Petoro - a driving force on the Norwegian continental shelf

SDFI and Petoro annual report 2012

Petoro AS - Notes

Note 1 - Government contribution and other income

The company received an operating contribution from the Norwegian government totalling NOK 225 million excluding VAT in 2012. In addition, an extra appropriation of NOK 27 million excluding VAT was provided in connection with Johan Sverdrup, of which NOK 19.5 million was recorded as income in 2012. A contribution of NOK 1.6 million was also provided in connection with the operation and establishment of Petoro Iceland AS. The net loss after financial items was NOK 8.1 million. Other revenue primarily relates to invoicing of services provided to operators of joint ventures and other joint venture partners.

Note 2 - Deferred revenue

The change in deferred revenue recorded in the income statement comprises deferred revenue related to NOK 3.7 million in investment made during 2012 as well as NOK 3.3 million in depreciation of investments made during the year and in earlier years.


Note 3 - Payroll expenses, number of employees, benefits, etc

Payroll expenses (all figures in NOK 1 000)





85 347

82 691

73 151

Payroll taxes

12 918

11 978

10 616

Pensions (note 10)

30 864

27 274

20 870

Other benefits

3 878

4 574

3 500


133 007

126 517

108 136


Employees at 31 Dec




Employees with a signed contract who had not started work at 31 Dec




Average number of work-years employed




Remuneration of senior executives
(all figures in NOK 1 000)





President, Kjell Pedersen

3 587


3 764

3 419

Rest of the management team:





Olav Boye Sivertsen

1 495


1 622


Marion Svihus

1 801


1 944


Tor Rasmus Skjærpe

2 488


2 630

1 634

Laurits Haga

2 013


2 150

1 068

Jan Rosnes

1 821


1 959


Grethe Kristin Moen

1 959


2 103

1 036

Roy Ruså

1 903


2 043


The president has chosen to retire on 11 June 2013.    

Recorded pension liabilities represent the current year’s estimated cost of the overall pension liability for the president plus the rest of the management team.

Breakdown of directors’ fees (all figures in NOK 1 000)

Directors’ fees

Gunnar Berge, chair


Hilde Myrberg, deputy chair


Nils-Henrik M von der Fehr, director


Per Arvid Schøyen, director


Mari Thjømøe, director


Line Geheb, director, elected by the employees, 1st half


Erik Aarrestad, director, elected by the employees, 1st half


Ragnar Sandvik, director, elected by the employees, 2nd half


Anniken Gravem, director, elected by the employees, 2nd half



Declaration on senior executive pay for Petoro AS

The declaration on remuneration for the president and other senior executives is in line with the provisions of the Norwegian Act on Public Limited Companies and the guidelines for state ownership, including the revised guidelines on conditions of employment for executives in state-owned undertakings and companies of 1 April 2011. These replaced the earlier guidelines for state ownership – attitude to executive pay, which dated from 2006.

Guidelines on remuneration
Petoro’s remuneration guidelines are entrenched in the company’s vision, goals and values. The relationship between the level of performance, demonstrated leadership/collegiality and reward will be predictable, motivational, clear and easy to communicate. Petoro has an integrated pay policy and system for the whole company, and aims to pay a competitive rate without being a pacesetter on remuneration in relation to the relevant market for the petroleum industry.

Decision-making process
The board determines compensation arrangements for the president, who in turn determines the compensation arrangements for the other members of the company’s senior management. The board has appointed a compensation sub-committee comprising the deputy chair and another director. The vice president for strategy and organisation provides the secretariat function for this committee, which prepares proposals and recommendations for the board on compensation issues.

Main principles for remuneration in the coming fiscal year
The compensation package for the president and the other senior executives will reflect the responsibilities and complexity of the role in question, the company’s values and culture, the relevant executive’s behaviour and performance, and the need to attract and retain key personnel. The arrangements are transparent and accord with the principles for good corporate governance.

Basic pay is the main component in Petoro’s compensation scheme. Senior executives are also entitled to benefits on the same lines as others in the company, including car allowance as well as pension and insurance benefits, but with a somewhat wider entitlement to communication allowance. Members of the management team other than the president also have a loyalty scheme which comprises an annual payment determined by the board. This amount is currently NOK 70 000, and one-third of the credit balance is paid every fifth year. The accumulated sum is lost if the executive leaves the company. Petoro does not have a bonus programme. Share programmes, options and other option-like arrangements are not used by the company.

Pay levels in a reference market comprising relevant companies in the upstream and supplies industries for oil and gas provide the basic guidelines for the company’s remuneration profile. Basic pay is primarily fixed on the basis of the responsibilities and complexity of the position, as well as its holder’s behaviour and performance. Basic pay is subject to an annual assessment.

Petoro has a defined benefit pension scheme. The president’s retirement age is 62. He can choose to retire on a full pension upon reaching the age of 60. The president reached the age of 60 on 11 December 2012. He has notified the board that he wishes to retire on a pension from 11 June 2013. Two other members of the management team also have the opportunity to retire on a full pension upon reaching the age of 62. Three members of the management team can opt to retire upon reaching the age of 65 on a reduced pension. The remaining executives retire at 67. The pension benefit is calculated as about 66 per cent of the pension basis, less an estimated National Insurance benefit. For competitive reasons, Petoro has an unfunded defined benefit plan for personnel earning more than 12 times the National Insurance base rate (G). This pension agreement was established before the revised guidelines on employment terms for senior executives in state-owned undertakings and companies came into force. It embraces all employees of the company earning more than 12G, and is not confined to senior executives.

Work has begun in Petoro on an overall review of the company’s pension schemes, taking account of industry practice for companies comparable with Petoro. The second interim report from the banking law commission will occupy a key place in this work.

Remuneration principles and their implementation in the preceding year
The annual evaluation of the basic pay of the president and other senior executives is conducted with effect from 1 July. For 2012, this assessment was carried out in the second quarter. The president’s remuneration was considered and approved by the board during the third quarter.


Note 4 - Tangible fixed assets

All figures in NOK 1 000

Fixed fittings

Equipment, etc



Purchase cost 1 Jan

4 021

8 825

27 990

40 836

Addition fixed assets



3 742

3 742

Disposal/obsolescence fixed assets


(1 385)

(7 914)

(9 299)

Purchase cost 31 Dec

4 021

7 440

23 818

35 279

Accumulated depreciation 1 Jan

2 891

8 614

25 012

36 516

Reversed accumulated depreciation


(1 385)

(7 914)

(9 299)

Depreciation for the year



2 705

3 252

Accumulated depreciation 31 Dec

3 309

7 358

19 803

30 470

Book value at 31 Dec 12



4 015


Economic life

Until lease
expires in 2014

3-5 years

3 years

Depreciation plan Linear Linear Linear  

Operational leasing contracts include the hire of a car as well as office equipment and machines. The initial hire period is three-five years.


Note 5 – Financial items

All figures in NOK 1 000




Financial income




     Interest income

3 474

3 373

2 843

     Currency gain




     Other financial income




Financial expenses




    Interest expenses




    Currency loss




    Other financial expenses




Net financial items

3 156

3 133

2 490


Note 6 - Investment in subsidiary





Voting share

Equity 31 Dec

Profit 2012

Petoro Iceland AS 11 Dec 2012 Stavanger 100% 100% NOK 2 mill 0

Petoro AS has received a contribution of NOK 2 million which is earmarked as share capital for Petoro Iceland AS. This contribution has been offset against the acquisition price of the shares. For that reason, investment in Petoro Iceland has been recorded as NOK 0 in the balance sheet.


Note 7 - Other debtors

Other debtors consist in their entirety of pre-paid costs relating primarily to rent, insurance, licences, subscriptions for market
information and VAT credits.


Note 8 - Bank deposits

Bank deposits total NOK 154.7 million, including NOK 105 million in withheld tax and pension plan assets.


Note 9 - Share capital and shareholder information

The share capital of the company at 31 December 2012 comprised 10 000 shares with a nominal value of NOK 1 000 each. All the shares are owned by the Ministry of Petroleum and Energy on behalf of the Norwegian government, and all have the same rights.


Note 10 - Equity

(All figures in NOK 1 000)

Share capital

Other equity


Equity at 1 Jan

10 000

21 401

31 401

Change in equity for the year




Net income


(8 054)

(8 054)

Equity at 31 Dec

10 000

13 348

23 348


Note 11 - Pension costs, assets and liabilities

The company is legally obliged to have an occupational pension plan pursuant to the Act on Mandatory Occupational Pensions. The company’s pension plan complies with the requirements of this Act.

The company has pension plans covering all its employees, which give the right to defined future benefits. These depend primarily on the number of years of pensionable earnings, the level of pay at retirement and the size of national insurance benefits.

Net pension cost (all figures in NOK 1 000)




Present value of benefits earned during the year

23 432

20 788

16 473

Interest expense on pension obligation

7 309

6 879

5 796

Return on pension plan assets

(4 155)

(3 899)

(3 524)

Recorded change in estimates

1 023



Payroll tax

3 255

2 854

2 323

Net pension cost

30 864

27 274

20 870

Capitalised pension obligation




Estimated pension obligation at 31 Dec

179 553

180 287

142 648

Pension plan assets (market value)

(88 545)

(80 484)

(67 940)

Net pension obligations before payroll tax

91 008

99 803

74 708

Unrecorded change in estimates

(9 585)

(32 028)

(20 875)

Payroll tax

11 481

9 683

7 591

Balanseført pensjonsforpliktelse

92 904

77 458

61 424

The following financial assumptions have been applied in calculating net pension cost and obligation:


2011 2010
Discount rate




Expected return on plan assets




Expected increase in pay




Expected increase in pensions




Expected change in NI base rate




The actuarial assumptions are based on common assumptions made in the insurance business for demographic factors.

Note 12 - Other current liabilities

Other current liabilities relate almost entirely to provision for costs incurred, pay outstanding and holiday pay.


Note 13 - Auditor’s fees

Erga Revisjon AS is the elected auditor of Petoro AS. Fees charged by Erga Revisjon to Petoro for external auditing in 2012 totalled NOK 0.2 million.

In accordance with the Act on Government Auditing of 7 May 2004, the Auditor General is the external auditor for the SDFI. Deloitte AS has also been engaged to conduct a financial audit of the SDFI as part of the company’s internal audit function. Deloitte charged NOK 1.5 million for this service in 2012. Deloitte has also executed internal audit projects and delivered services related to partner audits totalling NOK 2.2 million.


Note 14 - Business management agreements

To ensure efficient resource utilisation with an organisation totalling 65 employees, Petoro sets priorities for its work commitments in and between the interests it manages in the various joint ventures. This prioritisation reflects the significance of each joint venture to the overall value of the portfolio and risk assessments related to the various phases in a joint venture (exploration, development and production). To permit such prioritisation, Petoro has concluded business management agreements with various licence partners. These agreements delegate daily administrative supervision of selected production licences in the portfolio. Petoro nevertheless retains the formal responsibility, including responsibility for on-going financial management of the interest in the production licence. The bulk of the business management agreements have been entered into with Statoil ASA.


Note 15 - Leases

The company entered into a lease with Smedvig Eiendom AS for office premises in the autumn of 2003. The remaining term of the lease is two years, with options for a further two periods of five years each. Rent for the year was NOK 8.2 million, which included all management and shared expenses.


Note 16 - Significant contracts

Petoro has entered into an agreement with Upstream Accounting Excellence (Upax) on the delivery of accounting and associated ICT services related to the SDFI accounts. This five-year agreement was entered into in 2008, with delivery starting on 1 March 2009. Evry is the sub-contractor for ICT services. The recorded accounting fee for Upax in 2012 was NOK 15.2 million. Other services purchased from the contractor totalled NOK 0.2 million.

Note 17 - Close associates

Statoil ASA and Petoro AS have the same owner in the Ministry of Petroleum and Energy, and are accordingly close associates. Petoro purchased services in 2012 relating to business management agreements, cost sharing for the audit of licence accounts, insurance services for the Norwegian Government Petroleum Insurance Fund and other minor services. NOK 5.5 million was recorded in 2012 for the purchase of services from Statoil ASA. These were purchased at market price on the basis of hours worked. NOK 1.3 million has been invoiced for services rendered to Statoil ASA under the arm’s-length principle, based on hours worked by Petoro personnel and contract staff.
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