Description of the company’s business
Petoro AS was established by the Ministry of Petroleum and Energy on behalf of the Norwegian government on 9 May 2001. The company’s objective is to be responsible, on behalf of the government, for managing the commercial aspects of the State’s Direct Financial Interest (SDFI) in petroleum activities on the Norwegian Continental Shelf, and associated activities.
The state is the majority shareholder in Statoil ASA and the owner of the SDFI. On this basis, Statoil handles marketing and sale of the government’s petroleum. Petoro is responsible for monitoring that Statoil discharges its responsibilities under the applicable marketing and sale instruction.
Petoro AS is also responsible for presenting separate annual accounts for the SDFI portfolio. The cash flow for the SDFI is accordingly excluded from the limited company’s annual accounts.
Petoro Iceland AS was established in December 2012 as a wholly-owned subsidiary of Petoro AS. The objective of the company is, on behalf of the Norwegian state and at the expense and risk of the state, to be responsible for the commercial aspects related to the State’s Direct Financial Involvement in petroleum activities on the Icelandic Continental Shelf, and associated activities. The company has no employees. A management contract has been entered into with Petoro AS.
Group and consolidation
The consolidated accounts include the parent company, Petoro AS, and the Petoro Iceland AS subsidiary. They have been prepared as if the group was a single financial unit where transactions and accounts between the companies are eliminated.
The consolidated accounts have been prepared on the basis of uniform principles in that the subsidiary applies the same accounting principles as the parent company.
Classification of assets and liabilities
Assets intended for ownership or use over a longer period are classified as fixed assets. Other assets are classed as current assets. Receivables due within one year are classified as current assets. Similar criteria are applied for classification of current and long-term liabilities.
Fixed assets are carried at historical cost with a deduction for planned depreciation. Should the fair value of a fixed asset be lower than the book value, and this decline is not expected to be temporary, the asset will be written down to its fair value. Fixed assets with a limited economic lifetime are depreciated on a straight-line basis over their economic lifetime.
Shares in subsidiaries
Investments in subsidiaries are assessed in accordance with the cost method.
Accounts receivable and other receivables are carried at face value.
Bank deposits include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
Petoro implemented a new pension plan with effect from 1 January 2016. This is a defined contribution plan pursuant to the Defined Contribution Pensions Act. The company has a transitional arrangement for employees who are less than 15 years from retirement age. Premiums for the defined contribution plan are expensed on a continuous basis.
The capitalised obligation relating to the defined benefit plan for employees who remain in the defined benefit scheme, is the present value of the defined obligation on the balance sheet date less the fair value of the plan assets, adjusted for unrecorded change in estimates. The pension obligation is calculated annually by an independent actuary on the basis of a linear earnings method and expected final pay. The pension plan is valued at its expected fair value. The net book liability includes payroll tax.
Net pension expense is included in payroll expenses and comprises premiums for the defined contribution scheme and pension rights earned over the period, interest charges on the estimated pension obligation, expected return on pension plan assets, the recorded effect of estimate changes and accrued payroll tax from the defined benefit scheme. Payment of earned pension rights in the event of early retirement is reported as pension.
Changes made to estimates as a result of new information or changes in actuarial assumptions in excess of the larger of 10 per cent of the value of the pension plan assets or 10 per cent of the pension obligations are recorded in the income statement over a period which corresponds to the employees’ expected average remaining period of employment.
Current liabilities are assessed at their face value.
The company is exempt from tax with regard to Petoro AS pursuant to Section 2-30 of the Taxation Act. Tax expense in the consolidated accounts applies to Petoro Iceland AS.
The company receives appropriations from the government for services provided to the Ministry of Petroleum and Energy in accordance with the company’s objective. This operating contribution is appropriated annually by the Storting (parliament). The operating contribution is presented in the accounts as operating revenue.
Contributions for special projects are recorded as income in line with costs expended in the projects (matching principle).
The contribution applied to investment for the year is accrued as deferred revenue and specified as a liability in the balance sheet. The deferred contribution is recorded as income in line with the depreciation of the investments and specified as deferred revenue in the income statement.
Transactions in foreign currencies are recorded at the exchange rate on the transaction date. Receivables and liabilities in foreign currencies are recorded at the exchange rate on the balance sheet date.
Cash flow statement
The cash flow statement is prepared in accordance with the indirect method. Cash and cash equivalents include cash in hand and at bank, as well as other current liquid assets.