Notes to the Consolidated Financial Statements 2022
All amounts are in USD millions unless otherwise stated
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Note 1General information
Odfjell Drilling Ltd. and its subsidiaries (together 'the Group') operates mobile offshore drilling units.
Odfjell Drilling Ltd., is incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. Odfjell Drilling Ltd's head office is at Bergen House, Crawpeel Road, Aberdeen, Scotland, United Kingdom and the Company is tax resident in the United Kingdom.
The consolidated financial statements including notes for Odfjell Drilling Ltd. for the year 2022 were approved by the Board of Directors on 19 April 2023.
Basis of preparation
The consolidated financial statements of the Group for the year ended 31 December 2022 comply with IFRS as endorsed by the European Union (EU).
The consolidated financial statements ended 31 December 2022 comprise the income statement, statement of comprehensive income, statement of financial position, statement of cash flow, statement of changes in equity and note disclosures.
Going concern
Factors that, in the Group\u2019s view, could cause actual results to differ materially from the outlook contained in this report are the following: volatile oil and gas prices, global political changes regarding energy composition, competition within the oil and gas services industry, changes in clients\u2019 spending budgets, cost inflation, access to qualified resources and developments in the financial and fiscal markets.
Losses incurred by many financial institutions related to previous years\u2019 volatility and company restructurings in our industry, has led many financial institutions to target a shift in focus and exposure away from rig and oil services companies. However, the upswing in the oil and gas market, with a focus to secure stable energy supply, has impacted the financial markets positively with better access to capital. Odfjell Drilling has strong backlog, a robust balance sheet with low leverage, and a long standing relationship with its key lenders.
The Group's refinancing risk is considered low. Currently, bank loan facilities are maturing at different times up to\u00a0June 2024. The Group is considering alternative sources of financing, in addition to starting dialogue with banks. The Group expects to be successful in securing new or extended financing prior to maturity of the loans.
Taking all relevant risk factors and available options for financing into consideration, the Board has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. Hence, the Group has adopted the going concern basis in preparing its consolidated financial statements.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments, debt and equity financial assets, plan assets in defined benefit pension plans and contingent consideration that have been measured at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where the assumptions and estimates are significant to the consolidated financial statements are disclosed in each relevant note.
New and amended standards and interpretations effective on 1 January 2022
\u2022Onerous Contracts - Costs of Fulfilling a Contract (Amendments to IAS 37)
\u2022Covid-19-Related Rent Concessions beyond 30 June 2021\u2013 amendments to IFRS 16.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries.
Subsidiaries are all entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Subsidiaries are listed in Note 31.
Profit or loss and each component of Other Comprehensive Income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group\u2019s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. The difference between fair value of any consideration paid, and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity.
If the Group loses control over a subsidiary, it de-recognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may indicate that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Any investment retained is recognised at fair value. The fair value is the initial carrying amount for the purpose of subsequently accounting for the retained interest as an associate, joint venture or financial asset.
Foreign currency translation
(a) Functional and presentation currency
Items included in the separate financial statements of each of the Group\u2019s entities are measured using the currency of the primary economic environment in which the entity operates (\u2018the functional currency\u2019). The Consolidated Financial Statements are presented in USD (in million), which is the Group\u2019s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the monthly exchange rates for the month the transactions are recognised.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Foreign exchange gains and losses are presented in the income statement within \u2018other financial items\u2019.
(c) Group companies
The results and financial position of all the Group's entities that have a functional currency different from the presentation currency (USD) are translated into the presentation currency as follows:
\u2022Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u2022Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
\u2022All resulting exchange differences are recognised in other comprehensive income.
Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
The following are the most significant exchange rates used in the consolidation:
| \n \n | \n\n Average rate | \n\n Closing rate as at 31.12 | \n||
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n NOK | \n\n 0.10395 | \n\n 0.11631 | \n\n 0.10145 | \n\n 0.11339 | \n
| \n GBP | \n\n 1.23299 | \n\n 1.37556 | \n\n 1.20257 | \n\n 1.34788 | \n
| \n EUR | \n\n 1.05126 | \n\n 1.18325 | \n\n 1.06660 | \n\n 1.13259 | \n
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Statement of cash flows
The statement of cash flows is prepared under the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
The cash flow statement represents the cash flows for the total Group, including both continuing and discontinued operations. The split between continuing and discontinued operations are presented as separate lines within each category of the cash flow statement.
New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2022 and not early adopted
Certain new accounting standards, amendments to accounting standards, and interpretations have been published that are not mandatory for 31\u00a0December\u00a02022 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. These estimates are based on the actual underlying business, its present and forecast profitability over time, and expectations about external factors such as interest rates, foreign exchange rates and other factors which are outside the Group\u2019s control. The resulting estimates will, by definition, seldom equal the related actual results.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are listed below. Detailed information of these estimates and judgements are disclosed in the relevant notes.
\u2022Revenue recognition (Note 6 - Revenue)
\u2022Evaluation of indicators of impairment and/or impairment reversal (Note 10 - Tangible fixed assets)
\u2022Provisions and contingent liabilities (Note 29 - Contingencies)
\u2022Warrant liabilities measured at fair value (Note 13 - Financial assets and liabilities)
\u2022Determination of lease term and estimating the incremental borrowing rate (Note 18 - Leases)
Note 4Discontinued operations
Spin-off of Odfjell Technology
On 31 January 2022 Odfjell Drilling Ltd announced that it was contemplating spinning off two of its segments (the \"spin-off\") into a newly established company, Odfjell Technology Ltd. (\"OTL\" or \u201cOdfjell Technology\u201d), and to list the shares in OTL on the Oslo Stock Exchange (the \u201cListing\u201d). The spin-off consists of the group\u2019s Well Services and Energy segments, as well as the ownership in Odfjell Oceanwind. The spin-off also provides business support services.
Prior to executing the spin-off, an internal re-organisation was carried out and the relevant Well Services and Energy companies became subsidiaries of OTL.
In connection with the spin-off, Odfjell Technology on 4 February 2022, successfully priced NOK 1.1 bn in senior secured bonds through a private placement. The net proceeds from the bond issue, together with a new USD 25 million super senior revolving credit facility were used to carry out the internal re-organisation and to repay the Odfjell Drilling Services USD 150 million credit facility 1 March 2022.
At the end of March 2022, the shares in Odfjell Technology were distributed to the shareholders in the Company. The ratio for the distribution was 6:1, i.e. 6 shares in the Company gave the holder 1 share in OTL, rounded downwards to the closest whole share in OTL. The shares in OTL were listed on the Oslo Stock Exchange 29 March 2022. There was no public offering of shares in Odfjell Technology in connection with the Listing.
The spin-off was not previously classified as held for distribution or as a discontinued operation. The comparative Consolidated Income Statement and Other Comprehensive Income (\"OCI\") has been re-presented to show the discontinued operations separately from continuing operations.
Subsequent to the disposal, Odfjell Drilling has continued to purchase services from the discontinued operations. Although intra-group transactions have been fully eliminated in the consolidated financial results, management has elected to attribute the elimination of transactions between the continuing and discontinued operations before the disposal, in a way that reflects the continuance of these transactions subsequent to the disposal, because management believes this is useful to the users of the financial statements. No general corporate overhead expenses were allocated to the discontinued operation. Revenue and expenses are not presented as discontinued unless they will cease to be earned/incurred on disposal of the discontinued operation.
The fair value of the net assets distributed to the shareholders was USD 119.8 million, compared to a book value of USD 56.4 million. A gain from distribution of discontinued operations of USD 63 million was recognised in 2022.
The cumulative exchange differences related to a foreign operation that have been included in the foreign currency translation reserve, are reclassified to profit or loss when the foreign operation is distributed. A total exchange loss of USD 27 million has been reclassified from OCI to the income statement on distribution of the foreign operations in the Odfjell Technology group.
Results of discontinued operations
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Operating revenue | \n\n 94.4 | \n\n 342.9 | \n
| \n Elimination of inter-segment revenue | \n\n (17.4) | \n\n (51.2) | \n
| \n External revenue | \n\n 77.0 | \n\n 291.7 | \n
| \n Other gains / (losses) | \n\n 0.6 | \n\n 0.7 | \n
| \n Personnel expenses | \n\n (60.5) | \n\n (220.6) | \n
| \n Other operating expenses | \n\n (21.2) | \n\n (77.9) | \n
| \n Elimination of expenses related to inter-segment sales | \n\n 17.4 | \n\n 51.2 | \n
| \n EBITDA | \n\n 13.3 | \n\n 45.1 | \n
| \n Depreciation and amortisation | \n\n (2.4) | \n\n (30.6) | \n
| \n Operating profit (EBIT) | \n\n 10.9 | \n\n 14.5 | \n
| \n Share of profit (loss) from joint ventures and associates | \n\n (0.4) | \n\n (0.5) | \n
| \n Net financial items | \n\n (0.2) | \n\n (2.0) | \n
| \n Elimination of inter-segment financial income | \n\n (0.1) | \n\n (0.8) | \n
| \n Profit (loss) before tax | \n\n 10.3 | \n\n 11.2 | \n
| \n Income tax | \n\n 0.0 | \n\n 1.7 | \n
| \n Results of discontinued operations, net of tax | \n\n 10.3 | \n\n 12.9 | \n
| \n Reclassification of foreign currency translation reserve | \n\n (27.0) | \n\n - | \n
| \n Gain related to distribution of discontinued operations | \n\n 63.4 | \n\n - | \n
| \n Profit (loss) from discontinued operations, net of tax | \n\n 46.7 | \n\n 12.9 | \n
| \n Basic earnings per share - discontinued operations (USD) | \n\n 0.197 | \n\n 0.057 | \n
| \n Diluted earnings per share - discontinued operations (USD) | \n\n 0.197 | \n\n 0.057 | \n
Cash flow from (used in) discontinued operations
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Net cash generated from operating activities | \n\n 12.2 | \n\n 40.2 | \n
| \n Net cash used in investing activities | \n\n (59.0) | \n\n (26.4) | \n
| \n Net cash generated from / (used in) financing activities | \n\n 145.9 | \n\n (2.5) | \n
| \n Net cash flows | \n\n 99.1 | \n\n 11.3 | \n
Effect of disposal on the financial position of the Group
| \n USD million | \n\n 2022 | \n
| \n Property, plant and equipment | \n\n (106.0) | \n
| \n Intangible assets | \n\n (26.7) | \n
| \n Deferred tax asset | \n\n (1.8) | \n
| \n Investments in joint ventures and associates | \n\n (1.9) | \n
| \n Other non-current assets | \n\n (2.7) | \n
| \n Trade and other receivables | \n\n (102.8) | \n
| \n Other current assets | \n\n (9.8) | \n
| \n Cash and cash equivalents | \n\n (49.7) | \n
| \n Non-current interest-bearing borrowings | \n\n 125.3 | \n
| \n Non-current lease liabilities | \n\n 9.4 | \n
| \n Post-employment benefits | \n\n 5.4 | \n
| \n Non-current contract liabilities | \n\n 5.9 | \n
| \n Current interest-bearing borrowings | \n\n 25.6 | \n
| \n Current lease liabilities | \n\n 2.6 | \n
| \n Contract liabilities | \n\n 0.2 | \n
| \n Trade and other current payables | \n\n 35.5 | \n
| \n Other current liabilities | \n\n 35.2 | \n
| \n Net assets and liabilities | \n\n (56.4) | \n
| \n Cash and cash equivalents disposed of | \n\n (49.7) | \n
| \n Net cash outflows | \n\n (49.7) | \n
Note 5Segment summary
Accounting policy
Operating segments are reported in a manner consistent with the internal financial reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board.
Segment reporting
The Group provides drilling and related services to oil and gas companies. The group owned four mobile offshore drilling units during 2021 and 2022 with similar services, revenues, customers and production processes. Own drilling units (Own Fleet) is therefore assessed as one operating segment. The same applies for rig management services provided to other owners of other drilling units (External Fleet).
Own Fleet
The segment operates mobile offshore drilling units owned by Odfjell Drilling.
External Fleet
| \n \n | \n\n Own Fleet | \n\n External Fleet | \n\n Corporate / other | \n\n Consolidated | \n||||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n External segment revenue | \n\n 567.3 | \n\n 519.4 | \n\n 78.0 | \n\n 50.0 | \n\n 4.3 | \n\n 2.7 | \n\n 649.5 | \n\n 572.1 | \n
| \n Inter segment revenue | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Total revenue | \n\n 567.3 | \n\n 519.4 | \n\n 78.0 | \n\n 50.0 | \n\n 4.3 | \n\n 2.7 | \n\n 649.5 | \n\n 572.1 | \n
| \n EBITDA | \n\n 303.9 | \n\n 253.4 | \n\n 11.0 | \n\n 5.2 | \n\n (7.0) | \n\n (0.1) | \n\n 308.0 | \n\n 258.4 | \n
| \n Depreciation and amortisation | \n\n (167.1) | \n\n (149.0) | \n\n - | \n\n - | \n\n (4.4) | \n\n (2.4) | \n\n (171.5) | \n\n (151.4) | \n
| \n EBIT | \n\n 136.9 | \n\n 104.4 | \n\n 11.0 | \n\n 5.2 | \n\n (11.3) | \n\n (2.5) | \n\n 136.5 | \n\n 107.1 | \n
| \n Net financial items | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n (48.3) | \n\n (40.6) | \n
| \n Profit / (loss) before tax - Consolidated Group | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n 88.3 | \n\n 66.5 | \n
Note 6Revenue
Accounting policy - Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over rendered services to the customer.
Sometimes, the Group receives short-term advances from customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Group has, as a practical expedient in IFRS, recognised the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The group has only operating leases as a lessor. Rental income and the lease component of drilling contracts is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. The lease term may vary from contract to contract, and only includes the non-cancellable period of the contract with the addition of optional renewable periods if the lessee is reasonably certain to extend. None of the existing contracts have optional periods included in the lease term. The lease term is reassessed when options to extend are exercised. Contingent rents are recognised as revenue in the period in which they are earned.
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include evaluation of whether the customer option represents a material right that gives rise to a performance obligation, and if so, to estimate the stand-alone selling price of the option. Further, judgement is based on a decision of whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations. In addition, the progress towards complete satisfaction of the performance obligation at the end of the reporting period is estimated, as the completion date of the drilling period is unknown at the end of the reporting period.
Own Fleet
The revenue is primarily derived from drilling contracts with customers. The core promise in the contracts with the customers is to be available to provide drilling services over the operation period of a contract. Drilling services primarily comprise of providing the mobile offshore drilling unit, crews, related equipment and services necessary to operate the rig. The contract rates include both a lease component and a service component. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Therefore, the Group follow the series guidance in IFRS 15 and treat the series of distinct services as a single performance obligation.
Revenue is based on the transactions price in the contracts with the customers. The main part of the transaction price is day rates, which range from a full operating day rate to lower or zero rates for periods when drilling operations are interrupted. Payment of the day rate based transaction price is usually due on a monthly basis.
Some contracts entitle the Group to receive compensation for mobilisation and demobilisation, contract preparation, customer-requested goods and services or capital upgrades. The compensations are either as fixed lump-sums or based on variable day rates. Lump-sums are usually paid up-front or when certain milestones are met. The payment terms do not contain any significant financing components.
Most of the contracts include fees for variable or conditional service fee arrangements, such as bonuses for meeting or exceeding certain performance targets. The Group estimate these variable fees using a most likely amount approach on a contract by contract basis. Management makes a detailed assessment of the amount of revenue expected to be received and the probability of success in each case. Variable consideration is included in revenue only to the extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is resolved (generally upon completion of a well or drilling program).
Revenue from drilling contracts is generally recognised in the period from commencing a contract and until completion of the drilling programme (\"the drilling operation period\"). No revenue is recognised in the mobilisation and demobilisation period.
Since the customers continuously gain control over the drilling services, revenue is recognised over time, in line with transfer of control.
The likelihood of options being exercised, and thereby included in estimates for expected total revenue and the drilling operation period, is based on an assessment of whether a customer option provides a material right for the customer. If a contract includes an option that provides a material right for the customer, a proportion of contract revenue will be allocated to the material right and recognised as revenue when the additional service is provided or when the option expires.
Day rate considerations in the drilling operation period are attributed to the period to which the drilling operations are performed, and recognised as revenue in the same period. Other compensations, as described above, are allocated to the contract and recognised as revenue on a straight-line basis over the drilling operation period. Refer to Note 14 - Contract balances. Bonuses and other variable or conditional service fees are allocated to either the entire drilling operation period or to individual periods during the contract (using the series of services guidance in IFRS 15) depending on what the variable contract revenue relates to.
The costs to prepare the rig for contract and the cost for mobilisation of the rig to the drilling location, are capitalised as Assets from contract costs and expensed as operating cost over the drilling operations period. Refer to Note 14 - Contract balances. Demobilisation expenses are expensed as incurred.
External Fleet
The segment offers management services to other owners of drilling units; mainly operational management, management of regulatory requirements, marketing, contract negotiations and client relations, preparations for operation and mobilisation. The transaction price is mainly day rate based management fees, usually payable on a monthly basis. Refer to Note 14 - Contract balances for payment terms related to the management agreement for Deepsea Yantai. The payment terms do not contain any significant financing components. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. Variable or conditional service fee arrangements, such as bonuses, are treated according to principles described above. The period for recognising revenue is generally equal to the contract period.
Revenue specification
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Revenue from contracts with customers (IFRS 15) | \n\n 393.7 | \n\n 390.7 | \n
| \n Lease component in MODU contracts | \n\n 255.2 | \n\n 180.6 | \n
| \n Other operating revenue | \n\n 0.6 | \n\n 0.8 | \n
| \n Operating revenue | \n\n 649.5 | \n\n 572.1 | \n
Revenue from single external customers (> 10% of revenues)
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Customer 1 | \n\n 375.6 | \n\n 145.7 | \n
| \n Customer 2 | \n\n 129.2 | \n\n 164.5 | \n
Disaggregation of revenue by primary geographical markets
| \n \n | \n\n Own Fleet | \n\n External Fleet | \n\n Corporate / Other | \n\n Consolidated | \n||||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Norway | \n\n 567.3 | \n\n 519.4 | \n\n 74.9 | \n\n 50.0 | \n\n 4.3 | \n\n 2.7 | \n\n 646.4 | \n\n 572.1 | \n
| \n Namibia | \n\n - | \n\n - | \n\n 3.1 | \n\n - | \n\n - | \n\n - | \n\n 3.1 | \n\n - | \n
| \n Total operating revenue | \n\n 567.3 | \n\n 519.4 | \n\n 78.0 | \n\n 50.0 | \n\n 4.3 | \n\n 2.7 | \n\n 649.5 | \n\n 572.1 | \n
Performance obligations in contracts
Amounts allocated to performance obligations that are to be completed under existing customer contracts are set out as service elements in the following table.
The firm contract backlog does not include variable consideration which is constrained. The services provided under these contracts will be billed based on time incurred and at day rates according to contract.
| \n USD million | \n\n Future minimum lease payments | \n\n Performance obligations | \n\n Total firm backlog | \n
| \n Within one year | \n\n 223 | \n\n 227 | \n\n 450 | \n
| \n Between one and two years | \n\n 115 | \n\n 105 | \n\n 220 | \n
| \n Between two and three years | \n\n 74 | \n\n 61 | \n\n 135 | \n
| \n Between three and four years | \n\n 74 | \n\n 61 | \n\n 135 | \n
| \n Between four and five years | \n\n 74 | \n\n 61 | \n\n 135 | \n
| \n After five years | \n\n 149 | \n\n 122 | \n\n 271 | \n
| \n Total | \n\n 708 | \n\n 637 | \n\n 1,345 | \n
Note 7Personnel Expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Salaries and wages | \n\n \n | \n\n 152.9 | \n\n 153.0 | \n
| \n Employer`s national insurance contributions | \n\n \n | \n\n 23.6 | \n\n 23.2 | \n
| \n Pension expenses | \n\n\n | \n\n 13.2 | \n\n 11.0 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n 0.4 | \n\n 0.5 | \n
| \n Other benefits | \n\n \n | \n\n 6.0 | \n\n 7.4 | \n
| \n Hired personnel | \n\n \n | \n\n 10.4 | \n\n 5.2 | \n
| \n Capitalised personnel expenses * | \n\n \n | \n\n - | \n\n (0.7) | \n
| \n Total personnel expenses | \n\n \n | \n\n 206.5 | \n\n 199.6 | \n
| \n\n | \n
| \n \n | \n\n \n | \n\n 2022 | \n\n 2021 | \n
| \n No. of employees (annual average) | \n\n \n | \n\n 1,240 | \n\n 1,106 | \n
Note 8Combined items, income statement
Other gains and losses
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Distribution of capital from The Norwegian Shipowners\u2019 Mutual War Risks Insurance Association * | \n\n - | \n\n 7.3 | \n
| \n Net gain on disposal of tangible fixed assets | \n\n 0.0 | \n\n (0.1) | \n
| \n Other gains and losses | \n\n 0.0 | \n\n 7.3 | \n
| \n\n | \n
Other operating expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n \n | \n\n 45.1 | \n\n 46.4 | \n
| \n Hired equipment | \n\n \n | \n\n 27.9 | \n\n 17.3 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 35.3 | \n\n 38.0 | \n
| \n Insurance | \n\n \n | \n\n 3.6 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.2 | \n\n 2.7 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.7 | \n\n 1.3 | \n
| \n Travel and course expenses | \n\n \n | \n\n 9.7 | \n\n 7.3 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 5.4 | \n\n 0.6 | \n
| \n Capitalised contract cost | \n\n\n | \n\n (0.7) | \n\n - | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 4.9 | \n\n 4.2 | \n
| \n Total other operating expenses | \n\n \n | \n\n 135.0 | \n\n 121.3 | \n
Accounting policy - Borrowing costs
Interest expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 44.4 | \n\n 47.3 | \n
| \n Amortised transaction costs borrowings * | \n\n\n | \n\n 6.3 | \n\n 3.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 2.0 | \n
| \n Other interest expenses | \n\n \n | \n\n 0.6 | \n\n 0.1 | \n
| \n Total interest expenses | \n\n \n | \n\n 55.4 | \n\n 52.6 | \n
| \n\n | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (3.6) | \n\n 3.1 | \n
| \n Other financial income | \n\n \n | \n\n - | \n\n 0.0 | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n 13.7 | \n\n - | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (4.5) | \n\n 8.7 | \n
| \n Other financial expenses | \n\n \n | \n\n (1.2) | \n\n 0.0 | \n
| \n Total other financial items | \n\n \n | \n\n 4.4 | \n\n 11.9 | \n
| \n\n | \n
Note 9Income Taxes
Accounting policy
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Income tax expense
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Withholding taxes paid / payable | \n\n (0.5) | \n\n (1.8) | \n
| \n Payable taxes | \n\n (5.7) | \n\n (2.2) | \n
| \n Change in deferred tax | \n\n 0.8 | \n\n 0.2 | \n
| \n Total income tax expense | \n\n (5.4) | \n\n (3.8) | \n
| \n Effective tax rate | \n\n 5.5 % | \n\n 4.9 % | \n
| \n Income tax expense in attributable to: | \n\n \n | \n\n \n | \n
| \n Profit from continuing operations | \n\n (5.4) | \n\n (5.5) | \n
| \n Profit from discontinued operation | \n\n 0.0 | \n\n 1.7 | \n
Tax reconciliation
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Profit from continuing operations before income tax expense | \n\n 88.3 | \n\n 66.5 | \n
| \n Profit from discontinued operation before income tax expense | \n\n 10.3 | \n\n 11.2 | \n
| \n Total profit before income tax expense | \n\n 98.5 | \n\n 77.7 | \n
| \n Tax calculated at domestic tax rates applicable to profits in respective countries* (including withholding tax) | \n\n 0.5 | \n\n (7.1) | \n
| \n Net utilisation of unrecognised tax losses | \n\n - | \n\n 7.6 | \n
| \n Effect of changes in tax rates | \n\n - | \n\n 0.0 | \n
| \n Effect of adjustments recognised related to prior periods | \n\n (0.3) | \n\n (1.1) | \n
| \n Effect of net non-taxable income / (expenses) ** | \n\n (5.6) | \n\n (3.2) | \n
| \n Total income tax expense | \n\n (5.4) | \n\n (3.8) | \n
| \n\n | \n||
| \n\n | \n
Tax losses
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Unused tax losses for which no deferred tax asset has been recognised | \n\n - | \n\n 108.3 | \n
| \n Potential tax benefit 22% | \n\n - | \n\n 23.9 | \n
The movement in unrecognised tax assets is as follows:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Unrecognised tax asset as at 01.01 | \n\n 23.9 | \n\n 32.5 | \n
| \n Net utilisation of unrecognised tax losses | \n\n - | \n\n (7.6) | \n
| \n Effect of changes in tax rates | \n\n - | \n\n (0.1) | \n
| \n Disposal through distribution of operation to shareholders | \n\n (23.9) | \n\n - | \n
| \n Currency translation differences | \n\n - | \n\n (1.0) | \n
| \n Unrecognised tax asset as at 31.12 | \n\n - | \n\n 23.9 | \n
The gross movement on the deferred tax account is as follows:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 01.01 | \n\n 1.3 | \n\n 1.0 | \n
| \n Income statement charge | \n\n 0.8 | \n\n 0.2 | \n
| \n Change in deferred tax on other comprehensive income | \n\n 0.0 | \n\n 0.1 | \n
| \n Disposal through distribution of operation to shareholders | \n\n (1.8) | \n\n - | \n
| \n Currency translation differences | \n\n 0.1 | \n\n (0.0) | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 31.12 | \n\n 0.4 | \n\n 1.3 | \n
The Group\u2019s recognised deferred tax assets are related to operations in Norway.
Deferred tax assets - Specification and movements
| \n USD million | \n\n Tax losses | \n\n Current assets | \n\n Net pension liabilities | \n\n Fixed assets | \n\n Lease liabilities | \n\n Total | \n
| \n Opening balance 01.01.2021 | \n\n 0.0 | \n\n 0.2 | \n\n 1.5 | \n\n 0.3 | \n\n 9.5 | \n\n 11.6 | \n
| \n Income statement charge | \n\n (0.0) | \n\n (0.0) | \n\n (0.3) | \n\n 0.0 | \n\n 0.7 | \n\n 0.4 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.1 | \n\n - | \n\n - | \n\n 0.1 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n (0.0) | \n\n (0.0) | \n\n (0.0) | \n\n (0.3) | \n\n (0.4) | \n
| \n Closing balance 31.12.2021 | \n\n - | \n\n 0.2 | \n\n 1.3 | \n\n 0.4 | \n\n 9.8 | \n\n 11.7 | \n
| \n Income statement charge | \n\n - | \n\n - | \n\n (0.0) | \n\n (0.0) | \n\n 6.0 | \n\n 6.0 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.0 | \n\n - | \n\n - | \n\n 0.0 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n (0.2) | \n\n (1.2) | \n\n (0.3) | \n\n (2.4) | \n\n (4.1) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.0) | \n\n (0.0) | \n\n (0.9) | \n\n (0.9) | \n
| \n Closing balance 31.12.2022 | \n\n - | \n\n - | \n\n 0.1 | \n\n - | \n\n 12.5 | \n\n 12.7 | \n
Deferred tax liabilities - Specification and movements
| \n USD thousands | \n\n Deferred capital gains | \n\n Fixed assets | \n\n Right-of-use Assets | \n\n Total | \n
| \n Opening balance 01.01.2020 | \n\n (1.5) | \n\n - | \n\n (9.1) | \n\n (10.5) | \n
| \n Income statement charge | \n\n 0.3 | \n\n - | \n\n (0.5) | \n\n (0.2) | \n
| \n Currency translation differences | \n\n 0.0 | \n\n - | \n\n 0.3 | \n\n 0.4 | \n
| \n Closing balance 31.12.2021 | \n\n (1.2) | \n\n - | \n\n (9.2) | \n\n (10.4) | \n
| \n Income statement charge | \n\n 0.2 | \n\n (0.1) | \n\n (5.3) | \n\n (5.1) | \n
| \n Disposal through distribution of operations to shareholders | \n\n 0.0 | \n\n \n | \n\n 2.3 | \n\n 2.3 | \n
| \n Currency translation differences | \n\n 0.1 | \n\n - | \n\n 0.9 | \n\n 1.0 | \n
| \n Closing balance 31.12.2022 | \n\n (0.8) | \n\n (0.1) | \n\n (11.4) | \n\n (12.3) | \n
Net book value of deferred taxes
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Deferred tax assets | \n\n 12.7 | \n\n 11.7 | \n
| \n Deferred tax liabilities offset in deferred tax assets | \n\n (12.3) | \n\n (10.4) | \n
| \n Net book value of deferred tax asset at 31.12. | \n\n 0.4 | \n\n 1.3 | \n
The income tax (charge)/credit relating to components of the other comprehensive income is as follows:
| \n \n | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After tax | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After tax | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Actuarial loss on post employment benefit obligations | \n\n (0.1) | \n\n 0.0 | \n\n (0.0) | \n\n (0.4) | \n\n 0.1 | \n\n (0.3) | \n
| \n Other comprehensive income | \n\n (0.1) | \n\n 0.0 | \n\n (0.0) | \n\n (0.4) | \n\n 0.1 | \n\n (0.3) | \n
| \n Deferred tax | \n\n \n | \n\n 0.0 | \n\n \n | \n\n \n | \n\n 0.1 | \n\n \n | \n
Note 10Tangible fixed assets
Accounting policy
Property, plant and equipment comprise mainly of mobile offshore drilling units, well services equipment and machinery and equipment. Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes purchase price, any directly attributable costs of bringing the asset to working condition and borrowing costs.
Depreciation is calculated on a straight-line basis over the useful life of the asset or component. The depreciable amount equals historical cost less residual value. Items of property, plant and equipment with components that have substantially different useful lives are treated separately for depreciation purposes. The total expenditure on the rigs is therefore allocated into groups of components that have different expected useful lifetimes.
Subsequent costs for day-to-day repairs and maintenance are expensed as incurred.
The cost of modernisation and rebuilding projects is included in the asset\u2019s carrying amount when it is probable that the Group will derive future financial benefits and the cost of the item can be measured reliably. The carrying amount of the replaced part is written off. Modernisation and rebuilding projects are depreciated over the remaining useful life of the related assets.
The useful lives of assets and the depreciation methods are reviewed periodically in order to ensure that the method and period of depreciation are consistent with the expected pattern of financial benefits from the asset.
When assets are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting from their disposal is included in the income statement as other gains and losses.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices for mobile drilling units after a 30 year useful lifetime. Any changes are accounted for prospectively as a change in the accounting estimate. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Residual values for property, plant and equipment are estimated to be zero.
Rig and equipment are depreciated over a period from 5 to 30 years. Periodic maintenance is depreciated over the expected period until next docking, estimated as 5 years. Estimated useful life for operating drilling equipment is 3 to 10 years.
Newbuild in progress
Newbuilds under construction are capitalised as fixed assets during the construction as instalments are paid to the yard. Capitalised costs include interest expenses until commencement on first drilling contract, contractual costs and costs related to the monitoring of the project during the construction period. Contractual costs include costs related to the project for the duration of the contract, i.e. from signing of the contract to final completion of the contractual work. Any costs incurred prior to the signing of the contract that relate to the procurement of the contract are regarded as a purchase of contractual assistance and are included in contractual costs.
Government grants
Government grants are recognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Investment grants are capitalised and recognised systematically over the asset\u2019s useful life. Investment grants are recognised as a deduction of the asset\u2019s carrying amount.
Impairment of non-financial assets
All non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). For mobile offshore drilling units, each unit is deemed to be a CGU. Value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Non-financial assets, other than goodwill, that have suffered an impairment, are reviewed for reversal of the impairment whenever events or changes in circumstances indicate that the impairment loss recognised in prior periods may no longer exist or may have decreased.
Assets subject to operating leases
Mobile drilling units, Periodic maintenance and Well Service equipment contain assets used in contracts with customers that contain a lease component.
Specification and movements 2022
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 2,945.3 | \n\n 171.7 | \n\n 407.7 | \n\n 21.6 | \n\n 60.0 | \n\n 3,606.2 | \n
| \n Additions | \n\n 33.9 | \n\n 13.9 | \n\n 7.3 | \n\n 1.9 | \n\n 42.0 | \n\n 99.0 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 16.6 | \n\n 16.6 | \n
| \n Disposal | \n\n - | \n\n (0.4) | \n\n (2.5) | \n\n (0.2) | \n\n (1.3) | \n\n (4.3) | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n (413.4) | \n\n (21.3) | \n\n (18.2) | \n\n (452.8) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n 0.9 | \n\n 0.1 | \n\n (5.3) | \n\n (4.3) | \n
| \n Cost as at 31 December 2022 | \n\n 2,979.1 | \n\n 185.2 | \n\n - | \n\n 2.2 | \n\n 93.9 | \n\n 3,260.3 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n (1,071.2) | \n\n (69.5) | \n\n (321.9) | \n\n (18.2) | \n\n (16.5) | \n\n (1,497.3) | \n
| \n Depreciation from continuing operations | \n\n (112.6) | \n\n (39.0) | \n\n \n | \n\n (0.2) | \n\n (19.5) | \n\n (171.3) | \n
| \n Depreciation from discontinued operations | \n\n - | \n\n - | \n\n (2.0) | \n\n (0.1) | \n\n (0.2) | \n\n (2.3) | \n
| \n Adjustments due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n - | \n\n (2.7) | \n\n (2.7) | \n
| \n Disposals | \n\n - | \n\n 0.4 | \n\n 2.2 | \n\n 0.1 | \n\n 1.3 | \n\n 4.0 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n 322.6 | \n\n 18.1 | \n\n 6.2 | \n\n 346.8 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.9) | \n\n (0.1) | \n\n 1.4 | \n\n 0.4 | \n
| \n As at 31 December 2022 | \n\n (1,183.8) | \n\n (108.1) | \n\n - | \n\n (0.5) | \n\n (30.1) | \n\n (1,322.4) | \n
| \n Net book value at 31 December 2022 | \n\n 1,795.3 | \n\n 77.1 | \n\n - | \n\n 1.7 | \n\n 63.8 | \n\n 1,937.9 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 2,931.3 | \n\n 158.5 | \n\n 376.6 | \n\n 21.5 | \n\n 56.1 | \n\n 3,543.9 | \n
| \n Additions | \n\n 45.3 | \n\n 13.2 | \n\n 15.2 | \n\n 1.9 | \n\n 9.1 | \n\n 84.7 | \n
| \n Reclassifications * | \n\n (24.5) | \n\n - | \n\n 24.5 | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n (6.9) | \n\n - | \n\n (7.2) | \n\n (1.1) | \n\n (3.2) | \n\n (18.3) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (1.4) | \n\n (0.7) | \n\n (2.0) | \n\n (4.2) | \n
| \n Cost as at 31 December 2021 | \n\n 2,945.3 | \n\n 171.7 | \n\n 407.7 | \n\n 21.6 | \n\n 60.0 | \n\n 3,606.2 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n (965.8) | \n\n (34.9) | \n\n (307.8) | \n\n (18.6) | \n\n (13.5) | \n\n (1,340.5) | \n
| \n Depreciation from continuing operations | \n\n (112.2) | \n\n (34.6) | \n\n - | \n\n (0.1) | \n\n (4.4) | \n\n (151.3) | \n
| \n Depreciation from discontinued operations | \n\n - | \n\n - | \n\n (22.2) | \n\n (1.1) | \n\n (2.4) | \n\n (25.8) | \n
| \n Reclassifications | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 6.8 | \n\n - | \n\n 6.8 | \n\n 1.0 | \n\n 3.2 | \n\n 17.7 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n 1.4 | \n\n 0.6 | \n\n 0.6 | \n\n 2.5 | \n
| \n As at 31 December 2021 | \n\n (1,071.2) | \n\n (69.5) | \n\n (321.9) | \n\n (18.2) | \n\n (16.5) | \n\n (1,497.3) | \n
| \n Net book value at 31 December 2021 | \n\n 1,874.1 | \n\n 102.2 | \n\n 85.8 | \n\n 3.4 | \n\n 43.4 | \n\n 2,108.9 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n
Accumulated impairment that may qualify for reversal in a later period related to the mobile drilling units Deepsea Atlantic and Deepsea Stavanger amount to USD 148 million at 31 December 2022.
For more information about Right-of-use assets, refer to Note 18 - Leases.
Grants received
The Group have received USD 6.4 million from the Norwegian NOx fund in 2022 (USD 4.6 million in 2021). The grants are recognised as a deduction of additions presented in the table above.
Depreciation drilling units
Deepsea Atlantic is depreciated from 4 August 2009, Deepsea Stavanger is depreciated from 16 September 2010, Deepsea Aberdeen is depreciated from 21 April 2015, and Deepsea Nordkapp is depreciated from 10 May 2019.
The group evaluates remaining useful lifetime and residual values taking into account current and expected climate risk, and the shift to renewable energy sources.
Significant judgement and estimation uncertainty
Management exercises significant judgement in determining whether there are any indicators of impairment or reversal of impairment. Management evaluates both external and internal sources of information in the indicator assessments. The assessments include estimated effects of the climate change and the shift to renewable energy sources
Odfjell Drilling has not identified any impairment indicators, nor any indicators for reversal of impairment as at 31 December 2022.
Note 11Intangible assets
Accounting policy - Goodwill and Intangible assets
Accounting policy - Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
\u2022The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
\u2022Its intention to complete and its ability and intention to use or sell the asset
\u2022How the asset will generate future economic benefits
\u2022The availability of resources to complete the asset
\u2022The ability to measure reliably the expenditure during development
Specification and movements 2022
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 18.4 | \n\n 28.0 | \n\n 2.1 | \n\n 1.3 | \n\n 49.8 | \n
| \n Additions | \n\n - | \n\n 1.7 | \n\n - | \n\n - | \n\n 1.7 | \n
| \n Disposal through distribution of operations to shareholders | \n\n (15.4) | \n\n (29.5) | \n\n (2.1) | \n\n (1.3) | \n\n (48.4) | \n
| \n Currency translation differences | \n\n (0.0) | \n\n 0.6 | \n\n - | \n\n - | \n\n 0.6 | \n
| \n Cost as at 31 December 2022 | \n\n 3.0 | \n\n 0.7 | \n\n - | \n\n - | \n\n 3.6 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n - | \n\n (20.1) | \n\n (0.4) | \n\n (0.7) | \n\n (21.3) | \n
| \n Amortisation from continuing operations | \n\n - | \n\n (0.2) | \n\n - | \n\n \n | \n\n (0.2) | \n
| \n Amortisation from discontinued operations | \n\n - | \n\n (0.1) | \n\n (0.0) | \n\n (0.0) | \n\n (0.1) | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n 20.6 | \n\n 0.5 | \n\n 0.7 | \n\n 21.7 | \n
| \n Currency translation differences | \n\n - | \n\n (0.4) | \n\n - | \n\n - | \n\n (0.4) | \n
| \n As at 31 December 2022 | \n\n - | \n\n (0.3) | \n\n - | \n\n - | \n\n (0.3) | \n
| \n Net book value at 31 December 2022 | \n\n 3.0 | \n\n 0.4 | \n\n - | \n\n - | \n\n 3.4 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 19.7 | \n\n 23.2 | \n\n 1.7 | \n\n 1.3 | \n\n 45.9 | \n
| \n Additions | \n\n - | \n\n 5.6 | \n\n 0.5 | \n\n 0.0 | \n\n 6.1 | \n
| \n Disposal at loss of control of subsidiary | \n\n (0.8) | \n\n - | \n\n - | \n\n - | \n\n (0.8) | \n
| \n Currency translation differences | \n\n (0.6) | \n\n (0.9) | \n\n - | \n\n - | \n\n (1.5) | \n
| \n Cost as at 31 December 2021 | \n\n 18.4 | \n\n 28.0 | \n\n 2.1 | \n\n 1.3 | \n\n 49.8 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n - | \n\n (16.5) | \n\n (0.2) | \n\n (0.4) | \n\n (17.0) | \n
| \n Amortisation from continuing operations | \n\n - | \n\n (0.1) | \n\n - | \n\n - | \n\n (0.1) | \n
| \n Amortisation from discontinued operations | \n\n - | \n\n (4.2) | \n\n (0.3) | \n\n (0.3) | \n\n (4.8) | \n
| \n Currency translation differences | \n\n - | \n\n 0.6 | \n\n - | \n\n \n | \n\n 0.6 | \n
| \n As at 31 December 2021 | \n\n - | \n\n (20.1) | \n\n (0.4) | \n\n (0.7) | \n\n (21.3) | \n
| \n Net book value at 31 December 2021 | \n\n 18.4 | \n\n 7.8 | \n\n 1.7 | \n\n 0.7 | \n\n 28.5 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Summary of goodwill allocation for each operating segment
| \n \n | \n\n External Fleet | \n|
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n At 1 January | \n\n 3.3 | \n\n 3.4 | \n
| \n Translation differences | \n\n (0.3) | \n\n (0.1) | \n
| \n Net book value at 31 December | \n\n 3.0 | \n\n 3.3 | \n
All goodwill is allocated to the External Fleet segment
The recoverable amount of the CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on prognoses made by management covering a five-year period. The prognosis for the EBITDA margin in 2023 and the following years is based on past performance and expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax weighted average cost of capital and reflect specific risks relating to the relevant operating segments.
These assumptions have been used for the analysis of each CGU within the operating segment.
| \n Key assumptions for value-in-use calculations | \n\n External Fleet | \n|
| \n \n | \n\n 2022 | \n\n 2021 | \n
| \n EBITDA margin in prognosis period | \n\n 17% - 21% | \n\n 11% - 15% | \n
| \n Growth rate year 6 and forward | \n\n 0.0% | \n\n 0.0% | \n
| \n Weighted Average Cost of Capital, pre-tax | \n\n 10% | \n\n 10% | \n
Impairment tests performed for goodwill for respective CGUs do not indicate any impairment as per 31.12.2022.
Sensitivity analysis for goodwill impairment test as at 31.12.2022
The Group has performed sensitivity analysis for the goodwill impairment test by reducing operating income by one, five and ten percent and EBITDA margin by one, five and ten percentage points respectively for each of the segments.
None of the other scenarios indicated any impairment write-down of goodwill as at 31 December 2022.
Note 12Other assets
Other non-current assets
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Deposits | \n\n - | \n\n 2.7 | \n
| \n Total other non-current assets | \n\n - | \n\n 2.7 | \n
Other current assets
| \n USD million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 2.4 | \n\n 0.6 | \n
| \n Prepaid expenses | \n\n \n | \n\n 4.3 | \n\n 9.4 | \n
| \n Assets from contract costs | \n\n\n | \n\n 3.7 | \n\n 7.3 | \n
| \n Income tax receivables | \n\n \n | \n\n 0.1 | \n\n 3.0 | \n
| \n VAT receivables | \n\n \n | \n\n 1.8 | \n\n 3.4 | \n
| \n Other current receivables | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Total other current assets | \n\n \n | \n\n 13.3 | \n\n 28.0 | \n
Note 13Financial assets and liabilities
Accounting policies
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
The Group classify financial assets in the following categories:
\u2022amortised cost,
\u2022financial assets at fair value through profit or loss (FVPL),
\u2022financial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at:
\u2022fair value through profit or loss,
\u2022amortised cost, or as
\u2022derivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 17 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u2022In the principal market for the asset or liability , or
\u2022In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Significant judgement and estimation uncertainty
The Company has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. Changes in parameters such as volatility of share price, risk-free interest rate etc. could have substantial impacts on the estimated warrant liability. See further information about the warrant liability and assumptions applied in Note 24 Market risk.
Financial instruments by category and level
The tables below analyse financial instruments carried at fair value, by valuation method, based on the lowest level input that is significant to the fair value measurement as a whole. The different levels have been defined as follows:
\u2022Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
\u2022Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2)
\u2022Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). For short term assets and liabilities at level 3, the value is approximately equal to the carrying amount. As the time horizon is due in short term, future cash flows are not discounted.
Valuation techniques used to derive Level 2 fair values
Level 2 derivatives held at fair value through profit or loss and hedging derivatives comprise interest rate swaps and foreign exchange agreements. Interest rate swaps and foreign exchange agreements are fair valued using forward rates extracted from observable yield curves. Interest rate swaps and foreign exchange agreements are recognised according to mark-to-market reports from external financial institutions.
Valuation techniques used to derive Level 3 fair values
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 5.0 | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 2.4 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 7.5 | \n\n - | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n \n | \n\n 0.6 | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n - | \n\n 2.7 | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.6 | \n\n 10.2 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 91.0 | \n\n 154.5 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 157.2 | \n\n 173.0 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 267.7 | \n\n 350.4 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial liabilities at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n - | \n\n 3.0 | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n 2.8 | \n\n 1.0 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 529.0 | \n\n 875.4 | \n
| \n - Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 313.5 | \n\n 161.1 | \n
| \n - Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 41.7 | \n\n 38.3 | \n
| \n - Current lease liabilities | \n\n\n | \n\n \n | \n\n 26.5 | \n\n 7.8 | \n
| \n - Trade payables | \n\n \n | \n\n \n | \n\n 35.8 | \n\n 43.2 | \n
| \n - Other current liabilities | \n\n\n | \n\n \n | \n\n 27.9 | \n\n 56.6 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 977.2 | \n\n 1,186.3 | \n
Note 14Contract balances
Accounting policies - Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
For costs to fulfil contracts where the Group operates as a lessor, the Group has chosen to apply the guidance in IFRS 15 by analogy.
Accounting policies - Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.
Contract balances specification
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Contract assets | \n\n 8.6 | \n\n 10.2 | \n
| \n Contract liabilities | \n\n (13.7) | \n\n (27.4) | \n
Set out below is the amount of revenue recognised from:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Amounts included in contract liabilities at the beginning of the year | \n\n 15.6 | \n\n 12.6 | \n
| \n Performance obligations satisfied in the previous years | \n\n 3.3 | \n\n 2.7 | \n
Assets from contract costs
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Asset recognised at 31 December from costs incurred to fulfil a contract | \n\n\n | \n\n 3.7 | \n\n 7.3 | \n
| \n Amortisation recognised as cost of providing services during the period | \n\n \n | \n\n 4.9 | \n\n 4.2 | \n
The group has recognised assets for costs incurred to fulfil a contract with customers. The assets are presented within other current assets in the balance sheet.
Note 15Trade receivables
Accounting policy
A receivable represents the Group\u2019s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Trade receivables specification
| \n USD million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Trade receivables | \n\n \n | \n\n 47.4 | \n\n 103.1 | \n
| \n Earned, not yet invoiced operating revenues | \n\n \n | \n\n 43.7 | \n\n 52.8 | \n
| \n Loss allowance | \n\n\n | \n\n - | \n\n (1.4) | \n
| \n Trade receivables - net | \n\n \n | \n\n 91.0 | \n\n 154.5 | \n
As the receivables are due in the short term, the fair value is approximately equal to the carrying amount, and the future cash flows are not discounted.
Note 16Cash and cash equivalents
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Cash in bank | \n\n 46.2 | \n\n 83.6 | \n
| \n Time deposits | \n\n 89.4 | \n\n 63.5 | \n
| \n Retention accounts * | \n\n 13.2 | \n\n 11.9 | \n
| \n Restricted bank deposits ** | \n\n 8.4 | \n\n 14.0 | \n
| \n Total cash and cash equivalents | \n\n 157.2 | \n\n 173.0 | \n
| \n\n | \n||
| \n\n | \n
Note 17Interest-bearing borrowings
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Interest-bearing borrowings specification as at 31 December
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Borrowings | \n\n 483.5 | \n\n 289.9 | \n\n 773.4 | \n\n 839.3 | \n\n 156.2 | \n\n 995.5 | \n
| \n Transaction cost, unamortised | \n\n (3.3) | \n\n (1.8) | \n\n (5.1) | \n\n (11.3) | \n\n - | \n\n (11.3) | \n
| \n Seller's credit | \n\n 48.8 | \n\n 20.0 | \n\n 68.8 | \n\n 47.4 | \n\n - | \n\n 47.4 | \n
| \n Accrued interest expenses | \n\n - | \n\n 5.4 | \n\n 5.4 | \n\n - | \n\n 4.8 | \n\n 4.8 | \n
| \n Carrying amounts interest-bearing borrowings | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \n\n 875.4 | \n\n 161.1 | \n\n 1,036.4 | \n
Movements in interest-bearing borrowings
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Carrying amount as at 1 January | \n\n 875.4 | \n\n 161.1 | \n\n 1,036.4 | \n\n 695.8 | \n\n 515.8 | \n\n 1,211.6 | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n New borrowings | \n\n 219.2 | \n\n 25.0 | \n\n 244.2 | \n\n - | \n\n - | \n\n - | \n
| \n Paid transaction costs related to amendments and new borrowings | \n\n (2.2) | \n\n (0.6) | \n\n (2.7) | \n\n (2.1) | \n\n - | \n\n (2.1) | \n
| \n Repayment bank loan | \n\n (125.0) | \n\n (192.1) | \n\n (317.1) | \n\n - | \n\n (176.2) | \n\n (176.2) | \n
| \n Non-cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Disposal through distribution of operations to shareholders | \n\n (125.3) | \n\n (25.6) | \n\n (150.9) | \n\n - | \n\n - | \n\n - | \n
| \n Seller's Credit | \n\n 20.0 | \n\n - | \n\n 20.0 | \n\n - | \n\n - | \n\n - | \n
| \n Reclassified | \n\n (342.6) | \n\n 342.6 | \n\n - | \n\n 179.2 | \n\n (179.2) | \n\n - | \n
| \n Change in transaction cost, unamortised | \n\n 6.3 | \n\n 0.0 | \n\n 6.3 | \n\n 2.5 | \n\n 0.8 | \n\n 3.3 | \n
| \n Change in accrued interest cost | \n\n - | \n\n 3.0 | \n\n 3.0 | \n\n - | \n\n (0.1) | \n\n (0.1) | \n
| \n Currency translation differences | \n\n 3.2 | \n\n (0.0) | \n\n 3.2 | \n\n \n | \n\n - | \n\n - | \n
| \n Carrying amount as at 31 December | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \n\n 875.4 | \n\n 161.1 | \n\n 1,036.4 | \n
Repayment schedule for interest-bearing borrowings as at 31 December
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Maturity within 3 months | \n\n - | \n\n 19.6 | \n\n 19.6 | \n\n - | \n\n 26.1 | \n\n 26.1 | \n
| \n Maturity between 3 and 6 months | \n\n - | \n\n 45.6 | \n\n 45.6 | \n\n - | \n\n 52.1 | \n\n 52.1 | \n
| \n Maturity between 6 and 9 months | \n\n - | \n\n 19.6 | \n\n 19.6 | \n\n - | \n\n 26.1 | \n\n 26.1 | \n
| \n Maturity between 9 months and 1 year | \n\n - | \n\n 225.2 | \n\n 225.2 | \n\n - | \n\n 52.1 | \n\n 52.1 | \n
| \n Maturity between 1 and 2 years | \n\n 437.3 | \n\n - | \n\n 437.3 | \n\n 445.8 | \n\n - | \n\n 445.8 | \n
| \n Maturity between 2 and 3 years | \n\n 95.0 | \n\n - | \n\n 95.0 | \n\n 440.9 | \n\n - | \n\n 440.9 | \n
| \n Maturity between 3 and 4 years | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 4 and 5 years | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Maturity beyond 5 years | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Total contractual amounts | \n\n 532.3 | \n\n 309.9 | \n\n 842.2 | \n\n 886.7 | \n\n 156.2 | \n\n 1,042.9 | \n
The Odfjell Drilling Services Ltd. facility
Remaining contractual amount of USD 150 million as at 31 December 2021 was repaid 1 March 2022.
New borrowings in 2022
Refer to Note 4 Discontinued operations for further information regarding changes related to the spin-off in 2022.
29 November 2022, the Group repurchased the preference shares. The repurchase has been fully financed by way of a new direct loan of USD 95 million, repayable in monthly instalments starting in 2025 and with final maturity on 30 June 2026.
As per the terms of the repurchase of the preference shares, approximately USD 75 million has been settled in cash, with a further USD 20 million to be settled pursuant to a seller\u2019s credit agreement with a maturity date 31 July 2024.
The Odfjell Invest Ltd. facilities
Remaining contractual amount for the senior bank facility of USD 231.5 million and USD 100 million for the junior facility as at 31 December 2022.
29 November 2022 a repayment of USD 32 million was made to a single lender in the senior bank facility, thereby settling the outstanding balance to that single lender.
A related interest rate swap was terminated 30 November 2022 with a cash amount of USD 1.6 million being received by Odfjell Invest Ltd.
The Odfjell Rig III Ltd. facility
Remaining contractual amount of USD 133 million as at 31 December 2022.
The Odfjell Rig V Ltd. facility
Remaining contractual amount of USD 214 million as at 31 December 2022 for the bank facility.
The Odfjell Rig V Ltd. seller's credit
The carrying amount and fair value of the non-current liabilities are as follows:
Available drawing facilities
The group has no available not drawn facilities as per 31 December 2022.
Compliance with financial covenants as at 31.12.2022
The Odfjell Drilling Group is compliant with all financial covenants as at 31 December 2022.
Financial covenants
The borrowing facilities in the Odfjell Drilling Group include the following main covenants:
Group covenants
The Odfjell Drilling Group has agreed on the bank facilities to maintain:
\u2022a minimum free liquidity (cash and cash equivalents) requirement of USD 50 million and a total liquidity of minimum 5 per cent of interest-bearing debt (on consolidated basis) (if the Odfjell Drilling Group 12 months prior to delivery of any investments in excess of USD 100 million has any not\u00a0financed capital expenditure related to such investment, the minimum free liquidity requirement will increase to USD 100 million).
\u2022a book equity of at least USD 600 million and an equity ratio (equity to total assets) of minimum 30 per cent, increasing with 1% each calendar year from and including 2019, up to 35%.
\u2022a leverage ratio (net interest-bearing debt to EBITDA) not exceeding 5.00:1:00. EBITDA and Interest-Bearing Debt related to a new-build (drilling rig/vessel) or second-hand fleet addition shall be disregarded until the first full month after the earlier of (i) six (6) months after commencement of a firm employment contract for such new-build or second-hand fleet addition and (ii) twelve (12) months from the contractual delivery date (within the yard\u2019s delivery window) for such unit. Thereafter, actual EBITDA shall be annualised until a full twelve-month earnings history related to that new-build or second-hand fleet addition has been achieved.
\u2022a ratio of current assets to current liabilities of minimum 1.00:1.00.
The bank facility agreements contain undertakings and covenants, and terms and conditions which are considered to be customary for similar types of bank financings in the current market, including, but not limited to, undertakings related to reporting and information, certain restrictions on corporate actions and change of business and covenants relating to the valuation, operation and maintenance of the vessels.
The bank facility agreements further contain customary default and cross-default provisions.
The bank facility agreements provide for mandatory prepayment if Helene Odfjell (and her descendants) cease to own at least 50.1% of the shares in Odfjell Drilling Ltd.
Odfjell Invest Ltd \u2013 USD 425 million facility
Odfjell Drilling may pay dividends in an amount up to 50% of its net income in its previous financial year.
Odfjell Invest Ltd \u2013 USD 100 million junior facility
The junior facility contains materially the same undertakings and covenants as the USD 425 million facility.
The junior facility has no fixed instalments, but shall on certain conditions be partly repaid annually by free and available liquidity of the Odfjell Drilling Group above USD 175 million, however so that any such repayment shall be limited to 50% of the previous year\u2019s net result and adjusted for any identified liquidity requirements. Dividends and other distributions on the common shares of Odfjell Drilling are subject to lender\u2019s prior written consent for as long as the junior facility is outstanding.
Odfjell Rig III Ltd \u2013 USD 530 million facility
Payment of dividends from Odfjell Drilling Ltd., on ordinary shares shall be limited to 50% of its net income, provided that the lenders and Eksfin have on each occasion given their prior written consent.
Odfjell Rig V Ltd - USD 325 million facility
Dividends on ordinary shares shall be limited to 50% of its net income.
Odfjell Rig V Ltd - USD 43.25 million seller\u2019s credit from Samsung
USD 43.25 million seller\u2019s credit granted to Odfjell Rig V Ltd by Samsung Heavy Industries at delivery of Deepsea Nordkapp 7 January 2019, which is subordinated to the USD 325 million facility. The facility contains covenants that are customary for these types of facilities.
Odfjell Drilling Ltd - USD 95 million Direct loan
Direct loan of USD 95 million granted to Odfjell Drilling Ltd. in November 2022 by undisclosed client. There is a minimum equity ratio (on consolidated basis) covenant of minimum 35%.
Odfjell Rig Owning Ltd. \u2013 USD 20 million seller\u2019s credit from Akastor
Note 18Leases
The group\u2019s leasing activities as a lessee and how these are accounted for
This note relates to the Group as a lessee only.
The Group leases various offices, workshops and warehouses in addition to some equipment. Rental contracts are typically made for fixed periods of 6 months to 10 years, but may have extension or termination options. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payment that are based on an index or a rate (initially measured using the index or rate as at the commencement date), amounts expected to be payable by the group under residual value guarantees, the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee\u2019s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease, e.g. term, country, currency and security.
The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising of the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs, and any restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset\u2019s useful life.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and smaller items of office equipment.
Significant judgement and estimation uncertainty
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group's business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
The Group cannot readily determine the interest rate implicit in the lease, therefore it uses its incremental borrowing rate (IBR) to measure lease liabilities. IBR is estimated using observable inputs, such as market interest rates, when available. It is required to make certain entity-specific estimates mentioned above.
The balance sheet shows the following amounts related to leases:
| \n \n | \n\n Properties | \n\n Other fixed assets | \n\n Total Right-of-use assets | \n\n Properties | \n\n Other fixed assets | \n\n Total Right-of-use assets | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January | \n\n 60.0 | \n\n - | \n\n 60.0 | \n\n 56.1 | \n\n - | \n\n 56.1 | \n
| \n Additions | \n\n 3.8 | \n\n 38.2 | \n\n 42.0 | \n\n 9.1 | \n\n - | \n\n 9.1 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n - | \n\n 16.6 | \n\n 16.6 | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n - | \n\n (1.3) | \n\n (1.3) | \n\n (3.2) | \n\n - | \n\n (3.2) | \n
| \n Disposal through distribution of operations to shareholders | \n\n (18.2) | \n\n - | \n\n (18.2) | \n\n - | \n\n - | \n\n - | \n
| \n Currency translation differences | \n\n (4.5) | \n\n (0.8) | \n\n (5.3) | \n\n (2.0) | \n\n - | \n\n (2.0) | \n
| \n Cost as at 31 December | \n\n 41.2 | \n\n 52.7 | \n\n 93.9 | \n\n 60.0 | \n\n - | \n\n 60.0 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January | \n\n (16.5) | \n\n - | \n\n (16.5) | \n\n (13.5) | \n\n - | \n\n (13.5) | \n
| \n Depreciation from continuing operations | \n\n (3.6) | \n\n (15.8) | \n\n (19.5) | \n\n (4.4) | \n\n - | \n\n (4.4) | \n
| \n Depreciation from discontinued operations | \n\n (0.2) | \n\n - | \n\n (0.2) | \n\n (2.4) | \n\n \n | \n\n (2.4) | \n
| \n Adjustments due to previously eliminated inter-segment leases | \n\n - | \n\n (2.7) | \n\n (2.7) | \n\n \n | \n\n \n | \n\n \n | \n
| \n Disposals | \n\n - | \n\n 1.3 | \n\n 1.3 | \n\n 3.2 | \n\n - | \n\n 3.2 | \n
| \n Disposal through distribution of operations to shareholders | \n\n 6.2 | \n\n - | \n\n 6.2 | \n\n - | \n\n - | \n\n - | \n
| \n Currency translation differences | \n\n 1.2 | \n\n 0.2 | \n\n 1.4 | \n\n 0.6 | \n\n - | \n\n 0.6 | \n
| \n As at 31 December | \n\n (13.0) | \n\n (17.0) | \n\n (30.1) | \n\n (16.5) | \n\n - | \n\n (16.5) | \n
| \n Net book value at 31 December | \n\n 28.1 | \n\n 35.7 | \n\n 63.8 | \n\n 43.4 | \n\n - | \n\n 43.4 | \n
Lease liabilities
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non-current | \n\n 41.7 | \n\n 38.3 | \n
| \n Current | \n\n 26.5 | \n\n 7.8 | \n
| \n Total | \n\n 68.2 | \n\n 46.1 | \n
Movements in lease liabilities are analysed as follows:
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Carrying amount as at 1 January | \n\n 38.3 | \n\n 7.8 | \n\n 46.1 | \n\n 36.9 | \n\n 7.6 | \n\n 44.6 | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Payments for the principal portion of the lease liability | \n\n - | \n\n (18.6) | \n\n (18.6) | \n\n - | \n\n (6.1) | \n\n (6.1) | \n
| \n Payments for the interest portion of the lease liability | \n\n - | \n\n (4.3) | \n\n (4.3) | \n\n - | \n\n (2.5) | \n\n (2.5) | \n
| \n Non-cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n New lease liabilities recognised in the year | \n\n 42.1 | \n\n - | \n\n 42.1 | \n\n 9.1 | \n\n - | \n\n 9.1 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n 13.9 | \n\n - | \n\n 13.9 | \n\n - | \n\n - | \n\n - | \n
| \n Disposal through distribution of operations to shareholders | \n\n (9.4) | \n\n (2.6) | \n\n (12.0) | \n\n - | \n\n - | \n\n - | \n
| \n Interest expense on lease liabilities | \n\n 4.3 | \n\n - | \n\n 4.3 | \n\n 2.6 | \n\n - | \n\n 2.6 | \n
| \n Reclassified | \n\n (45.4) | \n\n 45.4 | \n\n - | \n\n (9.1) | \n\n 9.1 | \n\n - | \n
| \n Currency exchange differences | \n\n (2.1) | \n\n (1.1) | \n\n (3.2) | \n\n (1.3) | \n\n (0.3) | \n\n (1.5) | \n
| \n Carrying amount as at 31 December | \n\n 41.7 | \n\n 26.5 | \n\n 68.2 | \n\n 38.3 | \n\n 7.8 | \n\n 46.1 | \n
Rental costs for exemptions
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Expenses relating to short-term leases | \n\n 20.4 | \n\n 14.6 | \n
| \n Expenses relating to low value items | \n\n - | \n\n - | \n
Extension and termination options
Extension and termination options are included in a number of property and equipment leases across the group. These are used to maximise operational flexibility in terms of managing the assets used in the group's operations.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
Most extension options have not been included in the lease liability, because the group could replace the asset without significant cost of business disruption, or because the group is not certain it would need the asset in the option period.
Note 19Post-employment benefits
The Group has occupational pension plans in several countries established partly as defined benefit plans (in Norway), partly as multi-employer defined benefit plans accounted for as defined contribution plans (in Norway) and partly as defined contribution plans (in Norway and other countries). The pension plans are measured and presented according to IAS 19.
Pension obligations
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the income statement.
Mortality index used in actuarial calculations is K2013.
Defined benefit pension plans
The Group has funded defined benefit pension schemes in one Norwegian company (five companies as at 31 December 2021) covering a total of 9 active members and 19 pensioners as at 31 December 2021 (43 active members and 31 pensioners as at 31 December 2021). The scheme entitles employees to defined future benefits. These are mainly dependent on the number of years of service, the salary level at pensionable age and the size of benefits paid by the national insurance. The liabilities are covered through an insurance company.
In addition to the pension obligations that arises from the funded defined benefit plans, the Group\u2019s Norwegian companies have unfunded defined benefit obligations related to pensions and early retirement pensions. The early retirement pensions entitle staff to benefits (about USD 12,000 a year) from the company from the age of 62 until they are eligible for a national insurance pension when reaching the age of 67, if they retire and meet requirement to receive CPA (see below).
The Group has contractual pension agreement (CPA) schemes in Norway established in multi-employer plans. These multi-employer plans are defined benefit plans, but the Group does not have access to the necessary information for the accounting years 2021 and 2020 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
Movements in the net defined benefit obligation
| \n \n | \n\n Present value of obligation | \n\n Fair value of plan assets | \n\n Total | \n\n Present value of obligation | \n\n Fair value of plan assets | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n At 1 January | \n\n 26.1 | \n\n (20.1) | \n\n 6.0 | \n\n 25.7 | \n\n (18.8) | \n\n 6.9 | \n
| \n Current service cost | \n\n 0.5 | \n\n - | \n\n 0.5 | \n\n 1.1 | \n\n - | \n\n 1.1 | \n
| \n Loss on plan amendment, curtailment and settlement | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Interest expense/A7(income) | \n\n 0.2 | \n\n (0.1) | \n\n 0.0 | \n\n 0.4 | \n\n (0.3) | \n\n 0.1 | \n
| \n Total amount recognised in profit or loss | \n\n 0.7 | \n\n (0.1) | \n\n 0.5 | \n\n 1.5 | \n\n (0.3) | \n\n 1.2 | \n
| \n Re-measurements: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n (Gain)/loss from change in discount rate | \n\n (1.6) | \n\n - | \n\n (1.6) | \n\n - | \n\n - | \n\n - | \n
| \n (Gain)/loss from change in other financial assumptions | \n\n 1.5 | \n\n (0.1) | \n\n 1.4 | \n\n 0.7 | \n\n - | \n\n 0.7 | \n
| \n Experience (gain)/loss | \n\n (0.7) | \n\n 1.0 | \n\n 0.2 | \n\n (0.0) | \n\n (0.4) | \n\n (0.5) | \n
| \n Investment management cost | \n\n - | \n\n 0.1 | \n\n 0.1 | \n\n - | \n\n 0.2 | \n\n 0.2 | \n
| \n Total amount recognised in other comprehensive income | \n\n (0.9) | \n\n 0.9 | \n\n 0.1 | \n\n 0.7 | \n\n (0.3) | \n\n 0.4 | \n
| \n Exchange differences | \n\n (0.6) | \n\n 0.3 | \n\n (0.3) | \n\n (0.8) | \n\n 0.7 | \n\n (0.2) | \n
| \n Contributions: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Employers | \n\n (0.0) | \n\n (0.3) | \n\n (0.4) | \n\n (0.2) | \n\n (1.7) | \n\n (1.9) | \n
| \n Payments from plans: | \n\n \n | \n\n \n | \n\n - | \n\n \n | \n\n \n | \n\n - | \n
| \n Benefit payments | \n\n (0.2) | \n\n 0.2 | \n\n - | \n\n (0.7) | \n\n 0.3 | \n\n (0.4) | \n
| \n Settlements | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposal through distribution of operations to shareholders | \n\n (17.6) | \n\n 12.2 | \n\n (5.4) | \n\n - | \n\n - | \n\n - | \n
| \n At 31 December | \n\n 7.4 | \n\n (6.8) | \n\n 0.6 | \n\n 26.1 | \n\n (20.1) | \n\n 6.0 | \n
Estimated premium payments to funded defined benefit obligations in 2023 amounts to about USD 0.4 million.
Amounts recognised in Statement of Financial Position
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Present value of funded obligations | \n\n 7.4 | \n\n 23.3 | \n
| \n Fair value of plan assets | \n\n (6.8) | \n\n (20.1) | \n
| \n Deficit of funded plans | \n\n 0.6 | \n\n 3.3 | \n
| \n Present value of unfunded obligations | \n\n - | \n\n 2.7 | \n
| \n Total deficit of defined benefit pension plans | \n\n 0.6 | \n\n 6.0 | \n
The significant actuarial assumptions were as follows:
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Discount rate | \n\n 3.20% | \n\n 1.50% | \n
| \n Salary growth rate | \n\n 3.75% | \n\n 2.50% | \n
| \n Expected growth in G (base social security amount) | \n\n 3.50% | \n\n 2.25% | \n
| \n Pension growth rate | \n\n 1.7%-3.5% | \n\n 0.0%-2.25% | \n
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions are:
| \n \n | \n\n Change in assumption by: | \n\n Impact on Present value of obligation: | \n\n Change in assumption by: | \n\n Impact on Present value of obligation: | \n||
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 31.12.2022 | \n\n 31.12.2021 | \n||
| \n Discount rate | \n\n +0.5% | \n\n (0.4) | \n\n (1.7) | \n\n -0.5% | \n\n 0.5 | \n\n 2.0 | \n
| \n Salary growth rate | \n\n +0.5% | \n\n 0.0 | \n\n 0.6 | \n\n -0.5% | \n\n (0.1) | \n\n (0.6) | \n
| \n Pension growth rate | \n\n +0.5% | \n\n 0.4 | \n\n 1.2 | \n\n -0.5% | \n\n (0.3) | \n\n (0.0) | \n
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practise, this is unlikely to occur, and changes in some of the assumptions may be correlated.
The fair value of plan assets is disaggregated by class as follows
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Shares | \n\n 11% | \n\n 10% | \n
| \n Short term bonds | \n\n 15% | \n\n 20% | \n
| \n Money market | \n\n 8% | \n\n 11% | \n
| \n Long term bonds | \n\n 32% | \n\n 27% | \n
| \n Loans & Receivables | \n\n 22% | \n\n 19% | \n
| \n Real estate | \n\n 10% | \n\n 14% | \n
| \n Other | \n\n 1% | \n\n 1% | \n
Total pension expenses included in personnel expenses are decomposed as per below:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Pension expenses from defined benefit scheme included in personnel expenses | \n\n 0.5 | \n\n 1.1 | \n
| \n Pension expenses from defined contribution schemes | \n\n 6.4 | \n\n 12.2 | \n
| \n Pension expenses from multi-employer plans accounted for as defined contribution schemes | \n\n 6.3 | \n\n 7.7 | \n
| \n Total pension expenses included in personnel expenses | \n\n 13.2 | \n\n 21.0 | \n
See also Note 7 - Personnel expenses for further information regarding personnel expenses.
Note 20Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Note 21Other liabilities
Other current liabilities specification
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Social security and other taxes | \n\n 13.4 | \n\n 24.6 | \n
| \n Accrued salaries, holiday pay and employee bonus | \n\n 15.2 | \n\n 37.5 | \n
| \n Other payables and financial liabilities | \n\n 5.0 | \n\n 2.0 | \n
| \n Other accrued expenses | \n\n 7.7 | \n\n 17.1 | \n
| \n Total other current liabilities | \n\n 41.3 | \n\n 81.2 | \n
Refer to Note 29 - Contingencies for further information about accounting policy for provisions and accruals, as well as significant judgement applied and estimation uncertainty.
Note 22Financial risk management
Capital management and funding
The primary objective of the Group's capital management is to ensure that it maintains required capital ratios and liquidity available to support the business. Capital management should be such that the capital structure is sufficiently robust to withstand prolonged adverse conditions in significant risk factors, such as long-term down-cycles in our markets and unfavourable conditions in financial markets. Capital management also comprise securing the company to be
in compliance with covenants on interest bearing debt. Reference is made to Note 17 - Interest-bearing borrowings which disclose information about covenants on long-term interest-bearing liabilities.
The Group will manage the capital structure and adjust it, to maintain an optimal structure adapted to current economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payments, buy treasury shares, return capital to shareholders or issue new shares.
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Equity | \n\n 1,208.5 | \n\n 1,268.2 | \n
| \n Total assets | \n\n 2,219.3 | \n\n 2,515.2 | \n
| \n Equity ratio | \n\n 54% | \n\n 50% | \n
| \n Cash and cash equivalents excl.restricted capital | \n\n 148.8 | \n\n 159.0 | \n
| \n Available drawing facilities | \n\n - | \n\n - | \n
| \n Total available liquidity | \n\n 148.8 | \n\n 159.0 | \n
Deposits / placements
The liquidity management has four main objectives:
\u2022Matching of surplus funds against borrowing requirements.
\u2022Secure a level of liquidity (a minimum of two months operating expenses) to meet future plans of Odfjell Drilling.
\u2022Limitation of credit risks.
\u2022Maximise return on liquid assets.
Accordingly, investments may only be made in securities with a rating of Investment grade, BAA (Moodys) , BBB- (Standard and Poors and Fitch IBCA) or better.
A list of counter-party exposure limits is reported to the Board of Odfjell Drilling on a yearly basis.
The following instruments are allowed for short term placements;
\u2022Deposits in banks
\u2022Loans to companies/institutions/funds (like fixed or floating rate bonds, senior or subordinated debt)
\u2022Certificates
\u2022Money-market funds
Liquidity
The company's policy is to have liquidity corresponding to two months\u2019 operating expenses.
Financial risk factors
The Group is exposed to a range of financial risks: liquidity risk, market risk (including currency risk, interest rate risk, and price risk), and credit risk.
The financial risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group\u2019s financial
performance. To some extent, the Group uses derivative financial instruments to reduce certain risk exposures.
Risk management is carried out on a Group level. The Group identifies, evaluates and hedges financial risks in close co-operation with the Group's operational units. The board of Odfjell Drilling Ltd. has established written principles for risk management of foreign exchange risk, interest rate risk and use of derivative financial instruments.
Note 23Liquidity risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and to have sufficient cash or cash equivalents at any time to be able to finance its operations and investments in accordance with the Group's strategic plan.
With regular forecasts and liquidity analysis updates, the Group will ensure sufficient available liquidity to fulfil its duties at loan maturity, without unacceptable loss or risk of damaging the Group\u2019s reputation.
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through credit facilities and the ability to close out market positions.
The Group\u2019s cash flow forecasting is performed by Group Finance. Group Finance monitors rolling forecasts of the Group\u2019s liquidity requirements to ensure it has sufficient cash to meet operational needs at all times, so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group\u2019s debt financing plans and covenant compliance.
Surplus cash held by the operating entities over and above the balance required for working capital management is transferred to the Group Treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.
Odfjell Drilling held cash and cash equivalents amounting to USD 157 million at the end of 2022. This is deemed to be sufficient funding for the Group\u2019s current activity levels and committed capital expenditures during 2023.
The liquidity risk is connected with the market risk and the re-contracting risk for mobile drilling units. The management continuously focuses on securing new profitable contracts for the Group's mobile drilling units to generate sufficient cash flow from operations, hence reducing the liquidity risk going forward.
Operating in several jurisdictions Odfjell Drilling do from time to time receive enquiries from authorities about compliance related matters. Refer to Note 29 Contingencies for information regarding letter of indemnity and USD 31 million prepayment made in 2023 related to a tax ruling in Norway.
The Group's refinancing risk is considered low. Currently, bank loan facilities are maturing at different times up to\u00a0June\u00a02024. The Group is considering alternative sources of financing, and has also started dialogue with banks. The Group expects to be successful in securing new or extended financing prior to maturity of the loans. See Note 17 - Interest-bearing borrowings for further information about maturity of contractual amounts.
Maturity of financial liabilities
The amounts disclosed in the table are the contractual non-discounted cash flows. The table include estimated interest payments for drawn facilities at the balance sheet date, based on the remaining period at the end of the reporting period to the contractual maturity date. The estimated interest payments include payments based on forward rates for the interest rate swaps.
Maturity of financial liabilities - 31.12.2022
| \n USD million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Interest-bearing borrowings | \n\n 94.8 | \n\n 271.0 | \n\n 471.3 | \n\n 101.3 | \n\n - | \n\n 938.4 | \n\n 842.5 | \n
| \n Lease liabilities | \n\n 13.3 | \n\n 13.2 | \n\n 22.2 | \n\n 16.0 | \n\n 12.0 | \n\n 76.8 | \n\n 68.2 | \n
| \n Trade payables | \n\n 35.8 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 35.8 | \n\n 35.8 | \n
| \n Other current payables | \n\n 21.4 | \n\n 6.5 | \n\n - | \n\n - | \n\n - | \n\n 27.9 | \n\n 27.9 | \n
Maturity of financial liabilities - 31.12.2021
| \n USD million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Interest-bearing borrowings | \n\n 97.1 | \n\n 96.3 | \n\n 477.2 | \n\n 452.5 | \n\n - | \n\n 1,123.1 | \n\n 1,036.4 | \n
| \n Lease liabilities | \n\n 4.0 | \n\n 3.8 | \n\n 7.5 | \n\n 19.7 | \n\n 22.5 | \n\n 57.5 | \n\n 46.1 | \n
| \n Trade payables | \n\n 43.1 | \n\n 0.1 | \n\n - | \n\n - | \n\n - | \n\n 43.2 | \n\n 43.2 | \n
| \n Other current payables | \n\n 51.3 | \n\n 5.4 | \n\n - | \n\n - | \n\n - | \n\n 56.6 | \n\n 56.6 | \n
Note 24Market risk
Market risk is the risk of a change in market prices and demand, as well as changes in currency exchange rates and interest levels.
The re-contracting risk for the Group's wholly owned mobile drilling units is limited in 2023, as all units in the fleet has medium to long-term contracts.
Contract status and currency exposure in rig rates
The Deepsea Atlantic commenced its Johan Sverdrup phase 2 contract with Equinor on 31 December 2021. During 2022 Equinor Energy AS exercised further options for the Deepsea Atlantic to drill five additional wells on Johan Sverdrup Phase 2 development, extending the Deepsea Atlantic's firm backlog into the first quarter of 2024. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
The Deepsea Stavanger is currently on contract with Equinor and working on the Norwegian Continental Shelf. During 2022, Equinor exercised further work for Deepsea Stavanger under the continued optionality mechanism and the rig was also awarded a five-year firm contract with Aker BP ASA which is scheduled to commence in early 2025. The current fixed well program with Equinor is expected to take firm operations into the third quarter of 2023. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Deepsea Aberdeen is currently on a long-term contract with Equinor at the Breidablikk field. The current fixed well program with Equinor is expected to take firm operations into the fourth quarter of 2024. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Deepsea Nordkapp commenced operations for Aker BP under the Alliance agreement on 10 May 2019. The rig has currently firm work through the third quarter 2024 as Aker BP in 2022 exercised further options. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Climate Risk
During 2022, a project was undertaken with external advisors to raise awareness and assess the impacts of climate risks and opportunities. Cross-functional workshops were held to review the impact on the business from both physical and transitional risks in the short, medium and long term, prioritising risks for further deep dives.
The most significant transition risks identified, along with mitigating actions were:
\u2022Changes in fossil energy demand due to policies and consumer behaviour changes, leading to reduced demand for our assets and reduced revenue. This will be factored in to any asset growth decisions and alternative use of assets will be considered.
\u2022Cost of and access to capital may go up as banks move to low carbon portfolios, leading to increased interest costs. Consider debt structure and ensure carbon reducing initiatives understood by capital markets.
The most significant physical risk identified, along with mitigating actions is:
\u2022Impact of extreme weather offshore on crew and equipment logistics could increase costs and result in downtime. Critical spares analysis and robust planning required as well as protection in commercial contracts.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
\u2022There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u2022The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u2022The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
\u2022The effective portion of the gain or loss on the cash flow hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
\u2022Amounts recognised directly in other comprehensive income are reclassified as income or expense in the income statement in the period when the hedged liability or planned transaction will affect the income statement.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within financial income/expenses.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria\u00a0or the group has elected not to apply hedge accounting,\u00a0they are classified as \u2018held for trading\u2019 for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
The group has the following derivative financial instruments in the following line items in the balance sheet:
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Current assets | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n 2.4 | \n\n - | \n
| \n Foreign exchange contracts - cash flow hedges under hedge accounting | \n\n - | \n\n 0.6 | \n
| \n Total current derivative financial instruments asset | \n\n 2.4 | \n\n 0.6 | \n
| \n Non-current assets | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - at fair value through profit or loss | \n\n - | \n\n 5.0 | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n 7.5 | \n\n - | \n
| \n Total non-current derivative financial instruments asset | \n\n 7.5 | \n\n 5.0 | \n
| \n Non-current liabilities | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n - | \n\n 3.0 | \n
| \n Warrant liability - at fair value through profit or loss | \n\n 2.8 | \n\n 1.0 | \n
| \n Total non-current derivative financial instruments liabilities | \n\n 2.8 | \n\n 4.0 | \n
The group's hedging reserves disclosed in Note 27 - Other reserves related to the following instruments:
Cash flow hedging reserves
| \n USD million | \n\n Currency forwards | \n\n Interest rate swaps | \n\n Total hedge reserves | \n
| \n Opening balance 1 January 2021 | \n\n 4.4 | \n\n (10.5) | \n\n (6.2) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n 0.2 | \n\n 3.3 | \n\n 3.7 | \n
| \n Reclassified from OCI to profit or loss | \n\n (4.0) | \n\n 4.2 | \n\n 0.2 | \n
| \n Closing balance 31 December 2021 | \n\n 0.6 | \n\n (3.0) | \n\n (2.3) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n (0.3) | \n\n 12.7 | \n\n 12.4 | \n
| \n Reclassified from OCI to profit or loss | \n\n (0.2) | \n\n (2.2) | \n\n (2.4) | \n
| \n Closing balance 31 December 2022 | \n\n - | \n\n 7.5 | \n\n 7.7 | \n
In addition to the amounts disclosed in the reconciliation of the hedging reserves above, the following amounts were recognised in profit or loss in relation to derivatives:
Amounts recognised in profit or loss
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Interest rate swaps - at fair value through profit or loss | \n\n \n | \n\n \n | \n
| \n Amounts recognised in interest expenses | \n\n (0.1) | \n\n (0.8) | \n
| \n Gain from settlement of swaps | \n\n 12.1 | \n\n - | \n
| \n Change in fair value | \n\n (5.0) | \n\n 5.8 | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n \n | \n\n \n | \n
| \n Change in fair value | \n\n 2.4 | \n\n (1.4) | \n
| \n Warrant liability - at fair value through profit or loss | \n\n \n | \n\n \n | \n
| \n Change in fair value | \n\n (1.9) | \n\n 4.3 | \n
Foreign exchange risk
The consolidated material subsidiaries' reporting and functional currencies are USD and NOK.
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to USD and NOK. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity\u2019s functional currency. The group is exposed to risks due to fluctuations in exchange rates, especially as charter contracts are mainly priced in USD while most of the operating expenses are in local currency. The Group seeks to minimise these risks through currency hedging via financial instruments or by off-setting local currency elements in charter contracts.
Quoted mark-to-market values from financial institutions have been used to determine the fair value of the foreign exchange contracts at the end of the year. The foreign exchange contracts are only used for economic hedging purposes and not as speculative investments. However, these derivatives did not meet the hedge accounting criteria, and are accounted for at fair value through profit or loss.
The group\u2019s exposure to foreign currency risk at the end of the reporting period, expressed in USD, was as follows:
Foreign exchange risk - Exposure - 31.12.2022
| \n USD million | \n\n NOK | \n\n GBP | \n\n Other non-USD currencies | \n
| \n Cash and cash equivalents | \n\n 113.7 | \n\n 0.9 | \n\n 0.8 | \n
| \n Trade receivables | \n\n 68.6 | \n\n 0.1 | \n\n - | \n
| \n Contract assets | \n\n 6.4 | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (42.0) | \n\n - | \n\n - | \n
| \n Trade payables | \n\n (25.8) | \n\n (0.2) | \n\n (1.6) | \n
| \n Other current payables | \n\n (25.5) | \n\n (0.0) | \n\n (0.7) | \n
| \n Foreign currency contracts | \n\n \n | \n\n \n | \n\n \n | \n
| \n Buy foreign currency (at fair value through profit or loss\u200b) | \n\n 103.5 | \n\n - | \n\n - | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n 116.3 | \n\n - | \n\n - | \n
Foreign exchange risk - Exposure - 31.12.2021
| \n USD million | \n\n NOK | \n\n GBP | \n\n Other non-USD currencies | \n
| \n Cash and cash equivalents | \n\n 85.5 | \n\n 5.7 | \n\n 6.4 | \n
| \n Trade receivables | \n\n 64.1 | \n\n 25.0 | \n\n 8.0 | \n
| \n Contract assets | \n\n 7.1 | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (41.7) | \n\n (1.4) | \n\n (3.0) | \n
| \n Trade payables | \n\n (24.9) | \n\n (5.8) | \n\n (2.7) | \n
| \n Other current payables | \n\n (68.2) | \n\n (5.0) | \n\n (1.7) | \n
| \n Foreign currency forwards | \n\n \n | \n\n \n | \n\n \n | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n 17.4 | \n\n - | \n\n - | \n
Foreign currency forwards
| \n Foreign currency contracts | \n\n Currency | \n\n Notional amount | \n\n Maturity date | \n\n Hedge ratio | \n\n Weighted average hedged rate | \n\n Carrying amount | \n
| \n 31.12.2022 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Buy foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 290.0 | \n\n 30.05.2023 | \n\n n/a | \n\n 0.10345 | \n\n 0.8 | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 321.3 | \n\n 30.05.2023 | \n\n n/a | \n\n 0.09337 | \n\n (0.3) | \n
| \n Buy foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 729.8 | \n\n 01.06.2023 | \n\n n/a | \n\n 0.10276 | \n\n 2.3 | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 825.0 | \n\n 01.06.2023 | \n\n n/a | \n\n 0.09091 | \n\n (0.5) | \n
| \n 31.12.2021 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 153.5 | \n\n Jan 2021 - April 2022 | \n\n 1:1 | \n\n 0.11322 | \n\n 0.6 | \n
The aggregate net foreign exchange gains/losses recognised in profit or loss were:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) included in finance costs | \n\n (3.6) | \n\n 3.1 | \n
As shown in the table above, the Group is primarily exposed to changes in USD/NOK exchange rates.
Sensitivity to changes in USD/NOK exchange rates
| \n Sensitivity to changes in USD/NOK exchange rates | \n\n USD is strengthened by 20 % against NOK | \n\n USD is strengthened by 10 % against NOK | \n\n USD is weakened by 10 % against NOK | \n|||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Cash and cash equivalents | \n\n (9.8) | \n\n (4.4) | \n\n (5.3) | \n\n (2.4) | \n\n 6.5 | \n\n 3.0 | \n
| \n Current receivables | \n\n 3.0 | \n\n 5.4 | \n\n 1.7 | \n\n 2.9 | \n\n (2.0) | \n\n (3.6) | \n
| \n Current liabilities | \n\n (3.5) | \n\n (0.6) | \n\n (1.9) | \n\n (0.3) | \n\n 2.3 | \n\n 0.4 | \n
| \n Net effect on profit before tax | \n\n (10.2) | \n\n 0.3 | \n\n (5.6) | \n\n 0.2 | \n\n 6.8 | \n\n (0.2) | \n
Interest rate risk
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations at floating interest rates. The Group evaluates the share of interest rate hedging based on assessment of the Group\u2019s total interest rate risk and currently has a combination of fixed and floating interest rates in order to limit exposure. The Board of Directors is on regular basis considering the interest payment hedging of the external financing and mandate administration to execute necessary changes.
The Group had 8 interest rate swap agreements at 31 December 2022. Quoted mark-to-market values from financial institutions have been used to determine the fair value of the swap agreements at the end of the year. Some of the instruments used during 2022 were documented as cash flow hedges and other as financial investments, and changes in fair value were recognised in other comprehensive income (cash flow hedging) and others recognised through profit and loss statement (financial investments not defined as cash flow hedges).
Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item. This will effectively result in recognising interest expense at a fixed interest rate for the hedged floating rate loans.
Including interest rate swaps entered into, the fixed-rate portion of the group\u2019s interest bearing debt per 31 December 2022 is approximately 44%.
The swap contracts require settlement of net interest receivable or payable. The settlement dates coincide with the dates on which interest is payable on the underlying debt.
Average interest rate as of 31.12.2022 was 7.2%, including the effect of interest rate hedging.
Estimated fair value calculations from external financial institutions have been used to determine the fair value of the swap agreement at the end of the year.
The Group monitors its interest rate exposure on a dynamic basis. The Group calculates the impact on profit and loss of a defined interest rate shift.
As of 31.12.2022 the Group held the following LIBOR based interest rate swaps:
| \n \n | \n\n Notional amount | \n\n Maturity date | \n\n Hedge ratio | \n\n Weighted average hedged rate | \n\n Carrying amount | \n
| \n Cash flow hedges under hedge accounting | \n\n 213.8 | \n\n 2023 | \n\n 1:1 | \n\n 1.4392% | \n\n 6.6 | \n
| \n Cash flow hedges under hedge accounting | \n\n 21.6 | \n\n 2024 | \n\n 1:1 | \n\n 1.4415% | \n\n 1.0 | \n
As of 31.12.2021 the Group held the following LIBOR based interest rate swaps:
| \n \n | \n\n Notional amount | \n\n Maturity date | \n\n Hedge ratio | \n\n Weighted average hedged rate | \n\n Carrying amount | \n
| \n Cash flow hedges under hedge accounting | \n\n 248.0 | \n\n 2023 | \n\n 1:1 | \n\n 1.4392% | \n\n (2.4) | \n
| \n Cash flow hedges under hedge accounting | \n\n 62.5 | \n\n 2024 | \n\n 1:1 | \n\n 1.4371% | \n\n (0.6) | \n
| \n At fair value through profit or loss | \n\n 200.0 | \n\n 2025 | \n\n 1:1 | \n\n 0.4475% | \n\n 5.0 | \n
The exposure of the Group's borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period are as follows:
| \n USD million | \n\n 31.12.2022 | \n\n % of total loans | \n\n 31.12.2021 | \n\n % of total loans | \n
| \n Variable rate borrowings - USD LIBOR | \n\n 471.8 | \n\n 56% | \n\n 472.4 | \n\n 45% | \n
| \n Fixed rate borrowings - repricing or maturity dates: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Less than 1 year | \n\n 213.8 | \n\n 25% | \n\n - | \n\n 0% | \n
| \n 1-5 years | \n\n 156.6 | \n\n 19% | \n\n 570.5 | \n\n 55% | \n
| \n Later than 5 years | \n\n - | \n\n 0% | \n\n - | \n\n 0% | \n
| \n Total contractual amounts* | \n\n 842.2 | \n\n 100% | \n\n 1,042.9 | \n\n 100% | \n
| \n\n | \n
The result of the calculation on sensitivities returns the following expected values (incl. interest rate swaps entered into as at 31 December):
\u2022If interest rate is increased by 1.0 %, the effect would be an increase in financing costs of approximately USD 5 million for the next 12 months as at 31 December 2022, compared to USD 4 million at 31\u00a0December 2021.
Interest rate benchmark reform
The interest rate benchmark London Inter-Bank Offered Rate (LIBOR) is being wound down. The majority of LIBOR panels have ended, and their settings ceased or are permanently unrepresentative. The overnight, 1-month, 3-month, 6-month and 12-month USD LIBOR settings are continuing under a panel bank methodology until the end of June 2023. By the end of June 2023, the Group will amend existing contracts and agreements that reference USD LIBOR to Secured Overnight Financing Rate (SOFR).
Group treasury is managing the group\u2019s USD LIBOR transition plan. The most significant change will be amendments to the contractual terms of the USD LIBOR-referenced floating-rate debt and the associated swaps and the corresponding update of the hedge designation. However, the changed reference rate may also affect other systems, processes, risk and valuation models, as well as having tax and accounting implications.
No financial instruments have transitioned to an alternative benchmark rate at the end of the reporting period. No material financial effects are expected as a result of the IBOR reform.
The Group has signed ISDA 2020 Fallbacks Protocol & Supplement for derivatives. That means that the Group\u2019s interest rate swap agreements have a fallback to compounded SOFR, if noting else is agreed.
The Group is currently evaluating which SOFR both floating-rate debt and associated swaps will be transitioned to. The Group will conclude and implement the USD LIBOR transition to SOFR in Q2 2023.
Relief applied
The group has applied the following reliefs that were introduced by the amendments made to IFRS 9 Financial Instruments in September 2019 and the Interest Rate Benchmark Reform - Phase 2 - amendments:
\u2022When considering the \u2018highly probable\u2019 requirement, the group has assumed that the USD interest rate on which the group\u2019s hedged debt is based does not change materially as a result of IBOR reform.
\u2022In assessing whether the hedge is expected to be highly effective on a forward-looking basis the group has assumed that the USD LIBOR interest rate on which the cash flows of the hedged debt and the interest rate swap that hedges it are based is not materially altered by LIBOR reform.
\u2022The group has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
\u2022If the basis for determining contractual cash flows of a financial asset or liability measured at amortised cost changes solely as a result of the IBOR reform, the Group will update the effective interest rate to reflect the change that is required
Warrant liabilities
On 30 May 2018 the company issued warrants for 5,925,000 common shares to an affiliate of Akastor ASA for a total consideration of USD 1.00. Following the spin-off of Odfjell Technology, the hurdle rate and number of warrants has been adjusted to maintain the same value of the warrants, increasing the number of issued warrants to 6,837,492, and decreasing the exercise prices from the range of NOK 36 - NOK 107.50 to the range of NOK 31.20 - NOK 93.15.
The Warrants will be exercisable in six equal tranches from 2019 to 2024. A tranche which has become exercisable may also be exercised on the exercise dates for the subsequent tranches if the conditions for such subsequent exercise(s) are satisfied. Each tranche may be exercised if the price of the Shares has increased by a defined percentage over NOK 31.20 on the relevant exercise date (i.e. 31 May in 2019, 2020, 2021, 2022, 2023 and 2024 respectively), being NOK 37.43 for tranche 1, NOK 44.92 for tranche 2, NOK 53.91 for tranche 3, NOK 64.69 for tranche 4, NOK 77.62 for tranche 5 and NOK 93.15 for tranche 6. On 30 May 2024, any non-exercised Warrants will, to the extent the thresholds have not been met, be exercisable on a linear prorate basis, subject to the company's share price being within the range of NOK 31.20 and NOK 93.15.
In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of equity and must instead be classified as a derivative liability and measured at fair value with changes in fair value recognised in the consolidated statements of operations and comprehensive loss at each period-end. The derivative liabilities will ultimately be converted into the Company\u2019s equity (common shares) if and when the warrants are exercised, or will be extinguished on the expiry of the outstanding warrants, and will not result in the outlay of any cash by the Company. Immediately prior to exercise, the warrants are remeasured at their estimated fair value.
Upon exercise, the intrinsic value is transferred to share capital (the intrinsic value is the share price at the date the warrant is exercised less the exercise price of the warrant). Any remaining fair value is recorded through the statement of operations and comprehensive loss as part of the change in estimated fair value of derivative warrant liabilities.
The Company has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. The path-dependent nature of the instrument is modelled using a Monte Carlo simulation approach which uses computer generated random numbers to simulate share price paths. The price paths are generated using a process known as Geometric Brownian Motion (GBM). The price distributions generated by GBM are consistent with the assumptions underlying the widely used Black-Scholes model to price equity options.
The calculations are based on the following assumptions:
\u2022Valuation date : 31 December 2022
\u2022Share price: NOK 26.30
\u2022Volatility of share price: 44.57%
\u2022Risk-free interest rate: 3.13%
\u2022USD/NOK exchange rate: 9.8573
\u2022Dividend yield: zero
Based on the valuation, fair value of the warrant liability is estimated to be NOK 28 million / USD 2.8 million as at 31 December 2022 (NOK 8 million / USD 0.95 million as at 31 December 2021).
Note 25Credit risk
Accounting policy
The group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables and contract assets, the Group applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
Further description
The Group operates in two segments: Own Fleet and External Fleet. The market for the Group\u2019s services is the offshore oil and gas industry, and the customers consist primarily of major integrated oil companies, independent oil and gas producers and government owned oil companies. The Group performs ongoing credit evaluations of the customers and generally does not request material collateral.
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents, marketable securities, other receivables and certain derivatives instruments receivable amount, the Group\u2019s exposure to credit risk arises from default of the counter-party, with a maximum exposure equal to the carrying amount of these instruments. However, the Group believes this risk is limited as the counter-parties mainly have a high credit quality.
During 2022, the Group has continued its focus on credit risk in general related to the uncertain conditions in some geographical markets. The maximum exposure regarding trade receivables is the carrying amount of USD 91 million.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to non-billed work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The ageing of the trade receivables - 31.12.2022
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Not due | \n\n 0.0% | \n\n 87.4 | \n\n - | \n\n 87.4 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 2.6 | \n\n - | \n\n 2.6 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n 1.1 | \n\n - | \n\n 1.1 | \n
| \n Over 6 months | \n\n 0.0% | \n\n - | \n\n - | \n\n - | \n
| \n Total | \n\n \n | \n\n 91.0 | \n\n - | \n\n 91.0 | \n
Contract assets - 2022
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Not due | \n\n 0.0% | \n\n 8.6 | \n\n - | \n\n 8.6 | \n
The ageing of the trade receivables - 31.12.2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 130.9 | \n\n - | \n\n 130.9 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 17.5 | \n\n - | \n\n 17.5 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n 1.0 | \n\n - | \n\n 1.0 | \n
| \n Over 6 months | \n\n 21.4% | \n\n 6.6 | \n\n (1.4) | \n\n 5.2 | \n
| \n Total | \n\n \n | \n\n 156.0 | \n\n (1.4) | \n\n 154.5 | \n
Contract assets - 2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 10.2 | \n\n - | \n\n 10.2 | \n
Movements in loss allowance / the provision for impairment of trade receivables and contract assets are as follows:
| \n \n | \n\n Trade receivables | \n\n Contract assets | \n||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Loss allowance as at 1 January | \n\n 1.4 | \n\n 1.1 | \n\n - | \n\n - | \n
| \n Disposal through distribution of operations to shareholders | \n\n (1.4) | \n\n - | \n\n - | \n\n - | \n
| \n Utilised | \n\n - | \n\n (0.1) | \n\n - | \n\n - | \n
| \n Released provision | \n\n - | \n\n (0.3) | \n\n - | \n\n - | \n
| \n New provisions | \n\n - | \n\n 0.7 | \n\n - | \n\n - | \n
| \n Translation differences | \n\n - | \n\n (0.0) | \n\n - | \n\n - | \n
| \n Loss allowance as at 31 December | \n\n - | \n\n 1.4 | \n\n - | \n\n - | \n
Note 26Share capital and shareholder information
| \n \n | \n\n No.of shares | \n\n Nominal value | \n\n Share capital - USD thousands | \n
| \n Listed shares / Common shares issued | \n\n 236,783,202 | \n\n USD 0.01 | \n\n 2,368 | \n
| \n Preference shares issued | \n\n 16,123,125 | \n\n USD 0.01 | \n\n 161 | \n
| \n Total share capital | \n\n \n | \n\n \n | \n\n 2,529 | \n
Common shares
Authorised, not issued shares was 47, 093,673 as at 31 December 2022. There are no changes in issued shares or preference shares in 2022. All issued shares are fully paid.
The Group has not acquired any of its own common shares in 2022, and no common shares are held by entities in the Group.
The Company has only one class of ordinary shares. Each common share in the Company carries one vote, and all common shares carry equal rights, including the right to participate in General Meetings. All shareholders are treated on an equal basis.
Preference shares
29 November 2022, the Group repurchased the preference shares issued to Akastor ASA.(\u201cAkastor\u201d). The preference shares have been acquired for cash at par value, for approximately USD 95 million including accrued dividends. Warrants held by Akastor are not part of the transaction and will remain with Akastor.
Treasury shares - accounting policy
Accounting policy - Cash dividend
Cash dividend paid in 2022
Preferred payment in kind dividend - 2022
For information about warrants, refer to Note 24.
Distribution to shareholders
| \n Largest common shareholders at 31 December 2022 | \n\n Account type | \n\n Holding | \n\n % of shares | \n
| \n Odfjell Partners Holding Ltd. | \n\n Ordinary | \n\n 142,952,381 | \n\n 60.37% | \n
| \n J.P. Morgan Securities Plc | \n\n Nominee | \n\n 13,598,726 | \n\n 5.74% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 5,655,363 | \n\n 2.39% | \n
| \n Goldman Sachs International | \n\n Nominee | \n\n 4,650,055 | \n\n 1.96% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 3,501,856 | \n\n 1.48% | \n
| \n Merrill Lynch Prof. Clearing Corp. | \n\n Nominee | \n\n 3,191,246 | \n\n 1.35% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 2,709,205 | \n\n 1.14% | \n
| \n Citibank | \n\n Nominee | \n\n 1,924,128 | \n\n 0.81% | \n
| \n Brown Brothers Harriman & Co. | \n\n Nominee | \n\n 1,596,418 | \n\n 0.67% | \n
| \n Brown Brothers Harriman & Co. | \n\n Nominee | \n\n 1,576,290 | \n\n 0.67% | \n
| \n BNP Paribas | \n\n Nominee | \n\n 1,429,238 | \n\n 0.60% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 1,307,483 | \n\n 0.55% | \n
| \n J.P. Morgan Securities PLC | \n\n Ordinary | \n\n 1,223,607 | \n\n 0.52% | \n
| \n Nordea Bank Abp | \n\n Nominee | \n\n 1,200,000 | \n\n 0.51% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,150,793 | \n\n 0.49% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,062,822 | \n\n 0.45% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 1,007,930 | \n\n 0.43% | \n
| \n Ulsmo Finans AS | \n\n Ordinary | \n\n 950,000 | \n\n 0.40% | \n
| \n CACEIS Bank | \n\n Nominee | \n\n 849,437 | \n\n 0.36% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 841,837 | \n\n 0.36% | \n
| \n Total 20 largest common shareholders | \n\n \n | \n\n 192,378,815 | \n\n 81.25% | \n
| \n Other common shareholders | \n\n \n | \n\n 44,404,387 | \n\n 18.75% | \n
| \n Total common shareholders | \n\n \n | \n\n 236,783,202 | \n\n 100.00% | \n
Note 27Other reserves
| \n USD million | \n\n Note | \n\n Cash flow hedges | \n\n Translation differences | \n\n Share-Option plan | \n\n Acquisition non-controlling interests | \n\n Total | \n
| \n At 1 January 2021 | \n\n \n | \n\n (6.2) | \n\n (70.7) | \n\n 1.3 | \n\n (34.5) | \n\n (110.0) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 3.7 | \n\n - | \n\n - | \n\n - | \n\n 3.7 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n 0.2 | \n\n - | \n\n - | \n\n - | \n\n 0.2 | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n (3.8) | \n\n - | \n\n - | \n\n (3.8) | \n
| \n Cost of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n 0.5 | \n\n - | \n\n 0.5 | \n
| \n At 31 December 2021 | \n\n \n | \n\n (2.3) | \n\n (74.5) | \n\n 1.9 | \n\n (34.5) | \n\n (109.5) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 12.4 | \n\n - | \n\n - | \n\n - | \n\n 12.4 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n (2.4) | \n\n - | \n\n - | \n\n - | \n\n (2.4) | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n (8.9) | \n\n - | \n\n - | \n\n (8.9) | \n
| \n Reclassification of foreign currency translation reserve | \n\n\n | \n\n \n | \n\n 27.0 | \n\n - | \n\n - | \n\n 27.0 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n 0.4 | \n\n - | \n\n 0.4 | \n
| \n Settlement of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n (0.5) | \n\n \n | \n\n (0.5) | \n
| \n At 31 December 2022 | \n\n \n | \n\n 7.7 | \n\n (56.5) | \n\n 1.8 | \n\n (34.5) | \n\n (81.4) | \n
Note 28Securities and mortgages
Liabilities secured by mortgage
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non-current liabilities - contractual amounts | \n\n 532.3 | \n\n 886.7 | \n
| \n Current liabilities | \n\n 315.3 | \n\n 161.1 | \n
| \n Total | \n\n 847.6 | \n\n 1,047.7 | \n
Carrying amount of mortgaged assets:
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Property, plant and equipment | \n\n 1,937.9 | \n\n 2,108.9 | \n
| \n Receivables and contract assets | \n\n 112.9 | \n\n 192.8 | \n
| \n Bank deposits | \n\n 157.2 | \n\n 173.0 | \n
| \n Total | \n\n 2,208.0 | \n\n 2,474.7 | \n
Odfjell Invest Ltd. \u2013 USD 425 million Facility
(USD 231.5 million outstanding)
USD 425 million term loan facility agreement entered into on 26 June 2019 with Odfjell Invest Ltd., as borrower and DNB Bank ASA as Agent on behalf of the Lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 552.5 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
As security for the loan, substantially all of the assets of Odfjell Invest Ltd. and its subsidiaries, have been pledged in favour of the lenders. This includes the shares in Deep Sea Atlantic (UK) Ltd., Deep Sea Stavanger (UK) Ltd., mortgages over the semi-submersible drilling rigs Deepsea Atlantic and Deepsea Stavanger and assignment of rights to revenue, interest proceeds and bank accounts. In addition, the shares in Odfjell Invest Ltd., have been pledged by Odfjell Rig Owning Ltd., in favour of the lenders. Odfjell Drilling AS\u2019 shares in the charter company Odfjell Invest AS have also been pledged.
Deep Sea Atlantic (UK) Ltd., Deep Sea Stavanger (UK) Ltd., Odfjell Drilling Ltd. and Odfjell Rig Owning Ltd. have guaranteed as and for its own debt the due and punctual observance and performance of the obligors' obligations under the finance documents.
Odfjell Invest Ltd. \u2013 USD 100 million Junior Facility
(USD 100 million outstanding)
USD 100 million junior facility agreement entered into on 26 June 2019 with Odfjell Invest Ltd., as borrower and DNB Bank ASA as Agent on behalf of the lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 130 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
The facility is covered by the same security package as the USD 425 million facility on a second priority basis.
Odfjell Rig III Ltd. \u2013 USD 530 million Facility
(USD 133 million outstanding)
USD 530 million term loan facility agreement entered into on 7 May 2013 with Odfjell Rig III Ltd., as borrower and DNB Bank ASA as Agent on behalf of the lenders.
As security for the facilities, substantially all of the shares in and assets of Odfjell Rig III Ltd., Odfjell Drilling Shetland Limited and Deep Sea Drilling Company AS is pledged in favour of the lenders and hedging banks, including a mortgage in Deepsea Aberdeen. Also, Odfjell Drilling Ltd., Odfjell Rig Owning Ltd., Odfjell Drilling Shetland Limited and Deep Sea Drilling Company AS, have guaranteed the obligors' obligations under the finance documents.
Odfjell Rig V Ltd. \u2013 USD 325 million Facility
(USD 214 million outstanding)
USD 325 million term loan facility agreement entered into on 30 October 2018 with Odfjell Rig V Ltd., as borrower and DNB Bank ASA as Agent on behalf of the lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 422.5 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
All of the shares in and substantially all of the assets of Odfjell Rig V Ltd., have been pledged in favour of the lenders, including a mortgage over Deepsea Nordkapp which was established at delivery of the unit on 7 January 2019. Also, Odfjell Rig Owning Ltd. and Odfjell Invest II AS, have guaranteed the obligors' obligations under the finance documents. In addition, Odfjell Drilling AS has pledged its shares in Odfjell Invest II AS as security.
Odfjell Rig V Ltd. \u2013 USD 43.25 million seller\u2019s credit from Samsung
(USD 49 million outstanding)
USD 43.25 million seller\u2019s credit granted to Odfjell Rig V Ltd by Samsung Heavy Industries at delivery of Deepsea Nordkapp 7 January 2019.
The seller\u2019s credit is secured by a second priority mortgage over Deepsea Nordkapp, a second priority assignment of insurances and a parent company guarantee from Odfjell Rig Owning Ltd. The maximum liability of Odfjell Rig Owning Ltd shall be USD 43.25 million plus any amount of unpaid interest and other expenses under the agreement.
Odfjell Drilling Ltd. \u2013 USD 95 million Direct loan
(USD 95 million outstanding)
Direct loan of USD 95 million granted to Odfjell Drilling Ltd. in November 2022 by undisclosed client. Undisclosed client has pledge in preference shares and set-off right in drilling contract.
Odfjell Rig Owning Ltd. \u2013 USD 20 million seller\u2019s credit from Akastor
(USD 20 million outstanding)
Note 29Contingencies
Accounting policy - Provisions, contingent liabilities and contingent assets
A provision is recognised when an obligation exists (legal or constructive) as a result of a past event, it is probable that an economic settlement will be required as a consequence of the obligation, and a reliable estimate can be made of the amount of the obligation.
The best estimate of the expenditure required to settle the obligation is recognised as a provision. When the effect is material, the provision is discounted using a market based pre-tax discount rate.
Contingent liabilities and contingent assets are not recognised. Contingent liabilities are disclosed unless the possibility of an economic settlement as a consequence of the obligation is remote. Contingent assets are disclosed where an economic settlement as a consequence of the asset is probable.
Significant judgement and estimation uncertainty
Letter of indemnity
Odfjell Offshore Ltd, a previous subsidiary of Odfjell Drilling Ltd., now a subsidiary of Odfjell Technology Ltd, was registered as a Norwegian Registered Foreign Company (NUF) on 08.03.2016 after migration of the company in January 2016, and is taxable for income to Norway. In 2017, the company filed for a tax deduction, of approximately NOK 2.3 billion, on redemption of shares in Deep Sea Metro Ltd. A total of NOK 1.3 billion of this loss has been utilised through group contributions received from other Norwegian entities within the Odfjell Drilling Ltd group in the period 2017 to 2021.
Odfjell Drilling Ltd has on 1 March 2022 issued a letter of indemnity to Odfjell Technology Ltd (OTL) to hold OTL indemnified in respect of any liability that may occur in relation to the Odfjell Offshore Ltd tax case. This includes financing of any (pre-) payments to the Norwegian Tax Authorities, and funds for any legal proceedings.
21 December 2022 Odfjell Offshore Ltd received a tax ruling from the Norwegian Tax Authorities where the tax loss on the realization of shares in 2017 was denied on the basis of the anti-avoidance rule developed as tax case law. Odfjell Offshore Ltd will appeal the ruling, and the Group is still of the opinion that the most likely outcome of a court case is that the anti-avoidance rule should not be applicable and the denial of the tax loss should be revoked.
Odfjell Offshore Ltd have made an upfront payment 1 February 2023 of USD 31 million in taxes and interest for the financial years 2017 through to 2021, which the Odfjell Drilling Group have had to fund in accordance with the indemnity letter. The Group estimates that the amount will most likely be refunded, and has therefore not recognised any liability as at 31 December 2022.
There are no other material contingencies to be disclosed as per 31 December 2022.
Note 30Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Rig investments | \n\n 46.7 | \n\n 10.6 | \n
| \n Well Services equipment -Discontinued operations | \n\n - | \n\n 22.2 | \n
| \n Total | \n\n 46.7 | \n\n 32.8 | \n
Note 31Subsidiaries
Material subsidiaries
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Ownership 2022 | \n\n Ownership 2021 | \n\n Principal activities | \n
| \n Odfjell Rig Owning Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Invest Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Rig III Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Rig V Ltd. | \n\n England | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Odfjell Drilling Shetland Ltd. | \n\n Scotland | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Deep Sea Atlantic (UK) Ltd. | \n\n England | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Deep Sea Stavanger (UK) Ltd. | \n\n England | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Odfjell Invest AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Invest II AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Deep Sea Drilling Company AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Deep Sea Drilling Company I AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Drilling South Africa Ltd. | \n\n Scotland | \n\n South Africa / Namibia | \n\n USD | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Drilling AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Management | \n
| \n Deep Sea Management AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Crewing | \n
| \n Deep Sea Management International AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n - | \n\n Crewing | \n
| \n Odfjell Drilling Services Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Technology Ltd. * | \n\n Bermuda | \n\n UK | \n\n USD | \n\n - | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Platform Drilling AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Holding company / Drilling operation | \n
| \n Odfjell Drilling Management AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Drilling operation and maintenance of fixed installations | \n
| \n Odfjell Drilling (UK) Ltd. * | \n\n Scotland | \n\n UK | \n\n GBP | \n\n - | \n\n 100 | \n\n Drilling operation and maintenance of fixed installations | \n
| \n Odfjell Partners Invest Ltd. * | \n\n Bermuda | \n\n United Arab Emirates | \n\n USD | \n\n - | \n\n 100 | \n\n Holding company / Well services equipment owner | \n
| \n Odfjell Well Services II Ltd. * | \n\n Bermuda | \n\n Kurdistan | \n\n USD | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Services (Thailand) FLC * | \n\n Thailand | \n\n Thailand | \n\n THB | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Cooperatief U.A. * | \n\n Netherlands | \n\n Europe | \n\n EUR | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services SRL * | \n\n Romania | \n\n Europe | \n\n RON | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Service (UK) Ltd. * | \n\n Scotland | \n\n UK | \n\n GBP | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Norway AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Ltd. * | \n\n British Virgin Islands | \n\n United Arab Emirates | \n\n USD | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Drilling Technology AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Engineering | \n
| \n Odfjell Global Business Services AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Group Business Services | \n
| \n Odfjell Drilling Philippines Corporation * | \n\n Philippines | \n\n Philippines | \n\n PHP | \n\n - | \n\n 100 | \n\n Group Business Services | \n
| \n Odfjell Offshore Ltd. * | \n\n Bermuda | \n\n Norway | \n\n USD | \n\n - | \n\n 100 | \n\n Holding company | \n
| \n\n | \n
The group's principal subsidiaries are set out in table above. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group.
Other subsidiaries included in the consolidated group financial statements:
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Owner-ship 2022 | \n\n Owner-ship 2021 | \n\n Principal activities | \n
| \n Deep Sea Drilling Company II KS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Drilling Cooperatief UA | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Holding - no activity | \n
| \n Odfjell Invest Holland BV | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Perfuracoes e Servicos Ltda | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Drilling Netherlands BV | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Holding - no activity | \n
| \n Odfjell Drilling Brasil BV | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Holding - no activity | \n
| \n Odfjell Drilling Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Gestao de Perfurancoes do Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Arabia Drilling Services LLC * | \n\n Saudi Arabia | \n\n Saudi Arabia | \n\n SAR | \n\n - | \n\n 100 | \n\n No activity | \n
| \n Odfjell Energy Crewing AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n No activity | \n
| \n Odfjell Well Services Ltda * | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n - | \n\n 100 | \n\n No activity | \n
| \n\n | \n
Note 32Investments in joint ventures and associates
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.
Joint ventures
Note 33Related parties - transactions, receivables, liabilities and commitments
The Group had the following material transactions with related parties:
| \n USD million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Companies within the Odfjell Technology Ltd. Group | \n\n Related to main shareholder | \n\n 1.2 | \n\n n/a | \n
| \n Odfjell Oceanwind AS | \n\n Related to main shareholder | \n\n 0.5 | \n\n 1.4 | \n
| \n Kokstadflaten Utleie AS | \n\n Related to main shareholder | \n\n 0.6 | \n\n 0.8 | \n
| \n Total sales of services to related parties | \n\n 2.3 | \n\n 2.2 | \n
The revenues are related to administration services and are included in \"Corporate/Other\" column in the segment reporting.
| \n USD million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Companies within the Odfjell Technology Ltd. Group | \n\n Related to main shareholder | \n\n 44.9 | \n\n n/a | \n
| \n Total purchases from related parties | \n\n 44.9 | \n\n n/a | \n
Current receivables and liabilities
As a part of the day-to-day running of the business, Odfjell Drilling have the following current receivables and liabilities towards companies in the Odfjell Technology Ltd. Group (the discontinued operations). All receivables and liabilities have less than one year maturity.
| \n USD million | \n\n Related party | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Trade receivables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n 0.5 | \n\n n/a | \n
| \n Other current receivables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n 0.0 | \n\n n/a | \n
| \n Trade payables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n (10.1) | \n\n n/a | \n
| \n Other current payables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n (1.5) | \n\n n/a | \n
| \n Net current payables related parties | \n\n (11.0) | \n\n n/a | \n
Lease agreements
| \n USD million | \n\n \n | \n\n \n | \n\n Lease liability | \n\n Lease liability | \n\n Payments | \n\n Payments | \n
| \n Related party | \n\n Relation | \n\n Type of asset | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 2022 | \n\n 2021 | \n
| \n Odfjell Land AS | \n\n Related to main shareholder | \n\n Properties | \n\n 28.5 | \n\n 38.8 | \n\n 4.5 | \n\n 6.0 | \n
| \n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n Mooring and drilling equipment | \n\n 37.5 | \n\n - | \n\n 17.3 | \n\n \n | \n
| \n Total | \n\n 66.0 | \n\n 38.8 | \n\n 21.8 | \n\n 6.0 | \n
Shareholdings by related parties
Key management compensation
Key management includes directors (executive and non-executive). The compensation paid or payable to key management for employee services is shown in Note 34 - Remuneration to the Board of Directors, key executive management and Group auditor.
Note 34Remuneration to the Board of Directors, key executive management and auditor
Details of salary, variable pay and other benefits provided to Group management in 2022:
| \n USD thousands | \n\n \n | \n\n Salary | \n\n Bonus | \n\n Other remuneration | \n\n Pension premium | \n\n Expense share-based payments | \n\n Total | \n
| \n Kjetil Gjersdal | \n\n CEO from April 2022 - Odfjell Drilling AS | \n\n 344 | \n\n 182 | \n\n 19 | \n\n 13 | \n\n 91 | \n\n 649 | \n
| \n Frode Syslak | \n\n CFO from April 2022 - Odfjell Drilling AS | \n\n 155 | \n\n 44 | \n\n 10 | \n\n 12 | \n\n 48 | \n\n 269 | \n
| \n Simen Lieungh | \n\n CEO to March 2022 - Odfjell Drilling AS | \n\n 189 | \n\n 1,507 | \n\n 7 | \n\n 5 | \n\n 192 | \n\n 1,901 | \n
| \n Jone Torstensen | \n\n CFO to March2022 - Odfjell Drilling AS | \n\n 84 | \n\n 156 | \n\n 7 | \n\n 5 | \n\n - | \n\n 253 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Drilling Ltd. | \n\n 116 | \n\n 21 | \n\n 7 | \n\n 6 | \n\n - | \n\n 150 | \n
| \n Total | \n\n \n | \n\n 889 | \n\n 1,910 | \n\n 50 | \n\n 42 | \n\n 332 | \n\n 3,222 | \n
Details of salary, variable pay and other benefits provided to Group management in 2021:
| \n USD thousands | \n\n \n | \n\n Salary | \n\n Bonus | \n\n Other remuneration | \n\n Pension premium | \n\n Expense share-based payments | \n\n Total | \n
| \n Simen Lieungh | \n\n CEO - Odfjell Drilling AS | \n\n 640 | \n\n 1,686 | \n\n 52 | \n\n 15 | \n\n 528 | \n\n 2,921 | \n
| \n Jone Torstensen | \n\n CFO from 1 September 2021- Odfjell Drilling AS | \n\n 87 | \n\n - | \n\n 15 | \n\n 5 | \n\n - | \n\n 106 | \n
| \n Atle S\u00e6b\u00f8 | \n\n CFO to 1 September 2021- Odfjell Drilling AS | \n\n 227 | \n\n 174 | \n\n 17 | \n\n 23 | \n\n - | \n\n 442 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Drilling Ltd. | \n\n 199 | \n\n 37 | \n\n 12 | \n\n 11 | \n\n - | \n\n 259 | \n
| \n Total | \n\n \n | \n\n 1,153 | \n\n 1,897 | \n\n 96 | \n\n 54 | \n\n 528 | \n\n 3,728 | \n
The amounts listed as Salary, Bonus, and Other remuneration in the table above represent cash payments in 2021 and 2022. Refer to the Executive Remuneration Report for bonuses earned in 2021 and 2022.
Amounts listed as Pension premium and Expense share-based payments relates to the expense accounted for as personnel expenses in 2021 and 2022. For details regarding settlement in 2022 of share option programme with the previous CEO of Odfjell Drilling AS, refer to Note 35 - Share-based payments.
For details regarding the current incentive share option programme, refer to Note 35 - Share-based payments.
Fees to Board of non-executive directors:
| \n USD thousands | \n\n 2022 | \n\n 2021 | \n
| \n Helene Odfjell | \n\n 78 | \n\n 87 | \n
| \n Susanne Munch Thore | \n\n 49 | \n\n 55 | \n
| \n Alasdair Shiach | \n\n 44 | \n\n 49 | \n
| \n Thomas Marsoner | \n\n 39 | \n\n 44 | \n
| \n Total remuneration to Board of non-executive directors | \n\n 211 | \n\n 236 | \n
Fees to the Group's auditor
| \n USD thousands | \n\n 2022 | \n\n 2021 | \n
| \n Audit | \n\n 369 | \n\n 431 | \n
| \n Other assurance services | \n\n - | \n\n 17 | \n
| \n Tax advisory fee | \n\n - | \n\n - | \n
| \n Fees for other services | \n\n 13 | \n\n 138 | \n
| \n Total remuneration to the Group's auditor | \n\n 383 | \n\n 586 | \n
All listed fees are net of VAT
Note 35Share-based payments
Accounting policy
The company long term equity settled incentive share option programme in which the employee receives remuneration in the form of share-based payment for services rendered.
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details below.
Details regarding share option programme:
The company entered at 16 May 2018 into a long term incentive share option programme with Simen Lieungh (CEO at the time), granting him options to purchase 960,000 common shares.31 May 2022 this share option programme was settled. As a result of the spin off and a change in CEO, the programme was settled in cash for a total of NOK 4.5 million.
27 June 2022 the Company implemented a new share option plan and allocated options for a total of 1,450,000 common shares, at a strike price of NOK 23.37 per share to certain of its employees.
Overview of outstanding options:
| \n Overview of outstanding options: | \n\n 2022 | \n\n 2021 | \n
| \n Outstanding options 1.1 | \n\n 960,000 | \n\n 960,000 | \n
| \n Options granted | \n\n 1,450,000 | \n\n - | \n
| \n Options forfeited | \n\n - | \n\n - | \n
| \n Options exercised | \n\n (960,000) | \n\n - | \n
| \n Options expired | \n\n - | \n\n - | \n
| \n Outstanding options 31.12 | \n\n 1,450,000 | \n\n 960,000 | \n
| \n Of which exercisable | \n\n - | \n\n 640,000 | \n
The fair value of the options has been calculated using Black & Scholes option-pricing model. The average fair value of the options granted in 2022 is NOK 11.36. The total cost of the share option plan is calculated based on the fair value x options granted. The total cost equals NOK 16.5 million (approximately USD 1.7 million) and is recognised over the period until June 2027.
The calculations are based on the following assumptions:
\u2022The share price on the grant date were set to the stock exchange price NOK 23.675 on the grant date.
\u2022The strike price per option was NOK 23.37.
\u2022The expected price volatility of the company's shares was set to 50% based on historical volatility adjusted for expected changes.
\u2022The expiry date was set to 28 June 2027.
\u2022The expected dividend yield was set to 0%.
\u2022The risk-free interest rate was set to 3.67%.
Note 36Earnings per share
Accounting policy
The basic earnings per share are calculated as the ratio of the profit for the year that is due to the shareholders of the parent divided by the weighted average number of common shares outstanding.
When calculating the diluted earnings per share, the profit that is attributable to the common shareholders of the parent and the weighted average number of common shares outstanding are adjusted for all the dilution effects relating to warrants and share options.
Further description
The Company has issued warrants for 6,837,492 common shares, see further description in Note 24 - Market risk, and has in addition a share option plan for 1,450,000 common shares, see further description in Note 35 - Share-based payments. The warrants represent contingently issuable shares.
Neither the warrants nor the options affect the basic or diluted number of shares in 2021 or 2022.
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Profit/(loss) due to owners of the parent | \n\n 129.6 | \n\n 74.4 | \n
| \n Adjustment for dividends on preference shares | \n\n (8.3) | \n\n (8.6) | \n
| \n Profit/(loss) for the period due to holders of common shares | \n\n 121.3 | \n\n 65.8 | \n
| \n Adjustment related to warrants and share option plan | \n\n - | \n\n - | \n
| \n Diluted profit/(loss) for the period due to the holders of common shares | \n\n 121.3 | \n\n 65.8 | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n
| \n Weighted average number of common shares in issue | \n\n 236,783,202 | \n\n 236,783,202 | \n
| \n Effects of dilutive potential common shares: | \n\n \n | \n\n \n | \n
| \n Warrants | \n\n - | \n\n - | \n
| \n Share option plan | \n\n - | \n\n - | \n
| \n Diluted average number of shares outstanding | \n\n 236,783,202 | \n\n 236,783,202 | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n
| \n Basic earnings per share (USD) | \n\n 0.512 | \n\n 0.278 | \n
| \n Diluted earnings per share (USD) | \n\n 0.512 | \n\n 0.278 | \n
| \n Earnings per share - continuing operations | \n\n \n | \n\n \n | \n
| \n Profit/(loss) for the period due to holders of common shares | \n\n 74.6 | \n\n 52.3 | \n
| \n Diluted profit/(loss) for the period due to the holders of common shares | \n\n 74.6 | \n\n 52.3 | \n
| \n Basic earnings per share - continuing operations (USD) | \n\n 0.315 | \n\n 0.221 | \n
| \n Diluted earnings per share - continuing operations (USD) | \n\n 0.315 | \n\n 0.221 | \n
Note 37Events after the reporting period
All amounts are in USD millions unless otherwise stated
Note 1General information
Odfjell Drilling Ltd. and its subsidiaries (together 'the Group') operates mobile offshore drilling units.
Odfjell Drilling Ltd., is incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. Odfjell Drilling Ltd's head office is at Bergen House, Crawpeel Road, Aberdeen, Scotland, United Kingdom and the Company is tax resident in the United Kingdom.
The consolidated financial statements including notes for Odfjell Drilling Ltd. for the year 2022 were approved by the Board of Directors on 19 April 2023.
The consolidated financial statements including notes for Odfjell Drilling Ltd. for the year 2022 were approved by the Board of Directors on 19 April 2023.
Note 33Related parties - transactions, receivables, liabilities and commitments
The Group had the following material transactions with related parties:
| \n USD million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Companies within the Odfjell Technology Ltd. Group | \n\n Related to main shareholder | \n\n 1.2 | \n\n n/a | \n
| \n Odfjell Oceanwind AS | \n\n Related to main shareholder | \n\n 0.5 | \n\n 1.4 | \n
| \n Kokstadflaten Utleie AS | \n\n Related to main shareholder | \n\n 0.6 | \n\n 0.8 | \n
| \n Total sales of services to related parties | \n\n 2.3 | \n\n 2.2 | \n
The revenues are related to administration services and are included in \"Corporate/Other\" column in the segment reporting.
| \n USD million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Companies within the Odfjell Technology Ltd. Group | \n\n Related to main shareholder | \n\n 44.9 | \n\n n/a | \n
| \n Total purchases from related parties | \n\n 44.9 | \n\n n/a | \n
Current receivables and liabilities
As a part of the day-to-day running of the business, Odfjell Drilling have the following current receivables and liabilities towards companies in the Odfjell Technology Ltd. Group (the discontinued operations). All receivables and liabilities have less than one year maturity.
| \n USD million | \n\n Related party | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Trade receivables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n 0.5 | \n\n n/a | \n
| \n Other current receivables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n 0.0 | \n\n n/a | \n
| \n Trade payables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n (10.1) | \n\n n/a | \n
| \n Other current payables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n (1.5) | \n\n n/a | \n
| \n Net current payables related parties | \n\n (11.0) | \n\n n/a | \n
Lease agreements
| \n USD million | \n\n \n | \n\n \n | \n\n Lease liability | \n\n Lease liability | \n\n Payments | \n\n Payments | \n
| \n Related party | \n\n Relation | \n\n Type of asset | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 2022 | \n\n 2021 | \n
| \n Odfjell Land AS | \n\n Related to main shareholder | \n\n Properties | \n\n 28.5 | \n\n 38.8 | \n\n 4.5 | \n\n 6.0 | \n
| \n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n Mooring and drilling equipment | \n\n 37.5 | \n\n - | \n\n 17.3 | \n\n \n | \n
| \n Total | \n\n 66.0 | \n\n 38.8 | \n\n 21.8 | \n\n 6.0 | \n
Shareholdings by related parties
Key management compensation
Key management includes directors (executive and non-executive). The compensation paid or payable to key management for employee services is shown in Note 34 - Remuneration to the Board of Directors, key executive management and Group auditor.
Note 34Remuneration to the Board of Directors, key executive management and auditor
Details of salary, variable pay and other benefits provided to Group management in 2022:
| \n USD thousands | \n\n \n | \n\n Salary | \n\n Bonus | \n\n Other remuneration | \n\n Pension premium | \n\n Expense share-based payments | \n\n Total | \n
| \n Kjetil Gjersdal | \n\n CEO from April 2022 - Odfjell Drilling AS | \n\n 344 | \n\n 182 | \n\n 19 | \n\n 13 | \n\n 91 | \n\n 649 | \n
| \n Frode Syslak | \n\n CFO from April 2022 - Odfjell Drilling AS | \n\n 155 | \n\n 44 | \n\n 10 | \n\n 12 | \n\n 48 | \n\n 269 | \n
| \n Simen Lieungh | \n\n CEO to March 2022 - Odfjell Drilling AS | \n\n 189 | \n\n 1,507 | \n\n 7 | \n\n 5 | \n\n 192 | \n\n 1,901 | \n
| \n Jone Torstensen | \n\n CFO to March2022 - Odfjell Drilling AS | \n\n 84 | \n\n 156 | \n\n 7 | \n\n 5 | \n\n - | \n\n 253 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Drilling Ltd. | \n\n 116 | \n\n 21 | \n\n 7 | \n\n 6 | \n\n - | \n\n 150 | \n
| \n Total | \n\n \n | \n\n 889 | \n\n 1,910 | \n\n 50 | \n\n 42 | \n\n 332 | \n\n 3,222 | \n
Details of salary, variable pay and other benefits provided to Group management in 2021:
| \n USD thousands | \n\n \n | \n\n Salary | \n\n Bonus | \n\n Other remuneration | \n\n Pension premium | \n\n Expense share-based payments | \n\n Total | \n
| \n Simen Lieungh | \n\n CEO - Odfjell Drilling AS | \n\n 640 | \n\n 1,686 | \n\n 52 | \n\n 15 | \n\n 528 | \n\n 2,921 | \n
| \n Jone Torstensen | \n\n CFO from 1 September 2021- Odfjell Drilling AS | \n\n 87 | \n\n - | \n\n 15 | \n\n 5 | \n\n - | \n\n 106 | \n
| \n Atle S\u00e6b\u00f8 | \n\n CFO to 1 September 2021- Odfjell Drilling AS | \n\n 227 | \n\n 174 | \n\n 17 | \n\n 23 | \n\n - | \n\n 442 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Drilling Ltd. | \n\n 199 | \n\n 37 | \n\n 12 | \n\n 11 | \n\n - | \n\n 259 | \n
| \n Total | \n\n \n | \n\n 1,153 | \n\n 1,897 | \n\n 96 | \n\n 54 | \n\n 528 | \n\n 3,728 | \n
The amounts listed as Salary, Bonus, and Other remuneration in the table above represent cash payments in 2021 and 2022. Refer to the Executive Remuneration Report for bonuses earned in 2021 and 2022.
Amounts listed as Pension premium and Expense share-based payments relates to the expense accounted for as personnel expenses in 2021 and 2022. For details regarding settlement in 2022 of share option programme with the previous CEO of Odfjell Drilling AS, refer to Note 35 - Share-based payments.
For details regarding the current incentive share option programme, refer to Note 35 - Share-based payments.
Fees to Board of non-executive directors:
| \n USD thousands | \n\n 2022 | \n\n 2021 | \n
| \n Helene Odfjell | \n\n 78 | \n\n 87 | \n
| \n Susanne Munch Thore | \n\n 49 | \n\n 55 | \n
| \n Alasdair Shiach | \n\n 44 | \n\n 49 | \n
| \n Thomas Marsoner | \n\n 39 | \n\n 44 | \n
| \n Total remuneration to Board of non-executive directors | \n\n 211 | \n\n 236 | \n
Basis of preparation
The consolidated financial statements of the Group for the year ended 31 December 2022 comply with IFRS as endorsed by the European Union (EU).
The consolidated financial statements ended 31 December 2022 comprise the income statement, statement of comprehensive income, statement of financial position, statement of cash flow, statement of changes in equity and note disclosures.
Going concern
Factors that, in the Group\u2019s view, could cause actual results to differ materially from the outlook contained in this report are the following: volatile oil and gas prices, global political changes regarding energy composition, competition within the oil and gas services industry, changes in clients\u2019 spending budgets, cost inflation, access to qualified resources and developments in the financial and fiscal markets.
Losses incurred by many financial institutions related to previous years\u2019 volatility and company restructurings in our industry, has led many financial institutions to target a shift in focus and exposure away from rig and oil services companies. However, the upswing in the oil and gas market, with a focus to secure stable energy supply, has impacted the financial markets positively with better access to capital. Odfjell Drilling has strong backlog, a robust balance sheet with low leverage, and a long standing relationship with its key lenders.
The Group's refinancing risk is considered low. Currently, bank loan facilities are maturing at different times up to\u00a0June 2024. The Group is considering alternative sources of financing, in addition to starting dialogue with banks. The Group expects to be successful in securing new or extended financing prior to maturity of the loans.
Taking all relevant risk factors and available options for financing into consideration, the Board has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. Hence, the Group has adopted the going concern basis in preparing its consolidated financial statements.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments, debt and equity financial assets, plan assets in defined benefit pension plans and contingent consideration that have been measured at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where the assumptions and estimates are significant to the consolidated financial statements are disclosed in each relevant note.
New and amended standards and interpretations effective on 1 January 2022
\u2022Onerous Contracts - Costs of Fulfilling a Contract (Amendments to IAS 37)
\u2022Covid-19-Related Rent Concessions beyond 30 June 2021\u2013 amendments to IFRS 16.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries.
Subsidiaries are all entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Subsidiaries are listed in Note 31.
Profit or loss and each component of Other Comprehensive Income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group\u2019s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. The difference between fair value of any consideration paid, and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity.
If the Group loses control over a subsidiary, it de-recognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may indicate that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Any investment retained is recognised at fair value. The fair value is the initial carrying amount for the purpose of subsequently accounting for the retained interest as an associate, joint venture or financial asset.
Foreign currency translation
(a) Functional and presentation currency
Items included in the separate financial statements of each of the Group\u2019s entities are measured using the currency of the primary economic environment in which the entity operates (\u2018the functional currency\u2019). The Consolidated Financial Statements are presented in USD (in million), which is the Group\u2019s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the monthly exchange rates for the month the transactions are recognised.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Foreign exchange gains and losses are presented in the income statement within \u2018other financial items\u2019.
(c) Group companies
The results and financial position of all the Group's entities that have a functional currency different from the presentation currency (USD) are translated into the presentation currency as follows:
\u2022Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u2022Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
\u2022All resulting exchange differences are recognised in other comprehensive income.
Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
The following are the most significant exchange rates used in the consolidation:
| \n \n | \n\n Average rate | \n\n Closing rate as at 31.12 | \n||
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n NOK | \n\n 0.10395 | \n\n 0.11631 | \n\n 0.10145 | \n\n 0.11339 | \n
| \n GBP | \n\n 1.23299 | \n\n 1.37556 | \n\n 1.20257 | \n\n 1.34788 | \n
| \n EUR | \n\n 1.05126 | \n\n 1.18325 | \n\n 1.06660 | \n\n 1.13259 | \n
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Statement of cash flows
The statement of cash flows is prepared under the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
The cash flow statement represents the cash flows for the total Group, including both continuing and discontinued operations. The split between continuing and discontinued operations are presented as separate lines within each category of the cash flow statement.
New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2022 and not early adopted
Certain new accounting standards, amendments to accounting standards, and interpretations have been published that are not mandatory for 31\u00a0December\u00a02022 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
The consolidated financial statements of the Group for the year ended 31 December 2022 comply with IFRS as endorsed by the European Union (EU).
Going concern
Factors that, in the Group\u2019s view, could cause actual results to differ materially from the outlook contained in this report are the following: volatile oil and gas prices, global political changes regarding energy composition, competition within the oil and gas services industry, changes in clients\u2019 spending budgets, cost inflation, access to qualified resources and developments in the financial and fiscal markets.
Losses incurred by many financial institutions related to previous years\u2019 volatility and company restructurings in our industry, has led many financial institutions to target a shift in focus and exposure away from rig and oil services companies. However, the upswing in the oil and gas market, with a focus to secure stable energy supply, has impacted the financial markets positively with better access to capital. Odfjell Drilling has strong backlog, a robust balance sheet with low leverage, and a long standing relationship with its key lenders.
The Group's refinancing risk is considered low. Currently, bank loan facilities are maturing at different times up to\u00a0June 2024. The Group is considering alternative sources of financing, in addition to starting dialogue with banks. The Group expects to be successful in securing new or extended financing prior to maturity of the loans.
Taking all relevant risk factors and available options for financing into consideration, the Board has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. Hence, the Group has adopted the going concern basis in preparing its consolidated financial statements.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries.
Profit or loss and each component of Other Comprehensive Income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group\u2019s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. The difference between fair value of any consideration paid, and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity.
(a) Functional and presentation currency
Items included in the separate financial statements of each of the Group\u2019s entities are measured using the currency of the primary economic environment in which the entity operates (\u2018the functional currency\u2019). The Consolidated Financial Statements are presented in USD (in million), which is the Group\u2019s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the monthly exchange rates for the month the transactions are recognised.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Foreign exchange gains and losses are presented in the income statement within \u2018other financial items\u2019.
(c) Group companies
The results and financial position of all the Group's entities that have a functional currency different from the presentation currency (USD) are translated into the presentation currency as follows:
\u2022Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u2022Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
\u2022All resulting exchange differences are recognised in other comprehensive income.
The following are the most significant exchange rates used in the consolidation:
| \n \n | \n\n Average rate | \n\n Closing rate as at 31.12 | \n||
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n NOK | \n\n 0.10395 | \n\n 0.11631 | \n\n 0.10145 | \n\n 0.11339 | \n
| \n GBP | \n\n 1.23299 | \n\n 1.37556 | \n\n 1.20257 | \n\n 1.34788 | \n
| \n EUR | \n\n 1.05126 | \n\n 1.18325 | \n\n 1.06660 | \n\n 1.13259 | \n
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Statement of cash flows
The statement of cash flows is prepared under the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
The cash flow statement represents the cash flows for the total Group, including both continuing and discontinued operations. The split between continuing and discontinued operations are presented as separate lines within each category of the cash flow statement.
The spin-off was not previously classified as held for distribution or as a discontinued operation. The comparative Consolidated Income Statement and Other Comprehensive Income (\"OCI\") has been re-presented to show the discontinued operations separately from continuing operations.
Subsequent to the disposal, Odfjell Drilling has continued to purchase services from the discontinued operations. Although intra-group transactions have been fully eliminated in the consolidated financial results, management has elected to attribute the elimination of transactions between the continuing and discontinued operations before the disposal, in a way that reflects the continuance of these transactions subsequent to the disposal, because management believes this is useful to the users of the financial statements. No general corporate overhead expenses were allocated to the discontinued operation. Revenue and expenses are not presented as discontinued unless they will cease to be earned/incurred on disposal of the discontinued operation.
The fair value of the net assets distributed to the shareholders was USD 119.8 million, compared to a book value of USD 56.4 million. A gain from distribution of discontinued operations of USD 63 million was recognised in 2022.
The cumulative exchange differences related to a foreign operation that have been included in the foreign currency translation reserve, are reclassified to profit or loss when the foreign operation is distributed. A total exchange loss of USD 27 million has been reclassified from OCI to the income statement on distribution of the foreign operations in the Odfjell Technology group.
Accounting policy
Operating segments are reported in a manner consistent with the internal financial reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board.
Accounting policy - Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over rendered services to the customer.
Sometimes, the Group receives short-term advances from customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Group has, as a practical expedient in IFRS, recognised the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The group has only operating leases as a lessor. Rental income and the lease component of drilling contracts is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. The lease term may vary from contract to contract, and only includes the non-cancellable period of the contract with the addition of optional renewable periods if the lessee is reasonably certain to extend. None of the existing contracts have optional periods included in the lease term. The lease term is reassessed when options to extend are exercised. Contingent rents are recognised as revenue in the period in which they are earned.
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include evaluation of whether the customer option represents a material right that gives rise to a performance obligation, and if so, to estimate the stand-alone selling price of the option. Further, judgement is based on a decision of whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations. In addition, the progress towards complete satisfaction of the performance obligation at the end of the reporting period is estimated, as the completion date of the drilling period is unknown at the end of the reporting period.
Own Fleet
The revenue is primarily derived from drilling contracts with customers. The core promise in the contracts with the customers is to be available to provide drilling services over the operation period of a contract. Drilling services primarily comprise of providing the mobile offshore drilling unit, crews, related equipment and services necessary to operate the rig. The contract rates include both a lease component and a service component. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Therefore, the Group follow the series guidance in IFRS 15 and treat the series of distinct services as a single performance obligation.
Revenue is based on the transactions price in the contracts with the customers. The main part of the transaction price is day rates, which range from a full operating day rate to lower or zero rates for periods when drilling operations are interrupted. Payment of the day rate based transaction price is usually due on a monthly basis.
Some contracts entitle the Group to receive compensation for mobilisation and demobilisation, contract preparation, customer-requested goods and services or capital upgrades. The compensations are either as fixed lump-sums or based on variable day rates. Lump-sums are usually paid up-front or when certain milestones are met. The payment terms do not contain any significant financing components.
Most of the contracts include fees for variable or conditional service fee arrangements, such as bonuses for meeting or exceeding certain performance targets. The Group estimate these variable fees using a most likely amount approach on a contract by contract basis. Management makes a detailed assessment of the amount of revenue expected to be received and the probability of success in each case. Variable consideration is included in revenue only to the extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is resolved (generally upon completion of a well or drilling program).
Revenue from drilling contracts is generally recognised in the period from commencing a contract and until completion of the drilling programme (\"the drilling operation period\"). No revenue is recognised in the mobilisation and demobilisation period.
Since the customers continuously gain control over the drilling services, revenue is recognised over time, in line with transfer of control.
The likelihood of options being exercised, and thereby included in estimates for expected total revenue and the drilling operation period, is based on an assessment of whether a customer option provides a material right for the customer. If a contract includes an option that provides a material right for the customer, a proportion of contract revenue will be allocated to the material right and recognised as revenue when the additional service is provided or when the option expires.
Day rate considerations in the drilling operation period are attributed to the period to which the drilling operations are performed, and recognised as revenue in the same period. Other compensations, as described above, are allocated to the contract and recognised as revenue on a straight-line basis over the drilling operation period. Refer to Note 14 - Contract balances. Bonuses and other variable or conditional service fees are allocated to either the entire drilling operation period or to individual periods during the contract (using the series of services guidance in IFRS 15) depending on what the variable contract revenue relates to.
The costs to prepare the rig for contract and the cost for mobilisation of the rig to the drilling location, are capitalised as Assets from contract costs and expensed as operating cost over the drilling operations period. Refer to Note 14 - Contract balances. Demobilisation expenses are expensed as incurred.
External Fleet
The segment offers management services to other owners of drilling units; mainly operational management, management of regulatory requirements, marketing, contract negotiations and client relations, preparations for operation and mobilisation. The transaction price is mainly day rate based management fees, usually payable on a monthly basis. Refer to Note 14 - Contract balances for payment terms related to the management agreement for Deepsea Yantai. The payment terms do not contain any significant financing components. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. Variable or conditional service fee arrangements, such as bonuses, are treated according to principles described above. The period for recognising revenue is generally equal to the contract period.
Accounting policy - Borrowing costs
Accounting policy
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Accounting policy
Property, plant and equipment comprise mainly of mobile offshore drilling units, well services equipment and machinery and equipment. Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes purchase price, any directly attributable costs of bringing the asset to working condition and borrowing costs.
Depreciation is calculated on a straight-line basis over the useful life of the asset or component. The depreciable amount equals historical cost less residual value. Items of property, plant and equipment with components that have substantially different useful lives are treated separately for depreciation purposes. The total expenditure on the rigs is therefore allocated into groups of components that have different expected useful lifetimes.
Subsequent costs for day-to-day repairs and maintenance are expensed as incurred.
The cost of modernisation and rebuilding projects is included in the asset\u2019s carrying amount when it is probable that the Group will derive future financial benefits and the cost of the item can be measured reliably. The carrying amount of the replaced part is written off. Modernisation and rebuilding projects are depreciated over the remaining useful life of the related assets.
The useful lives of assets and the depreciation methods are reviewed periodically in order to ensure that the method and period of depreciation are consistent with the expected pattern of financial benefits from the asset.
When assets are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting from their disposal is included in the income statement as other gains and losses.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices for mobile drilling units after a 30 year useful lifetime. Any changes are accounted for prospectively as a change in the accounting estimate. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Residual values for property, plant and equipment are estimated to be zero.
Rig and equipment are depreciated over a period from 5 to 30 years. Periodic maintenance is depreciated over the expected period until next docking, estimated as 5 years. Estimated useful life for operating drilling equipment is 3 to 10 years.
Newbuild in progress
Newbuilds under construction are capitalised as fixed assets during the construction as instalments are paid to the yard. Capitalised costs include interest expenses until commencement on first drilling contract, contractual costs and costs related to the monitoring of the project during the construction period. Contractual costs include costs related to the project for the duration of the contract, i.e. from signing of the contract to final completion of the contractual work. Any costs incurred prior to the signing of the contract that relate to the procurement of the contract are regarded as a purchase of contractual assistance and are included in contractual costs.
Government grants
Government grants are recognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Investment grants are capitalised and recognised systematically over the asset\u2019s useful life. Investment grants are recognised as a deduction of the asset\u2019s carrying amount.
Impairment of non-financial assets
All non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). For mobile offshore drilling units, each unit is deemed to be a CGU. Value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Non-financial assets, other than goodwill, that have suffered an impairment, are reviewed for reversal of the impairment whenever events or changes in circumstances indicate that the impairment loss recognised in prior periods may no longer exist or may have decreased.
Accounting policy - Goodwill and Intangible assets
Accounting policy - Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
\u2022The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
\u2022Its intention to complete and its ability and intention to use or sell the asset
\u2022How the asset will generate future economic benefits
\u2022The availability of resources to complete the asset
\u2022The ability to measure reliably the expenditure during development
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Accounting policies
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
The Group classify financial assets in the following categories:
\u2022amortised cost,
\u2022financial assets at fair value through profit or loss (FVPL),
\u2022financial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at:
\u2022fair value through profit or loss,
\u2022amortised cost, or as
\u2022derivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 17 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u2022In the principal market for the asset or liability , or
\u2022In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Significant judgement and estimation uncertainty
The Company has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. Changes in parameters such as volatility of share price, risk-free interest rate etc. could have substantial impacts on the estimated warrant liability. See further information about the warrant liability and assumptions applied in Note 24 Market risk.
Financial instruments by category and level
The tables below analyse financial instruments carried at fair value, by valuation method, based on the lowest level input that is significant to the fair value measurement as a whole. The different levels have been defined as follows:
\u2022Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
\u2022Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2)
\u2022Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). For short term assets and liabilities at level 3, the value is approximately equal to the carrying amount. As the time horizon is due in short term, future cash flows are not discounted.
Valuation techniques used to derive Level 2 fair values
Level 2 derivatives held at fair value through profit or loss and hedging derivatives comprise interest rate swaps and foreign exchange agreements. Interest rate swaps and foreign exchange agreements are fair valued using forward rates extracted from observable yield curves. Interest rate swaps and foreign exchange agreements are recognised according to mark-to-market reports from external financial institutions.
Valuation techniques used to derive Level 3 fair values
Accounting policies - Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
For costs to fulfil contracts where the Group operates as a lessor, the Group has chosen to apply the guidance in IFRS 15 by analogy.
Accounting policies - Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.
Accounting policy
A receivable represents the Group\u2019s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
The group\u2019s leasing activities as a lessee and how these are accounted for
This note relates to the Group as a lessee only.
The Group leases various offices, workshops and warehouses in addition to some equipment. Rental contracts are typically made for fixed periods of 6 months to 10 years, but may have extension or termination options. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payment that are based on an index or a rate (initially measured using the index or rate as at the commencement date), amounts expected to be payable by the group under residual value guarantees, the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee\u2019s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease, e.g. term, country, currency and security.
The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising of the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs, and any restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset\u2019s useful life.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and smaller items of office equipment.
Pension obligations
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the income statement.
Mortality index used in actuarial calculations is K2013.
The Group has contractual pension agreement (CPA) schemes in Norway established in multi-employer plans. These multi-employer plans are defined benefit plans, but the Group does not have access to the necessary information for the accounting years 2021 and 2020 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
Note 20Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
\u2022There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u2022The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u2022The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
\u2022The effective portion of the gain or loss on the cash flow hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
\u2022Amounts recognised directly in other comprehensive income are reclassified as income or expense in the income statement in the period when the hedged liability or planned transaction will affect the income statement.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within financial income/expenses.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria\u00a0or the group has elected not to apply hedge accounting,\u00a0they are classified as \u2018held for trading\u2019 for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of equity and must instead be classified as a derivative liability and measured at fair value with changes in fair value recognised in the consolidated statements of operations and comprehensive loss at each period-end. The derivative liabilities will ultimately be converted into the Company\u2019s equity (common shares) if and when the warrants are exercised, or will be extinguished on the expiry of the outstanding warrants, and will not result in the outlay of any cash by the Company. Immediately prior to exercise, the warrants are remeasured at their estimated fair value.
Upon exercise, the intrinsic value is transferred to share capital (the intrinsic value is the share price at the date the warrant is exercised less the exercise price of the warrant). Any remaining fair value is recorded through the statement of operations and comprehensive loss as part of the change in estimated fair value of derivative warrant liabilities.
Accounting policy
The group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables and contract assets, the Group applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
Treasury shares - accounting policy
Accounting policy - Cash dividend
Accounting policy - Provisions, contingent liabilities and contingent assets
A provision is recognised when an obligation exists (legal or constructive) as a result of a past event, it is probable that an economic settlement will be required as a consequence of the obligation, and a reliable estimate can be made of the amount of the obligation.
The best estimate of the expenditure required to settle the obligation is recognised as a provision. When the effect is material, the provision is discounted using a market based pre-tax discount rate.
Contingent liabilities and contingent assets are not recognised. Contingent liabilities are disclosed unless the possibility of an economic settlement as a consequence of the obligation is remote. Contingent assets are disclosed where an economic settlement as a consequence of the asset is probable.
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.
Accounting policy
The company long term equity settled incentive share option programme in which the employee receives remuneration in the form of share-based payment for services rendered.
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details below.
Accounting policy
The basic earnings per share are calculated as the ratio of the profit for the year that is due to the shareholders of the parent divided by the weighted average number of common shares outstanding.
When calculating the diluted earnings per share, the profit that is attributable to the common shareholders of the parent and the weighted average number of common shares outstanding are adjusted for all the dilution effects relating to warrants and share options.
(a) Functional and presentation currency
Items included in the separate financial statements of each of the Group\u2019s entities are measured using the currency of the primary economic environment in which the entity operates (\u2018the functional currency\u2019). The Consolidated Financial Statements are presented in USD (in million), which is the Group\u2019s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the monthly exchange rates for the month the transactions are recognised.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Foreign exchange gains and losses are presented in the income statement within \u2018other financial items\u2019.
(c) Group companies
The results and financial position of all the Group's entities that have a functional currency different from the presentation currency (USD) are translated into the presentation currency as follows:
\u2022Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u2022Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
\u2022All resulting exchange differences are recognised in other comprehensive income.
The following are the most significant exchange rates used in the consolidation:
| \n \n | \n\n Average rate | \n\n Closing rate as at 31.12 | \n||
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n NOK | \n\n 0.10395 | \n\n 0.11631 | \n\n 0.10145 | \n\n 0.11339 | \n
| \n GBP | \n\n 1.23299 | \n\n 1.37556 | \n\n 1.20257 | \n\n 1.34788 | \n
| \n EUR | \n\n 1.05126 | \n\n 1.18325 | \n\n 1.06660 | \n\n 1.13259 | \n
The aggregate net foreign exchange gains/losses recognised in profit or loss were:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) included in finance costs | \n\n (3.6) | \n\n 3.1 | \n
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the monthly exchange rates for the month the transactions are recognised.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Foreign exchange gains and losses are presented in the income statement within \u2018other financial items\u2019.
(c) Group companies
The results and financial position of all the Group's entities that have a functional currency different from the presentation currency (USD) are translated into the presentation currency as follows:
\u2022Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u2022Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
\u2022All resulting exchange differences are recognised in other comprehensive income.
The following are the most significant exchange rates used in the consolidation:
| \n \n | \n\n Average rate | \n\n Closing rate as at 31.12 | \n||
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n NOK | \n\n 0.10395 | \n\n 0.11631 | \n\n 0.10145 | \n\n 0.11339 | \n
| \n GBP | \n\n 1.23299 | \n\n 1.37556 | \n\n 1.20257 | \n\n 1.34788 | \n
| \n EUR | \n\n 1.05126 | \n\n 1.18325 | \n\n 1.06660 | \n\n 1.13259 | \n
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The spin-off was not previously classified as held for distribution or as a discontinued operation. The comparative Consolidated Income Statement and Other Comprehensive Income (\"OCI\") has been re-presented to show the discontinued operations separately from continuing operations.
Subsequent to the disposal, Odfjell Drilling has continued to purchase services from the discontinued operations. Although intra-group transactions have been fully eliminated in the consolidated financial results, management has elected to attribute the elimination of transactions between the continuing and discontinued operations before the disposal, in a way that reflects the continuance of these transactions subsequent to the disposal, because management believes this is useful to the users of the financial statements. No general corporate overhead expenses were allocated to the discontinued operation. Revenue and expenses are not presented as discontinued unless they will cease to be earned/incurred on disposal of the discontinued operation.
The fair value of the net assets distributed to the shareholders was USD 119.8 million, compared to a book value of USD 56.4 million. A gain from distribution of discontinued operations of USD 63 million was recognised in 2022.
The cumulative exchange differences related to a foreign operation that have been included in the foreign currency translation reserve, are reclassified to profit or loss when the foreign operation is distributed. A total exchange loss of USD 27 million has been reclassified from OCI to the income statement on distribution of the foreign operations in the Odfjell Technology group.
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Note 4Discontinued operations
Spin-off of Odfjell Technology
On 31 January 2022 Odfjell Drilling Ltd announced that it was contemplating spinning off two of its segments (the \"spin-off\") into a newly established company, Odfjell Technology Ltd. (\"OTL\" or \u201cOdfjell Technology\u201d), and to list the shares in OTL on the Oslo Stock Exchange (the \u201cListing\u201d). The spin-off consists of the group\u2019s Well Services and Energy segments, as well as the ownership in Odfjell Oceanwind. The spin-off also provides business support services.
Prior to executing the spin-off, an internal re-organisation was carried out and the relevant Well Services and Energy companies became subsidiaries of OTL.
In connection with the spin-off, Odfjell Technology on 4 February 2022, successfully priced NOK 1.1 bn in senior secured bonds through a private placement. The net proceeds from the bond issue, together with a new USD 25 million super senior revolving credit facility were used to carry out the internal re-organisation and to repay the Odfjell Drilling Services USD 150 million credit facility 1 March 2022.
At the end of March 2022, the shares in Odfjell Technology were distributed to the shareholders in the Company. The ratio for the distribution was 6:1, i.e. 6 shares in the Company gave the holder 1 share in OTL, rounded downwards to the closest whole share in OTL. The shares in OTL were listed on the Oslo Stock Exchange 29 March 2022. There was no public offering of shares in Odfjell Technology in connection with the Listing.
The spin-off was not previously classified as held for distribution or as a discontinued operation. The comparative Consolidated Income Statement and Other Comprehensive Income (\"OCI\") has been re-presented to show the discontinued operations separately from continuing operations.
Subsequent to the disposal, Odfjell Drilling has continued to purchase services from the discontinued operations. Although intra-group transactions have been fully eliminated in the consolidated financial results, management has elected to attribute the elimination of transactions between the continuing and discontinued operations before the disposal, in a way that reflects the continuance of these transactions subsequent to the disposal, because management believes this is useful to the users of the financial statements. No general corporate overhead expenses were allocated to the discontinued operation. Revenue and expenses are not presented as discontinued unless they will cease to be earned/incurred on disposal of the discontinued operation.
The fair value of the net assets distributed to the shareholders was USD 119.8 million, compared to a book value of USD 56.4 million. A gain from distribution of discontinued operations of USD 63 million was recognised in 2022.
The cumulative exchange differences related to a foreign operation that have been included in the foreign currency translation reserve, are reclassified to profit or loss when the foreign operation is distributed. A total exchange loss of USD 27 million has been reclassified from OCI to the income statement on distribution of the foreign operations in the Odfjell Technology group.
Results of discontinued operations
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Operating revenue | \n\n 94.4 | \n\n 342.9 | \n
| \n Elimination of inter-segment revenue | \n\n (17.4) | \n\n (51.2) | \n
| \n External revenue | \n\n 77.0 | \n\n 291.7 | \n
| \n Other gains / (losses) | \n\n 0.6 | \n\n 0.7 | \n
| \n Personnel expenses | \n\n (60.5) | \n\n (220.6) | \n
| \n Other operating expenses | \n\n (21.2) | \n\n (77.9) | \n
| \n Elimination of expenses related to inter-segment sales | \n\n 17.4 | \n\n 51.2 | \n
| \n EBITDA | \n\n 13.3 | \n\n 45.1 | \n
| \n Depreciation and amortisation | \n\n (2.4) | \n\n (30.6) | \n
| \n Operating profit (EBIT) | \n\n 10.9 | \n\n 14.5 | \n
| \n Share of profit (loss) from joint ventures and associates | \n\n (0.4) | \n\n (0.5) | \n
| \n Net financial items | \n\n (0.2) | \n\n (2.0) | \n
| \n Elimination of inter-segment financial income | \n\n (0.1) | \n\n (0.8) | \n
| \n Profit (loss) before tax | \n\n 10.3 | \n\n 11.2 | \n
| \n Income tax | \n\n 0.0 | \n\n 1.7 | \n
| \n Results of discontinued operations, net of tax | \n\n 10.3 | \n\n 12.9 | \n
| \n Reclassification of foreign currency translation reserve | \n\n (27.0) | \n\n - | \n
| \n Gain related to distribution of discontinued operations | \n\n 63.4 | \n\n - | \n
| \n Profit (loss) from discontinued operations, net of tax | \n\n 46.7 | \n\n 12.9 | \n
| \n Basic earnings per share - discontinued operations (USD) | \n\n 0.197 | \n\n 0.057 | \n
| \n Diluted earnings per share - discontinued operations (USD) | \n\n 0.197 | \n\n 0.057 | \n
Cash flow from (used in) discontinued operations
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Net cash generated from operating activities | \n\n 12.2 | \n\n 40.2 | \n
| \n Net cash used in investing activities | \n\n (59.0) | \n\n (26.4) | \n
| \n Net cash generated from / (used in) financing activities | \n\n 145.9 | \n\n (2.5) | \n
| \n Net cash flows | \n\n 99.1 | \n\n 11.3 | \n
Effect of disposal on the financial position of the Group
| \n USD million | \n\n 2022 | \n
| \n Property, plant and equipment | \n\n (106.0) | \n
| \n Intangible assets | \n\n (26.7) | \n
| \n Deferred tax asset | \n\n (1.8) | \n
| \n Investments in joint ventures and associates | \n\n (1.9) | \n
| \n Other non-current assets | \n\n (2.7) | \n
| \n Trade and other receivables | \n\n (102.8) | \n
| \n Other current assets | \n\n (9.8) | \n
| \n Cash and cash equivalents | \n\n (49.7) | \n
| \n Non-current interest-bearing borrowings | \n\n 125.3 | \n
| \n Non-current lease liabilities | \n\n 9.4 | \n
| \n Post-employment benefits | \n\n 5.4 | \n
| \n Non-current contract liabilities | \n\n 5.9 | \n
| \n Current interest-bearing borrowings | \n\n 25.6 | \n
| \n Current lease liabilities | \n\n 2.6 | \n
| \n Contract liabilities | \n\n 0.2 | \n
| \n Trade and other current payables | \n\n 35.5 | \n
| \n Other current liabilities | \n\n 35.2 | \n
| \n Net assets and liabilities | \n\n (56.4) | \n
| \n Cash and cash equivalents disposed of | \n\n (49.7) | \n
| \n Net cash outflows | \n\n (49.7) | \n
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Accounting policies - Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
For costs to fulfil contracts where the Group operates as a lessor, the Group has chosen to apply the guidance in IFRS 15 by analogy.
Accounting policies - Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.
Statement of cash flows
The statement of cash flows is prepared under the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
The cash flow statement represents the cash flows for the total Group, including both continuing and discontinued operations. The split between continuing and discontinued operations are presented as separate lines within each category of the cash flow statement.
Statement of cash flows
The statement of cash flows is prepared under the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
The cash flow statement represents the cash flows for the total Group, including both continuing and discontinued operations. The split between continuing and discontinued operations are presented as separate lines within each category of the cash flow statement.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. These estimates are based on the actual underlying business, its present and forecast profitability over time, and expectations about external factors such as interest rates, foreign exchange rates and other factors which are outside the Group\u2019s control. The resulting estimates will, by definition, seldom equal the related actual results.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are listed below. Detailed information of these estimates and judgements are disclosed in the relevant notes.
\u2022Revenue recognition (Note 6 - Revenue)
\u2022Evaluation of indicators of impairment and/or impairment reversal (Note 10 - Tangible fixed assets)
\u2022Provisions and contingent liabilities (Note 29 - Contingencies)
\u2022Warrant liabilities measured at fair value (Note 13 - Financial assets and liabilities)
\u2022Determination of lease term and estimating the incremental borrowing rate (Note 18 - Leases)
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include evaluation of whether the customer option represents a material right that gives rise to a performance obligation, and if so, to estimate the stand-alone selling price of the option. Further, judgement is based on a decision of whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations. In addition, the progress towards complete satisfaction of the performance obligation at the end of the reporting period is estimated, as the completion date of the drilling period is unknown at the end of the reporting period.
Significant judgement and estimation uncertainty
Management exercises significant judgement in determining whether there are any indicators of impairment or reversal of impairment. Management evaluates both external and internal sources of information in the indicator assessments. The assessments include estimated effects of the climate change and the shift to renewable energy sources
Odfjell Drilling has not identified any impairment indicators, nor any indicators for reversal of impairment as at 31 December 2022.
Significant judgement and estimation uncertainty
Significant judgement and estimation uncertainty
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group's business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
Significant judgement and estimation uncertainty
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. These estimates are based on the actual underlying business, its present and forecast profitability over time, and expectations about external factors such as interest rates, foreign exchange rates and other factors which are outside the Group\u2019s control. The resulting estimates will, by definition, seldom equal the related actual results.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are listed below. Detailed information of these estimates and judgements are disclosed in the relevant notes.
\u2022Revenue recognition (Note 6 - Revenue)
\u2022Evaluation of indicators of impairment and/or impairment reversal (Note 10 - Tangible fixed assets)
\u2022Provisions and contingent liabilities (Note 29 - Contingencies)
\u2022Warrant liabilities measured at fair value (Note 13 - Financial assets and liabilities)
\u2022Determination of lease term and estimating the incremental borrowing rate (Note 18 - Leases)
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are listed below. Detailed information of these estimates and judgements are disclosed in the relevant notes.
\u2022Revenue recognition (Note 6 - Revenue)
\u2022Evaluation of indicators of impairment and/or impairment reversal (Note 10 - Tangible fixed assets)
\u2022Provisions and contingent liabilities (Note 29 - Contingencies)
\u2022Warrant liabilities measured at fair value (Note 13 - Financial assets and liabilities)
\u2022Determination of lease term and estimating the incremental borrowing rate (Note 18 - Leases)
Note 4Discontinued operations
Spin-off of Odfjell Technology
On 31 January 2022 Odfjell Drilling Ltd announced that it was contemplating spinning off two of its segments (the \"spin-off\") into a newly established company, Odfjell Technology Ltd. (\"OTL\" or \u201cOdfjell Technology\u201d), and to list the shares in OTL on the Oslo Stock Exchange (the \u201cListing\u201d). The spin-off consists of the group\u2019s Well Services and Energy segments, as well as the ownership in Odfjell Oceanwind. The spin-off also provides business support services.
Prior to executing the spin-off, an internal re-organisation was carried out and the relevant Well Services and Energy companies became subsidiaries of OTL.
In connection with the spin-off, Odfjell Technology on 4 February 2022, successfully priced NOK 1.1 bn in senior secured bonds through a private placement. The net proceeds from the bond issue, together with a new USD 25 million super senior revolving credit facility were used to carry out the internal re-organisation and to repay the Odfjell Drilling Services USD 150 million credit facility 1 March 2022.
At the end of March 2022, the shares in Odfjell Technology were distributed to the shareholders in the Company. The ratio for the distribution was 6:1, i.e. 6 shares in the Company gave the holder 1 share in OTL, rounded downwards to the closest whole share in OTL. The shares in OTL were listed on the Oslo Stock Exchange 29 March 2022. There was no public offering of shares in Odfjell Technology in connection with the Listing.
The spin-off was not previously classified as held for distribution or as a discontinued operation. The comparative Consolidated Income Statement and Other Comprehensive Income (\"OCI\") has been re-presented to show the discontinued operations separately from continuing operations.
Subsequent to the disposal, Odfjell Drilling has continued to purchase services from the discontinued operations. Although intra-group transactions have been fully eliminated in the consolidated financial results, management has elected to attribute the elimination of transactions between the continuing and discontinued operations before the disposal, in a way that reflects the continuance of these transactions subsequent to the disposal, because management believes this is useful to the users of the financial statements. No general corporate overhead expenses were allocated to the discontinued operation. Revenue and expenses are not presented as discontinued unless they will cease to be earned/incurred on disposal of the discontinued operation.
The fair value of the net assets distributed to the shareholders was USD 119.8 million, compared to a book value of USD 56.4 million. A gain from distribution of discontinued operations of USD 63 million was recognised in 2022.
The cumulative exchange differences related to a foreign operation that have been included in the foreign currency translation reserve, are reclassified to profit or loss when the foreign operation is distributed. A total exchange loss of USD 27 million has been reclassified from OCI to the income statement on distribution of the foreign operations in the Odfjell Technology group.
Results of discontinued operations
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Operating revenue | \n\n 94.4 | \n\n 342.9 | \n
| \n Elimination of inter-segment revenue | \n\n (17.4) | \n\n (51.2) | \n
| \n External revenue | \n\n 77.0 | \n\n 291.7 | \n
| \n Other gains / (losses) | \n\n 0.6 | \n\n 0.7 | \n
| \n Personnel expenses | \n\n (60.5) | \n\n (220.6) | \n
| \n Other operating expenses | \n\n (21.2) | \n\n (77.9) | \n
| \n Elimination of expenses related to inter-segment sales | \n\n 17.4 | \n\n 51.2 | \n
| \n EBITDA | \n\n 13.3 | \n\n 45.1 | \n
| \n Depreciation and amortisation | \n\n (2.4) | \n\n (30.6) | \n
| \n Operating profit (EBIT) | \n\n 10.9 | \n\n 14.5 | \n
| \n Share of profit (loss) from joint ventures and associates | \n\n (0.4) | \n\n (0.5) | \n
| \n Net financial items | \n\n (0.2) | \n\n (2.0) | \n
| \n Elimination of inter-segment financial income | \n\n (0.1) | \n\n (0.8) | \n
| \n Profit (loss) before tax | \n\n 10.3 | \n\n 11.2 | \n
| \n Income tax | \n\n 0.0 | \n\n 1.7 | \n
| \n Results of discontinued operations, net of tax | \n\n 10.3 | \n\n 12.9 | \n
| \n Reclassification of foreign currency translation reserve | \n\n (27.0) | \n\n - | \n
| \n Gain related to distribution of discontinued operations | \n\n 63.4 | \n\n - | \n
| \n Profit (loss) from discontinued operations, net of tax | \n\n 46.7 | \n\n 12.9 | \n
| \n Basic earnings per share - discontinued operations (USD) | \n\n 0.197 | \n\n 0.057 | \n
| \n Diluted earnings per share - discontinued operations (USD) | \n\n 0.197 | \n\n 0.057 | \n
Cash flow from (used in) discontinued operations
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Net cash generated from operating activities | \n\n 12.2 | \n\n 40.2 | \n
| \n Net cash used in investing activities | \n\n (59.0) | \n\n (26.4) | \n
| \n Net cash generated from / (used in) financing activities | \n\n 145.9 | \n\n (2.5) | \n
| \n Net cash flows | \n\n 99.1 | \n\n 11.3 | \n
Effect of disposal on the financial position of the Group
| \n USD million | \n\n 2022 | \n
| \n Property, plant and equipment | \n\n (106.0) | \n
| \n Intangible assets | \n\n (26.7) | \n
| \n Deferred tax asset | \n\n (1.8) | \n
| \n Investments in joint ventures and associates | \n\n (1.9) | \n
| \n Other non-current assets | \n\n (2.7) | \n
| \n Trade and other receivables | \n\n (102.8) | \n
| \n Other current assets | \n\n (9.8) | \n
| \n Cash and cash equivalents | \n\n (49.7) | \n
| \n Non-current interest-bearing borrowings | \n\n 125.3 | \n
| \n Non-current lease liabilities | \n\n 9.4 | \n
| \n Post-employment benefits | \n\n 5.4 | \n
| \n Non-current contract liabilities | \n\n 5.9 | \n
| \n Current interest-bearing borrowings | \n\n 25.6 | \n
| \n Current lease liabilities | \n\n 2.6 | \n
| \n Contract liabilities | \n\n 0.2 | \n
| \n Trade and other current payables | \n\n 35.5 | \n
| \n Other current liabilities | \n\n 35.2 | \n
| \n Net assets and liabilities | \n\n (56.4) | \n
| \n Cash and cash equivalents disposed of | \n\n (49.7) | \n
| \n Net cash outflows | \n\n (49.7) | \n
The spin-off was not previously classified as held for distribution or as a discontinued operation. The comparative Consolidated Income Statement and Other Comprehensive Income (\"OCI\") has been re-presented to show the discontinued operations separately from continuing operations.
Subsequent to the disposal, Odfjell Drilling has continued to purchase services from the discontinued operations. Although intra-group transactions have been fully eliminated in the consolidated financial results, management has elected to attribute the elimination of transactions between the continuing and discontinued operations before the disposal, in a way that reflects the continuance of these transactions subsequent to the disposal, because management believes this is useful to the users of the financial statements. No general corporate overhead expenses were allocated to the discontinued operation. Revenue and expenses are not presented as discontinued unless they will cease to be earned/incurred on disposal of the discontinued operation.
The fair value of the net assets distributed to the shareholders was USD 119.8 million, compared to a book value of USD 56.4 million. A gain from distribution of discontinued operations of USD 63 million was recognised in 2022.
The cumulative exchange differences related to a foreign operation that have been included in the foreign currency translation reserve, are reclassified to profit or loss when the foreign operation is distributed. A total exchange loss of USD 27 million has been reclassified from OCI to the income statement on distribution of the foreign operations in the Odfjell Technology group.
Note 5Segment summary
Accounting policy
Operating segments are reported in a manner consistent with the internal financial reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board.
Segment reporting
The Group provides drilling and related services to oil and gas companies. The group owned four mobile offshore drilling units during 2021 and 2022 with similar services, revenues, customers and production processes. Own drilling units (Own Fleet) is therefore assessed as one operating segment. The same applies for rig management services provided to other owners of other drilling units (External Fleet).
Own Fleet
The segment operates mobile offshore drilling units owned by Odfjell Drilling.
External Fleet
| \n \n | \n\n Own Fleet | \n\n External Fleet | \n\n Corporate / other | \n\n Consolidated | \n||||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n External segment revenue | \n\n 567.3 | \n\n 519.4 | \n\n 78.0 | \n\n 50.0 | \n\n 4.3 | \n\n 2.7 | \n\n 649.5 | \n\n 572.1 | \n
| \n Inter segment revenue | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Total revenue | \n\n 567.3 | \n\n 519.4 | \n\n 78.0 | \n\n 50.0 | \n\n 4.3 | \n\n 2.7 | \n\n 649.5 | \n\n 572.1 | \n
| \n EBITDA | \n\n 303.9 | \n\n 253.4 | \n\n 11.0 | \n\n 5.2 | \n\n (7.0) | \n\n (0.1) | \n\n 308.0 | \n\n 258.4 | \n
| \n Depreciation and amortisation | \n\n (167.1) | \n\n (149.0) | \n\n - | \n\n - | \n\n (4.4) | \n\n (2.4) | \n\n (171.5) | \n\n (151.4) | \n
| \n EBIT | \n\n 136.9 | \n\n 104.4 | \n\n 11.0 | \n\n 5.2 | \n\n (11.3) | \n\n (2.5) | \n\n 136.5 | \n\n 107.1 | \n
| \n Net financial items | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n (48.3) | \n\n (40.6) | \n
| \n Profit / (loss) before tax - Consolidated Group | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n 88.3 | \n\n 66.5 | \n
Accounting policy
Operating segments are reported in a manner consistent with the internal financial reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board.
Note 6Revenue
Accounting policy - Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over rendered services to the customer.
Sometimes, the Group receives short-term advances from customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Group has, as a practical expedient in IFRS, recognised the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The group has only operating leases as a lessor. Rental income and the lease component of drilling contracts is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. The lease term may vary from contract to contract, and only includes the non-cancellable period of the contract with the addition of optional renewable periods if the lessee is reasonably certain to extend. None of the existing contracts have optional periods included in the lease term. The lease term is reassessed when options to extend are exercised. Contingent rents are recognised as revenue in the period in which they are earned.
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include evaluation of whether the customer option represents a material right that gives rise to a performance obligation, and if so, to estimate the stand-alone selling price of the option. Further, judgement is based on a decision of whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations. In addition, the progress towards complete satisfaction of the performance obligation at the end of the reporting period is estimated, as the completion date of the drilling period is unknown at the end of the reporting period.
Own Fleet
The revenue is primarily derived from drilling contracts with customers. The core promise in the contracts with the customers is to be available to provide drilling services over the operation period of a contract. Drilling services primarily comprise of providing the mobile offshore drilling unit, crews, related equipment and services necessary to operate the rig. The contract rates include both a lease component and a service component. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Therefore, the Group follow the series guidance in IFRS 15 and treat the series of distinct services as a single performance obligation.
Revenue is based on the transactions price in the contracts with the customers. The main part of the transaction price is day rates, which range from a full operating day rate to lower or zero rates for periods when drilling operations are interrupted. Payment of the day rate based transaction price is usually due on a monthly basis.
Some contracts entitle the Group to receive compensation for mobilisation and demobilisation, contract preparation, customer-requested goods and services or capital upgrades. The compensations are either as fixed lump-sums or based on variable day rates. Lump-sums are usually paid up-front or when certain milestones are met. The payment terms do not contain any significant financing components.
Most of the contracts include fees for variable or conditional service fee arrangements, such as bonuses for meeting or exceeding certain performance targets. The Group estimate these variable fees using a most likely amount approach on a contract by contract basis. Management makes a detailed assessment of the amount of revenue expected to be received and the probability of success in each case. Variable consideration is included in revenue only to the extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is resolved (generally upon completion of a well or drilling program).
Revenue from drilling contracts is generally recognised in the period from commencing a contract and until completion of the drilling programme (\"the drilling operation period\"). No revenue is recognised in the mobilisation and demobilisation period.
Since the customers continuously gain control over the drilling services, revenue is recognised over time, in line with transfer of control.
The likelihood of options being exercised, and thereby included in estimates for expected total revenue and the drilling operation period, is based on an assessment of whether a customer option provides a material right for the customer. If a contract includes an option that provides a material right for the customer, a proportion of contract revenue will be allocated to the material right and recognised as revenue when the additional service is provided or when the option expires.
Day rate considerations in the drilling operation period are attributed to the period to which the drilling operations are performed, and recognised as revenue in the same period. Other compensations, as described above, are allocated to the contract and recognised as revenue on a straight-line basis over the drilling operation period. Refer to Note 14 - Contract balances. Bonuses and other variable or conditional service fees are allocated to either the entire drilling operation period or to individual periods during the contract (using the series of services guidance in IFRS 15) depending on what the variable contract revenue relates to.
The costs to prepare the rig for contract and the cost for mobilisation of the rig to the drilling location, are capitalised as Assets from contract costs and expensed as operating cost over the drilling operations period. Refer to Note 14 - Contract balances. Demobilisation expenses are expensed as incurred.
External Fleet
The segment offers management services to other owners of drilling units; mainly operational management, management of regulatory requirements, marketing, contract negotiations and client relations, preparations for operation and mobilisation. The transaction price is mainly day rate based management fees, usually payable on a monthly basis. Refer to Note 14 - Contract balances for payment terms related to the management agreement for Deepsea Yantai. The payment terms do not contain any significant financing components. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. Variable or conditional service fee arrangements, such as bonuses, are treated according to principles described above. The period for recognising revenue is generally equal to the contract period.
Revenue specification
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Revenue from contracts with customers (IFRS 15) | \n\n 393.7 | \n\n 390.7 | \n
| \n Lease component in MODU contracts | \n\n 255.2 | \n\n 180.6 | \n
| \n Other operating revenue | \n\n 0.6 | \n\n 0.8 | \n
| \n Operating revenue | \n\n 649.5 | \n\n 572.1 | \n
Revenue from single external customers (> 10% of revenues)
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Customer 1 | \n\n 375.6 | \n\n 145.7 | \n
| \n Customer 2 | \n\n 129.2 | \n\n 164.5 | \n
Disaggregation of revenue by primary geographical markets
| \n \n | \n\n Own Fleet | \n\n External Fleet | \n\n Corporate / Other | \n\n Consolidated | \n||||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Norway | \n\n 567.3 | \n\n 519.4 | \n\n 74.9 | \n\n 50.0 | \n\n 4.3 | \n\n 2.7 | \n\n 646.4 | \n\n 572.1 | \n
| \n Namibia | \n\n - | \n\n - | \n\n 3.1 | \n\n - | \n\n - | \n\n - | \n\n 3.1 | \n\n - | \n
| \n Total operating revenue | \n\n 567.3 | \n\n 519.4 | \n\n 78.0 | \n\n 50.0 | \n\n 4.3 | \n\n 2.7 | \n\n 649.5 | \n\n 572.1 | \n
Performance obligations in contracts
Amounts allocated to performance obligations that are to be completed under existing customer contracts are set out as service elements in the following table.
The firm contract backlog does not include variable consideration which is constrained. The services provided under these contracts will be billed based on time incurred and at day rates according to contract.
| \n USD million | \n\n Future minimum lease payments | \n\n Performance obligations | \n\n Total firm backlog | \n
| \n Within one year | \n\n 223 | \n\n 227 | \n\n 450 | \n
| \n Between one and two years | \n\n 115 | \n\n 105 | \n\n 220 | \n
| \n Between two and three years | \n\n 74 | \n\n 61 | \n\n 135 | \n
| \n Between three and four years | \n\n 74 | \n\n 61 | \n\n 135 | \n
| \n Between four and five years | \n\n 74 | \n\n 61 | \n\n 135 | \n
| \n After five years | \n\n 149 | \n\n 122 | \n\n 271 | \n
| \n Total | \n\n 708 | \n\n 637 | \n\n 1,345 | \n
Set out below is the amount of revenue recognised from:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Amounts included in contract liabilities at the beginning of the year | \n\n 15.6 | \n\n 12.6 | \n
| \n Performance obligations satisfied in the previous years | \n\n 3.3 | \n\n 2.7 | \n
Accounting policy - Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over rendered services to the customer.
Sometimes, the Group receives short-term advances from customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Group has, as a practical expedient in IFRS, recognised the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The group has only operating leases as a lessor. Rental income and the lease component of drilling contracts is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. The lease term may vary from contract to contract, and only includes the non-cancellable period of the contract with the addition of optional renewable periods if the lessee is reasonably certain to extend. None of the existing contracts have optional periods included in the lease term. The lease term is reassessed when options to extend are exercised. Contingent rents are recognised as revenue in the period in which they are earned.
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include evaluation of whether the customer option represents a material right that gives rise to a performance obligation, and if so, to estimate the stand-alone selling price of the option. Further, judgement is based on a decision of whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations. In addition, the progress towards complete satisfaction of the performance obligation at the end of the reporting period is estimated, as the completion date of the drilling period is unknown at the end of the reporting period.
Own Fleet
The revenue is primarily derived from drilling contracts with customers. The core promise in the contracts with the customers is to be available to provide drilling services over the operation period of a contract. Drilling services primarily comprise of providing the mobile offshore drilling unit, crews, related equipment and services necessary to operate the rig. The contract rates include both a lease component and a service component. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Therefore, the Group follow the series guidance in IFRS 15 and treat the series of distinct services as a single performance obligation.
Revenue is based on the transactions price in the contracts with the customers. The main part of the transaction price is day rates, which range from a full operating day rate to lower or zero rates for periods when drilling operations are interrupted. Payment of the day rate based transaction price is usually due on a monthly basis.
Some contracts entitle the Group to receive compensation for mobilisation and demobilisation, contract preparation, customer-requested goods and services or capital upgrades. The compensations are either as fixed lump-sums or based on variable day rates. Lump-sums are usually paid up-front or when certain milestones are met. The payment terms do not contain any significant financing components.
Most of the contracts include fees for variable or conditional service fee arrangements, such as bonuses for meeting or exceeding certain performance targets. The Group estimate these variable fees using a most likely amount approach on a contract by contract basis. Management makes a detailed assessment of the amount of revenue expected to be received and the probability of success in each case. Variable consideration is included in revenue only to the extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is resolved (generally upon completion of a well or drilling program).
Revenue from drilling contracts is generally recognised in the period from commencing a contract and until completion of the drilling programme (\"the drilling operation period\"). No revenue is recognised in the mobilisation and demobilisation period.
Since the customers continuously gain control over the drilling services, revenue is recognised over time, in line with transfer of control.
The likelihood of options being exercised, and thereby included in estimates for expected total revenue and the drilling operation period, is based on an assessment of whether a customer option provides a material right for the customer. If a contract includes an option that provides a material right for the customer, a proportion of contract revenue will be allocated to the material right and recognised as revenue when the additional service is provided or when the option expires.
Day rate considerations in the drilling operation period are attributed to the period to which the drilling operations are performed, and recognised as revenue in the same period. Other compensations, as described above, are allocated to the contract and recognised as revenue on a straight-line basis over the drilling operation period. Refer to Note 14 - Contract balances. Bonuses and other variable or conditional service fees are allocated to either the entire drilling operation period or to individual periods during the contract (using the series of services guidance in IFRS 15) depending on what the variable contract revenue relates to.
The costs to prepare the rig for contract and the cost for mobilisation of the rig to the drilling location, are capitalised as Assets from contract costs and expensed as operating cost over the drilling operations period. Refer to Note 14 - Contract balances. Demobilisation expenses are expensed as incurred.
External Fleet
The segment offers management services to other owners of drilling units; mainly operational management, management of regulatory requirements, marketing, contract negotiations and client relations, preparations for operation and mobilisation. The transaction price is mainly day rate based management fees, usually payable on a monthly basis. Refer to Note 14 - Contract balances for payment terms related to the management agreement for Deepsea Yantai. The payment terms do not contain any significant financing components. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. Variable or conditional service fee arrangements, such as bonuses, are treated according to principles described above. The period for recognising revenue is generally equal to the contract period.
Revenue specification
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Revenue from contracts with customers (IFRS 15) | \n\n 393.7 | \n\n 390.7 | \n
| \n Lease component in MODU contracts | \n\n 255.2 | \n\n 180.6 | \n
| \n Other operating revenue | \n\n 0.6 | \n\n 0.8 | \n
| \n Operating revenue | \n\n 649.5 | \n\n 572.1 | \n
Performance obligations in contracts
Amounts allocated to performance obligations that are to be completed under existing customer contracts are set out as service elements in the following table.
The firm contract backlog does not include variable consideration which is constrained. The services provided under these contracts will be billed based on time incurred and at day rates according to contract.
| \n USD million | \n\n Future minimum lease payments | \n\n Performance obligations | \n\n Total firm backlog | \n
| \n Within one year | \n\n 223 | \n\n 227 | \n\n 450 | \n
| \n Between one and two years | \n\n 115 | \n\n 105 | \n\n 220 | \n
| \n Between two and three years | \n\n 74 | \n\n 61 | \n\n 135 | \n
| \n Between three and four years | \n\n 74 | \n\n 61 | \n\n 135 | \n
| \n Between four and five years | \n\n 74 | \n\n 61 | \n\n 135 | \n
| \n After five years | \n\n 149 | \n\n 122 | \n\n 271 | \n
| \n Total | \n\n 708 | \n\n 637 | \n\n 1,345 | \n
Set out below is the amount of revenue recognised from:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Amounts included in contract liabilities at the beginning of the year | \n\n 15.6 | \n\n 12.6 | \n
| \n Performance obligations satisfied in the previous years | \n\n 3.3 | \n\n 2.7 | \n
Note 7Personnel Expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Salaries and wages | \n\n \n | \n\n 152.9 | \n\n 153.0 | \n
| \n Employer`s national insurance contributions | \n\n \n | \n\n 23.6 | \n\n 23.2 | \n
| \n Pension expenses | \n\n\n | \n\n 13.2 | \n\n 11.0 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n 0.4 | \n\n 0.5 | \n
| \n Other benefits | \n\n \n | \n\n 6.0 | \n\n 7.4 | \n
| \n Hired personnel | \n\n \n | \n\n 10.4 | \n\n 5.2 | \n
| \n Capitalised personnel expenses * | \n\n \n | \n\n - | \n\n (0.7) | \n
| \n Total personnel expenses | \n\n \n | \n\n 206.5 | \n\n 199.6 | \n
| \n\n | \n
Note 19Post-employment benefits
The Group has occupational pension plans in several countries established partly as defined benefit plans (in Norway), partly as multi-employer defined benefit plans accounted for as defined contribution plans (in Norway) and partly as defined contribution plans (in Norway and other countries). The pension plans are measured and presented according to IAS 19.
Pension obligations
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the income statement.
Mortality index used in actuarial calculations is K2013.
Defined benefit pension plans
The Group has funded defined benefit pension schemes in one Norwegian company (five companies as at 31 December 2021) covering a total of 9 active members and 19 pensioners as at 31 December 2021 (43 active members and 31 pensioners as at 31 December 2021). The scheme entitles employees to defined future benefits. These are mainly dependent on the number of years of service, the salary level at pensionable age and the size of benefits paid by the national insurance. The liabilities are covered through an insurance company.
In addition to the pension obligations that arises from the funded defined benefit plans, the Group\u2019s Norwegian companies have unfunded defined benefit obligations related to pensions and early retirement pensions. The early retirement pensions entitle staff to benefits (about USD 12,000 a year) from the company from the age of 62 until they are eligible for a national insurance pension when reaching the age of 67, if they retire and meet requirement to receive CPA (see below).
The Group has contractual pension agreement (CPA) schemes in Norway established in multi-employer plans. These multi-employer plans are defined benefit plans, but the Group does not have access to the necessary information for the accounting years 2021 and 2020 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
Movements in the net defined benefit obligation
| \n \n | \n\n Present value of obligation | \n\n Fair value of plan assets | \n\n Total | \n\n Present value of obligation | \n\n Fair value of plan assets | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n At 1 January | \n\n 26.1 | \n\n (20.1) | \n\n 6.0 | \n\n 25.7 | \n\n (18.8) | \n\n 6.9 | \n
| \n Current service cost | \n\n 0.5 | \n\n - | \n\n 0.5 | \n\n 1.1 | \n\n - | \n\n 1.1 | \n
| \n Loss on plan amendment, curtailment and settlement | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Interest expense/A7(income) | \n\n 0.2 | \n\n (0.1) | \n\n 0.0 | \n\n 0.4 | \n\n (0.3) | \n\n 0.1 | \n
| \n Total amount recognised in profit or loss | \n\n 0.7 | \n\n (0.1) | \n\n 0.5 | \n\n 1.5 | \n\n (0.3) | \n\n 1.2 | \n
| \n Re-measurements: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n (Gain)/loss from change in discount rate | \n\n (1.6) | \n\n - | \n\n (1.6) | \n\n - | \n\n - | \n\n - | \n
| \n (Gain)/loss from change in other financial assumptions | \n\n 1.5 | \n\n (0.1) | \n\n 1.4 | \n\n 0.7 | \n\n - | \n\n 0.7 | \n
| \n Experience (gain)/loss | \n\n (0.7) | \n\n 1.0 | \n\n 0.2 | \n\n (0.0) | \n\n (0.4) | \n\n (0.5) | \n
| \n Investment management cost | \n\n - | \n\n 0.1 | \n\n 0.1 | \n\n - | \n\n 0.2 | \n\n 0.2 | \n
| \n Total amount recognised in other comprehensive income | \n\n (0.9) | \n\n 0.9 | \n\n 0.1 | \n\n 0.7 | \n\n (0.3) | \n\n 0.4 | \n
| \n Exchange differences | \n\n (0.6) | \n\n 0.3 | \n\n (0.3) | \n\n (0.8) | \n\n 0.7 | \n\n (0.2) | \n
| \n Contributions: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Employers | \n\n (0.0) | \n\n (0.3) | \n\n (0.4) | \n\n (0.2) | \n\n (1.7) | \n\n (1.9) | \n
| \n Payments from plans: | \n\n \n | \n\n \n | \n\n - | \n\n \n | \n\n \n | \n\n - | \n
| \n Benefit payments | \n\n (0.2) | \n\n 0.2 | \n\n - | \n\n (0.7) | \n\n 0.3 | \n\n (0.4) | \n
| \n Settlements | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposal through distribution of operations to shareholders | \n\n (17.6) | \n\n 12.2 | \n\n (5.4) | \n\n - | \n\n - | \n\n - | \n
| \n At 31 December | \n\n 7.4 | \n\n (6.8) | \n\n 0.6 | \n\n 26.1 | \n\n (20.1) | \n\n 6.0 | \n
Estimated premium payments to funded defined benefit obligations in 2023 amounts to about USD 0.4 million.
Amounts recognised in Statement of Financial Position
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Present value of funded obligations | \n\n 7.4 | \n\n 23.3 | \n
| \n Fair value of plan assets | \n\n (6.8) | \n\n (20.1) | \n
| \n Deficit of funded plans | \n\n 0.6 | \n\n 3.3 | \n
| \n Present value of unfunded obligations | \n\n - | \n\n 2.7 | \n
| \n Total deficit of defined benefit pension plans | \n\n 0.6 | \n\n 6.0 | \n
The significant actuarial assumptions were as follows:
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Discount rate | \n\n 3.20% | \n\n 1.50% | \n
| \n Salary growth rate | \n\n 3.75% | \n\n 2.50% | \n
| \n Expected growth in G (base social security amount) | \n\n 3.50% | \n\n 2.25% | \n
| \n Pension growth rate | \n\n 1.7%-3.5% | \n\n 0.0%-2.25% | \n
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions are:
| \n \n | \n\n Change in assumption by: | \n\n Impact on Present value of obligation: | \n\n Change in assumption by: | \n\n Impact on Present value of obligation: | \n||
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 31.12.2022 | \n\n 31.12.2021 | \n||
| \n Discount rate | \n\n +0.5% | \n\n (0.4) | \n\n (1.7) | \n\n -0.5% | \n\n 0.5 | \n\n 2.0 | \n
| \n Salary growth rate | \n\n +0.5% | \n\n 0.0 | \n\n 0.6 | \n\n -0.5% | \n\n (0.1) | \n\n (0.6) | \n
| \n Pension growth rate | \n\n +0.5% | \n\n 0.4 | \n\n 1.2 | \n\n -0.5% | \n\n (0.3) | \n\n (0.0) | \n
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practise, this is unlikely to occur, and changes in some of the assumptions may be correlated.
The fair value of plan assets is disaggregated by class as follows
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Shares | \n\n 11% | \n\n 10% | \n
| \n Short term bonds | \n\n 15% | \n\n 20% | \n
| \n Money market | \n\n 8% | \n\n 11% | \n
| \n Long term bonds | \n\n 32% | \n\n 27% | \n
| \n Loans & Receivables | \n\n 22% | \n\n 19% | \n
| \n Real estate | \n\n 10% | \n\n 14% | \n
| \n Other | \n\n 1% | \n\n 1% | \n
Total pension expenses included in personnel expenses are decomposed as per below:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Pension expenses from defined benefit scheme included in personnel expenses | \n\n 0.5 | \n\n 1.1 | \n
| \n Pension expenses from defined contribution schemes | \n\n 6.4 | \n\n 12.2 | \n
| \n Pension expenses from multi-employer plans accounted for as defined contribution schemes | \n\n 6.3 | \n\n 7.7 | \n
| \n Total pension expenses included in personnel expenses | \n\n 13.2 | \n\n 21.0 | \n
See also Note 7 - Personnel expenses for further information regarding personnel expenses.
| \n \n | \n\n \n | \n\n 2022 | \n\n 2021 | \n
| \n No. of employees (annual average) | \n\n \n | \n\n 1,240 | \n\n 1,106 | \n
Note 8Combined items, income statement
Other operating expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n \n | \n\n 45.1 | \n\n 46.4 | \n
| \n Hired equipment | \n\n \n | \n\n 27.9 | \n\n 17.3 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 35.3 | \n\n 38.0 | \n
| \n Insurance | \n\n \n | \n\n 3.6 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.2 | \n\n 2.7 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.7 | \n\n 1.3 | \n
| \n Travel and course expenses | \n\n \n | \n\n 9.7 | \n\n 7.3 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 5.4 | \n\n 0.6 | \n
| \n Capitalised contract cost | \n\n\n | \n\n (0.7) | \n\n - | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 4.9 | \n\n 4.2 | \n
| \n Total other operating expenses | \n\n \n | \n\n 135.0 | \n\n 121.3 | \n
Note 8Combined items, income statement
Other gains and losses
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Distribution of capital from The Norwegian Shipowners\u2019 Mutual War Risks Insurance Association * | \n\n - | \n\n 7.3 | \n
| \n Net gain on disposal of tangible fixed assets | \n\n 0.0 | \n\n (0.1) | \n
| \n Other gains and losses | \n\n 0.0 | \n\n 7.3 | \n
| \n\n | \n
Other operating expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n \n | \n\n 45.1 | \n\n 46.4 | \n
| \n Hired equipment | \n\n \n | \n\n 27.9 | \n\n 17.3 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 35.3 | \n\n 38.0 | \n
| \n Insurance | \n\n \n | \n\n 3.6 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.2 | \n\n 2.7 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.7 | \n\n 1.3 | \n
| \n Travel and course expenses | \n\n \n | \n\n 9.7 | \n\n 7.3 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 5.4 | \n\n 0.6 | \n
| \n Capitalised contract cost | \n\n\n | \n\n (0.7) | \n\n - | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 4.9 | \n\n 4.2 | \n
| \n Total other operating expenses | \n\n \n | \n\n 135.0 | \n\n 121.3 | \n
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 44.4 | \n\n 47.3 | \n
| \n Amortised transaction costs borrowings * | \n\n\n | \n\n 6.3 | \n\n 3.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 2.0 | \n
| \n Other interest expenses | \n\n \n | \n\n 0.6 | \n\n 0.1 | \n
| \n Total interest expenses | \n\n \n | \n\n 55.4 | \n\n 52.6 | \n
| \n\n | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (3.6) | \n\n 3.1 | \n
| \n Other financial income | \n\n \n | \n\n - | \n\n 0.0 | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n 13.7 | \n\n - | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (4.5) | \n\n 8.7 | \n
| \n Other financial expenses | \n\n \n | \n\n (1.2) | \n\n 0.0 | \n
| \n Total other financial items | \n\n \n | \n\n 4.4 | \n\n 11.9 | \n
| \n\n | \n
Other gains and losses
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Distribution of capital from The Norwegian Shipowners\u2019 Mutual War Risks Insurance Association * | \n\n - | \n\n 7.3 | \n
| \n Net gain on disposal of tangible fixed assets | \n\n 0.0 | \n\n (0.1) | \n
| \n Other gains and losses | \n\n 0.0 | \n\n 7.3 | \n
| \n\n | \n
Other operating expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n \n | \n\n 45.1 | \n\n 46.4 | \n
| \n Hired equipment | \n\n \n | \n\n 27.9 | \n\n 17.3 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 35.3 | \n\n 38.0 | \n
| \n Insurance | \n\n \n | \n\n 3.6 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.2 | \n\n 2.7 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.7 | \n\n 1.3 | \n
| \n Travel and course expenses | \n\n \n | \n\n 9.7 | \n\n 7.3 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 5.4 | \n\n 0.6 | \n
| \n Capitalised contract cost | \n\n\n | \n\n (0.7) | \n\n - | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 4.9 | \n\n 4.2 | \n
| \n Total other operating expenses | \n\n \n | \n\n 135.0 | \n\n 121.3 | \n
Other gains and losses
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Distribution of capital from The Norwegian Shipowners\u2019 Mutual War Risks Insurance Association * | \n\n - | \n\n 7.3 | \n
| \n Net gain on disposal of tangible fixed assets | \n\n 0.0 | \n\n (0.1) | \n
| \n Other gains and losses | \n\n 0.0 | \n\n 7.3 | \n
| \n\n | \n
Other operating expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n \n | \n\n 45.1 | \n\n 46.4 | \n
| \n Hired equipment | \n\n \n | \n\n 27.9 | \n\n 17.3 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 35.3 | \n\n 38.0 | \n
| \n Insurance | \n\n \n | \n\n 3.6 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.2 | \n\n 2.7 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.7 | \n\n 1.3 | \n
| \n Travel and course expenses | \n\n \n | \n\n 9.7 | \n\n 7.3 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 5.4 | \n\n 0.6 | \n
| \n Capitalised contract cost | \n\n\n | \n\n (0.7) | \n\n - | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 4.9 | \n\n 4.2 | \n
| \n Total other operating expenses | \n\n \n | \n\n 135.0 | \n\n 121.3 | \n
Other operating expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n \n | \n\n 45.1 | \n\n 46.4 | \n
| \n Hired equipment | \n\n \n | \n\n 27.9 | \n\n 17.3 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 35.3 | \n\n 38.0 | \n
| \n Insurance | \n\n \n | \n\n 3.6 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.2 | \n\n 2.7 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.7 | \n\n 1.3 | \n
| \n Travel and course expenses | \n\n \n | \n\n 9.7 | \n\n 7.3 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 5.4 | \n\n 0.6 | \n
| \n Capitalised contract cost | \n\n\n | \n\n (0.7) | \n\n - | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 4.9 | \n\n 4.2 | \n
| \n Total other operating expenses | \n\n \n | \n\n 135.0 | \n\n 121.3 | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 44.4 | \n\n 47.3 | \n
| \n Amortised transaction costs borrowings * | \n\n\n | \n\n 6.3 | \n\n 3.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 2.0 | \n
| \n Other interest expenses | \n\n \n | \n\n 0.6 | \n\n 0.1 | \n
| \n Total interest expenses | \n\n \n | \n\n 55.4 | \n\n 52.6 | \n
| \n\n | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (3.6) | \n\n 3.1 | \n
| \n Other financial income | \n\n \n | \n\n - | \n\n 0.0 | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n 13.7 | \n\n - | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (4.5) | \n\n 8.7 | \n
| \n Other financial expenses | \n\n \n | \n\n (1.2) | \n\n 0.0 | \n
| \n Total other financial items | \n\n \n | \n\n 4.4 | \n\n 11.9 | \n
| \n\n | \n
Accounting policy - Borrowing costs
Accounting policy - Borrowing costs
Interest expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 44.4 | \n\n 47.3 | \n
| \n Amortised transaction costs borrowings * | \n\n\n | \n\n 6.3 | \n\n 3.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 2.0 | \n
| \n Other interest expenses | \n\n \n | \n\n 0.6 | \n\n 0.1 | \n
| \n Total interest expenses | \n\n \n | \n\n 55.4 | \n\n 52.6 | \n
| \n\n | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 44.4 | \n\n 47.3 | \n
| \n Amortised transaction costs borrowings * | \n\n\n | \n\n 6.3 | \n\n 3.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 2.0 | \n
| \n Other interest expenses | \n\n \n | \n\n 0.6 | \n\n 0.1 | \n
| \n Total interest expenses | \n\n \n | \n\n 55.4 | \n\n 52.6 | \n
| \n\n | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 44.4 | \n\n 47.3 | \n
| \n Amortised transaction costs borrowings * | \n\n\n | \n\n 6.3 | \n\n 3.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 2.0 | \n
| \n Other interest expenses | \n\n \n | \n\n 0.6 | \n\n 0.1 | \n
| \n Total interest expenses | \n\n \n | \n\n 55.4 | \n\n 52.6 | \n
| \n\n | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (3.6) | \n\n 3.1 | \n
| \n Other financial income | \n\n \n | \n\n - | \n\n 0.0 | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n 13.7 | \n\n - | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (4.5) | \n\n 8.7 | \n
| \n Other financial expenses | \n\n \n | \n\n (1.2) | \n\n 0.0 | \n
| \n Total other financial items | \n\n \n | \n\n 4.4 | \n\n 11.9 | \n
| \n\n | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (3.6) | \n\n 3.1 | \n
| \n Other financial income | \n\n \n | \n\n - | \n\n 0.0 | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n 13.7 | \n\n - | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (4.5) | \n\n 8.7 | \n
| \n Other financial expenses | \n\n \n | \n\n (1.2) | \n\n 0.0 | \n
| \n Total other financial items | \n\n \n | \n\n 4.4 | \n\n 11.9 | \n
| \n\n | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (3.6) | \n\n 3.1 | \n
| \n Other financial income | \n\n \n | \n\n - | \n\n 0.0 | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n 13.7 | \n\n - | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (4.5) | \n\n 8.7 | \n
| \n Other financial expenses | \n\n \n | \n\n (1.2) | \n\n 0.0 | \n
| \n Total other financial items | \n\n \n | \n\n 4.4 | \n\n 11.9 | \n
| \n\n | \n
Note 9Income Taxes
Accounting policy
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Income tax expense
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Withholding taxes paid / payable | \n\n (0.5) | \n\n (1.8) | \n
| \n Payable taxes | \n\n (5.7) | \n\n (2.2) | \n
| \n Change in deferred tax | \n\n 0.8 | \n\n 0.2 | \n
| \n Total income tax expense | \n\n (5.4) | \n\n (3.8) | \n
| \n Effective tax rate | \n\n 5.5 % | \n\n 4.9 % | \n
| \n Income tax expense in attributable to: | \n\n \n | \n\n \n | \n
| \n Profit from continuing operations | \n\n (5.4) | \n\n (5.5) | \n
| \n Profit from discontinued operation | \n\n 0.0 | \n\n 1.7 | \n
Tax reconciliation
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Profit from continuing operations before income tax expense | \n\n 88.3 | \n\n 66.5 | \n
| \n Profit from discontinued operation before income tax expense | \n\n 10.3 | \n\n 11.2 | \n
| \n Total profit before income tax expense | \n\n 98.5 | \n\n 77.7 | \n
| \n Tax calculated at domestic tax rates applicable to profits in respective countries* (including withholding tax) | \n\n 0.5 | \n\n (7.1) | \n
| \n Net utilisation of unrecognised tax losses | \n\n - | \n\n 7.6 | \n
| \n Effect of changes in tax rates | \n\n - | \n\n 0.0 | \n
| \n Effect of adjustments recognised related to prior periods | \n\n (0.3) | \n\n (1.1) | \n
| \n Effect of net non-taxable income / (expenses) ** | \n\n (5.6) | \n\n (3.2) | \n
| \n Total income tax expense | \n\n (5.4) | \n\n (3.8) | \n
| \n\n | \n||
| \n\n | \n
Tax losses
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Unused tax losses for which no deferred tax asset has been recognised | \n\n - | \n\n 108.3 | \n
| \n Potential tax benefit 22% | \n\n - | \n\n 23.9 | \n
The movement in unrecognised tax assets is as follows:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Unrecognised tax asset as at 01.01 | \n\n 23.9 | \n\n 32.5 | \n
| \n Net utilisation of unrecognised tax losses | \n\n - | \n\n (7.6) | \n
| \n Effect of changes in tax rates | \n\n - | \n\n (0.1) | \n
| \n Disposal through distribution of operation to shareholders | \n\n (23.9) | \n\n - | \n
| \n Currency translation differences | \n\n - | \n\n (1.0) | \n
| \n Unrecognised tax asset as at 31.12 | \n\n - | \n\n 23.9 | \n
The gross movement on the deferred tax account is as follows:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 01.01 | \n\n 1.3 | \n\n 1.0 | \n
| \n Income statement charge | \n\n 0.8 | \n\n 0.2 | \n
| \n Change in deferred tax on other comprehensive income | \n\n 0.0 | \n\n 0.1 | \n
| \n Disposal through distribution of operation to shareholders | \n\n (1.8) | \n\n - | \n
| \n Currency translation differences | \n\n 0.1 | \n\n (0.0) | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 31.12 | \n\n 0.4 | \n\n 1.3 | \n
The Group\u2019s recognised deferred tax assets are related to operations in Norway.
Deferred tax assets - Specification and movements
| \n USD million | \n\n Tax losses | \n\n Current assets | \n\n Net pension liabilities | \n\n Fixed assets | \n\n Lease liabilities | \n\n Total | \n
| \n Opening balance 01.01.2021 | \n\n 0.0 | \n\n 0.2 | \n\n 1.5 | \n\n 0.3 | \n\n 9.5 | \n\n 11.6 | \n
| \n Income statement charge | \n\n (0.0) | \n\n (0.0) | \n\n (0.3) | \n\n 0.0 | \n\n 0.7 | \n\n 0.4 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.1 | \n\n - | \n\n - | \n\n 0.1 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n (0.0) | \n\n (0.0) | \n\n (0.0) | \n\n (0.3) | \n\n (0.4) | \n
| \n Closing balance 31.12.2021 | \n\n - | \n\n 0.2 | \n\n 1.3 | \n\n 0.4 | \n\n 9.8 | \n\n 11.7 | \n
| \n Income statement charge | \n\n - | \n\n - | \n\n (0.0) | \n\n (0.0) | \n\n 6.0 | \n\n 6.0 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.0 | \n\n - | \n\n - | \n\n 0.0 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n (0.2) | \n\n (1.2) | \n\n (0.3) | \n\n (2.4) | \n\n (4.1) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.0) | \n\n (0.0) | \n\n (0.9) | \n\n (0.9) | \n
| \n Closing balance 31.12.2022 | \n\n - | \n\n - | \n\n 0.1 | \n\n - | \n\n 12.5 | \n\n 12.7 | \n
Deferred tax liabilities - Specification and movements
| \n USD thousands | \n\n Deferred capital gains | \n\n Fixed assets | \n\n Right-of-use Assets | \n\n Total | \n
| \n Opening balance 01.01.2020 | \n\n (1.5) | \n\n - | \n\n (9.1) | \n\n (10.5) | \n
| \n Income statement charge | \n\n 0.3 | \n\n - | \n\n (0.5) | \n\n (0.2) | \n
| \n Currency translation differences | \n\n 0.0 | \n\n - | \n\n 0.3 | \n\n 0.4 | \n
| \n Closing balance 31.12.2021 | \n\n (1.2) | \n\n - | \n\n (9.2) | \n\n (10.4) | \n
| \n Income statement charge | \n\n 0.2 | \n\n (0.1) | \n\n (5.3) | \n\n (5.1) | \n
| \n Disposal through distribution of operations to shareholders | \n\n 0.0 | \n\n \n | \n\n 2.3 | \n\n 2.3 | \n
| \n Currency translation differences | \n\n 0.1 | \n\n - | \n\n 0.9 | \n\n 1.0 | \n
| \n Closing balance 31.12.2022 | \n\n (0.8) | \n\n (0.1) | \n\n (11.4) | \n\n (12.3) | \n
Net book value of deferred taxes
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Deferred tax assets | \n\n 12.7 | \n\n 11.7 | \n
| \n Deferred tax liabilities offset in deferred tax assets | \n\n (12.3) | \n\n (10.4) | \n
| \n Net book value of deferred tax asset at 31.12. | \n\n 0.4 | \n\n 1.3 | \n
The income tax (charge)/credit relating to components of the other comprehensive income is as follows:
| \n \n | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After tax | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After tax | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Actuarial loss on post employment benefit obligations | \n\n (0.1) | \n\n 0.0 | \n\n (0.0) | \n\n (0.4) | \n\n 0.1 | \n\n (0.3) | \n
| \n Other comprehensive income | \n\n (0.1) | \n\n 0.0 | \n\n (0.0) | \n\n (0.4) | \n\n 0.1 | \n\n (0.3) | \n
| \n Deferred tax | \n\n \n | \n\n 0.0 | \n\n \n | \n\n \n | \n\n 0.1 | \n\n \n | \n
Accounting policy
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
The movement in unrecognised tax assets is as follows:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Unrecognised tax asset as at 01.01 | \n\n 23.9 | \n\n 32.5 | \n
| \n Net utilisation of unrecognised tax losses | \n\n - | \n\n (7.6) | \n
| \n Effect of changes in tax rates | \n\n - | \n\n (0.1) | \n
| \n Disposal through distribution of operation to shareholders | \n\n (23.9) | \n\n - | \n
| \n Currency translation differences | \n\n - | \n\n (1.0) | \n
| \n Unrecognised tax asset as at 31.12 | \n\n - | \n\n 23.9 | \n
The gross movement on the deferred tax account is as follows:
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 01.01 | \n\n 1.3 | \n\n 1.0 | \n
| \n Income statement charge | \n\n 0.8 | \n\n 0.2 | \n
| \n Change in deferred tax on other comprehensive income | \n\n 0.0 | \n\n 0.1 | \n
| \n Disposal through distribution of operation to shareholders | \n\n (1.8) | \n\n - | \n
| \n Currency translation differences | \n\n 0.1 | \n\n (0.0) | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 31.12 | \n\n 0.4 | \n\n 1.3 | \n
The Group\u2019s recognised deferred tax assets are related to operations in Norway.
Deferred tax assets - Specification and movements
| \n USD million | \n\n Tax losses | \n\n Current assets | \n\n Net pension liabilities | \n\n Fixed assets | \n\n Lease liabilities | \n\n Total | \n
| \n Opening balance 01.01.2021 | \n\n 0.0 | \n\n 0.2 | \n\n 1.5 | \n\n 0.3 | \n\n 9.5 | \n\n 11.6 | \n
| \n Income statement charge | \n\n (0.0) | \n\n (0.0) | \n\n (0.3) | \n\n 0.0 | \n\n 0.7 | \n\n 0.4 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.1 | \n\n - | \n\n - | \n\n 0.1 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n (0.0) | \n\n (0.0) | \n\n (0.0) | \n\n (0.3) | \n\n (0.4) | \n
| \n Closing balance 31.12.2021 | \n\n - | \n\n 0.2 | \n\n 1.3 | \n\n 0.4 | \n\n 9.8 | \n\n 11.7 | \n
| \n Income statement charge | \n\n - | \n\n - | \n\n (0.0) | \n\n (0.0) | \n\n 6.0 | \n\n 6.0 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.0 | \n\n - | \n\n - | \n\n 0.0 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n (0.2) | \n\n (1.2) | \n\n (0.3) | \n\n (2.4) | \n\n (4.1) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.0) | \n\n (0.0) | \n\n (0.9) | \n\n (0.9) | \n
| \n Closing balance 31.12.2022 | \n\n - | \n\n - | \n\n 0.1 | \n\n - | \n\n 12.5 | \n\n 12.7 | \n
Deferred tax liabilities - Specification and movements
| \n USD thousands | \n\n Deferred capital gains | \n\n Fixed assets | \n\n Right-of-use Assets | \n\n Total | \n
| \n Opening balance 01.01.2020 | \n\n (1.5) | \n\n - | \n\n (9.1) | \n\n (10.5) | \n
| \n Income statement charge | \n\n 0.3 | \n\n - | \n\n (0.5) | \n\n (0.2) | \n
| \n Currency translation differences | \n\n 0.0 | \n\n - | \n\n 0.3 | \n\n 0.4 | \n
| \n Closing balance 31.12.2021 | \n\n (1.2) | \n\n - | \n\n (9.2) | \n\n (10.4) | \n
| \n Income statement charge | \n\n 0.2 | \n\n (0.1) | \n\n (5.3) | \n\n (5.1) | \n
| \n Disposal through distribution of operations to shareholders | \n\n 0.0 | \n\n \n | \n\n 2.3 | \n\n 2.3 | \n
| \n Currency translation differences | \n\n 0.1 | \n\n - | \n\n 0.9 | \n\n 1.0 | \n
| \n Closing balance 31.12.2022 | \n\n (0.8) | \n\n (0.1) | \n\n (11.4) | \n\n (12.3) | \n
Net book value of deferred taxes
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Deferred tax assets | \n\n 12.7 | \n\n 11.7 | \n
| \n Deferred tax liabilities offset in deferred tax assets | \n\n (12.3) | \n\n (10.4) | \n
| \n Net book value of deferred tax asset at 31.12. | \n\n 0.4 | \n\n 1.3 | \n
Note 10Tangible fixed assets
Accounting policy
Property, plant and equipment comprise mainly of mobile offshore drilling units, well services equipment and machinery and equipment. Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes purchase price, any directly attributable costs of bringing the asset to working condition and borrowing costs.
Depreciation is calculated on a straight-line basis over the useful life of the asset or component. The depreciable amount equals historical cost less residual value. Items of property, plant and equipment with components that have substantially different useful lives are treated separately for depreciation purposes. The total expenditure on the rigs is therefore allocated into groups of components that have different expected useful lifetimes.
Subsequent costs for day-to-day repairs and maintenance are expensed as incurred.
The cost of modernisation and rebuilding projects is included in the asset\u2019s carrying amount when it is probable that the Group will derive future financial benefits and the cost of the item can be measured reliably. The carrying amount of the replaced part is written off. Modernisation and rebuilding projects are depreciated over the remaining useful life of the related assets.
The useful lives of assets and the depreciation methods are reviewed periodically in order to ensure that the method and period of depreciation are consistent with the expected pattern of financial benefits from the asset.
When assets are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting from their disposal is included in the income statement as other gains and losses.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices for mobile drilling units after a 30 year useful lifetime. Any changes are accounted for prospectively as a change in the accounting estimate. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Residual values for property, plant and equipment are estimated to be zero.
Rig and equipment are depreciated over a period from 5 to 30 years. Periodic maintenance is depreciated over the expected period until next docking, estimated as 5 years. Estimated useful life for operating drilling equipment is 3 to 10 years.
Newbuild in progress
Newbuilds under construction are capitalised as fixed assets during the construction as instalments are paid to the yard. Capitalised costs include interest expenses until commencement on first drilling contract, contractual costs and costs related to the monitoring of the project during the construction period. Contractual costs include costs related to the project for the duration of the contract, i.e. from signing of the contract to final completion of the contractual work. Any costs incurred prior to the signing of the contract that relate to the procurement of the contract are regarded as a purchase of contractual assistance and are included in contractual costs.
Government grants
Government grants are recognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Investment grants are capitalised and recognised systematically over the asset\u2019s useful life. Investment grants are recognised as a deduction of the asset\u2019s carrying amount.
Impairment of non-financial assets
All non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). For mobile offshore drilling units, each unit is deemed to be a CGU. Value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Non-financial assets, other than goodwill, that have suffered an impairment, are reviewed for reversal of the impairment whenever events or changes in circumstances indicate that the impairment loss recognised in prior periods may no longer exist or may have decreased.
Assets subject to operating leases
Mobile drilling units, Periodic maintenance and Well Service equipment contain assets used in contracts with customers that contain a lease component.
Specification and movements 2022
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 2,945.3 | \n\n 171.7 | \n\n 407.7 | \n\n 21.6 | \n\n 60.0 | \n\n 3,606.2 | \n
| \n Additions | \n\n 33.9 | \n\n 13.9 | \n\n 7.3 | \n\n 1.9 | \n\n 42.0 | \n\n 99.0 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 16.6 | \n\n 16.6 | \n
| \n Disposal | \n\n - | \n\n (0.4) | \n\n (2.5) | \n\n (0.2) | \n\n (1.3) | \n\n (4.3) | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n (413.4) | \n\n (21.3) | \n\n (18.2) | \n\n (452.8) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n 0.9 | \n\n 0.1 | \n\n (5.3) | \n\n (4.3) | \n
| \n Cost as at 31 December 2022 | \n\n 2,979.1 | \n\n 185.2 | \n\n - | \n\n 2.2 | \n\n 93.9 | \n\n 3,260.3 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n (1,071.2) | \n\n (69.5) | \n\n (321.9) | \n\n (18.2) | \n\n (16.5) | \n\n (1,497.3) | \n
| \n Depreciation from continuing operations | \n\n (112.6) | \n\n (39.0) | \n\n \n | \n\n (0.2) | \n\n (19.5) | \n\n (171.3) | \n
| \n Depreciation from discontinued operations | \n\n - | \n\n - | \n\n (2.0) | \n\n (0.1) | \n\n (0.2) | \n\n (2.3) | \n
| \n Adjustments due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n - | \n\n (2.7) | \n\n (2.7) | \n
| \n Disposals | \n\n - | \n\n 0.4 | \n\n 2.2 | \n\n 0.1 | \n\n 1.3 | \n\n 4.0 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n 322.6 | \n\n 18.1 | \n\n 6.2 | \n\n 346.8 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.9) | \n\n (0.1) | \n\n 1.4 | \n\n 0.4 | \n
| \n As at 31 December 2022 | \n\n (1,183.8) | \n\n (108.1) | \n\n - | \n\n (0.5) | \n\n (30.1) | \n\n (1,322.4) | \n
| \n Net book value at 31 December 2022 | \n\n 1,795.3 | \n\n 77.1 | \n\n - | \n\n 1.7 | \n\n 63.8 | \n\n 1,937.9 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 2,931.3 | \n\n 158.5 | \n\n 376.6 | \n\n 21.5 | \n\n 56.1 | \n\n 3,543.9 | \n
| \n Additions | \n\n 45.3 | \n\n 13.2 | \n\n 15.2 | \n\n 1.9 | \n\n 9.1 | \n\n 84.7 | \n
| \n Reclassifications * | \n\n (24.5) | \n\n - | \n\n 24.5 | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n (6.9) | \n\n - | \n\n (7.2) | \n\n (1.1) | \n\n (3.2) | \n\n (18.3) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (1.4) | \n\n (0.7) | \n\n (2.0) | \n\n (4.2) | \n
| \n Cost as at 31 December 2021 | \n\n 2,945.3 | \n\n 171.7 | \n\n 407.7 | \n\n 21.6 | \n\n 60.0 | \n\n 3,606.2 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n (965.8) | \n\n (34.9) | \n\n (307.8) | \n\n (18.6) | \n\n (13.5) | \n\n (1,340.5) | \n
| \n Depreciation from continuing operations | \n\n (112.2) | \n\n (34.6) | \n\n - | \n\n (0.1) | \n\n (4.4) | \n\n (151.3) | \n
| \n Depreciation from discontinued operations | \n\n - | \n\n - | \n\n (22.2) | \n\n (1.1) | \n\n (2.4) | \n\n (25.8) | \n
| \n Reclassifications | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 6.8 | \n\n - | \n\n 6.8 | \n\n 1.0 | \n\n 3.2 | \n\n 17.7 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n 1.4 | \n\n 0.6 | \n\n 0.6 | \n\n 2.5 | \n
| \n As at 31 December 2021 | \n\n (1,071.2) | \n\n (69.5) | \n\n (321.9) | \n\n (18.2) | \n\n (16.5) | \n\n (1,497.3) | \n
| \n Net book value at 31 December 2021 | \n\n 1,874.1 | \n\n 102.2 | \n\n 85.8 | \n\n 3.4 | \n\n 43.4 | \n\n 2,108.9 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n
Accumulated impairment that may qualify for reversal in a later period related to the mobile drilling units Deepsea Atlantic and Deepsea Stavanger amount to USD 148 million at 31 December 2022.
For more information about Right-of-use assets, refer to Note 18 - Leases.
Grants received
The Group have received USD 6.4 million from the Norwegian NOx fund in 2022 (USD 4.6 million in 2021). The grants are recognised as a deduction of additions presented in the table above.
Depreciation drilling units
Deepsea Atlantic is depreciated from 4 August 2009, Deepsea Stavanger is depreciated from 16 September 2010, Deepsea Aberdeen is depreciated from 21 April 2015, and Deepsea Nordkapp is depreciated from 10 May 2019.
The group evaluates remaining useful lifetime and residual values taking into account current and expected climate risk, and the shift to renewable energy sources.
Significant judgement and estimation uncertainty
Management exercises significant judgement in determining whether there are any indicators of impairment or reversal of impairment. Management evaluates both external and internal sources of information in the indicator assessments. The assessments include estimated effects of the climate change and the shift to renewable energy sources
Odfjell Drilling has not identified any impairment indicators, nor any indicators for reversal of impairment as at 31 December 2022.
Accounting policy
Property, plant and equipment comprise mainly of mobile offshore drilling units, well services equipment and machinery and equipment. Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes purchase price, any directly attributable costs of bringing the asset to working condition and borrowing costs.
Depreciation is calculated on a straight-line basis over the useful life of the asset or component. The depreciable amount equals historical cost less residual value. Items of property, plant and equipment with components that have substantially different useful lives are treated separately for depreciation purposes. The total expenditure on the rigs is therefore allocated into groups of components that have different expected useful lifetimes.
Subsequent costs for day-to-day repairs and maintenance are expensed as incurred.
The cost of modernisation and rebuilding projects is included in the asset\u2019s carrying amount when it is probable that the Group will derive future financial benefits and the cost of the item can be measured reliably. The carrying amount of the replaced part is written off. Modernisation and rebuilding projects are depreciated over the remaining useful life of the related assets.
The useful lives of assets and the depreciation methods are reviewed periodically in order to ensure that the method and period of depreciation are consistent with the expected pattern of financial benefits from the asset.
When assets are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting from their disposal is included in the income statement as other gains and losses.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices for mobile drilling units after a 30 year useful lifetime. Any changes are accounted for prospectively as a change in the accounting estimate. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Residual values for property, plant and equipment are estimated to be zero.
Rig and equipment are depreciated over a period from 5 to 30 years. Periodic maintenance is depreciated over the expected period until next docking, estimated as 5 years. Estimated useful life for operating drilling equipment is 3 to 10 years.
Newbuild in progress
Newbuilds under construction are capitalised as fixed assets during the construction as instalments are paid to the yard. Capitalised costs include interest expenses until commencement on first drilling contract, contractual costs and costs related to the monitoring of the project during the construction period. Contractual costs include costs related to the project for the duration of the contract, i.e. from signing of the contract to final completion of the contractual work. Any costs incurred prior to the signing of the contract that relate to the procurement of the contract are regarded as a purchase of contractual assistance and are included in contractual costs.
Government grants
Government grants are recognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Investment grants are capitalised and recognised systematically over the asset\u2019s useful life. Investment grants are recognised as a deduction of the asset\u2019s carrying amount.
Impairment of non-financial assets
All non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). For mobile offshore drilling units, each unit is deemed to be a CGU. Value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Non-financial assets, other than goodwill, that have suffered an impairment, are reviewed for reversal of the impairment whenever events or changes in circumstances indicate that the impairment loss recognised in prior periods may no longer exist or may have decreased.
Depreciation is calculated on a straight-line basis over the useful life of the asset or component. The depreciable amount equals historical cost less residual value. Items of property, plant and equipment with components that have substantially different useful lives are treated separately for depreciation purposes. The total expenditure on the rigs is therefore allocated into groups of components that have different expected useful lifetimes.
The useful lives of assets and the depreciation methods are reviewed periodically in order to ensure that the method and period of depreciation are consistent with the expected pattern of financial benefits from the asset.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices for mobile drilling units after a 30 year useful lifetime. Any changes are accounted for prospectively as a change in the accounting estimate. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Residual values for property, plant and equipment are estimated to be zero.
Rig and equipment are depreciated over a period from 5 to 30 years. Periodic maintenance is depreciated over the expected period until next docking, estimated as 5 years. Estimated useful life for operating drilling equipment is 3 to 10 years.
Depreciation is calculated on a straight-line basis over the useful life of the asset or component. The depreciable amount equals historical cost less residual value. Items of property, plant and equipment with components that have substantially different useful lives are treated separately for depreciation purposes. The total expenditure on the rigs is therefore allocated into groups of components that have different expected useful lifetimes.
The useful lives of assets and the depreciation methods are reviewed periodically in order to ensure that the method and period of depreciation are consistent with the expected pattern of financial benefits from the asset.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices for mobile drilling units after a 30 year useful lifetime. Any changes are accounted for prospectively as a change in the accounting estimate. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Residual values for property, plant and equipment are estimated to be zero.
Rig and equipment are depreciated over a period from 5 to 30 years. Periodic maintenance is depreciated over the expected period until next docking, estimated as 5 years. Estimated useful life for operating drilling equipment is 3 to 10 years.
Specification and movements 2022
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 2,945.3 | \n\n 171.7 | \n\n 407.7 | \n\n 21.6 | \n\n 60.0 | \n\n 3,606.2 | \n
| \n Additions | \n\n 33.9 | \n\n 13.9 | \n\n 7.3 | \n\n 1.9 | \n\n 42.0 | \n\n 99.0 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 16.6 | \n\n 16.6 | \n
| \n Disposal | \n\n - | \n\n (0.4) | \n\n (2.5) | \n\n (0.2) | \n\n (1.3) | \n\n (4.3) | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n (413.4) | \n\n (21.3) | \n\n (18.2) | \n\n (452.8) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n 0.9 | \n\n 0.1 | \n\n (5.3) | \n\n (4.3) | \n
| \n Cost as at 31 December 2022 | \n\n 2,979.1 | \n\n 185.2 | \n\n - | \n\n 2.2 | \n\n 93.9 | \n\n 3,260.3 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n (1,071.2) | \n\n (69.5) | \n\n (321.9) | \n\n (18.2) | \n\n (16.5) | \n\n (1,497.3) | \n
| \n Depreciation from continuing operations | \n\n (112.6) | \n\n (39.0) | \n\n \n | \n\n (0.2) | \n\n (19.5) | \n\n (171.3) | \n
| \n Depreciation from discontinued operations | \n\n - | \n\n - | \n\n (2.0) | \n\n (0.1) | \n\n (0.2) | \n\n (2.3) | \n
| \n Adjustments due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n - | \n\n (2.7) | \n\n (2.7) | \n
| \n Disposals | \n\n - | \n\n 0.4 | \n\n 2.2 | \n\n 0.1 | \n\n 1.3 | \n\n 4.0 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n 322.6 | \n\n 18.1 | \n\n 6.2 | \n\n 346.8 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.9) | \n\n (0.1) | \n\n 1.4 | \n\n 0.4 | \n
| \n As at 31 December 2022 | \n\n (1,183.8) | \n\n (108.1) | \n\n - | \n\n (0.5) | \n\n (30.1) | \n\n (1,322.4) | \n
| \n Net book value at 31 December 2022 | \n\n 1,795.3 | \n\n 77.1 | \n\n - | \n\n 1.7 | \n\n 63.8 | \n\n 1,937.9 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 2,931.3 | \n\n 158.5 | \n\n 376.6 | \n\n 21.5 | \n\n 56.1 | \n\n 3,543.9 | \n
| \n Additions | \n\n 45.3 | \n\n 13.2 | \n\n 15.2 | \n\n 1.9 | \n\n 9.1 | \n\n 84.7 | \n
| \n Reclassifications * | \n\n (24.5) | \n\n - | \n\n 24.5 | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n (6.9) | \n\n - | \n\n (7.2) | \n\n (1.1) | \n\n (3.2) | \n\n (18.3) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (1.4) | \n\n (0.7) | \n\n (2.0) | \n\n (4.2) | \n
| \n Cost as at 31 December 2021 | \n\n 2,945.3 | \n\n 171.7 | \n\n 407.7 | \n\n 21.6 | \n\n 60.0 | \n\n 3,606.2 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n (965.8) | \n\n (34.9) | \n\n (307.8) | \n\n (18.6) | \n\n (13.5) | \n\n (1,340.5) | \n
| \n Depreciation from continuing operations | \n\n (112.2) | \n\n (34.6) | \n\n - | \n\n (0.1) | \n\n (4.4) | \n\n (151.3) | \n
| \n Depreciation from discontinued operations | \n\n - | \n\n - | \n\n (22.2) | \n\n (1.1) | \n\n (2.4) | \n\n (25.8) | \n
| \n Reclassifications | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 6.8 | \n\n - | \n\n 6.8 | \n\n 1.0 | \n\n 3.2 | \n\n 17.7 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n 1.4 | \n\n 0.6 | \n\n 0.6 | \n\n 2.5 | \n
| \n As at 31 December 2021 | \n\n (1,071.2) | \n\n (69.5) | \n\n (321.9) | \n\n (18.2) | \n\n (16.5) | \n\n (1,497.3) | \n
| \n Net book value at 31 December 2021 | \n\n 1,874.1 | \n\n 102.2 | \n\n 85.8 | \n\n 3.4 | \n\n 43.4 | \n\n 2,108.9 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n
Accumulated impairment that may qualify for reversal in a later period related to the mobile drilling units Deepsea Atlantic and Deepsea Stavanger amount to USD 148 million at 31 December 2022.
For more information about Right-of-use assets, refer to Note 18 - Leases.
Grants received
The Group have received USD 6.4 million from the Norwegian NOx fund in 2022 (USD 4.6 million in 2021). The grants are recognised as a deduction of additions presented in the table above.
Depreciation drilling units
Deepsea Atlantic is depreciated from 4 August 2009, Deepsea Stavanger is depreciated from 16 September 2010, Deepsea Aberdeen is depreciated from 21 April 2015, and Deepsea Nordkapp is depreciated from 10 May 2019.
The group evaluates remaining useful lifetime and residual values taking into account current and expected climate risk, and the shift to renewable energy sources.
Significant judgement and estimation uncertainty
Management exercises significant judgement in determining whether there are any indicators of impairment or reversal of impairment. Management evaluates both external and internal sources of information in the indicator assessments. The assessments include estimated effects of the climate change and the shift to renewable energy sources
Specification and movements 2022
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 18.4 | \n\n 28.0 | \n\n 2.1 | \n\n 1.3 | \n\n 49.8 | \n
| \n Additions | \n\n - | \n\n 1.7 | \n\n - | \n\n - | \n\n 1.7 | \n
| \n Disposal through distribution of operations to shareholders | \n\n (15.4) | \n\n (29.5) | \n\n (2.1) | \n\n (1.3) | \n\n (48.4) | \n
| \n Currency translation differences | \n\n (0.0) | \n\n 0.6 | \n\n - | \n\n - | \n\n 0.6 | \n
| \n Cost as at 31 December 2022 | \n\n 3.0 | \n\n 0.7 | \n\n - | \n\n - | \n\n 3.6 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n - | \n\n (20.1) | \n\n (0.4) | \n\n (0.7) | \n\n (21.3) | \n
| \n Amortisation from continuing operations | \n\n - | \n\n (0.2) | \n\n - | \n\n \n | \n\n (0.2) | \n
| \n Amortisation from discontinued operations | \n\n - | \n\n (0.1) | \n\n (0.0) | \n\n (0.0) | \n\n (0.1) | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n 20.6 | \n\n 0.5 | \n\n 0.7 | \n\n 21.7 | \n
| \n Currency translation differences | \n\n - | \n\n (0.4) | \n\n - | \n\n - | \n\n (0.4) | \n
| \n As at 31 December 2022 | \n\n - | \n\n (0.3) | \n\n - | \n\n - | \n\n (0.3) | \n
| \n Net book value at 31 December 2022 | \n\n 3.0 | \n\n 0.4 | \n\n - | \n\n - | \n\n 3.4 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 19.7 | \n\n 23.2 | \n\n 1.7 | \n\n 1.3 | \n\n 45.9 | \n
| \n Additions | \n\n - | \n\n 5.6 | \n\n 0.5 | \n\n 0.0 | \n\n 6.1 | \n
| \n Disposal at loss of control of subsidiary | \n\n (0.8) | \n\n - | \n\n - | \n\n - | \n\n (0.8) | \n
| \n Currency translation differences | \n\n (0.6) | \n\n (0.9) | \n\n - | \n\n - | \n\n (1.5) | \n
| \n Cost as at 31 December 2021 | \n\n 18.4 | \n\n 28.0 | \n\n 2.1 | \n\n 1.3 | \n\n 49.8 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n - | \n\n (16.5) | \n\n (0.2) | \n\n (0.4) | \n\n (17.0) | \n
| \n Amortisation from continuing operations | \n\n - | \n\n (0.1) | \n\n - | \n\n - | \n\n (0.1) | \n
| \n Amortisation from discontinued operations | \n\n - | \n\n (4.2) | \n\n (0.3) | \n\n (0.3) | \n\n (4.8) | \n
| \n Currency translation differences | \n\n - | \n\n 0.6 | \n\n - | \n\n \n | \n\n 0.6 | \n
| \n As at 31 December 2021 | \n\n - | \n\n (20.1) | \n\n (0.4) | \n\n (0.7) | \n\n (21.3) | \n
| \n Net book value at 31 December 2021 | \n\n 18.4 | \n\n 7.8 | \n\n 1.7 | \n\n 0.7 | \n\n 28.5 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Newbuild in progress
Newbuilds under construction are capitalised as fixed assets during the construction as instalments are paid to the yard. Capitalised costs include interest expenses until commencement on first drilling contract, contractual costs and costs related to the monitoring of the project during the construction period. Contractual costs include costs related to the project for the duration of the contract, i.e. from signing of the contract to final completion of the contractual work. Any costs incurred prior to the signing of the contract that relate to the procurement of the contract are regarded as a purchase of contractual assistance and are included in contractual costs.
Government grants
Government grants are recognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Investment grants are capitalised and recognised systematically over the asset\u2019s useful life. Investment grants are recognised as a deduction of the asset\u2019s carrying amount.
Government grants
Government grants are recognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Investment grants are capitalised and recognised systematically over the asset\u2019s useful life. Investment grants are recognised as a deduction of the asset\u2019s carrying amount.
Grants received
Impairment of non-financial assets
All non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). For mobile offshore drilling units, each unit is deemed to be a CGU. Value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Non-financial assets, other than goodwill, that have suffered an impairment, are reviewed for reversal of the impairment whenever events or changes in circumstances indicate that the impairment loss recognised in prior periods may no longer exist or may have decreased.
Impairment of non-financial assets
All non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). For mobile offshore drilling units, each unit is deemed to be a CGU. Value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Non-financial assets, other than goodwill, that have suffered an impairment, are reviewed for reversal of the impairment whenever events or changes in circumstances indicate that the impairment loss recognised in prior periods may no longer exist or may have decreased.
Impairment of non-financial assets
All non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). For mobile offshore drilling units, each unit is deemed to be a CGU. Value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Non-financial assets, other than goodwill, that have suffered an impairment, are reviewed for reversal of the impairment whenever events or changes in circumstances indicate that the impairment loss recognised in prior periods may no longer exist or may have decreased.
Specification and movements 2022
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 2,945.3 | \n\n 171.7 | \n\n 407.7 | \n\n 21.6 | \n\n 60.0 | \n\n 3,606.2 | \n
| \n Additions | \n\n 33.9 | \n\n 13.9 | \n\n 7.3 | \n\n 1.9 | \n\n 42.0 | \n\n 99.0 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 16.6 | \n\n 16.6 | \n
| \n Disposal | \n\n - | \n\n (0.4) | \n\n (2.5) | \n\n (0.2) | \n\n (1.3) | \n\n (4.3) | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n (413.4) | \n\n (21.3) | \n\n (18.2) | \n\n (452.8) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n 0.9 | \n\n 0.1 | \n\n (5.3) | \n\n (4.3) | \n
| \n Cost as at 31 December 2022 | \n\n 2,979.1 | \n\n 185.2 | \n\n - | \n\n 2.2 | \n\n 93.9 | \n\n 3,260.3 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n (1,071.2) | \n\n (69.5) | \n\n (321.9) | \n\n (18.2) | \n\n (16.5) | \n\n (1,497.3) | \n
| \n Depreciation from continuing operations | \n\n (112.6) | \n\n (39.0) | \n\n \n | \n\n (0.2) | \n\n (19.5) | \n\n (171.3) | \n
| \n Depreciation from discontinued operations | \n\n - | \n\n - | \n\n (2.0) | \n\n (0.1) | \n\n (0.2) | \n\n (2.3) | \n
| \n Adjustments due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n - | \n\n (2.7) | \n\n (2.7) | \n
| \n Disposals | \n\n - | \n\n 0.4 | \n\n 2.2 | \n\n 0.1 | \n\n 1.3 | \n\n 4.0 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n 322.6 | \n\n 18.1 | \n\n 6.2 | \n\n 346.8 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.9) | \n\n (0.1) | \n\n 1.4 | \n\n 0.4 | \n
| \n As at 31 December 2022 | \n\n (1,183.8) | \n\n (108.1) | \n\n - | \n\n (0.5) | \n\n (30.1) | \n\n (1,322.4) | \n
| \n Net book value at 31 December 2022 | \n\n 1,795.3 | \n\n 77.1 | \n\n - | \n\n 1.7 | \n\n 63.8 | \n\n 1,937.9 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 2,931.3 | \n\n 158.5 | \n\n 376.6 | \n\n 21.5 | \n\n 56.1 | \n\n 3,543.9 | \n
| \n Additions | \n\n 45.3 | \n\n 13.2 | \n\n 15.2 | \n\n 1.9 | \n\n 9.1 | \n\n 84.7 | \n
| \n Reclassifications * | \n\n (24.5) | \n\n - | \n\n 24.5 | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n (6.9) | \n\n - | \n\n (7.2) | \n\n (1.1) | \n\n (3.2) | \n\n (18.3) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (1.4) | \n\n (0.7) | \n\n (2.0) | \n\n (4.2) | \n
| \n Cost as at 31 December 2021 | \n\n 2,945.3 | \n\n 171.7 | \n\n 407.7 | \n\n 21.6 | \n\n 60.0 | \n\n 3,606.2 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n (965.8) | \n\n (34.9) | \n\n (307.8) | \n\n (18.6) | \n\n (13.5) | \n\n (1,340.5) | \n
| \n Depreciation from continuing operations | \n\n (112.2) | \n\n (34.6) | \n\n - | \n\n (0.1) | \n\n (4.4) | \n\n (151.3) | \n
| \n Depreciation from discontinued operations | \n\n - | \n\n - | \n\n (22.2) | \n\n (1.1) | \n\n (2.4) | \n\n (25.8) | \n
| \n Reclassifications | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 6.8 | \n\n - | \n\n 6.8 | \n\n 1.0 | \n\n 3.2 | \n\n 17.7 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n 1.4 | \n\n 0.6 | \n\n 0.6 | \n\n 2.5 | \n
| \n As at 31 December 2021 | \n\n (1,071.2) | \n\n (69.5) | \n\n (321.9) | \n\n (18.2) | \n\n (16.5) | \n\n (1,497.3) | \n
| \n Net book value at 31 December 2021 | \n\n 1,874.1 | \n\n 102.2 | \n\n 85.8 | \n\n 3.4 | \n\n 43.4 | \n\n 2,108.9 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n
Accumulated impairment that may qualify for reversal in a later period related to the mobile drilling units Deepsea Atlantic and Deepsea Stavanger amount to USD 148 million at 31 December 2022.
For more information about Right-of-use assets, refer to Note 18 - Leases.
Grants received
The Group have received USD 6.4 million from the Norwegian NOx fund in 2022 (USD 4.6 million in 2021). The grants are recognised as a deduction of additions presented in the table above.
Depreciation drilling units
Deepsea Atlantic is depreciated from 4 August 2009, Deepsea Stavanger is depreciated from 16 September 2010, Deepsea Aberdeen is depreciated from 21 April 2015, and Deepsea Nordkapp is depreciated from 10 May 2019.
The group evaluates remaining useful lifetime and residual values taking into account current and expected climate risk, and the shift to renewable energy sources.
Significant judgement and estimation uncertainty
Management exercises significant judgement in determining whether there are any indicators of impairment or reversal of impairment. Management evaluates both external and internal sources of information in the indicator assessments. The assessments include estimated effects of the climate change and the shift to renewable energy sources
Odfjell Drilling has not identified any impairment indicators, nor any indicators for reversal of impairment as at 31 December 2022.
Note 11Intangible assets
Accounting policy - Goodwill and Intangible assets
Specification and movements 2022
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 18.4 | \n\n 28.0 | \n\n 2.1 | \n\n 1.3 | \n\n 49.8 | \n
| \n Additions | \n\n - | \n\n 1.7 | \n\n - | \n\n - | \n\n 1.7 | \n
| \n Disposal through distribution of operations to shareholders | \n\n (15.4) | \n\n (29.5) | \n\n (2.1) | \n\n (1.3) | \n\n (48.4) | \n
| \n Currency translation differences | \n\n (0.0) | \n\n 0.6 | \n\n - | \n\n - | \n\n 0.6 | \n
| \n Cost as at 31 December 2022 | \n\n 3.0 | \n\n 0.7 | \n\n - | \n\n - | \n\n 3.6 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n - | \n\n (20.1) | \n\n (0.4) | \n\n (0.7) | \n\n (21.3) | \n
| \n Amortisation from continuing operations | \n\n - | \n\n (0.2) | \n\n - | \n\n \n | \n\n (0.2) | \n
| \n Amortisation from discontinued operations | \n\n - | \n\n (0.1) | \n\n (0.0) | \n\n (0.0) | \n\n (0.1) | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n 20.6 | \n\n 0.5 | \n\n 0.7 | \n\n 21.7 | \n
| \n Currency translation differences | \n\n - | \n\n (0.4) | \n\n - | \n\n - | \n\n (0.4) | \n
| \n As at 31 December 2022 | \n\n - | \n\n (0.3) | \n\n - | \n\n - | \n\n (0.3) | \n
| \n Net book value at 31 December 2022 | \n\n 3.0 | \n\n 0.4 | \n\n - | \n\n - | \n\n 3.4 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 19.7 | \n\n 23.2 | \n\n 1.7 | \n\n 1.3 | \n\n 45.9 | \n
| \n Additions | \n\n - | \n\n 5.6 | \n\n 0.5 | \n\n 0.0 | \n\n 6.1 | \n
| \n Disposal at loss of control of subsidiary | \n\n (0.8) | \n\n - | \n\n - | \n\n - | \n\n (0.8) | \n
| \n Currency translation differences | \n\n (0.6) | \n\n (0.9) | \n\n - | \n\n - | \n\n (1.5) | \n
| \n Cost as at 31 December 2021 | \n\n 18.4 | \n\n 28.0 | \n\n 2.1 | \n\n 1.3 | \n\n 49.8 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n - | \n\n (16.5) | \n\n (0.2) | \n\n (0.4) | \n\n (17.0) | \n
| \n Amortisation from continuing operations | \n\n - | \n\n (0.1) | \n\n - | \n\n - | \n\n (0.1) | \n
| \n Amortisation from discontinued operations | \n\n - | \n\n (4.2) | \n\n (0.3) | \n\n (0.3) | \n\n (4.8) | \n
| \n Currency translation differences | \n\n - | \n\n 0.6 | \n\n - | \n\n \n | \n\n 0.6 | \n
| \n As at 31 December 2021 | \n\n - | \n\n (20.1) | \n\n (0.4) | \n\n (0.7) | \n\n (21.3) | \n
| \n Net book value at 31 December 2021 | \n\n 18.4 | \n\n 7.8 | \n\n 1.7 | \n\n 0.7 | \n\n 28.5 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Summary of goodwill allocation for each operating segment
| \n \n | \n\n External Fleet | \n|
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n At 1 January | \n\n 3.3 | \n\n 3.4 | \n
| \n Translation differences | \n\n (0.3) | \n\n (0.1) | \n
| \n Net book value at 31 December | \n\n 3.0 | \n\n 3.3 | \n
All goodwill is allocated to the External Fleet segment
The recoverable amount of the CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on prognoses made by management covering a five-year period. The prognosis for the EBITDA margin in 2023 and the following years is based on past performance and expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax weighted average cost of capital and reflect specific risks relating to the relevant operating segments.
These assumptions have been used for the analysis of each CGU within the operating segment.
| \n Key assumptions for value-in-use calculations | \n\n External Fleet | \n|
| \n \n | \n\n 2022 | \n\n 2021 | \n
| \n EBITDA margin in prognosis period | \n\n 17% - 21% | \n\n 11% - 15% | \n
| \n Growth rate year 6 and forward | \n\n 0.0% | \n\n 0.0% | \n
| \n Weighted Average Cost of Capital, pre-tax | \n\n 10% | \n\n 10% | \n
Impairment tests performed for goodwill for respective CGUs do not indicate any impairment as per 31.12.2022.
Sensitivity analysis for goodwill impairment test as at 31.12.2022
The Group has performed sensitivity analysis for the goodwill impairment test by reducing operating income by one, five and ten percent and EBITDA margin by one, five and ten percentage points respectively for each of the segments.
None of the other scenarios indicated any impairment write-down of goodwill as at 31 December 2022.
Accounting policy - Goodwill and Intangible assets
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Summary of goodwill allocation for each operating segment
| \n \n | \n\n External Fleet | \n|
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n At 1 January | \n\n 3.3 | \n\n 3.4 | \n
| \n Translation differences | \n\n (0.3) | \n\n (0.1) | \n
| \n Net book value at 31 December | \n\n 3.0 | \n\n 3.3 | \n
All goodwill is allocated to the External Fleet segment
The recoverable amount of the CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on prognoses made by management covering a five-year period. The prognosis for the EBITDA margin in 2023 and the following years is based on past performance and expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax weighted average cost of capital and reflect specific risks relating to the relevant operating segments.
These assumptions have been used for the analysis of each CGU within the operating segment.
| \n Key assumptions for value-in-use calculations | \n\n External Fleet | \n|
| \n \n | \n\n 2022 | \n\n 2021 | \n
| \n EBITDA margin in prognosis period | \n\n 17% - 21% | \n\n 11% - 15% | \n
| \n Growth rate year 6 and forward | \n\n 0.0% | \n\n 0.0% | \n
| \n Weighted Average Cost of Capital, pre-tax | \n\n 10% | \n\n 10% | \n
Impairment tests performed for goodwill for respective CGUs do not indicate any impairment as per 31.12.2022.
Sensitivity analysis for goodwill impairment test as at 31.12.2022
The Group has performed sensitivity analysis for the goodwill impairment test by reducing operating income by one, five and ten percent and EBITDA margin by one, five and ten percentage points respectively for each of the segments.
None of the other scenarios indicated any impairment write-down of goodwill as at 31 December 2022.
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Specification and movements 2022
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 18.4 | \n\n 28.0 | \n\n 2.1 | \n\n 1.3 | \n\n 49.8 | \n
| \n Additions | \n\n - | \n\n 1.7 | \n\n - | \n\n - | \n\n 1.7 | \n
| \n Disposal through distribution of operations to shareholders | \n\n (15.4) | \n\n (29.5) | \n\n (2.1) | \n\n (1.3) | \n\n (48.4) | \n
| \n Currency translation differences | \n\n (0.0) | \n\n 0.6 | \n\n - | \n\n - | \n\n 0.6 | \n
| \n Cost as at 31 December 2022 | \n\n 3.0 | \n\n 0.7 | \n\n - | \n\n - | \n\n 3.6 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n - | \n\n (20.1) | \n\n (0.4) | \n\n (0.7) | \n\n (21.3) | \n
| \n Amortisation from continuing operations | \n\n - | \n\n (0.2) | \n\n - | \n\n \n | \n\n (0.2) | \n
| \n Amortisation from discontinued operations | \n\n - | \n\n (0.1) | \n\n (0.0) | \n\n (0.0) | \n\n (0.1) | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n 20.6 | \n\n 0.5 | \n\n 0.7 | \n\n 21.7 | \n
| \n Currency translation differences | \n\n - | \n\n (0.4) | \n\n - | \n\n - | \n\n (0.4) | \n
| \n As at 31 December 2022 | \n\n - | \n\n (0.3) | \n\n - | \n\n - | \n\n (0.3) | \n
| \n Net book value at 31 December 2022 | \n\n 3.0 | \n\n 0.4 | \n\n - | \n\n - | \n\n 3.4 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 19.7 | \n\n 23.2 | \n\n 1.7 | \n\n 1.3 | \n\n 45.9 | \n
| \n Additions | \n\n - | \n\n 5.6 | \n\n 0.5 | \n\n 0.0 | \n\n 6.1 | \n
| \n Disposal at loss of control of subsidiary | \n\n (0.8) | \n\n - | \n\n - | \n\n - | \n\n (0.8) | \n
| \n Currency translation differences | \n\n (0.6) | \n\n (0.9) | \n\n - | \n\n - | \n\n (1.5) | \n
| \n Cost as at 31 December 2021 | \n\n 18.4 | \n\n 28.0 | \n\n 2.1 | \n\n 1.3 | \n\n 49.8 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n - | \n\n (16.5) | \n\n (0.2) | \n\n (0.4) | \n\n (17.0) | \n
| \n Amortisation from continuing operations | \n\n - | \n\n (0.1) | \n\n - | \n\n - | \n\n (0.1) | \n
| \n Amortisation from discontinued operations | \n\n - | \n\n (4.2) | \n\n (0.3) | \n\n (0.3) | \n\n (4.8) | \n
| \n Currency translation differences | \n\n - | \n\n 0.6 | \n\n - | \n\n \n | \n\n 0.6 | \n
| \n As at 31 December 2021 | \n\n - | \n\n (20.1) | \n\n (0.4) | \n\n (0.7) | \n\n (21.3) | \n
| \n Net book value at 31 December 2021 | \n\n 18.4 | \n\n 7.8 | \n\n 1.7 | \n\n 0.7 | \n\n 28.5 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Accounting policy - Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
\u2022The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
\u2022Its intention to complete and its ability and intention to use or sell the asset
\u2022How the asset will generate future economic benefits
\u2022The availability of resources to complete the asset
\u2022The ability to measure reliably the expenditure during development
Accounting policy - Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
\u2022The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
\u2022Its intention to complete and its ability and intention to use or sell the asset
\u2022How the asset will generate future economic benefits
\u2022The availability of resources to complete the asset
\u2022The ability to measure reliably the expenditure during development
Note 12Other assets
Other non-current assets
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Deposits | \n\n - | \n\n 2.7 | \n
| \n Total other non-current assets | \n\n - | \n\n 2.7 | \n
Other current assets
| \n USD million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 2.4 | \n\n 0.6 | \n
| \n Prepaid expenses | \n\n \n | \n\n 4.3 | \n\n 9.4 | \n
| \n Assets from contract costs | \n\n\n | \n\n 3.7 | \n\n 7.3 | \n
| \n Income tax receivables | \n\n \n | \n\n 0.1 | \n\n 3.0 | \n
| \n VAT receivables | \n\n \n | \n\n 1.8 | \n\n 3.4 | \n
| \n Other current receivables | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Total other current assets | \n\n \n | \n\n 13.3 | \n\n 28.0 | \n
Assets from contract costs
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Asset recognised at 31 December from costs incurred to fulfil a contract | \n\n\n | \n\n 3.7 | \n\n 7.3 | \n
| \n Amortisation recognised as cost of providing services during the period | \n\n \n | \n\n 4.9 | \n\n 4.2 | \n
The group has recognised assets for costs incurred to fulfil a contract with customers. The assets are presented within other current assets in the balance sheet.
Note 12Other assets
Other non-current assets
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Deposits | \n\n - | \n\n 2.7 | \n
| \n Total other non-current assets | \n\n - | \n\n 2.7 | \n
Other current assets
| \n USD million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 2.4 | \n\n 0.6 | \n
| \n Prepaid expenses | \n\n \n | \n\n 4.3 | \n\n 9.4 | \n
| \n Assets from contract costs | \n\n\n | \n\n 3.7 | \n\n 7.3 | \n
| \n Income tax receivables | \n\n \n | \n\n 0.1 | \n\n 3.0 | \n
| \n VAT receivables | \n\n \n | \n\n 1.8 | \n\n 3.4 | \n
| \n Other current receivables | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Total other current assets | \n\n \n | \n\n 13.3 | \n\n 28.0 | \n
Assets from contract costs
| \n USD million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Asset recognised at 31 December from costs incurred to fulfil a contract | \n\n\n | \n\n 3.7 | \n\n 7.3 | \n
| \n Amortisation recognised as cost of providing services during the period | \n\n \n | \n\n 4.9 | \n\n 4.2 | \n
The group has recognised assets for costs incurred to fulfil a contract with customers. The assets are presented within other current assets in the balance sheet.
Other current assets
| \n USD million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 2.4 | \n\n 0.6 | \n
| \n Prepaid expenses | \n\n \n | \n\n 4.3 | \n\n 9.4 | \n
| \n Assets from contract costs | \n\n\n | \n\n 3.7 | \n\n 7.3 | \n
| \n Income tax receivables | \n\n \n | \n\n 0.1 | \n\n 3.0 | \n
| \n VAT receivables | \n\n \n | \n\n 1.8 | \n\n 3.4 | \n
| \n Other current receivables | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Total other current assets | \n\n \n | \n\n 13.3 | \n\n 28.0 | \n
Note 13Financial assets and liabilities
Accounting policies
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
The Group classify financial assets in the following categories:
\u2022amortised cost,
\u2022financial assets at fair value through profit or loss (FVPL),
\u2022financial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at:
\u2022fair value through profit or loss,
\u2022amortised cost, or as
\u2022derivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 17 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u2022In the principal market for the asset or liability , or
\u2022In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Significant judgement and estimation uncertainty
The Company has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. Changes in parameters such as volatility of share price, risk-free interest rate etc. could have substantial impacts on the estimated warrant liability. See further information about the warrant liability and assumptions applied in Note 24 Market risk.
Financial instruments by category and level
The tables below analyse financial instruments carried at fair value, by valuation method, based on the lowest level input that is significant to the fair value measurement as a whole. The different levels have been defined as follows:
\u2022Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
\u2022Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2)
\u2022Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). For short term assets and liabilities at level 3, the value is approximately equal to the carrying amount. As the time horizon is due in short term, future cash flows are not discounted.
Valuation techniques used to derive Level 2 fair values
Level 2 derivatives held at fair value through profit or loss and hedging derivatives comprise interest rate swaps and foreign exchange agreements. Interest rate swaps and foreign exchange agreements are fair valued using forward rates extracted from observable yield curves. Interest rate swaps and foreign exchange agreements are recognised according to mark-to-market reports from external financial institutions.
Valuation techniques used to derive Level 3 fair values
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 5.0 | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 2.4 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 7.5 | \n\n - | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n \n | \n\n 0.6 | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n - | \n\n 2.7 | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.6 | \n\n 10.2 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 91.0 | \n\n 154.5 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 157.2 | \n\n 173.0 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 267.7 | \n\n 350.4 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial liabilities at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n - | \n\n 3.0 | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n 2.8 | \n\n 1.0 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 529.0 | \n\n 875.4 | \n
| \n - Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 313.5 | \n\n 161.1 | \n
| \n - Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 41.7 | \n\n 38.3 | \n
| \n - Current lease liabilities | \n\n\n | \n\n \n | \n\n 26.5 | \n\n 7.8 | \n
| \n - Trade payables | \n\n \n | \n\n \n | \n\n 35.8 | \n\n 43.2 | \n
| \n - Other current liabilities | \n\n\n | \n\n \n | \n\n 27.9 | \n\n 56.6 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 977.2 | \n\n 1,186.3 | \n
Note 17Interest-bearing borrowings
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Interest-bearing borrowings specification as at 31 December
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Borrowings | \n\n 483.5 | \n\n 289.9 | \n\n 773.4 | \n\n 839.3 | \n\n 156.2 | \n\n 995.5 | \n
| \n Transaction cost, unamortised | \n\n (3.3) | \n\n (1.8) | \n\n (5.1) | \n\n (11.3) | \n\n - | \n\n (11.3) | \n
| \n Seller's credit | \n\n 48.8 | \n\n 20.0 | \n\n 68.8 | \n\n 47.4 | \n\n - | \n\n 47.4 | \n
| \n Accrued interest expenses | \n\n - | \n\n 5.4 | \n\n 5.4 | \n\n - | \n\n 4.8 | \n\n 4.8 | \n
| \n Carrying amounts interest-bearing borrowings | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \n\n 875.4 | \n\n 161.1 | \n\n 1,036.4 | \n
Movements in interest-bearing borrowings
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Carrying amount as at 1 January | \n\n 875.4 | \n\n 161.1 | \n\n 1,036.4 | \n\n 695.8 | \n\n 515.8 | \n\n 1,211.6 | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n New borrowings | \n\n 219.2 | \n\n 25.0 | \n\n 244.2 | \n\n - | \n\n - | \n\n - | \n
| \n Paid transaction costs related to amendments and new borrowings | \n\n (2.2) | \n\n (0.6) | \n\n (2.7) | \n\n (2.1) | \n\n - | \n\n (2.1) | \n
| \n Repayment bank loan | \n\n (125.0) | \n\n (192.1) | \n\n (317.1) | \n\n - | \n\n (176.2) | \n\n (176.2) | \n
| \n Non-cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Disposal through distribution of operations to shareholders | \n\n (125.3) | \n\n (25.6) | \n\n (150.9) | \n\n - | \n\n - | \n\n - | \n
| \n Seller's Credit | \n\n 20.0 | \n\n - | \n\n 20.0 | \n\n - | \n\n - | \n\n - | \n
| \n Reclassified | \n\n (342.6) | \n\n 342.6 | \n\n - | \n\n 179.2 | \n\n (179.2) | \n\n - | \n
| \n Change in transaction cost, unamortised | \n\n 6.3 | \n\n 0.0 | \n\n 6.3 | \n\n 2.5 | \n\n 0.8 | \n\n 3.3 | \n
| \n Change in accrued interest cost | \n\n - | \n\n 3.0 | \n\n 3.0 | \n\n - | \n\n (0.1) | \n\n (0.1) | \n
| \n Currency translation differences | \n\n 3.2 | \n\n (0.0) | \n\n 3.2 | \n\n \n | \n\n - | \n\n - | \n
| \n Carrying amount as at 31 December | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \n\n 875.4 | \n\n 161.1 | \n\n 1,036.4 | \n
Repayment schedule for interest-bearing borrowings as at 31 December
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Maturity within 3 months | \n\n - | \n\n 19.6 | \n\n 19.6 | \n\n - | \n\n 26.1 | \n\n 26.1 | \n
| \n Maturity between 3 and 6 months | \n\n - | \n\n 45.6 | \n\n 45.6 | \n\n - | \n\n 52.1 | \n\n 52.1 | \n
| \n Maturity between 6 and 9 months | \n\n - | \n\n 19.6 | \n\n 19.6 | \n\n - | \n\n 26.1 | \n\n 26.1 | \n
| \n Maturity between 9 months and 1 year | \n\n - | \n\n 225.2 | \n\n 225.2 | \n\n - | \n\n 52.1 | \n\n 52.1 | \n
| \n Maturity between 1 and 2 years | \n\n 437.3 | \n\n - | \n\n 437.3 | \n\n 445.8 | \n\n - | \n\n 445.8 | \n
| \n Maturity between 2 and 3 years | \n\n 95.0 | \n\n - | \n\n 95.0 | \n\n 440.9 | \n\n - | \n\n 440.9 | \n
| \n Maturity between 3 and 4 years | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 4 and 5 years | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Maturity beyond 5 years | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Total contractual amounts | \n\n 532.3 | \n\n 309.9 | \n\n 842.2 | \n\n 886.7 | \n\n 156.2 | \n\n 1,042.9 | \n
The Odfjell Drilling Services Ltd. facility
Remaining contractual amount of USD 150 million as at 31 December 2021 was repaid 1 March 2022.
New borrowings in 2022
Refer to Note 4 Discontinued operations for further information regarding changes related to the spin-off in 2022.
29 November 2022, the Group repurchased the preference shares. The repurchase has been fully financed by way of a new direct loan of USD 95 million, repayable in monthly instalments starting in 2025 and with final maturity on 30 June 2026.
As per the terms of the repurchase of the preference shares, approximately USD 75 million has been settled in cash, with a further USD 20 million to be settled pursuant to a seller\u2019s credit agreement with a maturity date 31 July 2024.
The Odfjell Invest Ltd. facilities
Remaining contractual amount for the senior bank facility of USD 231.5 million and USD 100 million for the junior facility as at 31 December 2022.
29 November 2022 a repayment of USD 32 million was made to a single lender in the senior bank facility, thereby settling the outstanding balance to that single lender.
A related interest rate swap was terminated 30 November 2022 with a cash amount of USD 1.6 million being received by Odfjell Invest Ltd.
The Odfjell Rig III Ltd. facility
Remaining contractual amount of USD 133 million as at 31 December 2022.
The Odfjell Rig V Ltd. facility
Remaining contractual amount of USD 214 million as at 31 December 2022 for the bank facility.
The Odfjell Rig V Ltd. seller's credit
The carrying amount and fair value of the non-current liabilities are as follows:
Available drawing facilities
The group has no available not drawn facilities as per 31 December 2022.
Compliance with financial covenants as at 31.12.2022
The Odfjell Drilling Group is compliant with all financial covenants as at 31 December 2022.
Financial covenants
The borrowing facilities in the Odfjell Drilling Group include the following main covenants:
Group covenants
The Odfjell Drilling Group has agreed on the bank facilities to maintain:
\u2022a minimum free liquidity (cash and cash equivalents) requirement of USD 50 million and a total liquidity of minimum 5 per cent of interest-bearing debt (on consolidated basis) (if the Odfjell Drilling Group 12 months prior to delivery of any investments in excess of USD 100 million has any not\u00a0financed capital expenditure related to such investment, the minimum free liquidity requirement will increase to USD 100 million).
\u2022a book equity of at least USD 600 million and an equity ratio (equity to total assets) of minimum 30 per cent, increasing with 1% each calendar year from and including 2019, up to 35%.
\u2022a leverage ratio (net interest-bearing debt to EBITDA) not exceeding 5.00:1:00. EBITDA and Interest-Bearing Debt related to a new-build (drilling rig/vessel) or second-hand fleet addition shall be disregarded until the first full month after the earlier of (i) six (6) months after commencement of a firm employment contract for such new-build or second-hand fleet addition and (ii) twelve (12) months from the contractual delivery date (within the yard\u2019s delivery window) for such unit. Thereafter, actual EBITDA shall be annualised until a full twelve-month earnings history related to that new-build or second-hand fleet addition has been achieved.
\u2022a ratio of current assets to current liabilities of minimum 1.00:1.00.
The bank facility agreements contain undertakings and covenants, and terms and conditions which are considered to be customary for similar types of bank financings in the current market, including, but not limited to, undertakings related to reporting and information, certain restrictions on corporate actions and change of business and covenants relating to the valuation, operation and maintenance of the vessels.
The bank facility agreements further contain customary default and cross-default provisions.
The bank facility agreements provide for mandatory prepayment if Helene Odfjell (and her descendants) cease to own at least 50.1% of the shares in Odfjell Drilling Ltd.
Odfjell Invest Ltd \u2013 USD 425 million facility
Odfjell Drilling may pay dividends in an amount up to 50% of its net income in its previous financial year.
Odfjell Invest Ltd \u2013 USD 100 million junior facility
The junior facility contains materially the same undertakings and covenants as the USD 425 million facility.
The junior facility has no fixed instalments, but shall on certain conditions be partly repaid annually by free and available liquidity of the Odfjell Drilling Group above USD 175 million, however so that any such repayment shall be limited to 50% of the previous year\u2019s net result and adjusted for any identified liquidity requirements. Dividends and other distributions on the common shares of Odfjell Drilling are subject to lender\u2019s prior written consent for as long as the junior facility is outstanding.
Odfjell Rig III Ltd \u2013 USD 530 million facility
Payment of dividends from Odfjell Drilling Ltd., on ordinary shares shall be limited to 50% of its net income, provided that the lenders and Eksfin have on each occasion given their prior written consent.
Odfjell Rig V Ltd - USD 325 million facility
Dividends on ordinary shares shall be limited to 50% of its net income.
Odfjell Rig V Ltd - USD 43.25 million seller\u2019s credit from Samsung
USD 43.25 million seller\u2019s credit granted to Odfjell Rig V Ltd by Samsung Heavy Industries at delivery of Deepsea Nordkapp 7 January 2019, which is subordinated to the USD 325 million facility. The facility contains covenants that are customary for these types of facilities.
Odfjell Drilling Ltd - USD 95 million Direct loan
Direct loan of USD 95 million granted to Odfjell Drilling Ltd. in November 2022 by undisclosed client. There is a minimum equity ratio (on consolidated basis) covenant of minimum 35%.
Odfjell Rig Owning Ltd. \u2013 USD 20 million seller\u2019s credit from Akastor
Note 23Liquidity risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and to have sufficient cash or cash equivalents at any time to be able to finance its operations and investments in accordance with the Group's strategic plan.
With regular forecasts and liquidity analysis updates, the Group will ensure sufficient available liquidity to fulfil its duties at loan maturity, without unacceptable loss or risk of damaging the Group\u2019s reputation.
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through credit facilities and the ability to close out market positions.
The Group\u2019s cash flow forecasting is performed by Group Finance. Group Finance monitors rolling forecasts of the Group\u2019s liquidity requirements to ensure it has sufficient cash to meet operational needs at all times, so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group\u2019s debt financing plans and covenant compliance.
Surplus cash held by the operating entities over and above the balance required for working capital management is transferred to the Group Treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.
Odfjell Drilling held cash and cash equivalents amounting to USD 157 million at the end of 2022. This is deemed to be sufficient funding for the Group\u2019s current activity levels and committed capital expenditures during 2023.
The liquidity risk is connected with the market risk and the re-contracting risk for mobile drilling units. The management continuously focuses on securing new profitable contracts for the Group's mobile drilling units to generate sufficient cash flow from operations, hence reducing the liquidity risk going forward.
Operating in several jurisdictions Odfjell Drilling do from time to time receive enquiries from authorities about compliance related matters. Refer to Note 29 Contingencies for information regarding letter of indemnity and USD 31 million prepayment made in 2023 related to a tax ruling in Norway.
The Group's refinancing risk is considered low. Currently, bank loan facilities are maturing at different times up to\u00a0June\u00a02024. The Group is considering alternative sources of financing, and has also started dialogue with banks. The Group expects to be successful in securing new or extended financing prior to maturity of the loans. See Note 17 - Interest-bearing borrowings for further information about maturity of contractual amounts.
Maturity of financial liabilities
The amounts disclosed in the table are the contractual non-discounted cash flows. The table include estimated interest payments for drawn facilities at the balance sheet date, based on the remaining period at the end of the reporting period to the contractual maturity date. The estimated interest payments include payments based on forward rates for the interest rate swaps.
Maturity of financial liabilities - 31.12.2022
| \n USD million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Interest-bearing borrowings | \n\n 94.8 | \n\n 271.0 | \n\n 471.3 | \n\n 101.3 | \n\n - | \n\n 938.4 | \n\n 842.5 | \n
| \n Lease liabilities | \n\n 13.3 | \n\n 13.2 | \n\n 22.2 | \n\n 16.0 | \n\n 12.0 | \n\n 76.8 | \n\n 68.2 | \n
| \n Trade payables | \n\n 35.8 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 35.8 | \n\n 35.8 | \n
| \n Other current payables | \n\n 21.4 | \n\n 6.5 | \n\n - | \n\n - | \n\n - | \n\n 27.9 | \n\n 27.9 | \n
Maturity of financial liabilities - 31.12.2021
| \n USD million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Interest-bearing borrowings | \n\n 97.1 | \n\n 96.3 | \n\n 477.2 | \n\n 452.5 | \n\n - | \n\n 1,123.1 | \n\n 1,036.4 | \n
| \n Lease liabilities | \n\n 4.0 | \n\n 3.8 | \n\n 7.5 | \n\n 19.7 | \n\n 22.5 | \n\n 57.5 | \n\n 46.1 | \n
| \n Trade payables | \n\n 43.1 | \n\n 0.1 | \n\n - | \n\n - | \n\n - | \n\n 43.2 | \n\n 43.2 | \n
| \n Other current payables | \n\n 51.3 | \n\n 5.4 | \n\n - | \n\n - | \n\n - | \n\n 56.6 | \n\n 56.6 | \n
Note 24Market risk
Market risk is the risk of a change in market prices and demand, as well as changes in currency exchange rates and interest levels.
The re-contracting risk for the Group's wholly owned mobile drilling units is limited in 2023, as all units in the fleet has medium to long-term contracts.
Contract status and currency exposure in rig rates
The Deepsea Atlantic commenced its Johan Sverdrup phase 2 contract with Equinor on 31 December 2021. During 2022 Equinor Energy AS exercised further options for the Deepsea Atlantic to drill five additional wells on Johan Sverdrup Phase 2 development, extending the Deepsea Atlantic's firm backlog into the first quarter of 2024. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
The Deepsea Stavanger is currently on contract with Equinor and working on the Norwegian Continental Shelf. During 2022, Equinor exercised further work for Deepsea Stavanger under the continued optionality mechanism and the rig was also awarded a five-year firm contract with Aker BP ASA which is scheduled to commence in early 2025. The current fixed well program with Equinor is expected to take firm operations into the third quarter of 2023. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Deepsea Aberdeen is currently on a long-term contract with Equinor at the Breidablikk field. The current fixed well program with Equinor is expected to take firm operations into the fourth quarter of 2024. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Deepsea Nordkapp commenced operations for Aker BP under the Alliance agreement on 10 May 2019. The rig has currently firm work through the third quarter 2024 as Aker BP in 2022 exercised further options. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Climate Risk
During 2022, a project was undertaken with external advisors to raise awareness and assess the impacts of climate risks and opportunities. Cross-functional workshops were held to review the impact on the business from both physical and transitional risks in the short, medium and long term, prioritising risks for further deep dives.
The most significant transition risks identified, along with mitigating actions were:
\u2022Changes in fossil energy demand due to policies and consumer behaviour changes, leading to reduced demand for our assets and reduced revenue. This will be factored in to any asset growth decisions and alternative use of assets will be considered.
\u2022Cost of and access to capital may go up as banks move to low carbon portfolios, leading to increased interest costs. Consider debt structure and ensure carbon reducing initiatives understood by capital markets.
The most significant physical risk identified, along with mitigating actions is:
\u2022Impact of extreme weather offshore on crew and equipment logistics could increase costs and result in downtime. Critical spares analysis and robust planning required as well as protection in commercial contracts.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
\u2022There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u2022The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u2022The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
\u2022The effective portion of the gain or loss on the cash flow hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
\u2022Amounts recognised directly in other comprehensive income are reclassified as income or expense in the income statement in the period when the hedged liability or planned transaction will affect the income statement.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within financial income/expenses.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria\u00a0or the group has elected not to apply hedge accounting,\u00a0they are classified as \u2018held for trading\u2019 for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
The group has the following derivative financial instruments in the following line items in the balance sheet:
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Current assets | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n 2.4 | \n\n - | \n
| \n Foreign exchange contracts - cash flow hedges under hedge accounting | \n\n - | \n\n 0.6 | \n
| \n Total current derivative financial instruments asset | \n\n 2.4 | \n\n 0.6 | \n
| \n Non-current assets | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - at fair value through profit or loss | \n\n - | \n\n 5.0 | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n 7.5 | \n\n - | \n
| \n Total non-current derivative financial instruments asset | \n\n 7.5 | \n\n 5.0 | \n
| \n Non-current liabilities | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n - | \n\n 3.0 | \n
| \n Warrant liability - at fair value through profit or loss | \n\n 2.8 | \n\n 1.0 | \n
| \n Total non-current derivative financial instruments liabilities | \n\n 2.8 | \n\n 4.0 | \n
The group's hedging reserves disclosed in Note 27 - Other reserves related to the following instruments:
Cash flow hedging reserves
| \n USD million | \n\n Currency forwards | \n\n Interest rate swaps | \n\n Total hedge reserves | \n
| \n Opening balance 1 January 2021 | \n\n 4.4 | \n\n (10.5) | \n\n (6.2) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n 0.2 | \n\n 3.3 | \n\n 3.7 | \n
| \n Reclassified from OCI to profit or loss | \n\n (4.0) | \n\n 4.2 | \n\n 0.2 | \n
| \n Closing balance 31 December 2021 | \n\n 0.6 | \n\n (3.0) | \n\n (2.3) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n (0.3) | \n\n 12.7 | \n\n 12.4 | \n
| \n Reclassified from OCI to profit or loss | \n\n (0.2) | \n\n (2.2) | \n\n (2.4) | \n
| \n Closing balance 31 December 2022 | \n\n - | \n\n 7.5 | \n\n 7.7 | \n
In addition to the amounts disclosed in the reconciliation of the hedging reserves above, the following amounts were recognised in profit or loss in relation to derivatives:
Amounts recognised in profit or loss
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Interest rate swaps - at fair value through profit or loss | \n\n \n | \n\n \n | \n
| \n Amounts recognised in interest expenses | \n\n (0.1) | \n\n (0.8) | \n
| \n Gain from settlement of swaps | \n\n 12.1 | \n\n - | \n
| \n Change in fair value | \n\n (5.0) | \n\n 5.8 | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n \n | \n\n \n | \n
| \n Change in fair value | \n\n 2.4 | \n\n (1.4) | \n
| \n Warrant liability - at fair value through profit or loss | \n\n \n | \n\n \n | \n
| \n Change in fair value | \n\n (1.9) | \n\n 4.3 | \n
Foreign exchange risk
The consolidated material subsidiaries' reporting and functional currencies are USD and NOK.
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to USD and NOK. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity\u2019s functional currency. The group is exposed to risks due to fluctuations in exchange rates, especially as charter contracts are mainly priced in USD while most of the operating expenses are in local currency. The Group seeks to minimise these risks through currency hedging via financial instruments or by off-setting local currency elements in charter contracts.
Quoted mark-to-market values from financial institutions have been used to determine the fair value of the foreign exchange contracts at the end of the year. The foreign exchange contracts are only used for economic hedging purposes and not as speculative investments. However, these derivatives did not meet the hedge accounting criteria, and are accounted for at fair value through profit or loss.
The group\u2019s exposure to foreign currency risk at the end of the reporting period, expressed in USD, was as follows:
Foreign exchange risk - Exposure - 31.12.2022
| \n USD million | \n\n NOK | \n\n GBP | \n\n Other non-USD currencies | \n
| \n Cash and cash equivalents | \n\n 113.7 | \n\n 0.9 | \n\n 0.8 | \n
| \n Trade receivables | \n\n 68.6 | \n\n 0.1 | \n\n - | \n
| \n Contract assets | \n\n 6.4 | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (42.0) | \n\n - | \n\n - | \n
| \n Trade payables | \n\n (25.8) | \n\n (0.2) | \n\n (1.6) | \n
| \n Other current payables | \n\n (25.5) | \n\n (0.0) | \n\n (0.7) | \n
| \n Foreign currency contracts | \n\n \n | \n\n \n | \n\n \n | \n
| \n Buy foreign currency (at fair value through profit or loss\u200b) | \n\n 103.5 | \n\n - | \n\n - | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n 116.3 | \n\n - | \n\n - | \n
Foreign exchange risk - Exposure - 31.12.2021
| \n USD million | \n\n NOK | \n\n GBP | \n\n Other non-USD currencies | \n
| \n Cash and cash equivalents | \n\n 85.5 | \n\n 5.7 | \n\n 6.4 | \n
| \n Trade receivables | \n\n 64.1 | \n\n 25.0 | \n\n 8.0 | \n
| \n Contract assets | \n\n 7.1 | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (41.7) | \n\n (1.4) | \n\n (3.0) | \n
| \n Trade payables | \n\n (24.9) | \n\n (5.8) | \n\n (2.7) | \n
| \n Other current payables | \n\n (68.2) | \n\n (5.0) | \n\n (1.7) | \n
| \n Foreign currency forwards | \n\n \n | \n\n \n | \n\n \n | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n 17.4 | \n\n - | \n\n - | \n
Foreign currency forwards
| \n Foreign currency contracts | \n\n Currency | \n\n Notional amount | \n\n Maturity date | \n\n Hedge ratio | \n\n Weighted average hedged rate | \n\n Carrying amount | \n
| \n 31.12.2022 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Buy foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 290.0 | \n\n 30.05.2023 | \n\n n/a | \n\n 0.10345 | \n\n 0.8 | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 321.3 | \n\n 30.05.2023 | \n\n n/a | \n\n 0.09337 | \n\n (0.3) | \n
| \n Buy foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 729.8 | \n\n 01.06.2023 | \n\n n/a | \n\n 0.10276 | \n\n 2.3 | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 825.0 | \n\n 01.06.2023 | \n\n n/a | \n\n 0.09091 | \n\n (0.5) | \n
| \n 31.12.2021 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 153.5 | \n\n Jan 2021 - April 2022 | \n\n 1:1 | \n\n 0.11322 | \n\n 0.6 | \n
As shown in the table above, the Group is primarily exposed to changes in USD/NOK exchange rates.
Sensitivity to changes in USD/NOK exchange rates
| \n Sensitivity to changes in USD/NOK exchange rates | \n\n USD is strengthened by 20 % against NOK | \n\n USD is strengthened by 10 % against NOK | \n\n USD is weakened by 10 % against NOK | \n|||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Cash and cash equivalents | \n\n (9.8) | \n\n (4.4) | \n\n (5.3) | \n\n (2.4) | \n\n 6.5 | \n\n 3.0 | \n
| \n Current receivables | \n\n 3.0 | \n\n 5.4 | \n\n 1.7 | \n\n 2.9 | \n\n (2.0) | \n\n (3.6) | \n
| \n Current liabilities | \n\n (3.5) | \n\n (0.6) | \n\n (1.9) | \n\n (0.3) | \n\n 2.3 | \n\n 0.4 | \n
| \n Net effect on profit before tax | \n\n (10.2) | \n\n 0.3 | \n\n (5.6) | \n\n 0.2 | \n\n 6.8 | \n\n (0.2) | \n
Interest rate risk
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations at floating interest rates. The Group evaluates the share of interest rate hedging based on assessment of the Group\u2019s total interest rate risk and currently has a combination of fixed and floating interest rates in order to limit exposure. The Board of Directors is on regular basis considering the interest payment hedging of the external financing and mandate administration to execute necessary changes.
The Group had 8 interest rate swap agreements at 31 December 2022. Quoted mark-to-market values from financial institutions have been used to determine the fair value of the swap agreements at the end of the year. Some of the instruments used during 2022 were documented as cash flow hedges and other as financial investments, and changes in fair value were recognised in other comprehensive income (cash flow hedging) and others recognised through profit and loss statement (financial investments not defined as cash flow hedges).
Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item. This will effectively result in recognising interest expense at a fixed interest rate for the hedged floating rate loans.
Including interest rate swaps entered into, the fixed-rate portion of the group\u2019s interest bearing debt per 31 December 2022 is approximately 44%.
The swap contracts require settlement of net interest receivable or payable. The settlement dates coincide with the dates on which interest is payable on the underlying debt.
Average interest rate as of 31.12.2022 was 7.2%, including the effect of interest rate hedging.
Estimated fair value calculations from external financial institutions have been used to determine the fair value of the swap agreement at the end of the year.
The Group monitors its interest rate exposure on a dynamic basis. The Group calculates the impact on profit and loss of a defined interest rate shift.
As of 31.12.2022 the Group held the following LIBOR based interest rate swaps:
| \n \n | \n\n Notional amount | \n\n Maturity date | \n\n Hedge ratio | \n\n Weighted average hedged rate | \n\n Carrying amount | \n
| \n Cash flow hedges under hedge accounting | \n\n 213.8 | \n\n 2023 | \n\n 1:1 | \n\n 1.4392% | \n\n 6.6 | \n
| \n Cash flow hedges under hedge accounting | \n\n 21.6 | \n\n 2024 | \n\n 1:1 | \n\n 1.4415% | \n\n 1.0 | \n
As of 31.12.2021 the Group held the following LIBOR based interest rate swaps:
| \n \n | \n\n Notional amount | \n\n Maturity date | \n\n Hedge ratio | \n\n Weighted average hedged rate | \n\n Carrying amount | \n
| \n Cash flow hedges under hedge accounting | \n\n 248.0 | \n\n 2023 | \n\n 1:1 | \n\n 1.4392% | \n\n (2.4) | \n
| \n Cash flow hedges under hedge accounting | \n\n 62.5 | \n\n 2024 | \n\n 1:1 | \n\n 1.4371% | \n\n (0.6) | \n
| \n At fair value through profit or loss | \n\n 200.0 | \n\n 2025 | \n\n 1:1 | \n\n 0.4475% | \n\n 5.0 | \n
The exposure of the Group's borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period are as follows:
| \n USD million | \n\n 31.12.2022 | \n\n % of total loans | \n\n 31.12.2021 | \n\n % of total loans | \n
| \n Variable rate borrowings - USD LIBOR | \n\n 471.8 | \n\n 56% | \n\n 472.4 | \n\n 45% | \n
| \n Fixed rate borrowings - repricing or maturity dates: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Less than 1 year | \n\n 213.8 | \n\n 25% | \n\n - | \n\n 0% | \n
| \n 1-5 years | \n\n 156.6 | \n\n 19% | \n\n 570.5 | \n\n 55% | \n
| \n Later than 5 years | \n\n - | \n\n 0% | \n\n - | \n\n 0% | \n
| \n Total contractual amounts* | \n\n 842.2 | \n\n 100% | \n\n 1,042.9 | \n\n 100% | \n
| \n\n | \n
The result of the calculation on sensitivities returns the following expected values (incl. interest rate swaps entered into as at 31 December):
\u2022If interest rate is increased by 1.0 %, the effect would be an increase in financing costs of approximately USD 5 million for the next 12 months as at 31 December 2022, compared to USD 4 million at 31\u00a0December 2021.
Interest rate benchmark reform
The interest rate benchmark London Inter-Bank Offered Rate (LIBOR) is being wound down. The majority of LIBOR panels have ended, and their settings ceased or are permanently unrepresentative. The overnight, 1-month, 3-month, 6-month and 12-month USD LIBOR settings are continuing under a panel bank methodology until the end of June 2023. By the end of June 2023, the Group will amend existing contracts and agreements that reference USD LIBOR to Secured Overnight Financing Rate (SOFR).
Group treasury is managing the group\u2019s USD LIBOR transition plan. The most significant change will be amendments to the contractual terms of the USD LIBOR-referenced floating-rate debt and the associated swaps and the corresponding update of the hedge designation. However, the changed reference rate may also affect other systems, processes, risk and valuation models, as well as having tax and accounting implications.
No financial instruments have transitioned to an alternative benchmark rate at the end of the reporting period. No material financial effects are expected as a result of the IBOR reform.
The Group has signed ISDA 2020 Fallbacks Protocol & Supplement for derivatives. That means that the Group\u2019s interest rate swap agreements have a fallback to compounded SOFR, if noting else is agreed.
The Group is currently evaluating which SOFR both floating-rate debt and associated swaps will be transitioned to. The Group will conclude and implement the USD LIBOR transition to SOFR in Q2 2023.
Relief applied
The group has applied the following reliefs that were introduced by the amendments made to IFRS 9 Financial Instruments in September 2019 and the Interest Rate Benchmark Reform - Phase 2 - amendments:
\u2022When considering the \u2018highly probable\u2019 requirement, the group has assumed that the USD interest rate on which the group\u2019s hedged debt is based does not change materially as a result of IBOR reform.
\u2022In assessing whether the hedge is expected to be highly effective on a forward-looking basis the group has assumed that the USD LIBOR interest rate on which the cash flows of the hedged debt and the interest rate swap that hedges it are based is not materially altered by LIBOR reform.
\u2022The group has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
\u2022If the basis for determining contractual cash flows of a financial asset or liability measured at amortised cost changes solely as a result of the IBOR reform, the Group will update the effective interest rate to reflect the change that is required
Warrant liabilities
On 30 May 2018 the company issued warrants for 5,925,000 common shares to an affiliate of Akastor ASA for a total consideration of USD 1.00. Following the spin-off of Odfjell Technology, the hurdle rate and number of warrants has been adjusted to maintain the same value of the warrants, increasing the number of issued warrants to 6,837,492, and decreasing the exercise prices from the range of NOK 36 - NOK 107.50 to the range of NOK 31.20 - NOK 93.15.
The Warrants will be exercisable in six equal tranches from 2019 to 2024. A tranche which has become exercisable may also be exercised on the exercise dates for the subsequent tranches if the conditions for such subsequent exercise(s) are satisfied. Each tranche may be exercised if the price of the Shares has increased by a defined percentage over NOK 31.20 on the relevant exercise date (i.e. 31 May in 2019, 2020, 2021, 2022, 2023 and 2024 respectively), being NOK 37.43 for tranche 1, NOK 44.92 for tranche 2, NOK 53.91 for tranche 3, NOK 64.69 for tranche 4, NOK 77.62 for tranche 5 and NOK 93.15 for tranche 6. On 30 May 2024, any non-exercised Warrants will, to the extent the thresholds have not been met, be exercisable on a linear prorate basis, subject to the company's share price being within the range of NOK 31.20 and NOK 93.15.
Based on the valuation, fair value of the warrant liability is estimated to be NOK 28 million / USD 2.8 million as at 31 December 2022 (NOK 8 million / USD 0.95 million as at 31 December 2021).
Note 25Credit risk
Further description
The Group operates in two segments: Own Fleet and External Fleet. The market for the Group\u2019s services is the offshore oil and gas industry, and the customers consist primarily of major integrated oil companies, independent oil and gas producers and government owned oil companies. The Group performs ongoing credit evaluations of the customers and generally does not request material collateral.
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents, marketable securities, other receivables and certain derivatives instruments receivable amount, the Group\u2019s exposure to credit risk arises from default of the counter-party, with a maximum exposure equal to the carrying amount of these instruments. However, the Group believes this risk is limited as the counter-parties mainly have a high credit quality.
During 2022, the Group has continued its focus on credit risk in general related to the uncertain conditions in some geographical markets. The maximum exposure regarding trade receivables is the carrying amount of USD 91 million.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to non-billed work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The ageing of the trade receivables - 31.12.2022
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Not due | \n\n 0.0% | \n\n 87.4 | \n\n - | \n\n 87.4 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 2.6 | \n\n - | \n\n 2.6 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n 1.1 | \n\n - | \n\n 1.1 | \n
| \n Over 6 months | \n\n 0.0% | \n\n - | \n\n - | \n\n - | \n
| \n Total | \n\n \n | \n\n 91.0 | \n\n - | \n\n 91.0 | \n
Contract assets - 2022
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Not due | \n\n 0.0% | \n\n 8.6 | \n\n - | \n\n 8.6 | \n
The ageing of the trade receivables - 31.12.2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 130.9 | \n\n - | \n\n 130.9 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 17.5 | \n\n - | \n\n 17.5 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n 1.0 | \n\n - | \n\n 1.0 | \n
| \n Over 6 months | \n\n 21.4% | \n\n 6.6 | \n\n (1.4) | \n\n 5.2 | \n
| \n Total | \n\n \n | \n\n 156.0 | \n\n (1.4) | \n\n 154.5 | \n
Contract assets - 2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 10.2 | \n\n - | \n\n 10.2 | \n
Movements in loss allowance / the provision for impairment of trade receivables and contract assets are as follows:
| \n \n | \n\n Trade receivables | \n\n Contract assets | \n||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Loss allowance as at 1 January | \n\n 1.4 | \n\n 1.1 | \n\n - | \n\n - | \n
| \n Disposal through distribution of operations to shareholders | \n\n (1.4) | \n\n - | \n\n - | \n\n - | \n
| \n Utilised | \n\n - | \n\n (0.1) | \n\n - | \n\n - | \n
| \n Released provision | \n\n - | \n\n (0.3) | \n\n - | \n\n - | \n
| \n New provisions | \n\n - | \n\n 0.7 | \n\n - | \n\n - | \n
| \n Translation differences | \n\n - | \n\n (0.0) | \n\n - | \n\n - | \n
| \n Loss allowance as at 31 December | \n\n - | \n\n 1.4 | \n\n - | \n\n - | \n
Note 28Securities and mortgages
Liabilities secured by mortgage
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non-current liabilities - contractual amounts | \n\n 532.3 | \n\n 886.7 | \n
| \n Current liabilities | \n\n 315.3 | \n\n 161.1 | \n
| \n Total | \n\n 847.6 | \n\n 1,047.7 | \n
Odfjell Invest Ltd. \u2013 USD 425 million Facility
(USD 231.5 million outstanding)
USD 425 million term loan facility agreement entered into on 26 June 2019 with Odfjell Invest Ltd., as borrower and DNB Bank ASA as Agent on behalf of the Lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 552.5 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
As security for the loan, substantially all of the assets of Odfjell Invest Ltd. and its subsidiaries, have been pledged in favour of the lenders. This includes the shares in Deep Sea Atlantic (UK) Ltd., Deep Sea Stavanger (UK) Ltd., mortgages over the semi-submersible drilling rigs Deepsea Atlantic and Deepsea Stavanger and assignment of rights to revenue, interest proceeds and bank accounts. In addition, the shares in Odfjell Invest Ltd., have been pledged by Odfjell Rig Owning Ltd., in favour of the lenders. Odfjell Drilling AS\u2019 shares in the charter company Odfjell Invest AS have also been pledged.
Deep Sea Atlantic (UK) Ltd., Deep Sea Stavanger (UK) Ltd., Odfjell Drilling Ltd. and Odfjell Rig Owning Ltd. have guaranteed as and for its own debt the due and punctual observance and performance of the obligors' obligations under the finance documents.
Odfjell Invest Ltd. \u2013 USD 100 million Junior Facility
(USD 100 million outstanding)
USD 100 million junior facility agreement entered into on 26 June 2019 with Odfjell Invest Ltd., as borrower and DNB Bank ASA as Agent on behalf of the lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 130 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
The facility is covered by the same security package as the USD 425 million facility on a second priority basis.
Odfjell Rig III Ltd. \u2013 USD 530 million Facility
(USD 133 million outstanding)
USD 530 million term loan facility agreement entered into on 7 May 2013 with Odfjell Rig III Ltd., as borrower and DNB Bank ASA as Agent on behalf of the lenders.
As security for the facilities, substantially all of the shares in and assets of Odfjell Rig III Ltd., Odfjell Drilling Shetland Limited and Deep Sea Drilling Company AS is pledged in favour of the lenders and hedging banks, including a mortgage in Deepsea Aberdeen. Also, Odfjell Drilling Ltd., Odfjell Rig Owning Ltd., Odfjell Drilling Shetland Limited and Deep Sea Drilling Company AS, have guaranteed the obligors' obligations under the finance documents.
Odfjell Rig V Ltd. \u2013 USD 325 million Facility
(USD 214 million outstanding)
USD 325 million term loan facility agreement entered into on 30 October 2018 with Odfjell Rig V Ltd., as borrower and DNB Bank ASA as Agent on behalf of the lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 422.5 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
All of the shares in and substantially all of the assets of Odfjell Rig V Ltd., have been pledged in favour of the lenders, including a mortgage over Deepsea Nordkapp which was established at delivery of the unit on 7 January 2019. Also, Odfjell Rig Owning Ltd. and Odfjell Invest II AS, have guaranteed the obligors' obligations under the finance documents. In addition, Odfjell Drilling AS has pledged its shares in Odfjell Invest II AS as security.
Odfjell Rig V Ltd. \u2013 USD 43.25 million seller\u2019s credit from Samsung
(USD 49 million outstanding)
USD 43.25 million seller\u2019s credit granted to Odfjell Rig V Ltd by Samsung Heavy Industries at delivery of Deepsea Nordkapp 7 January 2019.
The seller\u2019s credit is secured by a second priority mortgage over Deepsea Nordkapp, a second priority assignment of insurances and a parent company guarantee from Odfjell Rig Owning Ltd. The maximum liability of Odfjell Rig Owning Ltd shall be USD 43.25 million plus any amount of unpaid interest and other expenses under the agreement.
Odfjell Drilling Ltd. \u2013 USD 95 million Direct loan
(USD 95 million outstanding)
Direct loan of USD 95 million granted to Odfjell Drilling Ltd. in November 2022 by undisclosed client. Undisclosed client has pledge in preference shares and set-off right in drilling contract.
Odfjell Rig Owning Ltd. \u2013 USD 20 million seller\u2019s credit from Akastor
(USD 20 million outstanding)
Accounting policies
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
The Group classify financial assets in the following categories:
\u2022amortised cost,
\u2022financial assets at fair value through profit or loss (FVPL),
\u2022financial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at:
\u2022fair value through profit or loss,
\u2022amortised cost, or as
\u2022derivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 17 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u2022In the principal market for the asset or liability , or
\u2022In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Significant judgement and estimation uncertainty
The Company has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. Changes in parameters such as volatility of share price, risk-free interest rate etc. could have substantial impacts on the estimated warrant liability. See further information about the warrant liability and assumptions applied in Note 24 Market risk.
Financial instruments by category and level
The tables below analyse financial instruments carried at fair value, by valuation method, based on the lowest level input that is significant to the fair value measurement as a whole. The different levels have been defined as follows:
\u2022Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
\u2022Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2)
\u2022Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). For short term assets and liabilities at level 3, the value is approximately equal to the carrying amount. As the time horizon is due in short term, future cash flows are not discounted.
Valuation techniques used to derive Level 2 fair values
Level 2 derivatives held at fair value through profit or loss and hedging derivatives comprise interest rate swaps and foreign exchange agreements. Interest rate swaps and foreign exchange agreements are fair valued using forward rates extracted from observable yield curves. Interest rate swaps and foreign exchange agreements are recognised according to mark-to-market reports from external financial institutions.
Valuation techniques used to derive Level 3 fair values
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
\u2022There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u2022The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u2022The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
\u2022The effective portion of the gain or loss on the cash flow hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
\u2022Amounts recognised directly in other comprehensive income are reclassified as income or expense in the income statement in the period when the hedged liability or planned transaction will affect the income statement.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within financial income/expenses.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria\u00a0or the group has elected not to apply hedge accounting,\u00a0they are classified as \u2018held for trading\u2019 for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
Financial assets
The Group classify financial assets in the following categories:
\u2022amortised cost,
\u2022financial assets at fair value through profit or loss (FVPL),
\u2022financial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial assets
The Group classify financial assets in the following categories:
\u2022amortised cost,
\u2022financial assets at fair value through profit or loss (FVPL),
\u2022financial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at:
\u2022fair value through profit or loss,
\u2022amortised cost, or as
\u2022derivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
Financial assets
The Group classify financial assets in the following categories:
\u2022amortised cost,
\u2022financial assets at fair value through profit or loss (FVPL),
\u2022financial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at:
\u2022fair value through profit or loss,
\u2022amortised cost, or as
\u2022derivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 5.0 | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 2.4 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 7.5 | \n\n - | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n \n | \n\n 0.6 | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n - | \n\n 2.7 | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.6 | \n\n 10.2 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 91.0 | \n\n 154.5 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 157.2 | \n\n 173.0 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 267.7 | \n\n 350.4 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial liabilities at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n - | \n\n 3.0 | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n 2.8 | \n\n 1.0 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 529.0 | \n\n 875.4 | \n
| \n - Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 313.5 | \n\n 161.1 | \n
| \n - Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 41.7 | \n\n 38.3 | \n
| \n - Current lease liabilities | \n\n\n | \n\n \n | \n\n 26.5 | \n\n 7.8 | \n
| \n - Trade payables | \n\n \n | \n\n \n | \n\n 35.8 | \n\n 43.2 | \n
| \n - Other current liabilities | \n\n\n | \n\n \n | \n\n 27.9 | \n\n 56.6 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 977.2 | \n\n 1,186.3 | \n
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
\u2022There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u2022The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u2022The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
\u2022The effective portion of the gain or loss on the cash flow hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
\u2022Amounts recognised directly in other comprehensive income are reclassified as income or expense in the income statement in the period when the hedged liability or planned transaction will affect the income statement.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within financial income/expenses.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria\u00a0or the group has elected not to apply hedge accounting,\u00a0they are classified as \u2018held for trading\u2019 for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
The group has the following derivative financial instruments in the following line items in the balance sheet:
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Current assets | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n 2.4 | \n\n - | \n
| \n Foreign exchange contracts - cash flow hedges under hedge accounting | \n\n - | \n\n 0.6 | \n
| \n Total current derivative financial instruments asset | \n\n 2.4 | \n\n 0.6 | \n
| \n Non-current assets | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - at fair value through profit or loss | \n\n - | \n\n 5.0 | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n 7.5 | \n\n - | \n
| \n Total non-current derivative financial instruments asset | \n\n 7.5 | \n\n 5.0 | \n
| \n Non-current liabilities | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n - | \n\n 3.0 | \n
| \n Warrant liability - at fair value through profit or loss | \n\n 2.8 | \n\n 1.0 | \n
| \n Total non-current derivative financial instruments liabilities | \n\n 2.8 | \n\n 4.0 | \n
The group's hedging reserves disclosed in Note 27 - Other reserves related to the following instruments:
Cash flow hedging reserves
| \n USD million | \n\n Currency forwards | \n\n Interest rate swaps | \n\n Total hedge reserves | \n
| \n Opening balance 1 January 2021 | \n\n 4.4 | \n\n (10.5) | \n\n (6.2) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n 0.2 | \n\n 3.3 | \n\n 3.7 | \n
| \n Reclassified from OCI to profit or loss | \n\n (4.0) | \n\n 4.2 | \n\n 0.2 | \n
| \n Closing balance 31 December 2021 | \n\n 0.6 | \n\n (3.0) | \n\n (2.3) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n (0.3) | \n\n 12.7 | \n\n 12.4 | \n
| \n Reclassified from OCI to profit or loss | \n\n (0.2) | \n\n (2.2) | \n\n (2.4) | \n
| \n Closing balance 31 December 2022 | \n\n - | \n\n 7.5 | \n\n 7.7 | \n
In addition to the amounts disclosed in the reconciliation of the hedging reserves above, the following amounts were recognised in profit or loss in relation to derivatives:
Amounts recognised in profit or loss
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Interest rate swaps - at fair value through profit or loss | \n\n \n | \n\n \n | \n
| \n Amounts recognised in interest expenses | \n\n (0.1) | \n\n (0.8) | \n
| \n Gain from settlement of swaps | \n\n 12.1 | \n\n - | \n
| \n Change in fair value | \n\n (5.0) | \n\n 5.8 | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n \n | \n\n \n | \n
| \n Change in fair value | \n\n 2.4 | \n\n (1.4) | \n
| \n Warrant liability - at fair value through profit or loss | \n\n \n | \n\n \n | \n
| \n Change in fair value | \n\n (1.9) | \n\n 4.3 | \n
Foreign currency forwards
| \n Foreign currency contracts | \n\n Currency | \n\n Notional amount | \n\n Maturity date | \n\n Hedge ratio | \n\n Weighted average hedged rate | \n\n Carrying amount | \n
| \n 31.12.2022 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Buy foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 290.0 | \n\n 30.05.2023 | \n\n n/a | \n\n 0.10345 | \n\n 0.8 | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 321.3 | \n\n 30.05.2023 | \n\n n/a | \n\n 0.09337 | \n\n (0.3) | \n
| \n Buy foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 729.8 | \n\n 01.06.2023 | \n\n n/a | \n\n 0.10276 | \n\n 2.3 | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n NOK | \n\n 825.0 | \n\n 01.06.2023 | \n\n n/a | \n\n 0.09091 | \n\n (0.5) | \n
| \n 31.12.2021 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 153.5 | \n\n Jan 2021 - April 2022 | \n\n 1:1 | \n\n 0.11322 | \n\n 0.6 | \n
As of 31.12.2022 the Group held the following LIBOR based interest rate swaps:
| \n \n | \n\n Notional amount | \n\n Maturity date | \n\n Hedge ratio | \n\n Weighted average hedged rate | \n\n Carrying amount | \n
| \n Cash flow hedges under hedge accounting | \n\n 213.8 | \n\n 2023 | \n\n 1:1 | \n\n 1.4392% | \n\n 6.6 | \n
| \n Cash flow hedges under hedge accounting | \n\n 21.6 | \n\n 2024 | \n\n 1:1 | \n\n 1.4415% | \n\n 1.0 | \n
As of 31.12.2021 the Group held the following LIBOR based interest rate swaps:
| \n \n | \n\n Notional amount | \n\n Maturity date | \n\n Hedge ratio | \n\n Weighted average hedged rate | \n\n Carrying amount | \n
| \n Cash flow hedges under hedge accounting | \n\n 248.0 | \n\n 2023 | \n\n 1:1 | \n\n 1.4392% | \n\n (2.4) | \n
| \n Cash flow hedges under hedge accounting | \n\n 62.5 | \n\n 2024 | \n\n 1:1 | \n\n 1.4371% | \n\n (0.6) | \n
| \n At fair value through profit or loss | \n\n 200.0 | \n\n 2025 | \n\n 1:1 | \n\n 0.4475% | \n\n 5.0 | \n
Warrant liabilities
On 30 May 2018 the company issued warrants for 5,925,000 common shares to an affiliate of Akastor ASA for a total consideration of USD 1.00. Following the spin-off of Odfjell Technology, the hurdle rate and number of warrants has been adjusted to maintain the same value of the warrants, increasing the number of issued warrants to 6,837,492, and decreasing the exercise prices from the range of NOK 36 - NOK 107.50 to the range of NOK 31.20 - NOK 93.15.
The Warrants will be exercisable in six equal tranches from 2019 to 2024. A tranche which has become exercisable may also be exercised on the exercise dates for the subsequent tranches if the conditions for such subsequent exercise(s) are satisfied. Each tranche may be exercised if the price of the Shares has increased by a defined percentage over NOK 31.20 on the relevant exercise date (i.e. 31 May in 2019, 2020, 2021, 2022, 2023 and 2024 respectively), being NOK 37.43 for tranche 1, NOK 44.92 for tranche 2, NOK 53.91 for tranche 3, NOK 64.69 for tranche 4, NOK 77.62 for tranche 5 and NOK 93.15 for tranche 6. On 30 May 2024, any non-exercised Warrants will, to the extent the thresholds have not been met, be exercisable on a linear prorate basis, subject to the company's share price being within the range of NOK 31.20 and NOK 93.15.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at:
\u2022fair value through profit or loss,
\u2022amortised cost, or as
\u2022derivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 17 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 17 - Interest-bearing borrowings.
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 17 - Interest-bearing borrowings.
Note 17Interest-bearing borrowings
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Interest-bearing borrowings specification as at 31 December
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Borrowings | \n\n 483.5 | \n\n 289.9 | \n\n 773.4 | \n\n 839.3 | \n\n 156.2 | \n\n 995.5 | \n
| \n Transaction cost, unamortised | \n\n (3.3) | \n\n (1.8) | \n\n (5.1) | \n\n (11.3) | \n\n - | \n\n (11.3) | \n
| \n Seller's credit | \n\n 48.8 | \n\n 20.0 | \n\n 68.8 | \n\n 47.4 | \n\n - | \n\n 47.4 | \n
| \n Accrued interest expenses | \n\n - | \n\n 5.4 | \n\n 5.4 | \n\n - | \n\n 4.8 | \n\n 4.8 | \n
| \n Carrying amounts interest-bearing borrowings | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \n\n 875.4 | \n\n 161.1 | \n\n 1,036.4 | \n
Movements in interest-bearing borrowings
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Carrying amount as at 1 January | \n\n 875.4 | \n\n 161.1 | \n\n 1,036.4 | \n\n 695.8 | \n\n 515.8 | \n\n 1,211.6 | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n New borrowings | \n\n 219.2 | \n\n 25.0 | \n\n 244.2 | \n\n - | \n\n - | \n\n - | \n
| \n Paid transaction costs related to amendments and new borrowings | \n\n (2.2) | \n\n (0.6) | \n\n (2.7) | \n\n (2.1) | \n\n - | \n\n (2.1) | \n
| \n Repayment bank loan | \n\n (125.0) | \n\n (192.1) | \n\n (317.1) | \n\n - | \n\n (176.2) | \n\n (176.2) | \n
| \n Non-cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Disposal through distribution of operations to shareholders | \n\n (125.3) | \n\n (25.6) | \n\n (150.9) | \n\n - | \n\n - | \n\n - | \n
| \n Seller's Credit | \n\n 20.0 | \n\n - | \n\n 20.0 | \n\n - | \n\n - | \n\n - | \n
| \n Reclassified | \n\n (342.6) | \n\n 342.6 | \n\n - | \n\n 179.2 | \n\n (179.2) | \n\n - | \n
| \n Change in transaction cost, unamortised | \n\n 6.3 | \n\n 0.0 | \n\n 6.3 | \n\n 2.5 | \n\n 0.8 | \n\n 3.3 | \n
| \n Change in accrued interest cost | \n\n - | \n\n 3.0 | \n\n 3.0 | \n\n - | \n\n (0.1) | \n\n (0.1) | \n
| \n Currency translation differences | \n\n 3.2 | \n\n (0.0) | \n\n 3.2 | \n\n \n | \n\n - | \n\n - | \n
| \n Carrying amount as at 31 December | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \n\n 875.4 | \n\n 161.1 | \n\n 1,036.4 | \n
Repayment schedule for interest-bearing borrowings as at 31 December
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Maturity within 3 months | \n\n - | \n\n 19.6 | \n\n 19.6 | \n\n - | \n\n 26.1 | \n\n 26.1 | \n
| \n Maturity between 3 and 6 months | \n\n - | \n\n 45.6 | \n\n 45.6 | \n\n - | \n\n 52.1 | \n\n 52.1 | \n
| \n Maturity between 6 and 9 months | \n\n - | \n\n 19.6 | \n\n 19.6 | \n\n - | \n\n 26.1 | \n\n 26.1 | \n
| \n Maturity between 9 months and 1 year | \n\n - | \n\n 225.2 | \n\n 225.2 | \n\n - | \n\n 52.1 | \n\n 52.1 | \n
| \n Maturity between 1 and 2 years | \n\n 437.3 | \n\n - | \n\n 437.3 | \n\n 445.8 | \n\n - | \n\n 445.8 | \n
| \n Maturity between 2 and 3 years | \n\n 95.0 | \n\n - | \n\n 95.0 | \n\n 440.9 | \n\n - | \n\n 440.9 | \n
| \n Maturity between 3 and 4 years | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 4 and 5 years | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Maturity beyond 5 years | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Total contractual amounts | \n\n 532.3 | \n\n 309.9 | \n\n 842.2 | \n\n 886.7 | \n\n 156.2 | \n\n 1,042.9 | \n
The Odfjell Drilling Services Ltd. facility
Remaining contractual amount of USD 150 million as at 31 December 2021 was repaid 1 March 2022.
New borrowings in 2022
Refer to Note 4 Discontinued operations for further information regarding changes related to the spin-off in 2022.
29 November 2022, the Group repurchased the preference shares. The repurchase has been fully financed by way of a new direct loan of USD 95 million, repayable in monthly instalments starting in 2025 and with final maturity on 30 June 2026.
As per the terms of the repurchase of the preference shares, approximately USD 75 million has been settled in cash, with a further USD 20 million to be settled pursuant to a seller\u2019s credit agreement with a maturity date 31 July 2024.
The Odfjell Invest Ltd. facilities
Remaining contractual amount for the senior bank facility of USD 231.5 million and USD 100 million for the junior facility as at 31 December 2022.
29 November 2022 a repayment of USD 32 million was made to a single lender in the senior bank facility, thereby settling the outstanding balance to that single lender.
A related interest rate swap was terminated 30 November 2022 with a cash amount of USD 1.6 million being received by Odfjell Invest Ltd.
The Odfjell Rig III Ltd. facility
Remaining contractual amount of USD 133 million as at 31 December 2022.
The Odfjell Rig V Ltd. facility
Remaining contractual amount of USD 214 million as at 31 December 2022 for the bank facility.
The Odfjell Rig V Ltd. seller's credit
The carrying amount and fair value of the non-current liabilities are as follows:
Available drawing facilities
The group has no available not drawn facilities as per 31 December 2022.
Compliance with financial covenants as at 31.12.2022
The Odfjell Drilling Group is compliant with all financial covenants as at 31 December 2022.
Financial covenants
The borrowing facilities in the Odfjell Drilling Group include the following main covenants:
Group covenants
The Odfjell Drilling Group has agreed on the bank facilities to maintain:
\u2022a minimum free liquidity (cash and cash equivalents) requirement of USD 50 million and a total liquidity of minimum 5 per cent of interest-bearing debt (on consolidated basis) (if the Odfjell Drilling Group 12 months prior to delivery of any investments in excess of USD 100 million has any not\u00a0financed capital expenditure related to such investment, the minimum free liquidity requirement will increase to USD 100 million).
\u2022a book equity of at least USD 600 million and an equity ratio (equity to total assets) of minimum 30 per cent, increasing with 1% each calendar year from and including 2019, up to 35%.
\u2022a leverage ratio (net interest-bearing debt to EBITDA) not exceeding 5.00:1:00. EBITDA and Interest-Bearing Debt related to a new-build (drilling rig/vessel) or second-hand fleet addition shall be disregarded until the first full month after the earlier of (i) six (6) months after commencement of a firm employment contract for such new-build or second-hand fleet addition and (ii) twelve (12) months from the contractual delivery date (within the yard\u2019s delivery window) for such unit. Thereafter, actual EBITDA shall be annualised until a full twelve-month earnings history related to that new-build or second-hand fleet addition has been achieved.
\u2022a ratio of current assets to current liabilities of minimum 1.00:1.00.
The bank facility agreements contain undertakings and covenants, and terms and conditions which are considered to be customary for similar types of bank financings in the current market, including, but not limited to, undertakings related to reporting and information, certain restrictions on corporate actions and change of business and covenants relating to the valuation, operation and maintenance of the vessels.
The bank facility agreements further contain customary default and cross-default provisions.
The bank facility agreements provide for mandatory prepayment if Helene Odfjell (and her descendants) cease to own at least 50.1% of the shares in Odfjell Drilling Ltd.
Odfjell Invest Ltd \u2013 USD 425 million facility
Odfjell Drilling may pay dividends in an amount up to 50% of its net income in its previous financial year.
Odfjell Invest Ltd \u2013 USD 100 million junior facility
The junior facility contains materially the same undertakings and covenants as the USD 425 million facility.
The junior facility has no fixed instalments, but shall on certain conditions be partly repaid annually by free and available liquidity of the Odfjell Drilling Group above USD 175 million, however so that any such repayment shall be limited to 50% of the previous year\u2019s net result and adjusted for any identified liquidity requirements. Dividends and other distributions on the common shares of Odfjell Drilling are subject to lender\u2019s prior written consent for as long as the junior facility is outstanding.
Odfjell Rig III Ltd \u2013 USD 530 million facility
Payment of dividends from Odfjell Drilling Ltd., on ordinary shares shall be limited to 50% of its net income, provided that the lenders and Eksfin have on each occasion given their prior written consent.
Odfjell Rig V Ltd - USD 325 million facility
Dividends on ordinary shares shall be limited to 50% of its net income.
Odfjell Rig V Ltd - USD 43.25 million seller\u2019s credit from Samsung
USD 43.25 million seller\u2019s credit granted to Odfjell Rig V Ltd by Samsung Heavy Industries at delivery of Deepsea Nordkapp 7 January 2019, which is subordinated to the USD 325 million facility. The facility contains covenants that are customary for these types of facilities.
Odfjell Drilling Ltd - USD 95 million Direct loan
Direct loan of USD 95 million granted to Odfjell Drilling Ltd. in November 2022 by undisclosed client. There is a minimum equity ratio (on consolidated basis) covenant of minimum 35%.
Odfjell Rig Owning Ltd. \u2013 USD 20 million seller\u2019s credit from Akastor
Offsetting of financial instruments
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u2022In the principal market for the asset or liability , or
\u2022In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
Valuation techniques used to derive Level 2 fair values
Level 2 derivatives held at fair value through profit or loss and hedging derivatives comprise interest rate swaps and foreign exchange agreements. Interest rate swaps and foreign exchange agreements are fair valued using forward rates extracted from observable yield curves. Interest rate swaps and foreign exchange agreements are recognised according to mark-to-market reports from external financial institutions.
Valuation techniques used to derive Level 3 fair values
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 5.0 | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 2.4 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 7.5 | \n\n - | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n \n | \n\n 0.6 | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n - | \n\n 2.7 | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.6 | \n\n 10.2 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 91.0 | \n\n 154.5 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 157.2 | \n\n 173.0 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 267.7 | \n\n 350.4 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial liabilities at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n - | \n\n 3.0 | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n 2.8 | \n\n 1.0 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 529.0 | \n\n 875.4 | \n
| \n - Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 313.5 | \n\n 161.1 | \n
| \n - Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 41.7 | \n\n 38.3 | \n
| \n - Current lease liabilities | \n\n\n | \n\n \n | \n\n 26.5 | \n\n 7.8 | \n
| \n - Trade payables | \n\n \n | \n\n \n | \n\n 35.8 | \n\n 43.2 | \n
| \n - Other current liabilities | \n\n\n | \n\n \n | \n\n 27.9 | \n\n 56.6 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 977.2 | \n\n 1,186.3 | \n
The Company has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. The path-dependent nature of the instrument is modelled using a Monte Carlo simulation approach which uses computer generated random numbers to simulate share price paths. The price paths are generated using a process known as Geometric Brownian Motion (GBM). The price distributions generated by GBM are consistent with the assumptions underlying the widely used Black-Scholes model to price equity options.
The calculations are based on the following assumptions:
\u2022Valuation date : 31 December 2022
\u2022Share price: NOK 26.30
\u2022Volatility of share price: 44.57%
\u2022Risk-free interest rate: 3.13%
\u2022USD/NOK exchange rate: 9.8573
\u2022Dividend yield: zero
Based on the valuation, fair value of the warrant liability is estimated to be NOK 28 million / USD 2.8 million as at 31 December 2022 (NOK 8 million / USD 0.95 million as at 31 December 2021).
The fair value of the options has been calculated using Black & Scholes option-pricing model. The average fair value of the options granted in 2022 is NOK 11.36. The total cost of the share option plan is calculated based on the fair value x options granted. The total cost equals NOK 16.5 million (approximately USD 1.7 million) and is recognised over the period until June 2027.
The calculations are based on the following assumptions:
\u2022The share price on the grant date were set to the stock exchange price NOK 23.675 on the grant date.
\u2022The strike price per option was NOK 23.37.
\u2022The expected price volatility of the company's shares was set to 50% based on historical volatility adjusted for expected changes.
\u2022The expiry date was set to 28 June 2027.
\u2022The expected dividend yield was set to 0%.
\u2022The risk-free interest rate was set to 3.67%.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u2022In the principal market for the asset or liability , or
\u2022In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 5.0 | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 2.4 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 7.5 | \n\n - | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n \n | \n\n 0.6 | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n - | \n\n 2.7 | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.6 | \n\n 10.2 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 91.0 | \n\n 154.5 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 157.2 | \n\n 173.0 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 267.7 | \n\n 350.4 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial liabilities at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n - | \n\n 3.0 | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n 2.8 | \n\n 1.0 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 529.0 | \n\n 875.4 | \n
| \n - Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 313.5 | \n\n 161.1 | \n
| \n - Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 41.7 | \n\n 38.3 | \n
| \n - Current lease liabilities | \n\n\n | \n\n \n | \n\n 26.5 | \n\n 7.8 | \n
| \n - Trade payables | \n\n \n | \n\n \n | \n\n 35.8 | \n\n 43.2 | \n
| \n - Other current liabilities | \n\n\n | \n\n \n | \n\n 27.9 | \n\n 56.6 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 977.2 | \n\n 1,186.3 | \n
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 5.0 | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 2.4 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 7.5 | \n\n - | \n
| \n - Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n \n | \n\n 0.6 | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n - | \n\n 2.7 | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.6 | \n\n 10.2 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 91.0 | \n\n 154.5 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 0.9 | \n\n 4.4 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 157.2 | \n\n 173.0 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 267.7 | \n\n 350.4 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Financial liabilities at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n - | \n\n 3.0 | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n 2.8 | \n\n 1.0 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 529.0 | \n\n 875.4 | \n
| \n - Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 313.5 | \n\n 161.1 | \n
| \n - Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 41.7 | \n\n 38.3 | \n
| \n - Current lease liabilities | \n\n\n | \n\n \n | \n\n 26.5 | \n\n 7.8 | \n
| \n - Trade payables | \n\n \n | \n\n \n | \n\n 35.8 | \n\n 43.2 | \n
| \n - Other current liabilities | \n\n\n | \n\n \n | \n\n 27.9 | \n\n 56.6 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 977.2 | \n\n 1,186.3 | \n
Based on the valuation, fair value of the warrant liability is estimated to be NOK 28 million / USD 2.8 million as at 31 December 2022 (NOK 8 million / USD 0.95 million as at 31 December 2021).
Note 15Trade receivables
Accounting policy
A receivable represents the Group\u2019s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Trade receivables specification
| \n USD million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Trade receivables | \n\n \n | \n\n 47.4 | \n\n 103.1 | \n
| \n Earned, not yet invoiced operating revenues | \n\n \n | \n\n 43.7 | \n\n 52.8 | \n
| \n Loss allowance | \n\n\n | \n\n - | \n\n (1.4) | \n
| \n Trade receivables - net | \n\n \n | \n\n 91.0 | \n\n 154.5 | \n
As the receivables are due in the short term, the fair value is approximately equal to the carrying amount, and the future cash flows are not discounted.
Accounting policy
The group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables and contract assets, the Group applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
Accounting policy
A receivable represents the Group\u2019s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Accounting policy
The group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables and contract assets, the Group applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
Note 16Cash and cash equivalents
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Cash in bank | \n\n 46.2 | \n\n 83.6 | \n
| \n Time deposits | \n\n 89.4 | \n\n 63.5 | \n
| \n Retention accounts * | \n\n 13.2 | \n\n 11.9 | \n
| \n Restricted bank deposits ** | \n\n 8.4 | \n\n 14.0 | \n
| \n Total cash and cash equivalents | \n\n 157.2 | \n\n 173.0 | \n
| \n\n | \n||
| \n\n | \n
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Cash in bank | \n\n 46.2 | \n\n 83.6 | \n
| \n Time deposits | \n\n 89.4 | \n\n 63.5 | \n
| \n Retention accounts * | \n\n 13.2 | \n\n 11.9 | \n
| \n Restricted bank deposits ** | \n\n 8.4 | \n\n 14.0 | \n
| \n Total cash and cash equivalents | \n\n 157.2 | \n\n 173.0 | \n
| \n\n | \n||
| \n\n | \n
Note 18Leases
The group\u2019s leasing activities as a lessee and how these are accounted for
This note relates to the Group as a lessee only.
The Group leases various offices, workshops and warehouses in addition to some equipment. Rental contracts are typically made for fixed periods of 6 months to 10 years, but may have extension or termination options. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payment that are based on an index or a rate (initially measured using the index or rate as at the commencement date), amounts expected to be payable by the group under residual value guarantees, the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee\u2019s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease, e.g. term, country, currency and security.
The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising of the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs, and any restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset\u2019s useful life.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and smaller items of office equipment.
Significant judgement and estimation uncertainty
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group's business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
The Group cannot readily determine the interest rate implicit in the lease, therefore it uses its incremental borrowing rate (IBR) to measure lease liabilities. IBR is estimated using observable inputs, such as market interest rates, when available. It is required to make certain entity-specific estimates mentioned above.
The balance sheet shows the following amounts related to leases:
| \n \n | \n\n Properties | \n\n Other fixed assets | \n\n Total Right-of-use assets | \n\n Properties | \n\n Other fixed assets | \n\n Total Right-of-use assets | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January | \n\n 60.0 | \n\n - | \n\n 60.0 | \n\n 56.1 | \n\n - | \n\n 56.1 | \n
| \n Additions | \n\n 3.8 | \n\n 38.2 | \n\n 42.0 | \n\n 9.1 | \n\n - | \n\n 9.1 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n - | \n\n 16.6 | \n\n 16.6 | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n - | \n\n (1.3) | \n\n (1.3) | \n\n (3.2) | \n\n - | \n\n (3.2) | \n
| \n Disposal through distribution of operations to shareholders | \n\n (18.2) | \n\n - | \n\n (18.2) | \n\n - | \n\n - | \n\n - | \n
| \n Currency translation differences | \n\n (4.5) | \n\n (0.8) | \n\n (5.3) | \n\n (2.0) | \n\n - | \n\n (2.0) | \n
| \n Cost as at 31 December | \n\n 41.2 | \n\n 52.7 | \n\n 93.9 | \n\n 60.0 | \n\n - | \n\n 60.0 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January | \n\n (16.5) | \n\n - | \n\n (16.5) | \n\n (13.5) | \n\n - | \n\n (13.5) | \n
| \n Depreciation from continuing operations | \n\n (3.6) | \n\n (15.8) | \n\n (19.5) | \n\n (4.4) | \n\n - | \n\n (4.4) | \n
| \n Depreciation from discontinued operations | \n\n (0.2) | \n\n - | \n\n (0.2) | \n\n (2.4) | \n\n \n | \n\n (2.4) | \n
| \n Adjustments due to previously eliminated inter-segment leases | \n\n - | \n\n (2.7) | \n\n (2.7) | \n\n \n | \n\n \n | \n\n \n | \n
| \n Disposals | \n\n - | \n\n 1.3 | \n\n 1.3 | \n\n 3.2 | \n\n - | \n\n 3.2 | \n
| \n Disposal through distribution of operations to shareholders | \n\n 6.2 | \n\n - | \n\n 6.2 | \n\n - | \n\n - | \n\n - | \n
| \n Currency translation differences | \n\n 1.2 | \n\n 0.2 | \n\n 1.4 | \n\n 0.6 | \n\n - | \n\n 0.6 | \n
| \n As at 31 December | \n\n (13.0) | \n\n (17.0) | \n\n (30.1) | \n\n (16.5) | \n\n - | \n\n (16.5) | \n
| \n Net book value at 31 December | \n\n 28.1 | \n\n 35.7 | \n\n 63.8 | \n\n 43.4 | \n\n - | \n\n 43.4 | \n
Lease liabilities
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non-current | \n\n 41.7 | \n\n 38.3 | \n
| \n Current | \n\n 26.5 | \n\n 7.8 | \n
| \n Total | \n\n 68.2 | \n\n 46.1 | \n
Movements in lease liabilities are analysed as follows:
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Carrying amount as at 1 January | \n\n 38.3 | \n\n 7.8 | \n\n 46.1 | \n\n 36.9 | \n\n 7.6 | \n\n 44.6 | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Payments for the principal portion of the lease liability | \n\n - | \n\n (18.6) | \n\n (18.6) | \n\n - | \n\n (6.1) | \n\n (6.1) | \n
| \n Payments for the interest portion of the lease liability | \n\n - | \n\n (4.3) | \n\n (4.3) | \n\n - | \n\n (2.5) | \n\n (2.5) | \n
| \n Non-cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n New lease liabilities recognised in the year | \n\n 42.1 | \n\n - | \n\n 42.1 | \n\n 9.1 | \n\n - | \n\n 9.1 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n 13.9 | \n\n - | \n\n 13.9 | \n\n - | \n\n - | \n\n - | \n
| \n Disposal through distribution of operations to shareholders | \n\n (9.4) | \n\n (2.6) | \n\n (12.0) | \n\n - | \n\n - | \n\n - | \n
| \n Interest expense on lease liabilities | \n\n 4.3 | \n\n - | \n\n 4.3 | \n\n 2.6 | \n\n - | \n\n 2.6 | \n
| \n Reclassified | \n\n (45.4) | \n\n 45.4 | \n\n - | \n\n (9.1) | \n\n 9.1 | \n\n - | \n
| \n Currency exchange differences | \n\n (2.1) | \n\n (1.1) | \n\n (3.2) | \n\n (1.3) | \n\n (0.3) | \n\n (1.5) | \n
| \n Carrying amount as at 31 December | \n\n 41.7 | \n\n 26.5 | \n\n 68.2 | \n\n 38.3 | \n\n 7.8 | \n\n 46.1 | \n
Rental costs for exemptions
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Expenses relating to short-term leases | \n\n 20.4 | \n\n 14.6 | \n
| \n Expenses relating to low value items | \n\n - | \n\n - | \n
Extension and termination options
Extension and termination options are included in a number of property and equipment leases across the group. These are used to maximise operational flexibility in terms of managing the assets used in the group's operations.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
Most extension options have not been included in the lease liability, because the group could replace the asset without significant cost of business disruption, or because the group is not certain it would need the asset in the option period.
The group\u2019s leasing activities as a lessee and how these are accounted for
This note relates to the Group as a lessee only.
The Group leases various offices, workshops and warehouses in addition to some equipment. Rental contracts are typically made for fixed periods of 6 months to 10 years, but may have extension or termination options. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payment that are based on an index or a rate (initially measured using the index or rate as at the commencement date), amounts expected to be payable by the group under residual value guarantees, the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee\u2019s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease, e.g. term, country, currency and security.
The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising of the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs, and any restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset\u2019s useful life.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and smaller items of office equipment.
Movements in lease liabilities are analysed as follows:
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n USD million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Carrying amount as at 1 January | \n\n 38.3 | \n\n 7.8 | \n\n 46.1 | \n\n 36.9 | \n\n 7.6 | \n\n 44.6 | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Payments for the principal portion of the lease liability | \n\n - | \n\n (18.6) | \n\n (18.6) | \n\n - | \n\n (6.1) | \n\n (6.1) | \n
| \n Payments for the interest portion of the lease liability | \n\n - | \n\n (4.3) | \n\n (4.3) | \n\n - | \n\n (2.5) | \n\n (2.5) | \n
| \n Non-cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n New lease liabilities recognised in the year | \n\n 42.1 | \n\n - | \n\n 42.1 | \n\n 9.1 | \n\n - | \n\n 9.1 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n 13.9 | \n\n - | \n\n 13.9 | \n\n - | \n\n - | \n\n - | \n
| \n Disposal through distribution of operations to shareholders | \n\n (9.4) | \n\n (2.6) | \n\n (12.0) | \n\n - | \n\n - | \n\n - | \n
| \n Interest expense on lease liabilities | \n\n 4.3 | \n\n - | \n\n 4.3 | \n\n 2.6 | \n\n - | \n\n 2.6 | \n
| \n Reclassified | \n\n (45.4) | \n\n 45.4 | \n\n - | \n\n (9.1) | \n\n 9.1 | \n\n - | \n
| \n Currency exchange differences | \n\n (2.1) | \n\n (1.1) | \n\n (3.2) | \n\n (1.3) | \n\n (0.3) | \n\n (1.5) | \n
| \n Carrying amount as at 31 December | \n\n 41.7 | \n\n 26.5 | \n\n 68.2 | \n\n 38.3 | \n\n 7.8 | \n\n 46.1 | \n
Pension obligations
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the income statement.
Mortality index used in actuarial calculations is K2013.
The Group has contractual pension agreement (CPA) schemes in Norway established in multi-employer plans. These multi-employer plans are defined benefit plans, but the Group does not have access to the necessary information for the accounting years 2021 and 2020 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
Note 20Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Note 20Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Note 21Other liabilities
Other current liabilities specification
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Social security and other taxes | \n\n 13.4 | \n\n 24.6 | \n
| \n Accrued salaries, holiday pay and employee bonus | \n\n 15.2 | \n\n 37.5 | \n
| \n Other payables and financial liabilities | \n\n 5.0 | \n\n 2.0 | \n
| \n Other accrued expenses | \n\n 7.7 | \n\n 17.1 | \n
| \n Total other current liabilities | \n\n 41.3 | \n\n 81.2 | \n
Refer to Note 29 - Contingencies for further information about accounting policy for provisions and accruals, as well as significant judgement applied and estimation uncertainty.
Note 21Other liabilities
Other current liabilities specification
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Social security and other taxes | \n\n 13.4 | \n\n 24.6 | \n
| \n Accrued salaries, holiday pay and employee bonus | \n\n 15.2 | \n\n 37.5 | \n
| \n Other payables and financial liabilities | \n\n 5.0 | \n\n 2.0 | \n
| \n Other accrued expenses | \n\n 7.7 | \n\n 17.1 | \n
| \n Total other current liabilities | \n\n 41.3 | \n\n 81.2 | \n
Refer to Note 29 - Contingencies for further information about accounting policy for provisions and accruals, as well as significant judgement applied and estimation uncertainty.
Note 21Other liabilities
Other current liabilities specification
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Social security and other taxes | \n\n 13.4 | \n\n 24.6 | \n
| \n Accrued salaries, holiday pay and employee bonus | \n\n 15.2 | \n\n 37.5 | \n
| \n Other payables and financial liabilities | \n\n 5.0 | \n\n 2.0 | \n
| \n Other accrued expenses | \n\n 7.7 | \n\n 17.1 | \n
| \n Total other current liabilities | \n\n 41.3 | \n\n 81.2 | \n
Note 22Financial risk management
Capital management and funding
The primary objective of the Group's capital management is to ensure that it maintains required capital ratios and liquidity available to support the business. Capital management should be such that the capital structure is sufficiently robust to withstand prolonged adverse conditions in significant risk factors, such as long-term down-cycles in our markets and unfavourable conditions in financial markets. Capital management also comprise securing the company to be
in compliance with covenants on interest bearing debt. Reference is made to Note 17 - Interest-bearing borrowings which disclose information about covenants on long-term interest-bearing liabilities.
The Group will manage the capital structure and adjust it, to maintain an optimal structure adapted to current economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payments, buy treasury shares, return capital to shareholders or issue new shares.
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Equity | \n\n 1,208.5 | \n\n 1,268.2 | \n
| \n Total assets | \n\n 2,219.3 | \n\n 2,515.2 | \n
| \n Equity ratio | \n\n 54% | \n\n 50% | \n
| \n Cash and cash equivalents excl.restricted capital | \n\n 148.8 | \n\n 159.0 | \n
| \n Available drawing facilities | \n\n - | \n\n - | \n
| \n Total available liquidity | \n\n 148.8 | \n\n 159.0 | \n
Deposits / placements
The liquidity management has four main objectives:
\u2022Matching of surplus funds against borrowing requirements.
\u2022Secure a level of liquidity (a minimum of two months operating expenses) to meet future plans of Odfjell Drilling.
\u2022Limitation of credit risks.
\u2022Maximise return on liquid assets.
Accordingly, investments may only be made in securities with a rating of Investment grade, BAA (Moodys) , BBB- (Standard and Poors and Fitch IBCA) or better.
A list of counter-party exposure limits is reported to the Board of Odfjell Drilling on a yearly basis.
The following instruments are allowed for short term placements;
\u2022Deposits in banks
\u2022Loans to companies/institutions/funds (like fixed or floating rate bonds, senior or subordinated debt)
\u2022Certificates
\u2022Money-market funds
Liquidity
The company's policy is to have liquidity corresponding to two months\u2019 operating expenses.
Financial risk factors
The Group is exposed to a range of financial risks: liquidity risk, market risk (including currency risk, interest rate risk, and price risk), and credit risk.
The financial risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group\u2019s financial
performance. To some extent, the Group uses derivative financial instruments to reduce certain risk exposures.
Risk management is carried out on a Group level. The Group identifies, evaluates and hedges financial risks in close co-operation with the Group's operational units. The board of Odfjell Drilling Ltd. has established written principles for risk management of foreign exchange risk, interest rate risk and use of derivative financial instruments.
Capital management and funding
The primary objective of the Group's capital management is to ensure that it maintains required capital ratios and liquidity available to support the business. Capital management should be such that the capital structure is sufficiently robust to withstand prolonged adverse conditions in significant risk factors, such as long-term down-cycles in our markets and unfavourable conditions in financial markets. Capital management also comprise securing the company to be
in compliance with covenants on interest bearing debt. Reference is made to Note 17 - Interest-bearing borrowings which disclose information about covenants on long-term interest-bearing liabilities.
Note 23Liquidity risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and to have sufficient cash or cash equivalents at any time to be able to finance its operations and investments in accordance with the Group's strategic plan.
With regular forecasts and liquidity analysis updates, the Group will ensure sufficient available liquidity to fulfil its duties at loan maturity, without unacceptable loss or risk of damaging the Group\u2019s reputation.
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through credit facilities and the ability to close out market positions.
The Group\u2019s cash flow forecasting is performed by Group Finance. Group Finance monitors rolling forecasts of the Group\u2019s liquidity requirements to ensure it has sufficient cash to meet operational needs at all times, so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group\u2019s debt financing plans and covenant compliance.
Surplus cash held by the operating entities over and above the balance required for working capital management is transferred to the Group Treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.
Odfjell Drilling held cash and cash equivalents amounting to USD 157 million at the end of 2022. This is deemed to be sufficient funding for the Group\u2019s current activity levels and committed capital expenditures during 2023.
The liquidity risk is connected with the market risk and the re-contracting risk for mobile drilling units. The management continuously focuses on securing new profitable contracts for the Group's mobile drilling units to generate sufficient cash flow from operations, hence reducing the liquidity risk going forward.
Operating in several jurisdictions Odfjell Drilling do from time to time receive enquiries from authorities about compliance related matters. Refer to Note 29 Contingencies for information regarding letter of indemnity and USD 31 million prepayment made in 2023 related to a tax ruling in Norway.
The Group's refinancing risk is considered low. Currently, bank loan facilities are maturing at different times up to\u00a0June\u00a02024. The Group is considering alternative sources of financing, and has also started dialogue with banks. The Group expects to be successful in securing new or extended financing prior to maturity of the loans. See Note 17 - Interest-bearing borrowings for further information about maturity of contractual amounts.
Maturity of financial liabilities
The amounts disclosed in the table are the contractual non-discounted cash flows. The table include estimated interest payments for drawn facilities at the balance sheet date, based on the remaining period at the end of the reporting period to the contractual maturity date. The estimated interest payments include payments based on forward rates for the interest rate swaps.
Maturity of financial liabilities - 31.12.2022
| \n USD million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Interest-bearing borrowings | \n\n 94.8 | \n\n 271.0 | \n\n 471.3 | \n\n 101.3 | \n\n - | \n\n 938.4 | \n\n 842.5 | \n
| \n Lease liabilities | \n\n 13.3 | \n\n 13.2 | \n\n 22.2 | \n\n 16.0 | \n\n 12.0 | \n\n 76.8 | \n\n 68.2 | \n
| \n Trade payables | \n\n 35.8 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 35.8 | \n\n 35.8 | \n
| \n Other current payables | \n\n 21.4 | \n\n 6.5 | \n\n - | \n\n - | \n\n - | \n\n 27.9 | \n\n 27.9 | \n
Maturity of financial liabilities - 31.12.2021
| \n USD million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Interest-bearing borrowings | \n\n 97.1 | \n\n 96.3 | \n\n 477.2 | \n\n 452.5 | \n\n - | \n\n 1,123.1 | \n\n 1,036.4 | \n
| \n Lease liabilities | \n\n 4.0 | \n\n 3.8 | \n\n 7.5 | \n\n 19.7 | \n\n 22.5 | \n\n 57.5 | \n\n 46.1 | \n
| \n Trade payables | \n\n 43.1 | \n\n 0.1 | \n\n - | \n\n - | \n\n - | \n\n 43.2 | \n\n 43.2 | \n
| \n Other current payables | \n\n 51.3 | \n\n 5.4 | \n\n - | \n\n - | \n\n - | \n\n 56.6 | \n\n 56.6 | \n
Note 24Market risk
Market risk is the risk of a change in market prices and demand, as well as changes in currency exchange rates and interest levels.
The re-contracting risk for the Group's wholly owned mobile drilling units is limited in 2023, as all units in the fleet has medium to long-term contracts.
Contract status and currency exposure in rig rates
The Deepsea Atlantic commenced its Johan Sverdrup phase 2 contract with Equinor on 31 December 2021. During 2022 Equinor Energy AS exercised further options for the Deepsea Atlantic to drill five additional wells on Johan Sverdrup Phase 2 development, extending the Deepsea Atlantic's firm backlog into the first quarter of 2024. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
The Deepsea Stavanger is currently on contract with Equinor and working on the Norwegian Continental Shelf. During 2022, Equinor exercised further work for Deepsea Stavanger under the continued optionality mechanism and the rig was also awarded a five-year firm contract with Aker BP ASA which is scheduled to commence in early 2025. The current fixed well program with Equinor is expected to take firm operations into the third quarter of 2023. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Deepsea Aberdeen is currently on a long-term contract with Equinor at the Breidablikk field. The current fixed well program with Equinor is expected to take firm operations into the fourth quarter of 2024. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Deepsea Nordkapp commenced operations for Aker BP under the Alliance agreement on 10 May 2019. The rig has currently firm work through the third quarter 2024 as Aker BP in 2022 exercised further options. The day rate consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day.
Climate Risk
During 2022, a project was undertaken with external advisors to raise awareness and assess the impacts of climate risks and opportunities. Cross-functional workshops were held to review the impact on the business from both physical and transitional risks in the short, medium and long term, prioritising risks for further deep dives.
The most significant transition risks identified, along with mitigating actions were:
\u2022Changes in fossil energy demand due to policies and consumer behaviour changes, leading to reduced demand for our assets and reduced revenue. This will be factored in to any asset growth decisions and alternative use of assets will be considered.
\u2022Cost of and access to capital may go up as banks move to low carbon portfolios, leading to increased interest costs. Consider debt structure and ensure carbon reducing initiatives understood by capital markets.
The most significant physical risk identified, along with mitigating actions is:
\u2022Impact of extreme weather offshore on crew and equipment logistics could increase costs and result in downtime. Critical spares analysis and robust planning required as well as protection in commercial contracts.
Foreign exchange risk
The consolidated material subsidiaries' reporting and functional currencies are USD and NOK.
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to USD and NOK. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity\u2019s functional currency. The group is exposed to risks due to fluctuations in exchange rates, especially as charter contracts are mainly priced in USD while most of the operating expenses are in local currency. The Group seeks to minimise these risks through currency hedging via financial instruments or by off-setting local currency elements in charter contracts.
Quoted mark-to-market values from financial institutions have been used to determine the fair value of the foreign exchange contracts at the end of the year. The foreign exchange contracts are only used for economic hedging purposes and not as speculative investments. However, these derivatives did not meet the hedge accounting criteria, and are accounted for at fair value through profit or loss.
The group\u2019s exposure to foreign currency risk at the end of the reporting period, expressed in USD, was as follows:
Foreign exchange risk - Exposure - 31.12.2022
| \n USD million | \n\n NOK | \n\n GBP | \n\n Other non-USD currencies | \n
| \n Cash and cash equivalents | \n\n 113.7 | \n\n 0.9 | \n\n 0.8 | \n
| \n Trade receivables | \n\n 68.6 | \n\n 0.1 | \n\n - | \n
| \n Contract assets | \n\n 6.4 | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (42.0) | \n\n - | \n\n - | \n
| \n Trade payables | \n\n (25.8) | \n\n (0.2) | \n\n (1.6) | \n
| \n Other current payables | \n\n (25.5) | \n\n (0.0) | \n\n (0.7) | \n
| \n Foreign currency contracts | \n\n \n | \n\n \n | \n\n \n | \n
| \n Buy foreign currency (at fair value through profit or loss\u200b) | \n\n 103.5 | \n\n - | \n\n - | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n 116.3 | \n\n - | \n\n - | \n
Foreign exchange risk - Exposure - 31.12.2021
| \n USD million | \n\n NOK | \n\n GBP | \n\n Other non-USD currencies | \n
| \n Cash and cash equivalents | \n\n 85.5 | \n\n 5.7 | \n\n 6.4 | \n
| \n Trade receivables | \n\n 64.1 | \n\n 25.0 | \n\n 8.0 | \n
| \n Contract assets | \n\n 7.1 | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (41.7) | \n\n (1.4) | \n\n (3.0) | \n
| \n Trade payables | \n\n (24.9) | \n\n (5.8) | \n\n (2.7) | \n
| \n Other current payables | \n\n (68.2) | \n\n (5.0) | \n\n (1.7) | \n
| \n Foreign currency forwards | \n\n \n | \n\n \n | \n\n \n | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n 17.4 | \n\n - | \n\n - | \n
As shown in the table above, the Group is primarily exposed to changes in USD/NOK exchange rates.
Sensitivity to changes in USD/NOK exchange rates
| \n Sensitivity to changes in USD/NOK exchange rates | \n\n USD is strengthened by 20 % against NOK | \n\n USD is strengthened by 10 % against NOK | \n\n USD is weakened by 10 % against NOK | \n|||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Cash and cash equivalents | \n\n (9.8) | \n\n (4.4) | \n\n (5.3) | \n\n (2.4) | \n\n 6.5 | \n\n 3.0 | \n
| \n Current receivables | \n\n 3.0 | \n\n 5.4 | \n\n 1.7 | \n\n 2.9 | \n\n (2.0) | \n\n (3.6) | \n
| \n Current liabilities | \n\n (3.5) | \n\n (0.6) | \n\n (1.9) | \n\n (0.3) | \n\n 2.3 | \n\n 0.4 | \n
| \n Net effect on profit before tax | \n\n (10.2) | \n\n 0.3 | \n\n (5.6) | \n\n 0.2 | \n\n 6.8 | \n\n (0.2) | \n
Interest rate risk
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations at floating interest rates. The Group evaluates the share of interest rate hedging based on assessment of the Group\u2019s total interest rate risk and currently has a combination of fixed and floating interest rates in order to limit exposure. The Board of Directors is on regular basis considering the interest payment hedging of the external financing and mandate administration to execute necessary changes.
The Group had 8 interest rate swap agreements at 31 December 2022. Quoted mark-to-market values from financial institutions have been used to determine the fair value of the swap agreements at the end of the year. Some of the instruments used during 2022 were documented as cash flow hedges and other as financial investments, and changes in fair value were recognised in other comprehensive income (cash flow hedging) and others recognised through profit and loss statement (financial investments not defined as cash flow hedges).
Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item. This will effectively result in recognising interest expense at a fixed interest rate for the hedged floating rate loans.
Including interest rate swaps entered into, the fixed-rate portion of the group\u2019s interest bearing debt per 31 December 2022 is approximately 44%.
The swap contracts require settlement of net interest receivable or payable. The settlement dates coincide with the dates on which interest is payable on the underlying debt.
Average interest rate as of 31.12.2022 was 7.2%, including the effect of interest rate hedging.
Estimated fair value calculations from external financial institutions have been used to determine the fair value of the swap agreement at the end of the year.
The Group monitors its interest rate exposure on a dynamic basis. The Group calculates the impact on profit and loss of a defined interest rate shift.
The exposure of the Group's borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period are as follows:
| \n USD million | \n\n 31.12.2022 | \n\n % of total loans | \n\n 31.12.2021 | \n\n % of total loans | \n
| \n Variable rate borrowings - USD LIBOR | \n\n 471.8 | \n\n 56% | \n\n 472.4 | \n\n 45% | \n
| \n Fixed rate borrowings - repricing or maturity dates: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Less than 1 year | \n\n 213.8 | \n\n 25% | \n\n - | \n\n 0% | \n
| \n 1-5 years | \n\n 156.6 | \n\n 19% | \n\n 570.5 | \n\n 55% | \n
| \n Later than 5 years | \n\n - | \n\n 0% | \n\n - | \n\n 0% | \n
| \n Total contractual amounts* | \n\n 842.2 | \n\n 100% | \n\n 1,042.9 | \n\n 100% | \n
| \n\n | \n
The result of the calculation on sensitivities returns the following expected values (incl. interest rate swaps entered into as at 31 December):
\u2022If interest rate is increased by 1.0 %, the effect would be an increase in financing costs of approximately USD 5 million for the next 12 months as at 31 December 2022, compared to USD 4 million at 31\u00a0December 2021.
Interest rate benchmark reform
The interest rate benchmark London Inter-Bank Offered Rate (LIBOR) is being wound down. The majority of LIBOR panels have ended, and their settings ceased or are permanently unrepresentative. The overnight, 1-month, 3-month, 6-month and 12-month USD LIBOR settings are continuing under a panel bank methodology until the end of June 2023. By the end of June 2023, the Group will amend existing contracts and agreements that reference USD LIBOR to Secured Overnight Financing Rate (SOFR).
Group treasury is managing the group\u2019s USD LIBOR transition plan. The most significant change will be amendments to the contractual terms of the USD LIBOR-referenced floating-rate debt and the associated swaps and the corresponding update of the hedge designation. However, the changed reference rate may also affect other systems, processes, risk and valuation models, as well as having tax and accounting implications.
No financial instruments have transitioned to an alternative benchmark rate at the end of the reporting period. No material financial effects are expected as a result of the IBOR reform.
The Group has signed ISDA 2020 Fallbacks Protocol & Supplement for derivatives. That means that the Group\u2019s interest rate swap agreements have a fallback to compounded SOFR, if noting else is agreed.
The Group is currently evaluating which SOFR both floating-rate debt and associated swaps will be transitioned to. The Group will conclude and implement the USD LIBOR transition to SOFR in Q2 2023.
Relief applied
The group has applied the following reliefs that were introduced by the amendments made to IFRS 9 Financial Instruments in September 2019 and the Interest Rate Benchmark Reform - Phase 2 - amendments:
\u2022When considering the \u2018highly probable\u2019 requirement, the group has assumed that the USD interest rate on which the group\u2019s hedged debt is based does not change materially as a result of IBOR reform.
\u2022In assessing whether the hedge is expected to be highly effective on a forward-looking basis the group has assumed that the USD LIBOR interest rate on which the cash flows of the hedged debt and the interest rate swap that hedges it are based is not materially altered by LIBOR reform.
\u2022The group has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
\u2022If the basis for determining contractual cash flows of a financial asset or liability measured at amortised cost changes solely as a result of the IBOR reform, the Group will update the effective interest rate to reflect the change that is required
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
\u2022There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u2022The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u2022The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
\u2022The effective portion of the gain or loss on the cash flow hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
\u2022Amounts recognised directly in other comprehensive income are reclassified as income or expense in the income statement in the period when the hedged liability or planned transaction will affect the income statement.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within financial income/expenses.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria\u00a0or the group has elected not to apply hedge accounting,\u00a0they are classified as \u2018held for trading\u2019 for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
\u2022There is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u2022The effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u2022The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
\u2022The effective portion of the gain or loss on the cash flow hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the income statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
\u2022Amounts recognised directly in other comprehensive income are reclassified as income or expense in the income statement in the period when the hedged liability or planned transaction will affect the income statement.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within financial income/expenses.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria\u00a0or the group has elected not to apply hedge accounting,\u00a0they are classified as \u2018held for trading\u2019 for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of equity and must instead be classified as a derivative liability and measured at fair value with changes in fair value recognised in the consolidated statements of operations and comprehensive loss at each period-end. The derivative liabilities will ultimately be converted into the Company\u2019s equity (common shares) if and when the warrants are exercised, or will be extinguished on the expiry of the outstanding warrants, and will not result in the outlay of any cash by the Company. Immediately prior to exercise, the warrants are remeasured at their estimated fair value.
Upon exercise, the intrinsic value is transferred to share capital (the intrinsic value is the share price at the date the warrant is exercised less the exercise price of the warrant). Any remaining fair value is recorded through the statement of operations and comprehensive loss as part of the change in estimated fair value of derivative warrant liabilities.
Note 25Credit risk
Further description
The Group operates in two segments: Own Fleet and External Fleet. The market for the Group\u2019s services is the offshore oil and gas industry, and the customers consist primarily of major integrated oil companies, independent oil and gas producers and government owned oil companies. The Group performs ongoing credit evaluations of the customers and generally does not request material collateral.
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents, marketable securities, other receivables and certain derivatives instruments receivable amount, the Group\u2019s exposure to credit risk arises from default of the counter-party, with a maximum exposure equal to the carrying amount of these instruments. However, the Group believes this risk is limited as the counter-parties mainly have a high credit quality.
During 2022, the Group has continued its focus on credit risk in general related to the uncertain conditions in some geographical markets. The maximum exposure regarding trade receivables is the carrying amount of USD 91 million.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to non-billed work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The ageing of the trade receivables - 31.12.2022
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Not due | \n\n 0.0% | \n\n 87.4 | \n\n - | \n\n 87.4 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 2.6 | \n\n - | \n\n 2.6 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n 1.1 | \n\n - | \n\n 1.1 | \n
| \n Over 6 months | \n\n 0.0% | \n\n - | \n\n - | \n\n - | \n
| \n Total | \n\n \n | \n\n 91.0 | \n\n - | \n\n 91.0 | \n
Contract assets - 2022
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Not due | \n\n 0.0% | \n\n 8.6 | \n\n - | \n\n 8.6 | \n
The ageing of the trade receivables - 31.12.2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 130.9 | \n\n - | \n\n 130.9 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 17.5 | \n\n - | \n\n 17.5 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n 1.0 | \n\n - | \n\n 1.0 | \n
| \n Over 6 months | \n\n 21.4% | \n\n 6.6 | \n\n (1.4) | \n\n 5.2 | \n
| \n Total | \n\n \n | \n\n 156.0 | \n\n (1.4) | \n\n 154.5 | \n
Contract assets - 2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n USD million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 10.2 | \n\n - | \n\n 10.2 | \n
Movements in loss allowance / the provision for impairment of trade receivables and contract assets are as follows:
| \n \n | \n\n Trade receivables | \n\n Contract assets | \n||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Loss allowance as at 1 January | \n\n 1.4 | \n\n 1.1 | \n\n - | \n\n - | \n
| \n Disposal through distribution of operations to shareholders | \n\n (1.4) | \n\n - | \n\n - | \n\n - | \n
| \n Utilised | \n\n - | \n\n (0.1) | \n\n - | \n\n - | \n
| \n Released provision | \n\n - | \n\n (0.3) | \n\n - | \n\n - | \n
| \n New provisions | \n\n - | \n\n 0.7 | \n\n - | \n\n - | \n
| \n Translation differences | \n\n - | \n\n (0.0) | \n\n - | \n\n - | \n
| \n Loss allowance as at 31 December | \n\n - | \n\n 1.4 | \n\n - | \n\n - | \n
Movements in loss allowance / the provision for impairment of trade receivables and contract assets are as follows:
| \n \n | \n\n Trade receivables | \n\n Contract assets | \n||
| \n USD million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Loss allowance as at 1 January | \n\n 1.4 | \n\n 1.1 | \n\n - | \n\n - | \n
| \n Disposal through distribution of operations to shareholders | \n\n (1.4) | \n\n - | \n\n - | \n\n - | \n
| \n Utilised | \n\n - | \n\n (0.1) | \n\n - | \n\n - | \n
| \n Released provision | \n\n - | \n\n (0.3) | \n\n - | \n\n - | \n
| \n New provisions | \n\n - | \n\n 0.7 | \n\n - | \n\n - | \n
| \n Translation differences | \n\n - | \n\n (0.0) | \n\n - | \n\n - | \n
| \n Loss allowance as at 31 December | \n\n - | \n\n 1.4 | \n\n - | \n\n - | \n
Note 26Share capital and shareholder information
| \n \n | \n\n No.of shares | \n\n Nominal value | \n\n Share capital - USD thousands | \n
| \n Listed shares / Common shares issued | \n\n 236,783,202 | \n\n USD 0.01 | \n\n 2,368 | \n
| \n Preference shares issued | \n\n 16,123,125 | \n\n USD 0.01 | \n\n 161 | \n
| \n Total share capital | \n\n \n | \n\n \n | \n\n 2,529 | \n
Common shares
Authorised, not issued shares was 47, 093,673 as at 31 December 2022. There are no changes in issued shares or preference shares in 2022. All issued shares are fully paid.
The Group has not acquired any of its own common shares in 2022, and no common shares are held by entities in the Group.
The Company has only one class of ordinary shares. Each common share in the Company carries one vote, and all common shares carry equal rights, including the right to participate in General Meetings. All shareholders are treated on an equal basis.
For information about warrants, refer to Note 24.
| \n Largest common shareholders at 31 December 2022 | \n\n Account type | \n\n Holding | \n\n % of shares | \n
| \n Odfjell Partners Holding Ltd. | \n\n Ordinary | \n\n 142,952,381 | \n\n 60.37% | \n
| \n J.P. Morgan Securities Plc | \n\n Nominee | \n\n 13,598,726 | \n\n 5.74% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 5,655,363 | \n\n 2.39% | \n
| \n Goldman Sachs International | \n\n Nominee | \n\n 4,650,055 | \n\n 1.96% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 3,501,856 | \n\n 1.48% | \n
| \n Merrill Lynch Prof. Clearing Corp. | \n\n Nominee | \n\n 3,191,246 | \n\n 1.35% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 2,709,205 | \n\n 1.14% | \n
| \n Citibank | \n\n Nominee | \n\n 1,924,128 | \n\n 0.81% | \n
| \n Brown Brothers Harriman & Co. | \n\n Nominee | \n\n 1,596,418 | \n\n 0.67% | \n
| \n Brown Brothers Harriman & Co. | \n\n Nominee | \n\n 1,576,290 | \n\n 0.67% | \n
| \n BNP Paribas | \n\n Nominee | \n\n 1,429,238 | \n\n 0.60% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 1,307,483 | \n\n 0.55% | \n
| \n J.P. Morgan Securities PLC | \n\n Ordinary | \n\n 1,223,607 | \n\n 0.52% | \n
| \n Nordea Bank Abp | \n\n Nominee | \n\n 1,200,000 | \n\n 0.51% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,150,793 | \n\n 0.49% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,062,822 | \n\n 0.45% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 1,007,930 | \n\n 0.43% | \n
| \n Ulsmo Finans AS | \n\n Ordinary | \n\n 950,000 | \n\n 0.40% | \n
| \n CACEIS Bank | \n\n Nominee | \n\n 849,437 | \n\n 0.36% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 841,837 | \n\n 0.36% | \n
| \n Total 20 largest common shareholders | \n\n \n | \n\n 192,378,815 | \n\n 81.25% | \n
| \n Other common shareholders | \n\n \n | \n\n 44,404,387 | \n\n 18.75% | \n
| \n Total common shareholders | \n\n \n | \n\n 236,783,202 | \n\n 100.00% | \n
Note 27Other reserves
| \n USD million | \n\n Note | \n\n Cash flow hedges | \n\n Translation differences | \n\n Share-Option plan | \n\n Acquisition non-controlling interests | \n\n Total | \n
| \n At 1 January 2021 | \n\n \n | \n\n (6.2) | \n\n (70.7) | \n\n 1.3 | \n\n (34.5) | \n\n (110.0) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 3.7 | \n\n - | \n\n - | \n\n - | \n\n 3.7 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n 0.2 | \n\n - | \n\n - | \n\n - | \n\n 0.2 | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n (3.8) | \n\n - | \n\n - | \n\n (3.8) | \n
| \n Cost of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n 0.5 | \n\n - | \n\n 0.5 | \n
| \n At 31 December 2021 | \n\n \n | \n\n (2.3) | \n\n (74.5) | \n\n 1.9 | \n\n (34.5) | \n\n (109.5) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 12.4 | \n\n - | \n\n - | \n\n - | \n\n 12.4 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n (2.4) | \n\n - | \n\n - | \n\n - | \n\n (2.4) | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n (8.9) | \n\n - | \n\n - | \n\n (8.9) | \n
| \n Reclassification of foreign currency translation reserve | \n\n\n | \n\n \n | \n\n 27.0 | \n\n - | \n\n - | \n\n 27.0 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n 0.4 | \n\n - | \n\n 0.4 | \n
| \n Settlement of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n (0.5) | \n\n \n | \n\n (0.5) | \n
| \n At 31 December 2022 | \n\n \n | \n\n 7.7 | \n\n (56.5) | \n\n 1.8 | \n\n (34.5) | \n\n (81.4) | \n
| \n \n | \n\n No.of shares | \n\n Nominal value | \n\n Share capital - USD thousands | \n
| \n Listed shares / Common shares issued | \n\n 236,783,202 | \n\n USD 0.01 | \n\n 2,368 | \n
| \n Preference shares issued | \n\n 16,123,125 | \n\n USD 0.01 | \n\n 161 | \n
| \n Total share capital | \n\n \n | \n\n \n | \n\n 2,529 | \n
Preference shares
29 November 2022, the Group repurchased the preference shares issued to Akastor ASA.(\u201cAkastor\u201d). The preference shares have been acquired for cash at par value, for approximately USD 95 million including accrued dividends. Warrants held by Akastor are not part of the transaction and will remain with Akastor.
Treasury shares - accounting policy
Treasury shares - accounting policy
Accounting policy - Cash dividend
Cash dividend paid in 2022
Preferred payment in kind dividend - 2022
Distribution to shareholders
Accounting policy - Cash dividend
Note 27Other reserves
| \n USD million | \n\n Note | \n\n Cash flow hedges | \n\n Translation differences | \n\n Share-Option plan | \n\n Acquisition non-controlling interests | \n\n Total | \n
| \n At 1 January 2021 | \n\n \n | \n\n (6.2) | \n\n (70.7) | \n\n 1.3 | \n\n (34.5) | \n\n (110.0) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 3.7 | \n\n - | \n\n - | \n\n - | \n\n 3.7 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n 0.2 | \n\n - | \n\n - | \n\n - | \n\n 0.2 | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n (3.8) | \n\n - | \n\n - | \n\n (3.8) | \n
| \n Cost of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n 0.5 | \n\n - | \n\n 0.5 | \n
| \n At 31 December 2021 | \n\n \n | \n\n (2.3) | \n\n (74.5) | \n\n 1.9 | \n\n (34.5) | \n\n (109.5) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 12.4 | \n\n - | \n\n - | \n\n - | \n\n 12.4 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n (2.4) | \n\n - | \n\n - | \n\n - | \n\n (2.4) | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n (8.9) | \n\n - | \n\n - | \n\n (8.9) | \n
| \n Reclassification of foreign currency translation reserve | \n\n\n | \n\n \n | \n\n 27.0 | \n\n - | \n\n - | \n\n 27.0 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n 0.4 | \n\n - | \n\n 0.4 | \n
| \n Settlement of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n (0.5) | \n\n \n | \n\n (0.5) | \n
| \n At 31 December 2022 | \n\n \n | \n\n 7.7 | \n\n (56.5) | \n\n 1.8 | \n\n (34.5) | \n\n (81.4) | \n
Note 28Securities and mortgages
Liabilities secured by mortgage
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non-current liabilities - contractual amounts | \n\n 532.3 | \n\n 886.7 | \n
| \n Current liabilities | \n\n 315.3 | \n\n 161.1 | \n
| \n Total | \n\n 847.6 | \n\n 1,047.7 | \n
Odfjell Invest Ltd. \u2013 USD 425 million Facility
(USD 231.5 million outstanding)
USD 425 million term loan facility agreement entered into on 26 June 2019 with Odfjell Invest Ltd., as borrower and DNB Bank ASA as Agent on behalf of the Lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 552.5 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
As security for the loan, substantially all of the assets of Odfjell Invest Ltd. and its subsidiaries, have been pledged in favour of the lenders. This includes the shares in Deep Sea Atlantic (UK) Ltd., Deep Sea Stavanger (UK) Ltd., mortgages over the semi-submersible drilling rigs Deepsea Atlantic and Deepsea Stavanger and assignment of rights to revenue, interest proceeds and bank accounts. In addition, the shares in Odfjell Invest Ltd., have been pledged by Odfjell Rig Owning Ltd., in favour of the lenders. Odfjell Drilling AS\u2019 shares in the charter company Odfjell Invest AS have also been pledged.
Deep Sea Atlantic (UK) Ltd., Deep Sea Stavanger (UK) Ltd., Odfjell Drilling Ltd. and Odfjell Rig Owning Ltd. have guaranteed as and for its own debt the due and punctual observance and performance of the obligors' obligations under the finance documents.
Odfjell Invest Ltd. \u2013 USD 100 million Junior Facility
(USD 100 million outstanding)
USD 100 million junior facility agreement entered into on 26 June 2019 with Odfjell Invest Ltd., as borrower and DNB Bank ASA as Agent on behalf of the lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 130 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
The facility is covered by the same security package as the USD 425 million facility on a second priority basis.
Odfjell Rig III Ltd. \u2013 USD 530 million Facility
(USD 133 million outstanding)
USD 530 million term loan facility agreement entered into on 7 May 2013 with Odfjell Rig III Ltd., as borrower and DNB Bank ASA as Agent on behalf of the lenders.
As security for the facilities, substantially all of the shares in and assets of Odfjell Rig III Ltd., Odfjell Drilling Shetland Limited and Deep Sea Drilling Company AS is pledged in favour of the lenders and hedging banks, including a mortgage in Deepsea Aberdeen. Also, Odfjell Drilling Ltd., Odfjell Rig Owning Ltd., Odfjell Drilling Shetland Limited and Deep Sea Drilling Company AS, have guaranteed the obligors' obligations under the finance documents.
Odfjell Rig V Ltd. \u2013 USD 325 million Facility
(USD 214 million outstanding)
USD 325 million term loan facility agreement entered into on 30 October 2018 with Odfjell Rig V Ltd., as borrower and DNB Bank ASA as Agent on behalf of the lenders. The liability of Odfjell Drilling Ltd., as guarantor hereunder shall be limited to USD 422.5 million plus any unpaid amount of interest, fees and expenses, and shall be reduced with amounts actually repaid (and prepaid, if any) under the loan agreement.
All of the shares in and substantially all of the assets of Odfjell Rig V Ltd., have been pledged in favour of the lenders, including a mortgage over Deepsea Nordkapp which was established at delivery of the unit on 7 January 2019. Also, Odfjell Rig Owning Ltd. and Odfjell Invest II AS, have guaranteed the obligors' obligations under the finance documents. In addition, Odfjell Drilling AS has pledged its shares in Odfjell Invest II AS as security.
Odfjell Rig V Ltd. \u2013 USD 43.25 million seller\u2019s credit from Samsung
(USD 49 million outstanding)
USD 43.25 million seller\u2019s credit granted to Odfjell Rig V Ltd by Samsung Heavy Industries at delivery of Deepsea Nordkapp 7 January 2019.
The seller\u2019s credit is secured by a second priority mortgage over Deepsea Nordkapp, a second priority assignment of insurances and a parent company guarantee from Odfjell Rig Owning Ltd. The maximum liability of Odfjell Rig Owning Ltd shall be USD 43.25 million plus any amount of unpaid interest and other expenses under the agreement.
Odfjell Drilling Ltd. \u2013 USD 95 million Direct loan
(USD 95 million outstanding)
Direct loan of USD 95 million granted to Odfjell Drilling Ltd. in November 2022 by undisclosed client. Undisclosed client has pledge in preference shares and set-off right in drilling contract.
Odfjell Rig Owning Ltd. \u2013 USD 20 million seller\u2019s credit from Akastor
(USD 20 million outstanding)
Carrying amount of mortgaged assets:
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Property, plant and equipment | \n\n 1,937.9 | \n\n 2,108.9 | \n
| \n Receivables and contract assets | \n\n 112.9 | \n\n 192.8 | \n
| \n Bank deposits | \n\n 157.2 | \n\n 173.0 | \n
| \n Total | \n\n 2,208.0 | \n\n 2,474.7 | \n
Note 29Contingencies
Letter of indemnity
Odfjell Offshore Ltd, a previous subsidiary of Odfjell Drilling Ltd., now a subsidiary of Odfjell Technology Ltd, was registered as a Norwegian Registered Foreign Company (NUF) on 08.03.2016 after migration of the company in January 2016, and is taxable for income to Norway. In 2017, the company filed for a tax deduction, of approximately NOK 2.3 billion, on redemption of shares in Deep Sea Metro Ltd. A total of NOK 1.3 billion of this loss has been utilised through group contributions received from other Norwegian entities within the Odfjell Drilling Ltd group in the period 2017 to 2021.
Odfjell Drilling Ltd has on 1 March 2022 issued a letter of indemnity to Odfjell Technology Ltd (OTL) to hold OTL indemnified in respect of any liability that may occur in relation to the Odfjell Offshore Ltd tax case. This includes financing of any (pre-) payments to the Norwegian Tax Authorities, and funds for any legal proceedings.
21 December 2022 Odfjell Offshore Ltd received a tax ruling from the Norwegian Tax Authorities where the tax loss on the realization of shares in 2017 was denied on the basis of the anti-avoidance rule developed as tax case law. Odfjell Offshore Ltd will appeal the ruling, and the Group is still of the opinion that the most likely outcome of a court case is that the anti-avoidance rule should not be applicable and the denial of the tax loss should be revoked.
Odfjell Offshore Ltd have made an upfront payment 1 February 2023 of USD 31 million in taxes and interest for the financial years 2017 through to 2021, which the Odfjell Drilling Group have had to fund in accordance with the indemnity letter. The Group estimates that the amount will most likely be refunded, and has therefore not recognised any liability as at 31 December 2022.
Accounting policy - Provisions, contingent liabilities and contingent assets
A provision is recognised when an obligation exists (legal or constructive) as a result of a past event, it is probable that an economic settlement will be required as a consequence of the obligation, and a reliable estimate can be made of the amount of the obligation.
The best estimate of the expenditure required to settle the obligation is recognised as a provision. When the effect is material, the provision is discounted using a market based pre-tax discount rate.
Contingent liabilities and contingent assets are not recognised. Contingent liabilities are disclosed unless the possibility of an economic settlement as a consequence of the obligation is remote. Contingent assets are disclosed where an economic settlement as a consequence of the asset is probable.
Accounting policy - Provisions, contingent liabilities and contingent assets
A provision is recognised when an obligation exists (legal or constructive) as a result of a past event, it is probable that an economic settlement will be required as a consequence of the obligation, and a reliable estimate can be made of the amount of the obligation.
The best estimate of the expenditure required to settle the obligation is recognised as a provision. When the effect is material, the provision is discounted using a market based pre-tax discount rate.
Contingent liabilities and contingent assets are not recognised. Contingent liabilities are disclosed unless the possibility of an economic settlement as a consequence of the obligation is remote. Contingent assets are disclosed where an economic settlement as a consequence of the asset is probable.
Letter of indemnity
Odfjell Offshore Ltd, a previous subsidiary of Odfjell Drilling Ltd., now a subsidiary of Odfjell Technology Ltd, was registered as a Norwegian Registered Foreign Company (NUF) on 08.03.2016 after migration of the company in January 2016, and is taxable for income to Norway. In 2017, the company filed for a tax deduction, of approximately NOK 2.3 billion, on redemption of shares in Deep Sea Metro Ltd. A total of NOK 1.3 billion of this loss has been utilised through group contributions received from other Norwegian entities within the Odfjell Drilling Ltd group in the period 2017 to 2021.
Odfjell Drilling Ltd has on 1 March 2022 issued a letter of indemnity to Odfjell Technology Ltd (OTL) to hold OTL indemnified in respect of any liability that may occur in relation to the Odfjell Offshore Ltd tax case. This includes financing of any (pre-) payments to the Norwegian Tax Authorities, and funds for any legal proceedings.
21 December 2022 Odfjell Offshore Ltd received a tax ruling from the Norwegian Tax Authorities where the tax loss on the realization of shares in 2017 was denied on the basis of the anti-avoidance rule developed as tax case law. Odfjell Offshore Ltd will appeal the ruling, and the Group is still of the opinion that the most likely outcome of a court case is that the anti-avoidance rule should not be applicable and the denial of the tax loss should be revoked.
Odfjell Offshore Ltd have made an upfront payment 1 February 2023 of USD 31 million in taxes and interest for the financial years 2017 through to 2021, which the Odfjell Drilling Group have had to fund in accordance with the indemnity letter. The Group estimates that the amount will most likely be refunded, and has therefore not recognised any liability as at 31 December 2022.
There are no other material contingencies to be disclosed as per 31 December 2022.
Letter of indemnity
Odfjell Offshore Ltd, a previous subsidiary of Odfjell Drilling Ltd., now a subsidiary of Odfjell Technology Ltd, was registered as a Norwegian Registered Foreign Company (NUF) on 08.03.2016 after migration of the company in January 2016, and is taxable for income to Norway. In 2017, the company filed for a tax deduction, of approximately NOK 2.3 billion, on redemption of shares in Deep Sea Metro Ltd. A total of NOK 1.3 billion of this loss has been utilised through group contributions received from other Norwegian entities within the Odfjell Drilling Ltd group in the period 2017 to 2021.
Odfjell Drilling Ltd has on 1 March 2022 issued a letter of indemnity to Odfjell Technology Ltd (OTL) to hold OTL indemnified in respect of any liability that may occur in relation to the Odfjell Offshore Ltd tax case. This includes financing of any (pre-) payments to the Norwegian Tax Authorities, and funds for any legal proceedings.
21 December 2022 Odfjell Offshore Ltd received a tax ruling from the Norwegian Tax Authorities where the tax loss on the realization of shares in 2017 was denied on the basis of the anti-avoidance rule developed as tax case law. Odfjell Offshore Ltd will appeal the ruling, and the Group is still of the opinion that the most likely outcome of a court case is that the anti-avoidance rule should not be applicable and the denial of the tax loss should be revoked.
Odfjell Offshore Ltd have made an upfront payment 1 February 2023 of USD 31 million in taxes and interest for the financial years 2017 through to 2021, which the Odfjell Drilling Group have had to fund in accordance with the indemnity letter. The Group estimates that the amount will most likely be refunded, and has therefore not recognised any liability as at 31 December 2022.
There are no other material contingencies to be disclosed as per 31 December 2022.
Note 30Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Rig investments | \n\n 46.7 | \n\n 10.6 | \n
| \n Well Services equipment -Discontinued operations | \n\n - | \n\n 22.2 | \n
| \n Total | \n\n 46.7 | \n\n 32.8 | \n
Note 30Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
| \n USD million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Rig investments | \n\n 46.7 | \n\n 10.6 | \n
| \n Well Services equipment -Discontinued operations | \n\n - | \n\n 22.2 | \n
| \n Total | \n\n 46.7 | \n\n 32.8 | \n
Note 31Subsidiaries
Material subsidiaries
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Ownership 2022 | \n\n Ownership 2021 | \n\n Principal activities | \n
| \n Odfjell Rig Owning Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Invest Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Rig III Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Rig V Ltd. | \n\n England | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Odfjell Drilling Shetland Ltd. | \n\n Scotland | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Deep Sea Atlantic (UK) Ltd. | \n\n England | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Deep Sea Stavanger (UK) Ltd. | \n\n England | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Odfjell Invest AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Invest II AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Deep Sea Drilling Company AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Deep Sea Drilling Company I AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Drilling South Africa Ltd. | \n\n Scotland | \n\n South Africa / Namibia | \n\n USD | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Drilling AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Management | \n
| \n Deep Sea Management AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Crewing | \n
| \n Deep Sea Management International AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n - | \n\n Crewing | \n
| \n Odfjell Drilling Services Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Technology Ltd. * | \n\n Bermuda | \n\n UK | \n\n USD | \n\n - | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Platform Drilling AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Holding company / Drilling operation | \n
| \n Odfjell Drilling Management AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Drilling operation and maintenance of fixed installations | \n
| \n Odfjell Drilling (UK) Ltd. * | \n\n Scotland | \n\n UK | \n\n GBP | \n\n - | \n\n 100 | \n\n Drilling operation and maintenance of fixed installations | \n
| \n Odfjell Partners Invest Ltd. * | \n\n Bermuda | \n\n United Arab Emirates | \n\n USD | \n\n - | \n\n 100 | \n\n Holding company / Well services equipment owner | \n
| \n Odfjell Well Services II Ltd. * | \n\n Bermuda | \n\n Kurdistan | \n\n USD | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Services (Thailand) FLC * | \n\n Thailand | \n\n Thailand | \n\n THB | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Cooperatief U.A. * | \n\n Netherlands | \n\n Europe | \n\n EUR | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services SRL * | \n\n Romania | \n\n Europe | \n\n RON | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Service (UK) Ltd. * | \n\n Scotland | \n\n UK | \n\n GBP | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Norway AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Ltd. * | \n\n British Virgin Islands | \n\n United Arab Emirates | \n\n USD | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Drilling Technology AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Engineering | \n
| \n Odfjell Global Business Services AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Group Business Services | \n
| \n Odfjell Drilling Philippines Corporation * | \n\n Philippines | \n\n Philippines | \n\n PHP | \n\n - | \n\n 100 | \n\n Group Business Services | \n
| \n Odfjell Offshore Ltd. * | \n\n Bermuda | \n\n Norway | \n\n USD | \n\n - | \n\n 100 | \n\n Holding company | \n
| \n\n | \n
The group's principal subsidiaries are set out in table above. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group.
Other subsidiaries included in the consolidated group financial statements:
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Owner-ship 2022 | \n\n Owner-ship 2021 | \n\n Principal activities | \n
| \n Deep Sea Drilling Company II KS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Drilling Cooperatief UA | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Holding - no activity | \n
| \n Odfjell Invest Holland BV | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Perfuracoes e Servicos Ltda | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Drilling Netherlands BV | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Holding - no activity | \n
| \n Odfjell Drilling Brasil BV | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Holding - no activity | \n
| \n Odfjell Drilling Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Gestao de Perfurancoes do Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Arabia Drilling Services LLC * | \n\n Saudi Arabia | \n\n Saudi Arabia | \n\n SAR | \n\n - | \n\n 100 | \n\n No activity | \n
| \n Odfjell Energy Crewing AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n No activity | \n
| \n Odfjell Well Services Ltda * | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n - | \n\n 100 | \n\n No activity | \n
| \n\n | \n
Note 32Investments in joint ventures and associates
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.
Joint ventures
Note 31Subsidiaries
Material subsidiaries
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Ownership 2022 | \n\n Ownership 2021 | \n\n Principal activities | \n
| \n Odfjell Rig Owning Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Invest Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Rig III Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Rig V Ltd. | \n\n England | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Odfjell Drilling Shetland Ltd. | \n\n Scotland | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Deep Sea Atlantic (UK) Ltd. | \n\n England | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Deep Sea Stavanger (UK) Ltd. | \n\n England | \n\n United Arab Emirates / UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Odfjell Invest AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Invest II AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Deep Sea Drilling Company AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Deep Sea Drilling Company I AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Drilling South Africa Ltd. | \n\n Scotland | \n\n South Africa / Namibia | \n\n USD | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Drilling AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Management | \n
| \n Deep Sea Management AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Crewing | \n
| \n Deep Sea Management International AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n - | \n\n Crewing | \n
| \n Odfjell Drilling Services Ltd. | \n\n Bermuda | \n\n UK | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Technology Ltd. * | \n\n Bermuda | \n\n UK | \n\n USD | \n\n - | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Platform Drilling AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Holding company / Drilling operation | \n
| \n Odfjell Drilling Management AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Drilling operation and maintenance of fixed installations | \n
| \n Odfjell Drilling (UK) Ltd. * | \n\n Scotland | \n\n UK | \n\n GBP | \n\n - | \n\n 100 | \n\n Drilling operation and maintenance of fixed installations | \n
| \n Odfjell Partners Invest Ltd. * | \n\n Bermuda | \n\n United Arab Emirates | \n\n USD | \n\n - | \n\n 100 | \n\n Holding company / Well services equipment owner | \n
| \n Odfjell Well Services II Ltd. * | \n\n Bermuda | \n\n Kurdistan | \n\n USD | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Services (Thailand) FLC * | \n\n Thailand | \n\n Thailand | \n\n THB | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Cooperatief U.A. * | \n\n Netherlands | \n\n Europe | \n\n EUR | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services SRL * | \n\n Romania | \n\n Europe | \n\n RON | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Service (UK) Ltd. * | \n\n Scotland | \n\n UK | \n\n GBP | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Norway AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Ltd. * | \n\n British Virgin Islands | \n\n United Arab Emirates | \n\n USD | \n\n - | \n\n 100 | \n\n Well services | \n
| \n Odfjell Drilling Technology AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Engineering | \n
| \n Odfjell Global Business Services AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n Group Business Services | \n
| \n Odfjell Drilling Philippines Corporation * | \n\n Philippines | \n\n Philippines | \n\n PHP | \n\n - | \n\n 100 | \n\n Group Business Services | \n
| \n Odfjell Offshore Ltd. * | \n\n Bermuda | \n\n Norway | \n\n USD | \n\n - | \n\n 100 | \n\n Holding company | \n
| \n\n | \n
The group's principal subsidiaries are set out in table above. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group.
Other subsidiaries included in the consolidated group financial statements:
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Owner-ship 2022 | \n\n Owner-ship 2021 | \n\n Principal activities | \n
| \n Deep Sea Drilling Company II KS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Drilling Cooperatief UA | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Holding - no activity | \n
| \n Odfjell Invest Holland BV | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Perfuracoes e Servicos Ltda | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Drilling Netherlands BV | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Holding - no activity | \n
| \n Odfjell Drilling Brasil BV | \n\n Netherlands | \n\n Netherlands | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Holding - no activity | \n
| \n Odfjell Drilling Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Gestao de Perfurancoes do Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Arabia Drilling Services LLC * | \n\n Saudi Arabia | \n\n Saudi Arabia | \n\n SAR | \n\n - | \n\n 100 | \n\n No activity | \n
| \n Odfjell Energy Crewing AS * | \n\n Norway | \n\n Norway | \n\n NOK | \n\n - | \n\n 100 | \n\n No activity | \n
| \n Odfjell Well Services Ltda * | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n - | \n\n 100 | \n\n No activity | \n
| \n\n | \n
Note 32Investments in joint ventures and associates
Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.
Joint ventures
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.
Note 34Remuneration to the Board of Directors, key executive management and auditor
Details of salary, variable pay and other benefits provided to Group management in 2022:
| \n USD thousands | \n\n \n | \n\n Salary | \n\n Bonus | \n\n Other remuneration | \n\n Pension premium | \n\n Expense share-based payments | \n\n Total | \n
| \n Kjetil Gjersdal | \n\n CEO from April 2022 - Odfjell Drilling AS | \n\n 344 | \n\n 182 | \n\n 19 | \n\n 13 | \n\n 91 | \n\n 649 | \n
| \n Frode Syslak | \n\n CFO from April 2022 - Odfjell Drilling AS | \n\n 155 | \n\n 44 | \n\n 10 | \n\n 12 | \n\n 48 | \n\n 269 | \n
| \n Simen Lieungh | \n\n CEO to March 2022 - Odfjell Drilling AS | \n\n 189 | \n\n 1,507 | \n\n 7 | \n\n 5 | \n\n 192 | \n\n 1,901 | \n
| \n Jone Torstensen | \n\n CFO to March2022 - Odfjell Drilling AS | \n\n 84 | \n\n 156 | \n\n 7 | \n\n 5 | \n\n - | \n\n 253 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Drilling Ltd. | \n\n 116 | \n\n 21 | \n\n 7 | \n\n 6 | \n\n - | \n\n 150 | \n
| \n Total | \n\n \n | \n\n 889 | \n\n 1,910 | \n\n 50 | \n\n 42 | \n\n 332 | \n\n 3,222 | \n
Details of salary, variable pay and other benefits provided to Group management in 2021:
| \n USD thousands | \n\n \n | \n\n Salary | \n\n Bonus | \n\n Other remuneration | \n\n Pension premium | \n\n Expense share-based payments | \n\n Total | \n
| \n Simen Lieungh | \n\n CEO - Odfjell Drilling AS | \n\n 640 | \n\n 1,686 | \n\n 52 | \n\n 15 | \n\n 528 | \n\n 2,921 | \n
| \n Jone Torstensen | \n\n CFO from 1 September 2021- Odfjell Drilling AS | \n\n 87 | \n\n - | \n\n 15 | \n\n 5 | \n\n - | \n\n 106 | \n
| \n Atle S\u00e6b\u00f8 | \n\n CFO to 1 September 2021- Odfjell Drilling AS | \n\n 227 | \n\n 174 | \n\n 17 | \n\n 23 | \n\n - | \n\n 442 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Drilling Ltd. | \n\n 199 | \n\n 37 | \n\n 12 | \n\n 11 | \n\n - | \n\n 259 | \n
| \n Total | \n\n \n | \n\n 1,153 | \n\n 1,897 | \n\n 96 | \n\n 54 | \n\n 528 | \n\n 3,728 | \n
The amounts listed as Salary, Bonus, and Other remuneration in the table above represent cash payments in 2021 and 2022. Refer to the Executive Remuneration Report for bonuses earned in 2021 and 2022.
Amounts listed as Pension premium and Expense share-based payments relates to the expense accounted for as personnel expenses in 2021 and 2022. For details regarding settlement in 2022 of share option programme with the previous CEO of Odfjell Drilling AS, refer to Note 35 - Share-based payments.
For details regarding the current incentive share option programme, refer to Note 35 - Share-based payments.
Fees to the Group's auditor
| \n USD thousands | \n\n 2022 | \n\n 2021 | \n
| \n Audit | \n\n 369 | \n\n 431 | \n
| \n Other assurance services | \n\n - | \n\n 17 | \n
| \n Tax advisory fee | \n\n - | \n\n - | \n
| \n Fees for other services | \n\n 13 | \n\n 138 | \n
| \n Total remuneration to the Group's auditor | \n\n 383 | \n\n 586 | \n
All listed fees are net of VAT
Note 35Share-based payments
Accounting policy
The company long term equity settled incentive share option programme in which the employee receives remuneration in the form of share-based payment for services rendered.
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details below.
Details regarding share option programme:
The company entered at 16 May 2018 into a long term incentive share option programme with Simen Lieungh (CEO at the time), granting him options to purchase 960,000 common shares.31 May 2022 this share option programme was settled. As a result of the spin off and a change in CEO, the programme was settled in cash for a total of NOK 4.5 million.
27 June 2022 the Company implemented a new share option plan and allocated options for a total of 1,450,000 common shares, at a strike price of NOK 23.37 per share to certain of its employees.
Overview of outstanding options:
| \n Overview of outstanding options: | \n\n 2022 | \n\n 2021 | \n
| \n Outstanding options 1.1 | \n\n 960,000 | \n\n 960,000 | \n
| \n Options granted | \n\n 1,450,000 | \n\n - | \n
| \n Options forfeited | \n\n - | \n\n - | \n
| \n Options exercised | \n\n (960,000) | \n\n - | \n
| \n Options expired | \n\n - | \n\n - | \n
| \n Outstanding options 31.12 | \n\n 1,450,000 | \n\n 960,000 | \n
| \n Of which exercisable | \n\n - | \n\n 640,000 | \n
The fair value of the options has been calculated using Black & Scholes option-pricing model. The average fair value of the options granted in 2022 is NOK 11.36. The total cost of the share option plan is calculated based on the fair value x options granted. The total cost equals NOK 16.5 million (approximately USD 1.7 million) and is recognised over the period until June 2027.
The calculations are based on the following assumptions:
\u2022The share price on the grant date were set to the stock exchange price NOK 23.675 on the grant date.
\u2022The strike price per option was NOK 23.37.
\u2022The expected price volatility of the company's shares was set to 50% based on historical volatility adjusted for expected changes.
\u2022The expiry date was set to 28 June 2027.
\u2022The expected dividend yield was set to 0%.
\u2022The risk-free interest rate was set to 3.67%.
Accounting policy
The company long term equity settled incentive share option programme in which the employee receives remuneration in the form of share-based payment for services rendered.
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model, further details below.
Note 36Earnings per share
Accounting policy
The basic earnings per share are calculated as the ratio of the profit for the year that is due to the shareholders of the parent divided by the weighted average number of common shares outstanding.
When calculating the diluted earnings per share, the profit that is attributable to the common shareholders of the parent and the weighted average number of common shares outstanding are adjusted for all the dilution effects relating to warrants and share options.
Further description
The Company has issued warrants for 6,837,492 common shares, see further description in Note 24 - Market risk, and has in addition a share option plan for 1,450,000 common shares, see further description in Note 35 - Share-based payments. The warrants represent contingently issuable shares.
Neither the warrants nor the options affect the basic or diluted number of shares in 2021 or 2022.
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Profit/(loss) due to owners of the parent | \n\n 129.6 | \n\n 74.4 | \n
| \n Adjustment for dividends on preference shares | \n\n (8.3) | \n\n (8.6) | \n
| \n Profit/(loss) for the period due to holders of common shares | \n\n 121.3 | \n\n 65.8 | \n
| \n Adjustment related to warrants and share option plan | \n\n - | \n\n - | \n
| \n Diluted profit/(loss) for the period due to the holders of common shares | \n\n 121.3 | \n\n 65.8 | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n
| \n Weighted average number of common shares in issue | \n\n 236,783,202 | \n\n 236,783,202 | \n
| \n Effects of dilutive potential common shares: | \n\n \n | \n\n \n | \n
| \n Warrants | \n\n - | \n\n - | \n
| \n Share option plan | \n\n - | \n\n - | \n
| \n Diluted average number of shares outstanding | \n\n 236,783,202 | \n\n 236,783,202 | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n
| \n Basic earnings per share (USD) | \n\n 0.512 | \n\n 0.278 | \n
| \n Diluted earnings per share (USD) | \n\n 0.512 | \n\n 0.278 | \n
| \n Earnings per share - continuing operations | \n\n \n | \n\n \n | \n
| \n Profit/(loss) for the period due to holders of common shares | \n\n 74.6 | \n\n 52.3 | \n
| \n Diluted profit/(loss) for the period due to the holders of common shares | \n\n 74.6 | \n\n 52.3 | \n
| \n Basic earnings per share - continuing operations (USD) | \n\n 0.315 | \n\n 0.221 | \n
| \n Diluted earnings per share - continuing operations (USD) | \n\n 0.315 | \n\n 0.221 | \n
Accounting policy
The basic earnings per share are calculated as the ratio of the profit for the year that is due to the shareholders of the parent divided by the weighted average number of common shares outstanding.
When calculating the diluted earnings per share, the profit that is attributable to the common shareholders of the parent and the weighted average number of common shares outstanding are adjusted for all the dilution effects relating to warrants and share options.
Note 37Events after the reporting period