SDFI and Petoro annual report 2022
Download report     |

Petoro AS - Notes

Note 1 - Government contribution and other revenue

NOK 289.6 million was appropriated for operation of Petoro AS, excluding VAT, in 2020. The amount is recorded as a contribution from the Norwegian government.

Other revenue primarily relates to services in connection with negotiation management in the SDFI portfolio.

Note 2 - Deferred revenue

The change in deferred revenue recorded in the income statement comprises deferred revenue related to NOK 1.8 million in investments made during 2022, as well as NOK 0.7 million in depreciation of investments made during the year and in earlier years, cf. Note 5.

Note 3 - Payroll expenses, number of employees, remuneration, etc.

Payroll expenses (All figures in NOK 1 000)20222021
Directors' fees2,0171,995
Liability insurance for the board (applies to the entire board of directors)203148
Payroll tax18,34717,173
Pensions (see Note 10)25,61330,115
Other remuneration4,9393,597
Employees at 31 December7070
Employees with a signed contract who had not started work at 31 Dec.52
Average number of full-time equivalents employed68.465.9
  1. Fixed salaries consist of basic salary and holiday pay.
  2. Cash allowance is performance-related pay. This disbursement is not included in pensionable income.
  3. Other taxable remuneration includes car allowance, as well as minor remuneration for news subscriptions and telephone service. Not included in holiday pay or pension.
  4. All members of the management team have defined contribution pension. Expensed pension represents the annual payment.

Declaration on senior executive pay for Petoro AS

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 “Norwegian State Guidelines on executive remuneration in wholly or partly state-owned enterprises and companies”, which came into force on 30 April 2021. The part of the guidelines that concerns requirements for the pay declaration entered into force following the ordinary general meeting in June 2022, and Petoro will publish a declaration on senior executive pay for 2022 in advance of the ordinary general meeting in June 2023. “Norwegian State Guidelines on executive remuneration in wholly or partly state-owned enterprises and companies’’ were most recently updated on 12 December 2022, and remain in force as of 2023. Petoro AS’ guidelines on remuneration for senior executives are updated continuously to reflect changes in the state’s guidelines.

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 and collegiality, and reward shall be predictable, motivational, clear and easy to communicate. Petoro AS has a uniform pay policy and system for the whole company, and aims to pay a competitive rate without being a pacesetter on remuneration, with reference to moderation as regards total compensation 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 HR manager acts as secretary for the committee. The compensation committee prepares proposals and recommendations for the Board in 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 
Total compensation 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 an equal footing with others in the company, including performance-related salary, car allowance, pension and insurance benefits, as well as a system for communication allowance.

Pay levels in a reference group comprising relevant companies in the petroleum industry provide 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 AS has a performance-related salary scheme to promote achievement of the company’s goals. The principles and framework for performance-related salary are adopted by the Board and take into account the “Norwegian State Guidelines on executive remuneration in wholly or partly state-owned enterprises and companies”. This scheme covers all employees, including the CEO, with an equal percentage of basic salary.

The board will stipulate performance-related salary in accordance with the assessed goal attainment within the framework of 10 per cent of basic salary. The goals included in the assessment of performance-related salary consist of select quantitative goals associated with operational and financial activities, as well as goals associated with the company’s prioritised activities. The goals shall be based on objective, definable and measurable criteria that management can influence, and are stipulated with a point of departure in the company’s strategy and risk scenario, as well as guidelines laid out in annual allocation letters from our owner.

In 2022, the following goals were included in the assessment of performance-related salary; Serious incidents (frequency), liquids production (kboed), CO2 reduction measures and project progress (decision milestones), as well as improvements in drilling efficiency in selected licences (improvement in %). This was in addition to goals and milestones linked to increasing long-term production beyond the operator’s plans, improving the work process for decision support for new wells, preparing area analyses, establishing the company’s first sustainability report and efficiency measures through the use of digitalisation. Performance-related salary for 2022 was addressed by the Board after preparation of the annual accounts. The accounts for 2022 include provision of an estimated amount for performance-related salary for the year. Performance-related salary disbursed in 2022 amounted to 9 per cent of basic salary based on the company’s goal attainment in 2021.

Share programmes, options and other option-like arrangements are not used by the company.

Petoro AS has a defined contribution-based pension scheme pursuant to the Defined Contribution Pensions Act. The company has no collective pension scheme for employees whose pay exceeds 12 G. This scheme was introduced on 1 Jan. 2016. Petoro AS 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) at 1 Jan. 2016. Senior executives with employment contracts entered into before 13 February 2015 are covered by the same transitional scheme as other employees.

Senior executives are covered by the company’s defined contribution pension scheme, which applies for salaries under 12 G (G is the basic amount in the Norwegian national insurance). Consequently, after these new guidelines came into force, Petoro AS no longer has senior executives with a defined benefit pension and no pension expenses over and above those which follow from the defined contribution plan will accrue (pursuant to the Defined Contribution Pension Act). Petoro’s internal retirement age is 70.

According to the employment agreement, the CEO has a mutual notice period of six months, as well as a six-month termination payment.

Remuneration principles and their implementation in the preceding year 
The annual evaluation of the basic pay of the CEO and other senior executives was conducted with effect from 1 July. In 2022, the evaluation of other executives was carried out in the 3rd quarter.


Note 4 – Financial items

All figures in NOK 1,00020222021
Financial income
   Interest income6,1461,897
   Currency gain210136
Financial expenses
   Interest expenses--
   Currency loss277275
Net financial result6,0791,758

Note 5 - Tangible fixed assets

All figures in NOK 1,000Fixtures and fittingsOperating equipmentICTTotal
Acquisition cost at 1 Jan. 20224,97910,46340,33155,773
Additions fixed assets2184671,0911,775
Disposal fixed assets/obsolescence----
Acquisition cost 31 Dec. 20225,196 10,93041,42157,548

Accumulated depreciation at 1 Jan. 20224,7069,49140,27054,467
Reversed accumulated depreciation----
Depreciation for the year9053991720
Accumulated depreciation 31 Dec. 20224,79610,03040,36255,188

Book value at 31 Dec. 20224009001,0602,360
Economic lifeLease term3/5 years3 years
Depreciation scheduleStraight lineStraight lineStraight line
Operational leasing contracts include office equipment and machines. The initial lease period is 3-5 years.

Note 6 - Other receivables

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

Note 7 - Bank deposits

Bank deposits total NOK 249 million, including NOK 9 million in withheld tax and funds to cover unsecured pension obligations in the amount of NOK 218 million.

Note 8 - Share capital and shareholder information

The company’s share capital at 31 December 2022 comprised 10,000 shares with a nominal value of NOK 1,000 each. All shares are owned by the Norwegian state, and all have the same rights.

Note 9 - Equity

Petoro AS (All figures in NOK 1 000)Share capitalOther equityTotal
Equity at 1 Jan. 202210,00017,59127,591
Net profit825825
Equity at 31 Dec. 202210,00018,41628,416

Note 10 - 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.

The company implemented a new pension plan with effect from 1 January 2016. This is a defined contribution plan pursuant to the Defined Contribution Pensions Act. Premiums for the defined contribution plan are expensed on a continuous basis. The company has a transitional arrangement for employees with defined benefit pension who were less than 15 years from retirement age on 1 January 2016. As of 31 December 2022, 49 employees are covered by the defined contribution scheme, while 21 employees are covered by the transitional scheme.
Net pension cost (figures in NOK 1,000)20222021
Present value of benefits earned during the year12,84212,842
Interest expense on pension obligation6,2046,204
Return on pension plan assets(3,592)(3,592)
Recorded change in estimates4,9394,939
Payroll tax1,5501,550
Pension cost, defined benefit scheme16,41621,943
Pension cost, defined contribution plan incl. payroll tax9,1978,172
Net pension cost25,61330,115
Capitalised pension obligation20222021
Estimated pension obligation at 31 Dec.366,081357,870
Pension plan assets (market value)(135,500)(142,312)
Net pension obligations 230,581215,558
Unrecorded change in estimates(45,955)(28,546)
Capitalised pension obligation184,626187,012
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 AS has allocated dedicated funds to cover unsecured pension liabilities, cf. Note 7.

The actuarial assumptions are based on common assumptions made in the insurance business for demographic factors.
Discount rate3.00%1.90%
Expected return on plan assets4.70%3.10%
Expected increase in pay3.50%2.75%
Expected increase in pensions1.50%0.00%
Expected adjustment of the National Insurance Scheme's Basic Amount (G)3.25%2.50%

Note 11 - Other current liabilities

Other current liabilities generally consists of deposits for incurred costs, salaries owed, holiday pay, withheld taxes and social security and appropriation invoiced in advance for the 1st quarter of 2023.

Note 12 - Auditor’s fees

The company’s chosen auditor is KPMG AS. Fees charged for external auditing of the consolidated financial statements in 2022 totalled NOK 0.4 million. Consultancy services from KPMG totalling NOK 6,300 have also been expensed in connection with assistance related to the digital collaboration solution.

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 conduct a financial audit of the SDFI accounts as part of the company’s internal auditing. PwC invoiced NOK 0.7 million for financial auditing and NOK 0.6 million for internal auditing in 2022. Costs have also been expensed for invoiced services from PwC within joint venture auditing totalling NOK 2.7 million.

Note 13 - Leases

Petoro AS entered into a lease with Smedvig Eiendom AS for office premises in the autumn of 2003. Petoro AS chose to exercise the last option in the lease from 2021. The remaining lease term is now 3 years. Rent for the year totalled NOK 11.6 million, which included all operating and shared expenses.

Note 14 - Significant contracts

Petoro AS has an agreement with Azets Insights AS (Azets) concerning the delivery of accounting services and associated ICT services linked to SDFI accounting. This agreement entered into force on 1 March 2020 and runs for five years with an option for Petoro AS to extend it for two years. Accounting fees carried to expense for Azets in 2022 for accountancy for the SDFI amounted to NOK 11.5 million.

Petoro AS has an agreement with TietoEVRY ASA for providing IT operations services for office support, administrative and technical petroleum solutions, as well as consultant assistance. This agreement entered into force on 1 January 2017 and runs for five years with an option for Petoro AS to extend it for 1+1 years. Costs under the IT operations agreement for 2022 amounted to NOK 13.2 million.

Note 15 - Related parties

Equinor ASA and Petoro AS have the same owner, the Ministry of Trade, Industry and Fisheries, and are thus related parties. There were no significant transactions in 2022 between Equinor ASA and Petoro AS. Petoro AS acted as negotiation manager for certain fields associated with the SDFI portfolio where Equinor ASA is operator, cf. Note 1.