Petoro - a driving force on the Norwegian continental shelf

SDFI and Petoro annual report 2016

Petoro AS - Notes

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Note 1 - Government contribution and other revenue

The company recorded an operating contribution from the Norwegian government totalling NOK 273.6 million excluding VAT as income in 2016. For the group, the amount was NOK 283.9 million. The appropriation for the year, excluding VAT, was NOK 274.9 million for Petoro AS and NOK 10.3 million for Petoro Iceland AS, giving a total amount of NOK 285.2 million for the group. The figures above include an extra appropriation for Petoro AS for 2016 totalling NOK 4.2 million excluding VAT to cover external legal assistance and various technical assistance in ongoing legal disputes. 

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 2.1 million  in investments made during 2016, as well as NOK 2.8 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)



Wages and salaries

97 225

98 681 

Directors' fees 1 778 1 737 
Payroll tax

15 214

15 044 

Pensions (see Note 11)

32 852

38 881 

Other benefits

4 637

3 663 


151 706   

158 006 




Number of employees as of 31 Dec.



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



Average number of full-time equivalents employed




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

Fixed salaries1

Loyalty scheme2

Cash allowance3

Other administra-tively set renumeration4

Taxable salaries

Expensed pension


Grethe K Moen

3 184




3 651

1 844

Rest of the management team (seven people):


Olav Boye Sivertsen

1 825




2 189


Marion Svihus

2 159




2 767


Laurits Haga

2 284




2 928


Roy Ruså

2 258




2 888


Jan Terje Mathisen

2 165




2 697


Kjell Morisbak Lund 5

2 567




3 014


Nashater Solheim 6

1 146




1 214


Hege Manskow







Rest of the management team (seven people)

14 849


1 541

1 057

18 191

3 758

  1. Fixed salaries consist of basic salary and holiday pay
  2. The company’s loyalty scheme made disbursements in January 2016 to five managers who satisfied the terms for the scheme. This disbursement is not included in pensionable income
  3. Cash allowance not included in pensionable income
  4. Other administratively set remuneration, primarily fixed car allowance
  5. Fixed salaries include cash allowance as compensation for loss of the defined benefit pension scheme calculated based on actuarial assumptions and pension earning income.
  6. Remuneration through 31 May
  7. Remuneration since 2 September

Expensed pension represents the current year’s estimated cost of the overall pension liability for the CEO plus the rest of the management team, including calculated premium in the defined contribution scheme for managers covered by this. Benefits for management personnel include funds accrued in the loyalty scheme when they are disbursed. No funds were accrued in the loyalty scheme in 2016.



The declaration on remuneration for the CEO and other senior executives is in line with the provisions of the Norwegian Public Limited Liability Companies Act and the guidelines for state ownership, including the Guidelines on pay and other remuneration for senior executives in wholly or partly state-owned enterprises and companies, which came into force on 13 February 2015. 

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 shall be predictable, motivational, clear and easy to communicate. Petoro has a uniform 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 for the CEO, who in turn determines the compensation for other members of the company’s senior management. The board has appointed a compensation sub-committee comprising the deputy chair and another director. The human resources manager 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 accounting year
Petoro’s wage policy is to be competitive without being a pacesetter on overall remuneration, including the company’s pension schemes. 

The compensation package for the CEO and the other senior executives shall 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 in accordance 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 equal footing with others in the company, including car allowance as well as pension and insurance benefits, as well as  a system for communication allowance. 

The management team, with the exception of the CEO, are also covered by a loyalty scheme like other employees. The board determines from year to year whether or not to allocate funds to the scheme. No allocation was made to the scheme in 2016. The first disbursement from the scheme took place in January 2016 for employees who satisfied the conditions. The scheme was originally established in 2011 for executives. Certain executives therefore received one-third of a five-year allocation in January 2016. 

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 oil and gas industry 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. Basic pay is subject to an annual assessment. The annual need for a cash allowance is also assessed in order to reflect market developments during the previous calendar year. This cash allowance is not pensionable.

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.  From the same date, Petoro has no collective pension plan for employees with pay above 12 G. Petoro has a transitional scheme that is still defined-benefit for pay above 12 G. This is the same for executives as for other employees less than 15 years from retirement age (67). Senior executives with employment contracts entered into before 13 February 2015 are covered by the same transitional scheme as other employees.

The CEO’s retirement age is 67. Her employment contract stipulates a mutual six-month period of notice. Agreement has been entered into on a pay guarantee scheme of 12 months in addition to the period of notice. One member of the management team has the opportunity to retire on a full pension upon reaching the age of 62. Two members of the management team can choose to resign at age 65 with reduced benefits. The remaining executives retire at 67. These pension agreements were established before the revised guidelines on employment terms for senior executives in state-owned companies came into force. 

Senior executives appointed after the new guidelines came into force on 13 February 2015 will  only be covered by the company’s defined contribution plan for pay below 12 G. Consequently, after these new guidelines came into force, Petoro will have no new senior executives with a defined benefit pension and no pension expenses over and above those which follow from the tax-favoured defined benefit plan.

Remuneration principles and their implementation in the preceding year 
The annual evaluation of the basic pay of the CEO and other senior executives is conducted with effect from 1 July. In 2016, the evaluation of other executives was carried out in the second quarter. The board considered the CEO’s pay evaluation at its meeting on 26 May 2016. 


Note 4 - Tangible fixed assets


All figures in NOK 1 000

Fixtures and fittings

Operating equipment



Acqusition cost 1 Jan. 2016

4 434

8 520

29 825

42 780

Additions fixed assets



2 067

2 099

Disposal fixed assets/obsolescence





Acqusition cost 31 Dec. 2016

4 434

8 553

31 892

44 879


Acc. depreciation 1 Jan. 2016

4 144

7 924

25 853

37 921

Returned accumulated depreciation





Depreciation for the year



2 186

2 759

Acc. depreciation 31 Dec. 2016

4 231

8 410

28 040

40 680


Book value 31 Dec. 2016



3 852

4 198

Economic life

Until lease expires in 2020

3/5 years

3 years

Depreciation schedule Straight line       Straight line       Straight line        

Operational leasing contracts include office equipment and machines. The initial lease period is 3-5 years. 


Note 5 – Financial items

Financial items (all figures in NOK 1 000)



Financial income



     Interest income 933

2 093

     Currency gain



Financial expenses



  ��  Interest expenses



     Currency loss



     Other financial expenses



Net financial items Petoro AS


1 718

Net financial items from subsidiary



Net financial items group


1 813


Note 6 - Investments in subsidiary


Acquisition date

Business office


Voting share

Equity 31 Dec.

Loss 2016

Petoro Iceland AS 11 Dec. 2012 Stavanger 100% 100% 1 983 (394)

Petoro AS received a contribution of NOK 2 million in 2012 which was 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 AS has been recorded as NOK 0 in the balance sheet.

Petoro Iceland AS receives its own appropriations over the central government budget to fund its operations. It has also entered into an agreement with the parent company, Petoro AS, on an overdraft facility of NOK 3 million. This agreement has been established according to the arm’s-length principle and is based on normal commercial terms and principles, and is thereby considered to accord with the pricing of corresponding financial services in the market. The facility remained undrawn at 31 December 2016.


Note 7 - Other receivables

Other receivables 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

Of consolidated bank deposits totalling NOK 194.4 million, Petoro AS accounts for NOK 192.6 million. This includes NOK 140.5 million in withheld tax and pension plan assets. 


Note 9 - Share capital and shareholder information

The company’s share capital at 31 December 2016 comprised 10 000 shares with a nominal value of NOK 1 000 each. All 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


Petoro AS (All figures in NOK 1 000)

Share capital

Other equity


Equity at 1 Jan. 2016

10 000

11 789

21 789

Change in equity for the year




Net loss


(4 461)

(4 461)

Equity at 31 Dec. 2016

10 000

7 328

17 328


Group (All figures in NOK 1 000)

Share capital

Other equity


Equity at 1 Jan. 2016

10 000

13 378

23 378

Change in equity for the year




Net loss


(4 068)

(4 068)

Equity at 31 Dec. 2016

10 000

 9 310

19 310

Consolidated reserves include a contribution of NOK 2 million from the Norwegian government in connection with establishment of Petoro Iceland AS.


Note 11 - Pension costs, assets and liabilities

The company is obliged to operate an occupational pension scheme under the Norwegian Act on Mandatory Occupational Pension Schemes. The company’s pension plans comply with the requirements of this Act. 

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.

Net pension costs (Figures in NOK 1 000)



Present value of benefits earned during the year

16 314

29 569

Interest expense on pension obligation

7 240

5 278

Return on pension plan assets

(3 428)

(3 409)

Recorded change in estimates

5 912

5 369

Recorded change in pension plan (213) (2 766)
Payroll tax

2 300

4 770

Pension cost, defined benefit scheme

28 125

38 811

Pension cost, defined contribution scheme

4 727


Net pension cost

32 852

38 881

Capitalised pension obligation



Estimated pension obligation at 31 Dec.

274 435

291 320

Pension plan assets (market value)

(83 035)

(99 919)

Net pension obligations 

191 400

191 401

Unrecorded change in estimates

(48 975)

(60 975)

Capitalised pension obligation

142 425

130 426

Financial assumptions applied in calculating net pension expense for the year relate to the preceding year for net pension costs and to the present year for the net pension obligation. The change to pension plans at the end of 2016 is reflected in the capitalised pension obligations at 31 December.




Discount rate

2.60 %

2.50 %

Expected return on plan assets

3.30 %

3.30 %

Expected increase in pay

2.25 %

2.50 %

Expected increase in pensions

0.0 %

0.0 %

Expected adjustment of the National Insurance Scheme's Basic Amount (G)

2.00 %

2.25 %

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 group’s chosen auditor. Fees charged for external auditing of the group’s financial statements in 2016 totalled NOK 0.4 million. The figure for Petoro AS was NOK 0.3 million.

In accordance with the Act relating to the Office of the Auditor General of 7 May 2004, the OAG is the external auditor for the SDFI. PricewaterhouseCoopers AS (PwC) has been engaged as the company’s financial accountant in order to prepare a financial audit of the SDFI accounts as part of the company’s internal auditing. PwC invoiced NOK 1.2 million for financial auditing in 2016.  PwC has also delivered services within partner auditing totalling NOK 3 million.


Note 14 - Leases

Petoro AS entered into a lease with Smedvig Eiendom AS for office premises in the autumn of 2003. The ordinary term of the lease expired on 31 December 2014. Petoro chose to exercise its option to extend the lease to 31 December 2020. The remaining term of the lease is now four years, with an option to renew for a further five-year period. Rent for the year totalled NOK 9.3 million, which included all operating and shared expenses.


Note 15 - 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. This agreement entered into force on 1 March 2014 and runs for five years with an option for Petoro to extend it for a further year. Evry is the sub-contractor for ICT services. The recorded accounting fee for UPAX in 2016 amounted to NOK 13.6 million. Other services purchased from the contractor totalled NOK 4.3 million.


Note 16 - Close associates

Statoil ASA and Petoro AS have the same owner, the Ministry of Petroleum and Energy, and are close associates. Petoro purchased services in 2016 relating to the audit of licence accounts, insurance services for the State Petroleum Insurance Fund and other minor services. These were purchased at market price on the basis of hours worked. NOK 0.02 million has been invoiced for services rendered to Statoil ASA at market price, based on hours worked by Petoro personnel and contract staff.


Note 17 - Intra-group transactions

Petoro Iceland AS has entered into a management agreement with Petoro AS. The objective of the agreement is for Petoro AS to manage the operations of Petoro Iceland AS on the terms and conditions specified in the agreement. NOK 0.3 million was invoiced in 2016 for the purchase of hours and services. These services are calculated at market price on the basis of hours worked and the government rates for travel expenses. The parent company has a credit of NOK 0.1 million with the subsidiary. The amounts have been eliminated in the consolidated accounts.


Note 18 - Licences/interests

The Icelandic government awarded two licences on 4 January 2013 to explore for and produce hydrocarbons on the Icelandic Continental Shelf. A third licence was awarded in January 2014. The Norwegian government has decided that Petoro Iceland AS, through its branch office in Iceland, shall manage the Norwegian participating interest of 25 per cent in these licences. The work programme in the licences is divided into three phases, and the licensees can opt to relinquish the licences at the end of each phase. At 31 December 2016, Petoro Iceland AS had participating interests in one production licence. Both production licenses awarded in 2013 have been relinquished.


Note 19 - Tax - consolidated

Tax expense for the year, broken down as follows:



Tax payable



Icelandic tax



Total tax expense






Calculation of tax base for the year



Profit before tax expense



Permanent differences



Change in temporary differences



Loss carried forward (463) 0
Tax base for the year



Tax payable