Petoro - a driving force on the Norwegian continental shelf

SDFI and Petoro annual report 2018

Petoro AS - Notes

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Note 1 - Government contribution and other revenue

The appropriation for the year. excluding VAT. was NOK 280.3 million. The amount is recorded as operating contribution from the Norwegian government. Other revenue primarily relates to invoicing of services provided to Petoro Iceland AS.


Note 2 - Deferred revenue

The change in deferred revenue comprises deferred revenue related to NOK 3.7 million in investments made during 2018. ref. Note 4. as well as NOK 3.5 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 1000)




105 421

107 223

Directors’ fees

1 841

1 787

Liability insurance for the board (applies to the entire board of directors)



Payroll tax

15 632

16 038

Pensions (see Note 11)

31 991

31 222

Other benefits

3 557

4 242


158 547

160 620


Employees at 31 December



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



Average number of full-time equivalents employed




Remuneration of senior executives 
 (All figures in NOK 1000)

Fixed salaries1

Loyalty scheme2

Cash allowance3

Other taxable benefits4

Taxable pay

Expensed pension


Grethe K. Moen

3 369




3 771

2 431

Rest of the management team:


Olav Boye Sivertsen5

1 921




2 621


Roy Ruså

2 300




2 678


Ole Njærheim

2 337




2 619


Jonny Mæland6

2 128




2 770


Kjell Morisbak Lund7

2 687




3 045


Hege Manskow

1 439




1 673


Rest of the management team:

12 813


1 486


15 406

2 051

  1. Fixed salaries consist of basic salary and holiday pay.
  2. The company’s loyalty scheme made disbursements in January 2018 to three managers who satisfied the terms for the scheme. This disbursement is not included in pensionable income. This scheme was discontinued in 2017.
  3. Cash allowance includes variable pay and nonrecurring disbursements. Cash allowance not included in pensionable income.
  4. Other administratively set remuneration includes car allowance. as well as minor remuneration for new subscriptions. telephone and broadband communication. 
  5. Cash allowance includes compensation (nonrecurring disbursement) for surrendering the right to early pension. Not included in holiday pay or pension.
  6. Cash allowance (nonrecurring disbursement) in connection with employment. Not included in holiday pay or pension.
  7. Fixed salaries includes cash allowance as compensation for loss of defined benefit pension calculated based on actuarial assumptions and pensionable income.

Grethe K. Moen. Olav Boye Sivertsen and Roy Ruså have a transitional arrangement for pension that is still defined benefit. while other executives in the company have a defined contribution arrangement.

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. The loyalty scheme was discontinued in 2017. The second of three discontinuation rates was disbursed in January 2018.



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 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. The board determines compensation for the CEO. who in turn determines the compensation for other members of the company’s senior management within the approved framework.

Main principles for remuneration
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 principles for good corporate governance.

Basic pay is the main component in Petoro’s compensation scheme. Senior executives are also entitled to benefits on an 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.

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.

Petoro has a variable salary scheme. The principle and framework for performance-related salary have been stipulated by the board and embedded in 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. This scheme covers all employees. including the President and CEO. with an equal percentage of basic salary. The board will assess goal attainment and stipulate performance-related salary in accordance with the assessed goal attainment within the framework of 10 per cent of basic salary.

On 4 May 2017. the board decided to discontinue the loyalty scheme for employees. The President and CEO was not covered by this scheme. which was established in 2013 to aid the competitive situation. The discontinuation has been implemented with disbursement of the final payment in January 2019 to employees who were part of the scheme at the date of discontinuation.

Share programmes. options and other option-like arrangements are not used in Petoro.

Petoro AS implemented a new pension plan for the company with effect from 1 January 2016. This is a defined contribution plan pursuant to the Defined Contribution Pensions Act. From the same date. Petoro AS has no collective pension plan for employees with pay above 12 G. Petoro AS has a transitional scheme that is still defined-benefit also for pay above 12 G. This is the same for executives as for other employees less than 15 years from retirement age (67) at 1 January 2016. 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. The 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 can choose to resign at age 65 with reduced benefits. The remaining executives retire at 67. These pension agreements were established before the new guidelines of 13 February 2015 on employment terms for senior executives in state-owned companies came into force.

Senior executives appointed after the new guidelines came into force 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 AS will have no new senior executives with a defined benefit pension and no pension expenses over and above those which follow from the defined benefit plan will accrue (pursuant to the Defined Contribution Pension Act).

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. The board addressed the wage evaluation of the President and CEO in the board meeting on 20 September 2018. In 2018. the evaluation of other executives was carried out in the third quarter.


Note 4 - Tangible fixed assets


All figures in NOK 1000

Fixtures and fittings

Operating equipment



Acquisition cost at 1 January 2018

4 979

8 553

36 327

49 859

Additions fixed assets



3 380

3 736

Disposal fixed assets/obsolescence





Acquisition cost 31 December 2018

4 979

8 909

39 707

53 595


Accumulated depreciation 1 January 2018

4 372

8 372

31 018

43 762

Reversed accumulated depreciation





Depreciation for the year



3 151

3 472

Accumulated depreciation 31 December 2018

4 514

8 551

34 169

47 234


Book value 31 December 2018



5 538

6 360

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 2 786 860
     Currency gain agio 624 460

Financial expenses



     Interest expenses



     Currency loss disagio 215 110
     Other financial expenses



Net financial items 3 195 1 210


Note 6 - Investments in subsidiary

Company (All figures in NOK 1000)

Acquisition date

Business office

Ownership interest

Voting interest

Equity 31 December

Result 2018

Petoro Iceland AS



100 %

100 %

2 272


Petoro AS received NOK 2 million in state contributions in 2012. which are earmarked share capital in Petoro Iceland AS. The contribution is entered against the cost price of the shares. For this reason. the investments in Petoro Iceland AS are recorded on the balance sheet at NOK 0.

The company 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 in the amount 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 2018.


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

Bank deposits total NOK 230 million. including NOK 8 million in withheld tax and funds to cover unsecured pension obligations in the amount of NOK 172 million.


Note 9 - Share capital and shareholder information

The company’s share capital at 31 December 2018 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 state. and all have the same rights.


Note 10 - Equity


Petoro AS (All figures in NOK 1 000)

Share capital

Other equity


Equity at 1 January 2018

10 000

7 251 17 251
Result for 2018


5 747 5 747
Equity at 31 Dec 2018

10 000

12 998 22 998


Note 11 - Pension costs, assets and liabilities

The company is obliged to offer 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 for the company 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 as of 1 January 2016. Premiums for the defined contribution plan are expensed on a continuous basis.

Net pension cost  (all figures in NOK 1000)



Present value of benefits earned during the year

14 806

15 614

Interest expense on pension obligation

7 710

7 237

Return on pension plan assets

-3 898

- 2 852

Recorded change in estimates

5 241

3 260

Payroll tax

1 918

2 045

Pension cost. defined benefit scheme

25 777

25 304

Pension cost. defined contribution plan

6 214

5 918

Net pension cost

31 991

31 222

Calculation of the year’s net pension cost is based on the assumptions of previous years. The net pension liability is calculated on the basis of assumptions in the present year. Petoro has allocated own funds to cover unsecured pension obligations. ref. Note 8.




Discount rate

2.60 %

2.50 %

Expected return on plan assets

4.30 %

4.00 %

Expected increase in pay

2.75 %

2.25 %

Expected increase in pensions

0.80 %

0.40 %

Expected adjustment of the National Insurance Scheme’s basic amount (G)

2.50 %

2.25 %




Discount rate

2.50 %

2.60 %

Expected return on plan assets

4.00 %

3.30 %

Expected increase in pay

2.50 %

2.25 %

Expected increase in pensions

0.40 %

0.00 %

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

2.25 %

2.00 %

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

KPMG AS is the company’s chosen auditor. Fees charged for external auditing of the group’s financial statements in 2018 totalled NOK 0.4 million. There were no invoices for additional services in 2018.

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 portfolio. 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 has invoiced NOK 0.6 million for financial auditing and NOK 0.6 million for internal auditing in 2018. Costs have also been expensed for services from PwC within partner auditing totalling NOK 1.6 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 AS chose to exercise its option to extend the lease to 31 December 2020. The remaining term of the lease is now two years. with an option to renew for a further five-year period. Rent for the year totalled NOK 11.1 million. which includes all operating and shared expenses.


Note 15 - Significant contracts

Petoro has entered into an agreement with Upstream Accounting Excellence (UPAX) for the delivery of accounting and associated ICT services related to the SDFI accounts. 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. Petoro has exercised the option for a one-year extension. Evry is the sub-contractor for ICT services. The recorded accounting fee for UPAX in 2018 amounted to NOK 14.3 million. Other services purchased from the contractor totalled NOK 1.1 million.


Note 16 - Close associates

Petoro AS is the parent company for Petoro Iceland AS. The company has no employees and has entered into a management agreement with the parent company. The services as manager for Petoro Iceland AS are estimated at market price based on time spent and government travel rates. There is no debt in the parent company vis-à-vis the subsidiary at year-end.


Capitalised pension obligation



Estimated pension obligation at 31 Dec.

335 004

313 665

Pension plan assets (market value)

-101 827

-92 900

Net pension obligations before payroll tax

233 177

220 765

Unrecorded change in estimates

-66 432

-61 703

Capitalised pension obligation

166 745

159 062