 998 4 994 999 998
Accumulated deficits
Loss carried forward (4 495 999 137) (4 432 407 429)
Other equity (0) 7 994 808
Total retained earnings (4 495 999 137) (4 424 412 621)
Total Equity / Head office current account 14 2 249 000 861 570 587 377
Provision for decommissioning 16 5 134 367 542 4 552 261 590
Total provisions 5 134 367 542 4 552 261 590
Long term debt - related parties 15 4 000 000 000 5 000 000 000
Total long term liabilities 4 000 000 000 5 000 000 000
Trade payables 100 546 838 99 962 468
Payables - related parties 15 126 123 691 867 077 784
Current tax payables 11 2 596 527 107 1 583 000 305
Public duties payable 33 574 795 26 092 207
Other short term liabilities 13 1 521 797 530 1 886 858 639
Total current liabilities 4 378 569 961 4 462 991 403
Total liabilities 13 512 937 503 14 015 252 994
Total equity and liabilities 15 761 938 365 14 585 840 371
Centrica Energi NUF Balance sheet – Equity and liabilitiesBalance sheet at 31 December (Amounts in NOK)
Stavanger, April 27th, 2017
Dag Halvard Omre Asset Director Norway
Note 2016 2015
Profit/(loss) before tax 2 016 495 474 (2 260 997 460)
Tax paid (1 071 936 728) (1 671 690 024)
Depreciation and amortisation 6, 7 2 313 523 454 2 815 964 760
Impairment/(reversal of impairment) 6, 7 (261 603 242) 3 631 052 898
(Gain)/loss divestments of licences (6 602 188) (8 346 849)
Decommissioning interest 16 99 916 643 122 462 229
Decommissioning cost 16 (44 672 726) (283 918 544)
Unrealised foreign currency (gain)/loss 5 301 975 (12 669 654)
Change in working capital (121 405 184) (396 140 678)
Cost related to stock option plan (8 165 634) 8 165 634
Cash flow provided by operating activities 2 920 851 843 1 943 882 313
Proceeds from share in licences 5 560 047 36 391 324
Capital expenditures 6, 7 (2 218 494 437) (1 869 904 306)
Cash flow used in investing activities (2 212 934 390) (1 833 512 982)
Change in loan to related parties 15 (617 923 682) 607 542
Change in short term loan from related parties 15 (750 000 000) 750 000 000
Change in long term loan from related parties 15 (1 000 000 000) (1 855 651 983)
Conversion of debt to equity 14 1 750 000 000 700 000 000
Cash flow used in financing activities (617 923 682) (405 044 441)
Effect of exchange rate changes in cash and cash equivalents (5 347 954) 17 119 517
Net increase/(decrease) in cash and cash equivalents 84 645 817 (277 555 594)
Cash and cash equivalents beginning of the period 100 037 911 377 593 505
Cash and cash equivalents end of the period 184 683 729 100 037 911
Centrica Energi NUF Statement of Cash flows(Amounts in NOK)
26 27
CENTRICA ENERGI NUF
Centrica Energi NUF Notes to the accounts
The financial statements have been prepared in accordance with Accounting Regulations and generally accepted accounting principles in Norway. Classification and valuation of balance sheet items Assets for long term ownership or use are classified as fixed assets. Other assets are classified as current assets. Receivables to be paid within one year are classified as current assets. Same principles have been applied for classification of short and long term liabilities. Fixed assets are held at cost less accumulated depreciation and any provisions for impairment. Current assets are valued at the lower of cost and market value. Short and long term liabilities are included in the balance sheet at nominal amount when established. Exploration, evaluation, development and production assets The Company uses the successful efforts method for accounting for exploration and evaluation expenditure. Exploration and evaluation expenditures associated with an exploration well resulting in a discovery of hydrocarbons, including acquisition costs related to exploration and evaluation activities, are capitalised initially as intangible assets. Certain expenditures such as geological and geophysical exploration costs are expensed. If the prospects are subsequently determined to be successful on completion of evaluation, the relevant expenditures including licence acquisition costs are transferred to PP&E and is subsequently depreciated on a unit of production basis. If the prospects are subsequently determined to be unsuccessful on completion of evaluation, the associated costs are expensed in the period in which that determination is made. All field development costs are capitalised as PP&E. Such costs relate to acquisition and installation of production facilities and include development drilling costs, project-related engineering and other technical service costs. PP&E, including rights and concessions related to production activities, are depreciated from the commencement of production in the fields concerned, using the unit of production method, based on all of the 2P reserves of those fields. Changes in these estimates are dealt with prospectively. Heimdal area is an exception to this rule and is depreciated on a straight-line based on estimated remaining life of the field. The net carrying value of the fields in production and development is compared on a field-by-field basis with the likely discounted future net revenues to be derived from the remaining commercial reserves. An impairment loss is recognized where it is considered that recorded amounts are unlikely to be fully recovered from the net present value of future net revenues. Exploration assets are reviewed annually for indicators of impairment and production and development assets are tested annually for impairment. The impairment will be reversed if the conditions requiring the impairment is no longer applicable. Goodwill is depreciated on a straight line basis, based on calculated economical life estimated at 9 years. Participation in Joint Ventures (JV) The Company’s share in Joint Ventures licences on the Norwegian continental shelf are recognized in the income statement and balance sheet similar to using the gross method (proportionate con-solidation) in accordance with underlying rights and obligations. Research & Development Costs are expensed when incurred. Decommissioning Costs Under the terms of the concessions of the licences in which the company participate the Norwegian State has at end of field life, or when the licence expire, the right to take over the permanent instal-lations. If the State does not exercise this right, the Ministry may require the owners to partially and
NOTE
1ACCOUNTING PRINCIPLES
fully remove the installations. The Ministry of Petroleum and Energy decides whether the installations shall be removed. Provisions are made for the net present value of the estimated costs of decommissioning the installa-tions at the end of the producing lives of fields, based on price levels and technology at the balance sheet date. A decommissioning provision is recognized with a corresponding entry to property, plant and equipment. Changes in these estimates or changes to the discount rates, are dealt with prospectively and reflected as an adjustment to the provision and corresponding asset included within property, plant and equipment. Decommissioning assets are depreciated in line with tangible assets as described above. Recharges to Operated licences Salary and operating costs are allocated to the company’s various activities. As appropriate, costs are recharged to the company’s partners in those licences where Centrica is the operator. For 2011 and onwards, costs which are recharged to the operated licences are presented as a reduction in salary costs and operating costs. Receivables Accounts receivables and other receivables are included in the balance sheet at nominal value with reduction for expected losses. Provision for the expected losses are based on an individual assessment of each receivable. Foreign exchange Cash equivalents denominated in foreign currencies are measured at the foreign currency rate at the balance sheet date. Foreign currency transactions are recorded applying the exchange rate at the date of the transaction. Spare parts and supplies Stock of spare parts and supplies is valued at the lower of cost using the FIFO principle and net realisable value. Obsolete spare parts and supplies are written off. Revenue and cost recognition Revenue is recognized in the profit and loss account when realised. Revenue is realised when own-ership is transferred to the customer at the time of delivery. The company sells crude, condensate, gas and NGL.
Costs are matched with and expensed in the same period as related income. Costs which cannot be matched directly to income are expensed in the period they are incurred. Taxes The Company’s income taxes are based on calculations and assumptions that are subject to examination by tax authorities. The company accrues for uncertain tax positions when it is more likely than not that the Company’s position will not be sustained or based on the latest resolution made by the tax authorities even if appealed by the company. Over/under lift Over and under lift of hydrocarbons are valued at marked price (estimated sales value deducted for cost of sales). Changes in over lift balances are accounted for as a decrease or increase in cost of sales. Changes in under lift balances are accounted for as a decrease or increase in revenue. Over lift is classified as other short term liabilities and under lift is classified as other receivables. Pensions The company has a contribution based pension arrangement were costs are expensed as incurred. The arrangement meet the requirement of mandatory pension arrangement “OTP”. Purchase and sale of licence shares For purchases or sales of licence shares (Farm-in / Farm-out agreements) during the exploration phase, where all or part of the consideration is tied to carry agreements, the cost is booked as incurred according to the appropriate accounting principles. Any consideration paid as part of the transfer is recorded as a reduction of the carrying value. Any consideration in excess of the carrying value is recorded to the income statement. Payment received from the buyer during the settlement period are recorded as a reduction to cost.
28 29
CENTRICA ENERGI NUF
Ordinary purchase and sale of licence shares are considered fulfilled when official approval is received and agreement is closed. Statement of cash flows The statement of cash flow is presented using the indirect method. Cash and cash equivalents includes cash, bank deposits and other short term liquid investments with maturities of three months or less. From 2016 change in short term loan from related parties is presented under financing activities. Previous year this was presented under operating activities. For comparison 2015 cash flow has been reclassified to be in line with updated cash flow presentation. Centrica Energi NUF – ownership Centrica Energi NUF is owned by Centrica Norway Ltd which is owned by Centrica Plc. Centrica Plc is registered in England and Wales. Office address: Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD, England. Centrica NUF accounts are included in the Centrica Plc group accounts. Centrica Group Accounts can be requested by contacting Centrica PLC, or on Centrica PLC’s website: www.centrica.com.
Revenue relates to sales of oil, NGL and gas production on Statfjord, Vale, Heimdal, Kvitebjørn and Valemon, in addition to processing and transport services provided by the Heimdal installation. All sales are within Europe.
2016 2015
Sale of crude oil 2 612 263 960 2 473 086 515
Sale of natural gas liquids 534 892 933 642 587 582
Sale of gas 3 430 016 808 4 502 799 162
Transport and processing services 294 067 654 232 727 000
Total 6 871 241 356 7 851 200 258
2016 2015
Geology and geophysics 14 860 504 23 151 980
Seismic 77 023 581 131 954 567
Special studies 1 892 450 5 939 593
Other exploration expenses 47 161 009 77 082 283
Total 140 937 544 238 128 423
Auditors’ remuneration:
2016 2015
Statutory audit 1 070 832 1 556 000
Tax compliance and advice 0 40 000
Other compliance services "not statutory audit related" 196 750 210 000
Total 1 267 582 1 806 000
VAT is not included in audit fee.
NOTE
2REVENUES
NOTE
3EXPLORATION EXPENSES
NOTE
4AUDITORS’ REMUNERATION
2016 2015
Salaries 1) 222 433 955 258 135 810
Social security costs 33 965 725 39 138 694
Pension costs 17 036 387 16 173 673
Other compensations 3 029 628 8 347 967
Charges to JV partners (122 874 226) (114 129 888)
Total 153 591 469 207 666 255
1) Salaries include bonus, severance packages and expatriate cost in additon to base pay. Average number of employees for 2016 was 126.0 (2015: 124.0).
Remuneration to management:
Salary and pension 5 976 211
Other compensations 148 560
Total 6 124 771
The company is subject to the requirements of the Mandatory Company Pensions Act, and the company`s pension scheme comply with these requirments. The pension plan is a contribution based pension arrangement and the period`s contributions are recognised in the income state-ment as pension cost. The Asset Director Norway takes part in Centrica’s Long Term Incentive Scheme (LTIS). Any awarded shares are released free of charge after a 3 year period, provided that a number of pre-defined conditions are met and that Asset Director Norway is still employed by the Company. No other benefits, including ‘golden parachutes’, loans or security has been given to the Asset Director Norway or members of the board.
Capitalised exploration Goodwill Other TOTAL
Cost as of 01.01 1 373 647 320 1 873 080 479 34 394 267 3 281 122 066
Additions 1), 2) 75 148 548 0 170 827 75 319 375
Transfer to Asset under construction (1 062 142 504) 0 0 (1 062 142 504)
Cost as of 31.12 386 653 364 1 873 080 479 34 565 093 2 294 298 936
Accumulated depreciation 0 853 080 479 20 144 513 873 224 992
Accumulated write-off 6 754 558 1 020 000 000 170 827 1 026 925 385
Book value 31.12 379 898 806 0 14 249 754 394 148 560
Annual depreciation 0 98 995 654 5 868 504 104 864 158
Annual write-off 2) 6 754 559 0 170 827 6 925 386
Depreciation methodStraight Line
(9 years)
1) The capitalised exploration costs are mainly related to Valemon Exploration and Fogelberg. 2) Additions and write-off on other intangible assets are related to capitalised hedge.
Goodwill is related to acquisition of Marathons share in the Heimdal area in 2008. Goodwill is depre-ciated over 9 years which is the weighted average expected economic life and remaining licence period for business acquired. Last year of goodwill depreciation is 2016.
NOTE
5PAYROLL EXPENSES
NOTE
6INTANGIBLE ASSETS
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CENTRICA ENERGI NUF
Assets under development
Producing assets
Fixtures and fittings
Office Equipment TOTAL
Cost as of 01.01 929 946 021 20 916 496 212 27 525 938 67 172 693 21 941 140 864
Additions 1 024 515 088 1 117 036 163 243 440 1 380 371 2 143 175 062
Change in estimate for decommisioning assets 0 526 862 034 0 0 526 862 034
Transfer from other intangible assets 1 062 142 504 0 0 0 1 062 142 504
Cost as of 31.12 3 016 603 613 22 560 394 409 27 769 378 68 553 064 25 673 320 464
Accumulated depreciation 01.01 0 9 848 840 652 6 031 355 49 458 294 9 904 330 301
Accumulated write-off 01.01 0 1 918 182 731 0 0 1 918 182 731
Annual depreciation and write-off 0 1 927 350 204 4 209 960 8 570 504 1 940 130 668
Accumulated depreciation 31.12 0 12 044 719 484 10 241 315 58 028 798 12 112 989 597
Accumulated write-off 31.12 0 1 649 654 103 0 0 1 649 654 103
Book value 31.12 3 016 603 613 8 866 020 822 17 528 064 10 524 266 11 910 676 764
Annual depreciation 0 2 195 878 832 4 209 960 8 570 504 2 208 659 296
Reversal of impairment losses1) 0 (268 528 628) 0 0 (268 528 628)
Depreciation method UoP/Straight Line 2)
Straight Line
Straight Line
Estimated useful lives (years) 5 - 10 years 3 years
1) The carrying values of PP&E are tested annually for impairment/reversal of impairment and are reviewed for impairment/reversal of impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Residual values and useful lives are reassessed annually and if necessary changes are accounted for prospectively. The future post-tax cash flows used for impairment are discounted using a post-tax nominal discount rate of 9.0% (2015: 9.0%) to determine the fair value less cost of sales. Inflation rate used for impair-ment calculations is 2.0% (2015: 2.0%). WACC is 9.0% (2015: 9.0%) and is calculated based on the cost of capital and the cost of debt. It is applied to the average capital employed when calcu-lating economic profit to ensure projects cover their cost of capital. Commodity prices used in the impairment calculations are based on observable market data and in part on internal estimates. In the impairment calculation a forward oil price, in the liquid period for the next 4 years is used amounting to respectively USD 53.5/bbl, USD 55.5/bbl, USD56.5/bbl and USD64.7/bbl, as well as a forward rate for USD versus GBP at 1.3 for 2017 and NOK versus USD at 8.5 for 2017.
Reversal of impairment losses in producing assets are related to Kvitebjørn field.
2) All licences are depreciated according to UoP (Unit of Production) method with the exception of Heimdal which is depreciated straight-line over expected lifetime. Capitalised interest cost for 2016 was NOK 46.7 mill and for 2015 NOK 10.0 mill.
NOTE
7PROPERTY, PLANT AND EQUIPMENT
Operating leases Until April 2015 the company leased office space in Veritasveien 25 from Det Norske Veritas AS and DONG E&P Norge AS. The rent in 2015 amounted to NOK 4.2 million. In March 2015 the company moved into new office space in Veritasveien 29 and the rent in 2016 was NOK 18.7 mil-lion (2015 NOK 16.4 million). The office in Veritasveien 29 is leased from Rosenberggata 101 AS and the new lease agreement expires 10 years from handover date. The company has the option of extending the contract by 5+5 years. Office lease cost is classified as an operating lease and included in the income statement.
2016 2015
Services supplied by related companies 123 389 640 128 270 455
Consultancy 51 530 103 61 929 759
Recruitment 79 247 963 710
Insurance 47 940 826 79 061 565
IT including software maintenance 11 706 189 13 360 466
Travel expenses 3 221 418 4 517 452
Other costs 59 398 834 49 188 951
Charges to operated licences (114 590 891) (120 239 369)
Total 182 675 365 217 052 989
2016 2015
Spare parts and supplies 236 410 566 255 379 121
Total 236 410 566 255 379 121
Spare parts and supplies relates primarly to non-operated licences. There is no information from the operator which indicate the existence of obsolete spare parts or supplies at year end.
2016 2015
Restricted cash included as part of cash and bank deposits 9 640 057 9 851 511
Total 9 640 057 9 851 511
NOTE
8OTHER OPERATING EXPENSES
NOTE
9SPARE PARTS AND SUPPLIES
NOTE
10CASH AND CASH EQUIVALENTS
Office lease future minimum lease payments 2016 2015
Payable within
1 year 19 355 711 18 917 525
2 to 5 years 84 163 062 80 624 028
Thereafter 77 163 381 89 632 756
Total 180 682 154 189 174 309
Refrence is made to note 17 commitments.
32 33
CENTRICA ENERGI NUF
Taxes Payable/Basis for tax refund 2016 2015
Net income before taxes 2 016 495 474 (2 260 997 460)
Permanent differences 536 904 037 2 623 838 546
Changes in temporary differences 9 121 758 1 915 771 554
Basis for company tax before loss carried forward 2 562 521 269 2 278 612 640
Basis for company tax 2 562 521 269 2 278 612 640
Financing costs only subject to 28% tax 131 838 852 176 712 936
Uplift (440 003 380) (414 552 516)
Basis for special tax 2 254 356 741 2 040 773 060
Company tax charged through Profit and Loss accounts (27%) (640 630 317) (623 096 573)
Special tax charged through Profit and Loss accounts (51%) (1 194 809 073) (1 055 662 008)
Provision for possible outstanding tax liability in previous years (250 024 138) (319 952 130)
Tax payable charged to the income statement (2 085 463 528) (1 998 710 710)
Total Company tax in balance sheet 640 630 317 623 096 573
Total Special tax in balance sheet 1 194 809 073 1 055 662 008
Term payments (226 000 000) (819 603 362)
Provision for possible outstanding tax liability in previous years 987 087 719 726 000 000
Tax payable /(receivable) in balance sheet 2 596 527 109 1 585 155 218
Specification of temporary differences – computation of deferred taxes Changes 2016 2015
Fixed assets 549 602 906 2 084 289 222 1 534 686 316
Other Fixed Assets (2 454 810) (6 938 650) (4 483 840)
Decommissioning - net (478 327 964) (2 684 887 749) (2 206 559 785)
Other Temporary differences (77 941 890) (408 673 561) (330 731 671)
Net temporary differences (9 121 758) (1 016 210 738) (1 007 088 980)
Basis for deferred tax - company tax (9 121 758) (1 016 210 738) (1 007 088 980)
Fix assets related to hedging exempt from special tax 0 605 735 605 735
Fix assets related to capitalised interest exempt from special tax 8 198 681 (46 409 327) (54 608 008)
Basis for deferred tax - special tax (923 077) (1 062 014 330) (1 061 091 253)
Deferred tax in balance sheet (817 372 044) (814 150 609)
Income taxes charged to the income statement consist of: 2016 2015
Tax payable/Tax refund, exploration expenses (1 835 439 390) (1 678 758 580)
Changes in deferred taxes 2 280 440 517 258 320
Changes in deferred taxes - special tax 489 231 975 052 096
Adjustment prior year periods (247 869 224) (319 952 131)
Effect of change in the tax rate 451 762 1 080 045
Total taxes charged to the income statement (2 080 087 182) (505 320 250)
NOTE
11INCOME TAXES
Effective tax rate reconciliation 2016 2015
Income before taxes 2 016 495 474 (2 260 997 460)
Expected tax charge 78% (1 572 866 470) 1 763 578 019
Permanent differences (418 785 149) (2 046 594 066)
Financial items net (69 874 592) (90 123 597)
Uplift 233 201 791 211 421 783
Deferred tax exempt from special tax (4 345 301) (1 991 396)
Adjustment prior year periods (247 869 224) (319 952 131)
Correction prior years 0 (22 738 907)
Effect of change in the tax rate* 451 762 1 080 045
Total taxes charged to the income statement (2 080 087 182) (505 320 250)
The tax rate on company tax is from fiscal year 2017 reduced to 24%. Deferred tax liability and deferred tax asset as of 31 December 2016 has been calculated with a tax rate of 24% for company tax and special tax of 54%.
2016 2015
Prepaid expenses 8 166 348 25 743 672
Line-fill 30 738 745 30 738 745
Under lift producing fields 65 719 090 131 531 209
Accrued income 391 367 872 389 971 720
Receivables non-operated licences 3 241 744 32 575 544
Under call non-operated licences 502 373 355 338 228 121
Other receivables 0 6 300 820
Total 1 001 607 152 955 089 830
2016 2015
Other licence related liabilities 1) 571 943 277 699 252 342
Over lift producing fields 103 250 089 28 621 146
Over call operated licences 59 607 300 52 637 936
Deferred revenue 10 462 980 9 014 417
Salary and bonus accrual 138 105 731 107 220 192
Accrual restructuring cost 2) 37 762 072 0
Other accruals 3) 600 666 082 990 112 607
Total 1 521 797 531 1 886 858 639
The company has no debt with more than 5 years maturity. 1) Other licence liabilities relate to both operated and not operated licences. 2) Accrual for severance payment and other restructuring related cost, refrence is also made to note 24. 3) Other accruals include future payments related to contingent consideration, tariff costs and other miscellaneous short term liabilities.
NOTE
12OTHER RECEIVABLES
NOTE
13OTHER PAYABLES
34 35
CENTRICA ENERGI NUF
Changes in equity during the year
Shareholder's equity
Loss carried forward
Other equity Total
Equity/Head office current account 01.01 4 994 999 998 (4 432 407 429) 7 994 808 570 587 377
Hedge 0 0 170 827 170 827
Share scheme cost 0 0 (8 165 634) (8 165 634)
Capital increase 1 750 000 000 0 0 1 750 000 000
Loss carried forward 0 (63 591 708) 0 (63 591 708)
Equity/Head office current account 31.12 6 744 999 998 (4 495 999 137) 0 2 249 000 861
The company performed an equity contribution of NOK 1 750 000 000 in 2016 for settlement of structural funding loan, reference is made to note 15 balance with related parties.
The company is a branch (NUF) owned 100 % by the UK registered entity Centrica Norway Ltd which is owned by Centrica Plc, a FTSE 100 company. The Equity/Head office current account is deemed equity based on decision made by head office.
Intercompany Related parties 2016 2015
Short term loans to related parties Centrica Overseas Holding Ltd 1) 709 714 825 91 791 142
Total 709 714 825 91 791 142
Receivable - related parties Multiple related parties 466 852 583 469 538 716
Total 466 852 583 469 538 716
Long term loan from related parties Centrica International BV 2) 4 000 000 000 5 000 000 000
Total 4 000 000 000 5 000 000 000
Short term loan Centrica International BV 2) 0 750 000 000
Total 0 750 000 000
Short term debt - related parties Multiple related parties 126 123 691 117 077 784
Total 126 123 691 117 077 784
1) Centrica Energi has a draw down funding facility of NOK 2 750 million with Centrica Overseas Holding Limited with expiry date September 28, 2017. In January 2017 the repayment date for the facility was extended to 29 of October 2018. 2) Centrica Energi has as per 31 December, 2016 a structural funding loan agreements of total NOK 4 000 million from Centrica International BV with expiry date September 24, 2018. In 2016 the structural funding loans with expiry date September 2016 on NOK 750 million and September 2017 NOK 1 000 million were settled as part of increase in shareholders equity, reference is made to note 14 Equity/Head office account. The interest rate is supplied by Centrica Plc and added to the company loan. Reference is made to note 23 for transactions with related parties.
NOTE
14 EQUITY/HEAD OFFICE ACCOUNT
NOTE
15BALANCES WITH RELATED PARTIES
2016 2015
Decommissioning obligations at 01.01. 4 552 261 590 5 517 484 031
Addition new decommissioning projects 99 210 709 0
Decommissioning cost in balance (44 672 726) (253 430 903)
Decommissioning cost in profit and loss 0 (30 487 641)
Revision in estimates 427 651 325 (803 766 126)
Interest expenses 99 916 643 122 462 229
Asset decommissioning obligation at 31.12. 5 134 367 542 4 552 261 590
Assets related to decommissioning at 01.01. 2 296 363 408 3 689 612 946
Additional assets/revision in estimates 526 862 034 (803 766 126)
Depreciation (406 279 607) (589 483 412)
Assets related to decommissioning at 31.12. 2 416 945 836 2 296 363 408
The provision for future decommissioning of offshore installations is recognized at the net present value of the estimated cost at the end of the installation’s life of field, based on the assumption of today’s technology and level of cost. Future decommissioning costs are then discounted using index based treasury bonds as the most appropriate risk free interest rate. As per 31 December, 2016 the interest used is 1.2% (31 December, 2015: 2.2%). Assets related to decommissioning is also included in note 7 under “Producing assets”. The interest expense is classified as finance cost in the profit and loss account. Total obligation includes a short-term portion as per December 31, 2016 of NOK 5 865 806 (December 31, 2015 NOK 91 195 668).
Leases 2016 2015
Per December 31, 2016 the maturity anlalyses for the total minimum lease payments under non-cancellable leases were:
Payable within
1 year 19 355 711 18 917 526
2 to 5 years 297 241 685 76 134 636
Thereafter 77 163 381 79 306 912
Total 393 760 777 174 359 074
The leasing commitments per December 31, 2016 mainly relates office rental and development of PL405 Oda.
Acquisition of property plant and equipment 2016 2015
Contractual commimtement for acquisition of property, plant and equipment were as follows: 1 955 564 551 2 018 992 701
Other financial commitments The amount of other financial commitments not provided in the financial statement was NOK 2 874 985 143 (2015: NOK 3 496 475 106), largely in relation to transport capacity charges.
NOTE
16PROVISION FOR DECOMMISSIONING
NOTE
17COMMITMENTS
36 37
CENTRICA ENERGI NUF
The main marked risks for Centrica Energi are fluctuations in oil and gas prices, and currency fluctuation between pound (GBP), dollar (USD) and kroner (NOK). The company have not hedged the financial risk associated with oil and gas prices. The company hedged in 2015 the currency exposure related to drilling expenses in USD, there were no new hedge agreements in 2016. The company’s credit and liquidity risk is low as the company is financed by the parent company in UK. The parten company holds a dominant position in the UK power market. Customer relationships are largly with solid participant on the NCS and related parties.
The company has per December 31, 2016 following status in terms of share in licences:
Licence number Share in %Field/ discovery Operator
Expiration of licence
PL036/PL249 50,00 % Vale Centrica Energi June - 2021
PL405 40,00 % Oda Centrica Energi Dec - 2036
PL433 50,00 % Fogelberg Centrica Energi Feb - 2042
PL528 40,00 % Ivory Centrica Energi May - 2017
PL528 B 40,00 % Ivory Centrica Energi May - 2017
PL 719 50,00 % Scarecrow Centrica Energi June - 2019
PL749 40,00 % Seychelles Centrica Energi Feb - 2022
PL757 40,00 % Batur Centrica Energi Feb - 2021
PL 798 40,00 % Riesling Centrica Energi Feb - 2023
PL 811 40,00 % Gullaxy Centrica Energi Feb - 2024
PL 852 60,00 % Scarecrow Centrica Energi June - 2021
PL036 BS 28,80 % Heimdal Statoil Petroleum June - 2021
PL037 23,13 % Statfjord area Statoil Petroleum Aug - 2026
PL050 ES 13,00 % Valemon Statoil Petroleum Sept - 2031
PL050 FS 13,00 % Valemon Statoil Petroleum Sept - 2031
PL050 GS 13,00 % Valemon Statoil Petroleum Sept - 2031
PL050 HS 13,00 % Valemon Statoil Petroleum Sept - 2031
PL193 B 13,00 % Valemon Statoil Petroleum Sept - 2031
PL193 D 13,00 % Valemon Statoil Petroleum Sept - 2031
PL193 19,00 % Kvitebjørn Statoil Petroleum Sept - 2031
PL193 C 19,00 % Kvitebjørn Statoil Petroleum Sept - 2031
PL193 E 19,00 % Kvitebjørn Statoil Petroleum Sept - 2031
PL745 S 20,00 % Jesper Statoil Petroleum Feb - 2022
PL475 BS 20,00 % Maria Wintershall Norge Feb - 2036
PL475 CS 20,00 % Maria Wintershall Norge Feb - 2036
PL 734 30,00 % Zeppelin Wintershall Norge Feb - 2021
PL 836 S 30,00 % Yoshi Wintershall Norge Feb - 2023¨
PL627 20,00 % Skirne East Total E&P Norge Feb - 2021
PL627 B 20,00 % Skirne East Total E&P Norge Feb - 2021
PL 795 20,00 % Ravenwood Total E&P Norge Feb - 2023
NOTE
18FINANCIAL AND MARKET RISKS
NOTE
19LICENCE OWNERSHIP
Licence number Share in %Field/ discovery Operator
Expiration of licence
PL 810 30,00 % Katie Faroe Petroleum Norge Feb - 2023
PL 825 30,00 % Rungne Faroe Petroleum Norge Feb - 2023
PL644 20,00 % Hades OMV Norge Feb - 2020
PL644 B 20,00 % Hades OMV Norge Feb - 2020
PL 778 20,00 % Høvring Lundin Norway Feb - 2022
PL 832 20,00 % Dionysos Shell Norge Feb - 2025
The licences on the Norwegian continental shelf are owned by Centrica Resources (Norge) AS. The rights to the licences is throught a pass through agreement transferred to Centrica NUF through Centrica Overseas Holding Ltd.
Reserves as of December 31, 2016 are based on numbers from the fields’ respective operator. The Vale and Statfjord fields are adjusted based on company’s own evaluation of life cycle based on the operators production profiles.
2016 2015
Licence Gas bfcLiquid
mmboeTotalt
mmboe Gas bfcLiquid
mmboeTotalt
mmboe
Producing fields:
Heimdal 4,85 0,15 0,96 6,51 0,20 1,29
Vale 16,22 1,80 4,51 20,68 2,08 5,52
Statfjord Unit 79,96 17,87 31,20 83,91 19,66 33,64
Statfjord Nord 1,44 5,39 5,63 1,29 5,39 5,61
Statfjord Øst 0,59 1,00 1,10 0,61 1,06 1,16
Sygna 0,0 0,82 0,82 0,0 0,98 0,98
Kvitebjørn 261,94 11,24 54,90 285,32 10,46 58,02
Valemon 1) 56,24 2,20 11,57 78,34 4,06 17,12
Development fields:
Maria 12,34 27,19 29,25 12,34 27,19 29,25
Oda 6,40 16,26 17,33 5,51 16,29 17,21
Total 439,97 83,93 157,26 494,52 87,38 169,80
Increase due to purchase - -
Increase in reserves of exploration fields 0,12 -2,74
Increase in reserves in producing fields 10,43 8,83
NOTE
20RESERVES (NOT AUDITED BY EXTERNAL AUDITOR)
1) Increase in reserves from the discovery in 2017 from Valmon West is not included, refrence is made to note 24.
Gaffnew, Cline & Associates conduct yearly an independent review of reserves to Centrica Plc. For the company have Gaffnew, Cline & Associates conducted an independent review in 2016 of the fields Valemon, Kvitebjørn and Maria.
1 mill boe = 6 BCF
38 39
CENTRICA ENERGI NUF
Foreign exchange rates applied at year end are group given exchange rates.
2016 2015
Pounds (GBP) 10,6621 13,0412
US dollars (USD) 8,6403 8,8515
Euro (EUR) 9,0870 9,6175
2016 2015
Interest income 19 856 399 4 612 566
Intercompany interest income 4 567 924 0
Interest income 24 424 323 4 612 566
Foreign exchange gain 112 941 037 352 113 238
Hedging 0 166 892
Other financial income 112 941 037 352 280 129
Finance income 137 365 360 356 892 695
Interest expenses 6 324 358 19 945 762
Intercompany loan interest expenses 243 106 379 309 654 468
Capitalised borrowing cost (46 702 042) (10 008 468)
Interest expenses 202 728 696 319 591 762
Foreign exchange losses 127 194 084 301 035 243
Unwind of discount on decommissioning provisions 99 916 643 122 462 229
Other financial expenses 219 812 1 222 851
Other financial expenses 227 330 539 424 720 324
Finance cost 430 059 235 744 312 085
Net financial items (292 693 875) (387 419 390)
NOTE
21FOREIGN EXCHANGE RATES USED AT YEAR END
NOTE
22FINANCIAL ITEMS
Transaction with related parties:
a) Sales of products and services Intercompany 2016 2015
Sale of Crude Oil Centrica Resources Ltd 231 639 924 415 835 963
Sale of Dry Gas British Gas Trading 3 424 421 765 4 502 656 192
Sale of services Centrica Resources Ltd 11 528 229 9 885 205
Sale of services Centrica North Sea Oil Limited 85 023 0
Sale of services Centrica North Sea Gas Limited 302 089 0
Interest income on loan to related parties Centrica Overseas Holdings Ltd 4 567 924 0
b) Purchase of products and services Intercompany 2016 2015
Purchase of services from related parties British Gas Trading 77 752 022 123 199 668
Purchase of services from related parties Centrica Production Services Ltd 140 800 512 147 722 619
Interest expenses on loan from related parties Centrica Overseas Holdings Ltd 5 316 916 43 654 057
Interest expenses on loan from related parties Centrica International BV 237 789 463 266 000 411
The purchase of services from Centrica Production Services Ltd mainly relates to management fee and corporate charges. For remuneration to management, see note 5. For intercompany balances see note 15. In addition in year insurance charges of NOK 47 256 296 has been recharged from Centrica Plc.
On the 17th of January 2017 as part of the APA 2016 Centrica was awarded share in 4 new licences, none of them as operator.
Following the reorganisation changes in the company in 2016, 13 employes will receive severance payment in 2017 and 2018.
In early 2017 a gas discovery was announced at Valemon West, in which Centrica owns a 13% interest. Centrica’s share of reserves is estimated at 2,4-6,3mmboe and production is expected to start later in Q1 2017 started in March 2017. New information has been assessed towards impair-ment and/or reversal of prior year impairment. Based on available sources of information there are no clear indication for increase in asset value or decrease in asset value.
In February 2017, Centrica as operator for the Oda field awarded contracts for drilling, production system and subsea equipment in connection with the development of the Oda field in the North Sea.
No other subsequent events have been identified which impact the financial information as per December 31, 2016.
NOTE
23TRANSACTIONS WITH RELATED PARTIES
NOTE
24SUBSEQUENT EVENTS
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IndependentAuditor’s Report
The Independent Auditor’s Report covers the financial statement starting on page 18. Information prior to the financial statement on page 39 is unaudited and not covered by the Independent Auditor’s Report.
42 43
Centrica Norway | Visiting adress: Veritasveien 29, Stavanger Post adress: P.O. Box 520 Sentrum, 4003 Stavanger, NorwayTelephone: +47 51 31 00 00 | E-mail: [email protected] Web adress: www. centrica.no
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