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 Prime View, Prime Four Business Park, Kingswells, 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 2023 were approved by the Board of Directors on 18\u00a0April 2024.
The consolidated financial statements including notes for Odfjell Drilling Ltd. for the year 2023 were approved by the Board of Directors on 18\u00a0April 2024.
Basis of preparation
The consolidated financial statements of the Group for the year ended 31 December 2023 comply with IFRS\u00ae Accounting Standards as endorsed by the European Union (EU).
The consolidated financial statements ended 31 December 2023 comprise the income statement, statement of comprehensive income, statement of financial position, statement of cash flows, 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 and development in the renewables sector, 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.
The Group's refinancing risk is considered low given the full refinancing exercise undertaken in 2023. Bank loan facilities do not start maturing until 2028 and the bond in Q2 2028
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 Accounting Standards 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.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries.
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.
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.
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 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n
| \n NOK | \n\n 0.09464 | \n\n 0.10395 | \n\n 0.09831 | \n\n 0.10145 | \n
| \n GBP | \n\n 1.24370 | \n\n 1.23299 | \n\n 1.27150 | \n\n 1.20257 | \n
| \n EUR | \n\n 1.08184 | \n\n 1.05126 | \n\n 1.10500 | \n\n 1.06660 | \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.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
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 consolidated financial statements of the Group for the year ended 31 December 2023 comply with IFRS\u00ae Accounting Standards 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 and development in the renewables sector, 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.
The Group's refinancing risk is considered low given the full refinancing exercise undertaken in 2023. Bank loan facilities do not start maturing until 2028 and the bond in Q2 2028
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.
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) 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 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n
| \n NOK | \n\n 0.09464 | \n\n 0.10395 | \n\n 0.09831 | \n\n 0.10145 | \n
| \n GBP | \n\n 1.24370 | \n\n 1.23299 | \n\n 1.27150 | \n\n 1.20257 | \n
| \n EUR | \n\n 1.08184 | \n\n 1.05126 | \n\n 1.10500 | \n\n 1.06660 | \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.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
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.
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 15, 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 estimation uncertainty
There is estimation uncertainty in the Group's revenue recognition related to bonus and other variable considerations 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).
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 consists 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.
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
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.
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.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices less cost of disposal for mobile drilling units after a 30 year useful lifetime. 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.
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 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
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
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 the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
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
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.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a \u00a0modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.\u00a0
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
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.
Significant estimation uncertainty
The Group 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 23 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.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
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. Fees related to revolving credit facilities are amortised on a straight-line basis over the period which the credit facility is available.
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.
The lease payments are discounted using the lessee\u2019s incremental borrowing rate. 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.
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.
Defined contribution plans
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 2023 and 2022 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
The Norwegian subsidiaries in the Group with employees are required to have a civil service pension scheme according to the Norwegian Act relating to mandatory occupational pensions. These subsidiaries have pension schemes in accordance with the requirements in this Act.
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, or they are expected to be settled in the normal operating cycle.
In accordance with Accounting Standards, 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 - 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
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 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n
| \n NOK | \n\n 0.09464 | \n\n 0.10395 | \n\n 0.09831 | \n\n 0.10145 | \n
| \n GBP | \n\n 1.24370 | \n\n 1.23299 | \n\n 1.27150 | \n\n 1.20257 | \n
| \n EUR | \n\n 1.08184 | \n\n 1.05126 | \n\n 1.10500 | \n\n 1.06660 | \n
The aggregate net foreign exchange gains/losses recognised in profit or loss were:
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Net currency gain / (loss) included in finance costs | \n\n (8.6) | \n\n (3.6) | \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 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n
| \n NOK | \n\n 0.09464 | \n\n 0.10395 | \n\n 0.09831 | \n\n 0.10145 | \n
| \n GBP | \n\n 1.24370 | \n\n 1.23299 | \n\n 1.27150 | \n\n 1.20257 | \n
| \n EUR | \n\n 1.08184 | \n\n 1.05126 | \n\n 1.10500 | \n\n 1.06660 | \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.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
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.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
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.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
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 in 2022
In March 2022, Odfjell Drilling successfully listed Odfjell Technology Ltd as a separate entity and the shares in Odfjell Technology was distributed to the shareholders in the Company.
The results of discontinued operations in 2022 of USD 47 million are presented separately from the continuing operations as a single amount of profit. The profit includes the results of discontinued operations until distribution, net of tax, which amounted to USD 10 million. Furthermore, a gain of USD 36 million was recognised in 2022 when distributing the discontinued operation. The gain equals the fair value of the discontinued operation less the book value of the net assets distributed, adjusted for the cumulative foreign currency translation reserve in Other Comprehensive Income recycled to the income statement.
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.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
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.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
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.
Contract liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
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.
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.
Note 3Critical accounting estimates and judgements
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 regarding estimation uncertainty is disclosed in the following notes.
\u2022Revenue recognition (Note 6 - Revenue)
\u2022Value in use regarding impairment reversal (Note 10 - Tangible fixed assets)
\u2022Useful life mobile drilling units (Note 10 - Tangible fixed assets)
\u2022Warrant liabilities measured at fair value (Note 13 - Financial assets and liabilities)
Detailed information regarding significant judgements is disclosed in the following notes.
\u2022Evaluation of indicators of impairment (Note 10 - Tangible fixed assets)
\u2022Provisions and contingent liabilities (Note 28 - Contingencies)
\u2022Determination of lease term (Note 18 - Leases
Significant estimation uncertainty
There is estimation uncertainty in the Group's revenue recognition related to bonus and other variable considerations 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).
Significant estimation uncertainty
There is estimation uncertainty in the estimation of value in use / estimated recoverable amount as described above related to reversal of impairment.
There is also estimation uncertainty in the evaluation of useful lifetime of the mobile drilling units. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Management evaluates both external and internal sources of information when assessing remaining useful lifetime, including estimated effects of the climate change and the shift to renewable energy sources.
Significant judgement exercised
Management exercises significant judgement in determining whether there are any indicators 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 as at 31 December 2023.
Significant estimation uncertainty
The Group 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 23 Market risk.
Significant judgement exercised
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 executed
Note 3Critical accounting estimates and judgements
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 regarding estimation uncertainty is disclosed in the following notes.
\u2022Revenue recognition (Note 6 - Revenue)
\u2022Value in use regarding impairment reversal (Note 10 - Tangible fixed assets)
\u2022Useful life mobile drilling units (Note 10 - Tangible fixed assets)
\u2022Warrant liabilities measured at fair value (Note 13 - Financial assets and liabilities)
Detailed information regarding significant judgements is disclosed in the following notes.
\u2022Evaluation of indicators of impairment (Note 10 - Tangible fixed assets)
\u2022Provisions and contingent liabilities (Note 28 - Contingencies)
\u2022Determination of lease term (Note 18 - Leases
Significant estimation uncertainty
Significant estimation uncertainty
There is estimation uncertainty in the estimation of value in use / estimated recoverable amount as described above related to reversal of impairment.
Significant estimation uncertainty
The Group 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 23 Market risk.
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 regarding estimation uncertainty is disclosed in the following notes.
\u2022Revenue recognition (Note 6 - Revenue)
\u2022Value in use regarding impairment reversal (Note 10 - Tangible fixed assets)
\u2022Useful life mobile drilling units (Note 10 - Tangible fixed assets)
\u2022Warrant liabilities measured at fair value (Note 13 - Financial assets and liabilities)
Detailed information regarding significant judgements is disclosed in the following notes.
\u2022Evaluation of indicators of impairment (Note 10 - Tangible fixed assets)
\u2022Provisions and contingent liabilities (Note 28 - Contingencies)
\u2022Determination of lease term (Note 18 - Leases
Detailed information regarding significant judgements is disclosed in the following notes.
\u2022Evaluation of indicators of impairment (Note 10 - Tangible fixed assets)
\u2022Provisions and contingent liabilities (Note 28 - Contingencies)
\u2022Determination of lease term (Note 18 - Leases
Significant judgement exercised
Management exercises significant judgement in determining whether there are any indicators 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
Significant judgement exercised
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 may from time to time be subject to various legal proceedings, disputes and claims including regulatory discussions related to the Group\u2019s business, investments etc., of which the outcomes are subject to significant uncertainty. Management applies significant judgement when evaluating the degree of probability of an unfavourable outcome and the ability to make a reasonable estimate of the amount of loss. Unanticipated events or changes in these factors may require the Group to accrue for a matter that has not been previously accrued for because it was not considered probable, or a reasonable estimate could not be made, or increase or decrease an amount accrued for a matter in previous reporting periods.
Letter of indemnity and related receivable
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 realisation of shares in 2017 was denied on the basis of the anti-avoidance rule developed as tax case law. Odfjell Offshore Ltd has appealed 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 NOK 307 million (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.
As stated above the Group's best judgement is that the tax case will be won by Odfjell Offshore Ltd. The Group has therefore not recognised a provision for the contingent indemnification liability. Consequently, the Group has recognised the upfront payment made as a non-current receivable that will be repaid if the legal appeal prevails.
Note 4Discontinued operations
Spin-off of Odfjell Technology in 2022
In March 2022, Odfjell Drilling successfully listed Odfjell Technology Ltd as a separate entity and the shares in Odfjell Technology was distributed to the shareholders in the Company.
The results of discontinued operations in 2022 of USD 47 million are presented separately from the continuing operations as a single amount of profit. The profit includes the results of discontinued operations until distribution, net of tax, which amounted to USD 10 million. Furthermore, a gain of USD 36 million was recognised in 2022 when distributing the discontinued operation. The gain equals the fair value of the discontinued operation less the book value of the net assets distributed, adjusted for the cumulative foreign currency translation reserve in Other Comprehensive Income recycled to the income statement.
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 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n
| \n External segment revenue | \n\n 572.9 | \n\n 567.3 | \n\n 156.3 | \n\n 78.0 | \n\n 3.3 | \n\n 4.3 | \n\n 732.5 | \n\n 649.5 | \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 572.9 | \n\n 567.3 | \n\n 156.3 | \n\n 78.0 | \n\n 3.3 | \n\n 4.3 | \n\n 732.5 | \n\n 649.5 | \n
| \n EBITDA | \n\n 315.1 | \n\n 303.9 | \n\n 23.6 | \n\n 11.0 | \n\n (10.2) | \n\n (7.0) | \n\n 328.5 | \n\n 308.0 | \n
| \n Depreciation and amortisation | \n\n (18.8) | \n\n (167.1) | \n\n - | \n\n - | \n\n (3.3) | \n\n (4.4) | \n\n (22.1) | \n\n (171.5) | \n
| \n EBIT | \n\n 296.3 | \n\n 136.9 | \n\n 23.6 | \n\n 11.0 | \n\n (13.5) | \n\n (11.3) | \n\n 306.4 | \n\n 136.5 | \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 (84.0) | \n\n (48.3) | \n
| \n Profit before tax - Consolidated Group | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n 222.4 | \n\n 88.3 | \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 15, 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 estimation uncertainty
There is estimation uncertainty in the Group's revenue recognition related to bonus and other variable considerations 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).
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 consists 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.
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 2023 | \n\n 2022 | \n
| \n Revenue from contracts with customers (IFRS 15) | \n\n 448.7 | \n\n 393.7 | \n
| \n Lease component in Own Fleet contracts | \n\n 283.4 | \n\n 255.2 | \n
| \n Other operating revenue | \n\n 0.4 | \n\n 0.6 | \n
| \n Operating revenue | \n\n 732.5 | \n\n 649.5 | \n
Revenue from single external customers (> 10% of revenues)
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Customer 1 | \n\n 441.9 | \n\n 375.6 | \n
| \n Customer 2 | \n\n 127.2 | \n\n 129.2 | \n
| \n Customer 3 | \n\n 85.0 | \n\n - | \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 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n
| \n Norway | \n\n 572.9 | \n\n 567.3 | \n\n 65.5 | \n\n 74.9 | \n\n 3.3 | \n\n 4.3 | \n\n 641.7 | \n\n 646.4 | \n
| \n Namibia | \n\n - | \n\n - | \n\n 82.4 | \n\n 3.1 | \n\n - | \n\n - | \n\n 82.4 | \n\n 3.1 | \n
| \n Canada | \n\n - | \n\n - | \n\n 8.4 | \n\n - | \n\n \n | \n\n - | \n\n 8.4 | \n\n - | \n
| \n Total operating revenue | \n\n 572.9 | \n\n 567.3 | \n\n 156.3 | \n\n 78.0 | \n\n 3.3 | \n\n 4.3 | \n\n 732.5 | \n\n 649.5 | \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 | \n
| \n Within one year | \n\n 249 | \n\n 211 | \n\n 460 | \n
| \n Between one and two years | \n\n 390 | \n\n 231 | \n\n 621 | \n
| \n Between two and three years | \n\n 274 | \n\n 146 | \n\n 420 | \n
| \n Between three and four years | \n\n 98 | \n\n 59 | \n\n 156 | \n
| \n Between four and five years | \n\n 100 | \n\n 59 | \n\n 159 | \n
| \n After five years | \n\n 104 | \n\n 59 | \n\n 163 | \n
| \n Total | \n\n 1,215 | \n\n 765 | \n\n 1,980 | \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 liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
Contract balances specification
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Contract assets | \n\n 8.4 | \n\n 8.6 | \n
| \n Contract liabilities | \n\n (22.1) | \n\n (13.7) | \n
The contract assets as at 31 December 2023 and 31 December 2022 are related to the management agreement with CIMC Raffles regarding management and operation of the Deepsea Yantai. Accrued revenue for the services provided during transit and first mobilisation is payable at the expiry or the termination of the management agreement, or will be offset in the purchase price of the rig, should Odfjell Drilling purchase the unit.
Set out below is the amount of revenue recognised from:
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Amounts included in contract liabilities at the beginning of the year | \n\n 10.8 | \n\n 15.6 | \n
| \n Performance obligations satisfied in the previous years | \n\n 7.2 | \n\n 3.3 | \n
Assets from contract costs
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Asset recognised at 31 December from costs incurred to fulfil a contract | \n\n\n | \n\n 1.4 | \n\n 3.7 | \n
| \n Amortisation recognised as cost of providing services during the period | \n\n \n | \n\n 2.3 | \n\n 4.9 | \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.
The asset is amortised on a straight-line basis over the term of the specific contract it relates to, consistent with the pattern of recognition of the associated revenue.
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 15, 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 estimation uncertainty
There is estimation uncertainty in the Group's revenue recognition related to bonus and other variable considerations 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).
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 consists 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.
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 2023 | \n\n 2022 | \n
| \n Revenue from contracts with customers (IFRS 15) | \n\n 448.7 | \n\n 393.7 | \n
| \n Lease component in Own Fleet contracts | \n\n 283.4 | \n\n 255.2 | \n
| \n Other operating revenue | \n\n 0.4 | \n\n 0.6 | \n
| \n Operating revenue | \n\n 732.5 | \n\n 649.5 | \n
Revenue from single external customers (> 10% of revenues)
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Customer 1 | \n\n 441.9 | \n\n 375.6 | \n
| \n Customer 2 | \n\n 127.2 | \n\n 129.2 | \n
| \n Customer 3 | \n\n 85.0 | \n\n - | \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 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n
| \n Norway | \n\n 572.9 | \n\n 567.3 | \n\n 65.5 | \n\n 74.9 | \n\n 3.3 | \n\n 4.3 | \n\n 641.7 | \n\n 646.4 | \n
| \n Namibia | \n\n - | \n\n - | \n\n 82.4 | \n\n 3.1 | \n\n - | \n\n - | \n\n 82.4 | \n\n 3.1 | \n
| \n Canada | \n\n - | \n\n - | \n\n 8.4 | \n\n - | \n\n \n | \n\n - | \n\n 8.4 | \n\n - | \n
| \n Total operating revenue | \n\n 572.9 | \n\n 567.3 | \n\n 156.3 | \n\n 78.0 | \n\n 3.3 | \n\n 4.3 | \n\n 732.5 | \n\n 649.5 | \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 | \n
| \n Within one year | \n\n 249 | \n\n 211 | \n\n 460 | \n
| \n Between one and two years | \n\n 390 | \n\n 231 | \n\n 621 | \n
| \n Between two and three years | \n\n 274 | \n\n 146 | \n\n 420 | \n
| \n Between three and four years | \n\n 98 | \n\n 59 | \n\n 156 | \n
| \n Between four and five years | \n\n 100 | \n\n 59 | \n\n 159 | \n
| \n After five years | \n\n 104 | \n\n 59 | \n\n 163 | \n
| \n Total | \n\n 1,215 | \n\n 765 | \n\n 1,980 | \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 liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
Contract balances specification
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Contract assets | \n\n 8.4 | \n\n 8.6 | \n
| \n Contract liabilities | \n\n (22.1) | \n\n (13.7) | \n
The contract assets as at 31 December 2023 and 31 December 2022 are related to the management agreement with CIMC Raffles regarding management and operation of the Deepsea Yantai. Accrued revenue for the services provided during transit and first mobilisation is payable at the expiry or the termination of the management agreement, or will be offset in the purchase price of the rig, should Odfjell Drilling purchase the unit.
Set out below is the amount of revenue recognised from:
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Amounts included in contract liabilities at the beginning of the year | \n\n 10.8 | \n\n 15.6 | \n
| \n Performance obligations satisfied in the previous years | \n\n 7.2 | \n\n 3.3 | \n
Assets from contract costs
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Asset recognised at 31 December from costs incurred to fulfil a contract | \n\n\n | \n\n 1.4 | \n\n 3.7 | \n
| \n Amortisation recognised as cost of providing services during the period | \n\n \n | \n\n 2.3 | \n\n 4.9 | \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.
The asset is amortised on a straight-line basis over the term of the specific contract it relates to, consistent with the pattern of recognition of the associated revenue.
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 15, 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 estimation uncertainty
There is estimation uncertainty in the Group's revenue recognition related to bonus and other variable considerations 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).
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 consists 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.
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 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 liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
Note 7Personnel Expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Salaries and wages | \n\n \n | \n\n 188.3 | \n\n 152.9 | \n
| \n Employer`s national insurance contributions | \n\n \n | \n\n 30.7 | \n\n 23.6 | \n
| \n Pension expenses | \n\n\n | \n\n 15.3 | \n\n 13.2 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n 0.4 | \n\n 0.4 | \n
| \n Other benefits | \n\n \n | \n\n 8.5 | \n\n 6.0 | \n
| \n Hired personnel | \n\n \n | \n\n 19.1 | \n\n 10.4 | \n
| \n Total personnel expenses | \n\n \n | \n\n 262.4 | \n\n 206.5 | \n
Note 19Post-employment benefits
The Group has occupational pension plans for employees. The pension plans are measured and presented according to IAS 19.
Defined contribution plans
Defined benefit pension plans
The Group has funded defined benefit pension schemes in one Norwegian company covering a total of 8 active members and 19 pensioners as at 31 December 2023. 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 2023 and 2022 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
The Norwegian subsidiaries in the Group with employees are required to have a civil service pension scheme according to the Norwegian Act relating to mandatory occupational pensions. These subsidiaries have pension schemes in accordance with the requirements in this Act.
Amounts recognised in Statement of Financial Position
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Present value of funded obligations | \n\n 7.6 | \n\n 7.4 | \n
| \n Fair value of plan assets | \n\n (6.8) | \n\n (6.8) | \n
| \n Deficit of funded plans | \n\n 0.7 | \n\n 0.6 | \n
| \n Present value of unfunded obligations | \n\n - | \n\n - | \n
| \n Total deficit of defined benefit pension plans | \n\n 0.7 | \n\n 0.6 | \n
Total pension expenses included in personnel expenses are decomposed as per below:
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Pension expenses from defined benefit scheme included in personnel expenses | \n\n 0.2 | \n\n 0.5 | \n
| \n Pension expenses from defined contribution schemes | \n\n 7.9 | \n\n 6.4 | \n
| \n Pension expenses from multi-employer plans accounted for as defined contribution schemes | \n\n 7.3 | \n\n 6.3 | \n
| \n Total pension expenses included in personnel expenses | \n\n 15.3 | \n\n 13.2 | \n
See Note 7 - Personnel expenses for further information regarding personnel expenses.
| \n \n | \n\n 2023 | \n\n 2022 | \n
| \n No. of employees (annual average) | \n\n 1,471 | \n\n 1,240 | \n
Note 8Combined items, income statement
Other operating expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Hired services | \n\n \n | \n\n 48.5 | \n\n 45.1 | \n
| \n Hired equipment | \n\n \n | \n\n 27.7 | \n\n 27.9 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 36.2 | \n\n 35.3 | \n
| \n Insurance | \n\n \n | \n\n 3.4 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.1 | \n\n 2.2 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.4 | \n\n 1.7 | \n
| \n Travel and course expenses | \n\n \n | \n\n 13.5 | \n\n 9.7 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 6.5 | \n\n 5.4 | \n
| \n Capitalised contract cost | \n\n\n | \n\n - | \n\n (0.7) | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 2.3 | \n\n 4.9 | \n
| \n Total other operating expenses | \n\n \n | \n\n 141.6 | \n\n 135.0 | \n
Note 8Combined items, income statement
Other operating expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Hired services | \n\n \n | \n\n 48.5 | \n\n 45.1 | \n
| \n Hired equipment | \n\n \n | \n\n 27.7 | \n\n 27.9 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 36.2 | \n\n 35.3 | \n
| \n Insurance | \n\n \n | \n\n 3.4 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.1 | \n\n 2.2 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.4 | \n\n 1.7 | \n
| \n Travel and course expenses | \n\n \n | \n\n 13.5 | \n\n 9.7 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 6.5 | \n\n 5.4 | \n
| \n Capitalised contract cost | \n\n\n | \n\n - | \n\n (0.7) | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 2.3 | \n\n 4.9 | \n
| \n Total other operating expenses | \n\n \n | \n\n 141.6 | \n\n 135.0 | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 61.0 | \n\n 44.4 | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 7.9 | \n\n 6.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 4.2 | \n
| \n Other interest expenses | \n\n \n | \n\n 2.1 | \n\n 0.6 | \n
| \n Total interest expenses | \n\n \n | \n\n 75.2 | \n\n 55.4 | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (8.6) | \n\n (3.6) | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n - | \n\n 13.7 | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (3.8) | \n\n (4.5) | \n
| \n Other financial expenses | \n\n \n | \n\n (1.7) | \n\n (1.2) | \n
| \n Total other financial items | \n\n \n | \n\n (14.1) | \n\n 4.4 | \n
| \n\n | \n
Other operating expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Hired services | \n\n \n | \n\n 48.5 | \n\n 45.1 | \n
| \n Hired equipment | \n\n \n | \n\n 27.7 | \n\n 27.9 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 36.2 | \n\n 35.3 | \n
| \n Insurance | \n\n \n | \n\n 3.4 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.1 | \n\n 2.2 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.4 | \n\n 1.7 | \n
| \n Travel and course expenses | \n\n \n | \n\n 13.5 | \n\n 9.7 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 6.5 | \n\n 5.4 | \n
| \n Capitalised contract cost | \n\n\n | \n\n - | \n\n (0.7) | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 2.3 | \n\n 4.9 | \n
| \n Total other operating expenses | \n\n \n | \n\n 141.6 | \n\n 135.0 | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 61.0 | \n\n 44.4 | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 7.9 | \n\n 6.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 4.2 | \n
| \n Other interest expenses | \n\n \n | \n\n 2.1 | \n\n 0.6 | \n
| \n Total interest expenses | \n\n \n | \n\n 75.2 | \n\n 55.4 | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (8.6) | \n\n (3.6) | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n - | \n\n 13.7 | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (3.8) | \n\n (4.5) | \n
| \n Other financial expenses | \n\n \n | \n\n (1.7) | \n\n (1.2) | \n
| \n Total other financial items | \n\n \n | \n\n (14.1) | \n\n 4.4 | \n
| \n\n | \n
Other operating expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Hired services | \n\n \n | \n\n 48.5 | \n\n 45.1 | \n
| \n Hired equipment | \n\n \n | \n\n 27.7 | \n\n 27.9 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 36.2 | \n\n 35.3 | \n
| \n Insurance | \n\n \n | \n\n 3.4 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.1 | \n\n 2.2 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.4 | \n\n 1.7 | \n
| \n Travel and course expenses | \n\n \n | \n\n 13.5 | \n\n 9.7 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 6.5 | \n\n 5.4 | \n
| \n Capitalised contract cost | \n\n\n | \n\n - | \n\n (0.7) | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 2.3 | \n\n 4.9 | \n
| \n Total other operating expenses | \n\n \n | \n\n 141.6 | \n\n 135.0 | \n
Other operating expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Hired services | \n\n \n | \n\n 48.5 | \n\n 45.1 | \n
| \n Hired equipment | \n\n \n | \n\n 27.7 | \n\n 27.9 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n \n | \n\n 36.2 | \n\n 35.3 | \n
| \n Insurance | \n\n \n | \n\n 3.4 | \n\n 3.6 | \n
| \n Freight and transport | \n\n \n | \n\n 2.1 | \n\n 2.2 | \n
| \n Premises facility expenses | \n\n \n | \n\n 1.4 | \n\n 1.7 | \n
| \n Travel and course expenses | \n\n \n | \n\n 13.5 | \n\n 9.7 | \n
| \n Other operating and administrative expenses | \n\n \n | \n\n 6.5 | \n\n 5.4 | \n
| \n Capitalised contract cost | \n\n\n | \n\n - | \n\n (0.7) | \n
| \n Amortised other operating contract cost | \n\n\n | \n\n 2.3 | \n\n 4.9 | \n
| \n Total other operating expenses | \n\n \n | \n\n 141.6 | \n\n 135.0 | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 61.0 | \n\n 44.4 | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 7.9 | \n\n 6.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 4.2 | \n
| \n Other interest expenses | \n\n \n | \n\n 2.1 | \n\n 0.6 | \n
| \n Total interest expenses | \n\n \n | \n\n 75.2 | \n\n 55.4 | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (8.6) | \n\n (3.6) | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n - | \n\n 13.7 | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (3.8) | \n\n (4.5) | \n
| \n Other financial expenses | \n\n \n | \n\n (1.7) | \n\n (1.2) | \n
| \n Total other financial items | \n\n \n | \n\n (14.1) | \n\n 4.4 | \n
| \n\n | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 61.0 | \n\n 44.4 | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 7.9 | \n\n 6.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 4.2 | \n
| \n Other interest expenses | \n\n \n | \n\n 2.1 | \n\n 0.6 | \n
| \n Total interest expenses | \n\n \n | \n\n 75.2 | \n\n 55.4 | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 61.0 | \n\n 44.4 | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 7.9 | \n\n 6.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 4.2 | \n
| \n Other interest expenses | \n\n \n | \n\n 2.1 | \n\n 0.6 | \n
| \n Total interest expenses | \n\n \n | \n\n 75.2 | \n\n 55.4 | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (8.6) | \n\n (3.6) | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n - | \n\n 13.7 | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (3.8) | \n\n (4.5) | \n
| \n Other financial expenses | \n\n \n | \n\n (1.7) | \n\n (1.2) | \n
| \n Total other financial items | \n\n \n | \n\n (14.1) | \n\n 4.4 | \n
| \n\n | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 61.0 | \n\n 44.4 | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 7.9 | \n\n 6.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 4.2 | \n
| \n Other interest expenses | \n\n \n | \n\n 2.1 | \n\n 0.6 | \n
| \n Total interest expenses | \n\n \n | \n\n 75.2 | \n\n 55.4 | \n
Interest expenses
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Interest expenses borrowings | \n\n \n | \n\n 61.0 | \n\n 44.4 | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 7.9 | \n\n 6.3 | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 4.2 | \n\n 4.2 | \n
| \n Other interest expenses | \n\n \n | \n\n 2.1 | \n\n 0.6 | \n
| \n Total interest expenses | \n\n \n | \n\n 75.2 | \n\n 55.4 | \n
Other financial items
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Net currency gain / (loss) | \n\n \n | \n\n (8.6) | \n\n (3.6) | \n
| \n Gain from settlement of interest rate swaps | \n\n\n | \n\n - | \n\n 13.7 | \n
| \n Change in value of market-based derivatives * | \n\n\n | \n\n (3.8) | \n\n (4.5) | \n
| \n Other financial expenses | \n\n \n | \n\n (1.7) | \n\n (1.2) | \n
| \n Total other financial items | \n\n \n | \n\n (14.1) | \n\n 4.4 | \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.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
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.
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 assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
OECD Pillar Two model rules
The Group is within the scope of the OECD Pillar Two model rules, however the effects of the global minimum tax ('GloBE) is not expected to come into effect with the current set-up for the Group until 2026 at the earliest, and likely not until 2027 due to the revenue thresholds in the rules. Since the Pillar Two legislation was not effective at the reporting date, the Group has no related current tax exposure. The Group applies the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12 issued in May 2023. Under the legislation, the Group will be liable to pay a top-up tax for the difference between their GloBE effective tax rate per jurisdiction and the 15% minimum tax rate.
The Group is in the process of assessing its exposure to the Pillar Two legislation for when it comes into effect. Due to the complexities in applying the legislation and calculating GloBE income, the quantitative impact of the enacted or substantively enacted legislation is not yet reasonably estimable.
Relocation completed in 2023
Odfjell Drilling is continuously evaluating its structure to ensure that it has the most suitable and efficient corporate organisation and set-up. Following the spinoff of Odfjell Technology in 2022, the rationale behind the previous set-up has lessened, and the reorganisation was initiated.
The mobile offshore rigs were up until December 2023 allocated to and operated by Dubai registered branches of their respective UK tax resident companies. Net profit related to the rigs were attributable to the Dubai branch of the respective company in accordance with the foreign branch exemption, and were therefore not taxable in the UK. There was no corporate income tax for the Dubai branches in 2022 and 2023.
On 1 December 2023 the rig owning subsidiaries together with their immediate parent companies completed a tax relocation from the United Kingdom to Malta. Later in December 2023 the mobile offshore rigs were transferred from the Dubai branches to the Malta taxable companies.
The tax value of the rigs when entering Malta tax jurisdiction were set to estimated market values, which was higher than the book value of the assets. This resulted in a deferred income tax asset of USD 7.7 million being recognised. The deferred tax asset is calculated using a tax rate of 5% which represent the statutory tax rate expected to apply when the temporary differences reverse.
Income tax expense
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Payable taxes | \n\n (8.2) | \n\n (6.2) | \n
| \n Change in deferred tax | \n\n 7.9 | \n\n 0.8 | \n
| \n Total income tax expense | \n\n (0.3) | \n\n (5.4) | \n
| \n Effective tax rate | \n\n 0.1 % | \n\n 5.5 % | \n
| \n Income tax expense in attributable to: | \n\n \n | \n\n \n | \n
| \n Profit from continuing operations | \n\n (0.3) | \n\n (5.4) | \n
| \n Profit from discontinued operation | \n\n - | \n\n 0.0 | \n
Tax reconciliation
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Profit from continuing operations before income tax expense | \n\n 222.4 | \n\n 88.3 | \n
| \n Profit from discontinued operation before income tax expense | \n\n - | \n\n 10.3 | \n
| \n Total profit before income tax expense | \n\n 222.4 | \n\n 98.5 | \n
| \n Tax calculated at domestic tax rates applicable to profits in respective countries | \n\n (3.0) | \n\n 0.5 | \n
| \n Effect of tax relocation to Malta | \n\n 7.7 | \n\n - | \n
| \n Effect of adjustments recognised related to prior periods | \n\n (0.0) | \n\n (0.3) | \n
| \n Effect of net non-taxable income / (expenses) | \n\n (5.0) | \n\n (5.6) | \n
| \n Income tax expense | \n\n (0.3) | \n\n (5.4) | \n
| \n\n | \n||
| \n\n | \n
Tax losses
The Group does not have any material tax losses for which no tax asset has been recognised.
Refer to Note 28 Contingencies for information regarding letter of indemnity and payment made in 2023 in relation to the Odfjell Offshore Ltd tax case.
The gross movement on the deferred tax account is as follows:
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 01.01 | \n\n 0.4 | \n\n 1.3 | \n
| \n Income statement charge | \n\n 7.9 | \n\n 0.8 | \n
| \n Change in deferred tax on other comprehensive income | \n\n 0.2 | \n\n 0.0 | \n
| \n Disposal through distribution of operation to shareholders | \n\n - | \n\n (1.8) | \n
| \n Currency translation differences | \n\n (0.0) | \n\n 0.1 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 31.12 | \n\n 8.5 | \n\n 0.4 | \n
The Group\u2019s recognised deferred tax assets are related to operations in Malta and 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 01.01.2022 | \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
| \n Income statement charge | \n\n 10.2 | \n\n 0.2 | \n\n (0.1) | \n\n - | \n\n (1.4) | \n\n 8.9 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n 0.1 | \n\n 0.1 | \n\n - | \n\n - | \n\n 0.2 | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n (0.0) | \n\n - | \n\n (0.5) | \n\n (0.5) | \n
| \n Closing balance 31.12.2023 | \n\n 10.2 | \n\n 0.3 | \n\n 0.2 | \n\n - | \n\n 10.6 | \n\n 21.3 | \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 01.01.2022 | \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
| \n Income statement charge | \n\n 0.2 | \n\n (2.3) | \n\n 1.2 | \n\n (1.0) | \n
| \n Currency translation differences | \n\n 0.0 | \n\n 0.0 | \n\n 0.4 | \n\n 0.5 | \n
| \n Closing balance 31.12.2023 | \n\n (0.6) | \n\n (2.4) | \n\n (9.7) | \n\n (12.8) | \n
Net book value of deferred taxes
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Deferred tax assets | \n\n 21.3 | \n\n 12.7 | \n
| \n Deferred tax liabilities offset in deferred tax assets | \n\n (12.8) | \n\n (12.3) | \n
| \n Net book value of deferred tax asset at 31.12. | \n\n 8.5 | \n\n 0.4 | \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 | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After | \n
| \n USD million | \n\n 2023 | \n\n 2023 | \n\n 2023 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Remeasurements of post employment benefit obligations | \n\n (0.5) | \n\n 0.1 | \n\n (0.4) | \n\n (0.1) | \n\n 0.0 | \n\n (0.0) | \n
| \n Cash flow hedges | \n\n (7.7) | \n\n 0.1 | \n\n (7.6) | \n\n - | \n\n - | \n\n - | \n
| \n Other comprehensive income | \n\n (8.2) | \n\n 0.2 | \n\n (8.0) | \n\n (0.1) | \n\n 0.0 | \n\n (0.0) | \n
| \n Deferred tax | \n\n \n | \n\n 0.2 | \n\n \n | \n\n \n | \n\n 0.0 | \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.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
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.
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 assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
OECD Pillar Two model rules
The Group is within the scope of the OECD Pillar Two model rules, however the effects of the global minimum tax ('GloBE) is not expected to come into effect with the current set-up for the Group until 2026 at the earliest, and likely not until 2027 due to the revenue thresholds in the rules. Since the Pillar Two legislation was not effective at the reporting date, the Group has no related current tax exposure. The Group applies the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12 issued in May 2023. Under the legislation, the Group will be liable to pay a top-up tax for the difference between their GloBE effective tax rate per jurisdiction and the 15% minimum tax rate.
The Group is in the process of assessing its exposure to the Pillar Two legislation for when it comes into effect. Due to the complexities in applying the legislation and calculating GloBE income, the quantitative impact of the enacted or substantively enacted legislation is not yet reasonably estimable.
Relocation completed in 2023
Odfjell Drilling is continuously evaluating its structure to ensure that it has the most suitable and efficient corporate organisation and set-up. Following the spinoff of Odfjell Technology in 2022, the rationale behind the previous set-up has lessened, and the reorganisation was initiated.
The mobile offshore rigs were up until December 2023 allocated to and operated by Dubai registered branches of their respective UK tax resident companies. Net profit related to the rigs were attributable to the Dubai branch of the respective company in accordance with the foreign branch exemption, and were therefore not taxable in the UK. There was no corporate income tax for the Dubai branches in 2022 and 2023.
On 1 December 2023 the rig owning subsidiaries together with their immediate parent companies completed a tax relocation from the United Kingdom to Malta. Later in December 2023 the mobile offshore rigs were transferred from the Dubai branches to the Malta taxable companies.
The tax value of the rigs when entering Malta tax jurisdiction were set to estimated market values, which was higher than the book value of the assets. This resulted in a deferred income tax asset of USD 7.7 million being recognised. The deferred tax asset is calculated using a tax rate of 5% which represent the statutory tax rate expected to apply when the temporary differences reverse.
Income tax expense
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Payable taxes | \n\n (8.2) | \n\n (6.2) | \n
| \n Change in deferred tax | \n\n 7.9 | \n\n 0.8 | \n
| \n Total income tax expense | \n\n (0.3) | \n\n (5.4) | \n
| \n Effective tax rate | \n\n 0.1 % | \n\n 5.5 % | \n
| \n Income tax expense in attributable to: | \n\n \n | \n\n \n | \n
| \n Profit from continuing operations | \n\n (0.3) | \n\n (5.4) | \n
| \n Profit from discontinued operation | \n\n - | \n\n 0.0 | \n
Tax reconciliation
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Profit from continuing operations before income tax expense | \n\n 222.4 | \n\n 88.3 | \n
| \n Profit from discontinued operation before income tax expense | \n\n - | \n\n 10.3 | \n
| \n Total profit before income tax expense | \n\n 222.4 | \n\n 98.5 | \n
| \n Tax calculated at domestic tax rates applicable to profits in respective countries | \n\n (3.0) | \n\n 0.5 | \n
| \n Effect of tax relocation to Malta | \n\n 7.7 | \n\n - | \n
| \n Effect of adjustments recognised related to prior periods | \n\n (0.0) | \n\n (0.3) | \n
| \n Effect of net non-taxable income / (expenses) | \n\n (5.0) | \n\n (5.6) | \n
| \n Income tax expense | \n\n (0.3) | \n\n (5.4) | \n
| \n\n | \n||
| \n\n | \n
Tax losses
The Group does not have any material tax losses for which no tax asset has been recognised.
Refer to Note 28 Contingencies for information regarding letter of indemnity and payment made in 2023 in relation to the Odfjell Offshore Ltd tax case.
The gross movement on the deferred tax account is as follows:
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 01.01 | \n\n 0.4 | \n\n 1.3 | \n
| \n Income statement charge | \n\n 7.9 | \n\n 0.8 | \n
| \n Change in deferred tax on other comprehensive income | \n\n 0.2 | \n\n 0.0 | \n
| \n Disposal through distribution of operation to shareholders | \n\n - | \n\n (1.8) | \n
| \n Currency translation differences | \n\n (0.0) | \n\n 0.1 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 31.12 | \n\n 8.5 | \n\n 0.4 | \n
The Group\u2019s recognised deferred tax assets are related to operations in Malta and 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 01.01.2022 | \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
| \n Income statement charge | \n\n 10.2 | \n\n 0.2 | \n\n (0.1) | \n\n - | \n\n (1.4) | \n\n 8.9 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n 0.1 | \n\n 0.1 | \n\n - | \n\n - | \n\n 0.2 | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n (0.0) | \n\n - | \n\n (0.5) | \n\n (0.5) | \n
| \n Closing balance 31.12.2023 | \n\n 10.2 | \n\n 0.3 | \n\n 0.2 | \n\n - | \n\n 10.6 | \n\n 21.3 | \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 01.01.2022 | \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
| \n Income statement charge | \n\n 0.2 | \n\n (2.3) | \n\n 1.2 | \n\n (1.0) | \n
| \n Currency translation differences | \n\n 0.0 | \n\n 0.0 | \n\n 0.4 | \n\n 0.5 | \n
| \n Closing balance 31.12.2023 | \n\n (0.6) | \n\n (2.4) | \n\n (9.7) | \n\n (12.8) | \n
Net book value of deferred taxes
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Deferred tax assets | \n\n 21.3 | \n\n 12.7 | \n
| \n Deferred tax liabilities offset in deferred tax assets | \n\n (12.8) | \n\n (12.3) | \n
| \n Net book value of deferred tax asset at 31.12. | \n\n 8.5 | \n\n 0.4 | \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 | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After | \n
| \n USD million | \n\n 2023 | \n\n 2023 | \n\n 2023 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Remeasurements of post employment benefit obligations | \n\n (0.5) | \n\n 0.1 | \n\n (0.4) | \n\n (0.1) | \n\n 0.0 | \n\n (0.0) | \n
| \n Cash flow hedges | \n\n (7.7) | \n\n 0.1 | \n\n (7.6) | \n\n - | \n\n - | \n\n - | \n
| \n Other comprehensive income | \n\n (8.2) | \n\n 0.2 | \n\n (8.0) | \n\n (0.1) | \n\n 0.0 | \n\n (0.0) | \n
| \n Deferred tax | \n\n \n | \n\n 0.2 | \n\n \n | \n\n \n | \n\n 0.0 | \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.
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.
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.
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.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices less cost of disposal for mobile drilling units after a 30 year useful lifetime. 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.
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 and Periodic maintenance contain assets used in contracts with customers that contain a lease component.
Specification and movements 2023
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \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 At 1 January 2023 | \n\n 2,979.1 | \n\n 185.2 | \n\n 2.2 | \n\n 93.9 | \n\n 3,260.3 | \n
| \n Additions | \n\n 26.9 | \n\n 51.8 | \n\n 0.6 | \n\n 19.7 | \n\n 98.9 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n - | \n\n (0.0) | \n\n (2.1) | \n\n (2.1) | \n
| \n Cost as at 31 December 2023 | \n\n 3,006.0 | \n\n 237.0 | \n\n 2.7 | \n\n 111.5 | \n\n 3,357.2 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n (1,183.8) | \n\n (108.1) | \n\n (0.5) | \n\n (30.1) | \n\n (1,322.4) | \n
| \n Depreciation | \n\n (118.0) | \n\n (45.0) | \n\n (0.4) | \n\n (21.8) | \n\n (185.3) | \n
| \n Reversal of impairment | \n\n 163.4 | \n\n - | \n\n - | \n\n - | \n\n 163.4 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.0) | \n\n 0.1 | \n\n 0.1 | \n
| \n As at 31 December 2023 | \n\n (1,138.4) | \n\n (153.1) | \n\n (0.9) | \n\n (51.8) | \n\n (1,344.2) | \n
| \n Net book value at 31 December 2023 | \n\n 1,867.6 | \n\n 83.9 | \n\n 1.8 | \n\n 59.7 | \n\n 2,013.0 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
For more information about Right-of-use assets, refer to Note 18 - Leases.
Grants received
The Group have received USD 12.7 million from the Norwegian NOx fund in 2023 (USD 6.4 million in 2022). The grants are recognised as a deduction of additions presented in the table above.
Depreciation drilling units
Deepsea Atlantic is depreciated from 4\u00a0August\u00a02009, Deepsea Stavanger is depreciated from 16\u00a0September 2010, Deepsea Aberdeen is depreciated from 21 April 2015, and Deepsea Nordkapp is depreciated from 10 May 2019.
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
Reversal of impairment losses recognised in prior periods
Mobile drilling units impaired in previous periods, are assessed for reversal of the impairment whenever there are indicators that the impairment loss previously recognised no longer exist or has decreased. Odfjell Drilling did per 30 September 2023 identify indications that there are significant favourable effects in the market environment, leading to changes in the estimate
used to determine the recoverable amount when the rigs were impaired. These changes mainly impact the expected future day rates.
On the basis of the identified indicators of impairment reversal, Odfjell Drilling assessed the two impaired drilling rigs for impairment reversal.
Based on the estimated recoverable amount for the previously impaired rigs, the Group has recognised reversal of impairment of USD 71 million for Deepsea Atlantic and USD 92 million for Deepsea Stavanger as at 30 September 2023.
This is a reversal of all previous impairment for these rigs. The carrying amount for the rigs is now equal to the amount that would have been determined, net of depreciation, had no impairment loss been recognised in prior periods.
The key assumptions used in the tests are listed in the table below
| \n Key assumptions | \n\n Deepsea Atlantic | \n\n Deepsea Stavanger | \n
| \n Weighted Average Cost of Capital (WACC) | \n\n 11.0% | \n\n 11.0% | \n
| \n Pre-tax discount rate | \n\n 12.1% | \n\n 12.1% | \n
| \n Estimated firm contract days | \n\n 984 | \n\n 2,101 | \n
| \n Estimated average day rate for firm periods (USD thousand) | \n\n 396 | \n\n 398 | \n
| \n Future base case day rates (USD thousand) | \n\n 450 | \n\n 450 | \n
| \n Future base case OPEX day rates (USD thousand) | \n\n 160 | \n\n 160 | \n
| \n Financial utilisation in periods without firm contract | \n\n 95% | \n\n 95% | \n
Sensitivity analysis - all amounts in USD million
| \n Estimated impairment write-down if: | \n\n \n | \n\n Deepsea Atlantic | \n\n Deepsea Stavanger | \n
| \n \u2022WACC increased by | \n\n 1,5 pp | \n\n - | \n\n - | \n
| \n \u2022WACC increased by | \n\n 3,0 pp | \n\n 4 | \n\n 15 | \n
| \n \u2022Day rate level decreased by * | \n\n 10% | \n\n - | \n\n - | \n
| \n \u2022Day rate level decreased by * | \n\n 20% | \n\n 61 | \n\n 11 | \n
| \n \u2022Normalised opex level increased by | \n\n 10% | \n\n - | \n\n - | \n
| \n \u2022Normalised opex level increased by | \n\n 20% | \n\n 1 | \n\n 12 | \n
| \n \u2022Financial utilisation in normalised period decreased by | \n\n 10 pp | \n\n - | \n\n - | \n
| \n \u2022Financial utilisation in normalised period decreased by | \n\n 20 pp | \n\n 61 | \n\n 18 | \n
| \n\n | \n
Significant estimation uncertainty
There is estimation uncertainty in the estimation of value in use / estimated recoverable amount as described above related to reversal of impairment.
There is also estimation uncertainty in the evaluation of useful lifetime of the mobile drilling units. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Management evaluates both external and internal sources of information when assessing remaining useful lifetime, including estimated effects of the climate change and the shift to renewable energy sources.
Significant judgement exercised
Management exercises significant judgement in determining whether there are any indicators 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 as at 31 December 2023.
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.
Residual values for mobile offshore drilling units are determined based on the estimated second hand prices less cost of disposal for mobile drilling units after a 30 year useful lifetime. 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.
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 less cost of disposal for mobile drilling units after a 30 year useful lifetime. 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.
Specification and movements 2023
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \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 At 1 January 2023 | \n\n 2,979.1 | \n\n 185.2 | \n\n 2.2 | \n\n 93.9 | \n\n 3,260.3 | \n
| \n Additions | \n\n 26.9 | \n\n 51.8 | \n\n 0.6 | \n\n 19.7 | \n\n 98.9 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n - | \n\n (0.0) | \n\n (2.1) | \n\n (2.1) | \n
| \n Cost as at 31 December 2023 | \n\n 3,006.0 | \n\n 237.0 | \n\n 2.7 | \n\n 111.5 | \n\n 3,357.2 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n (1,183.8) | \n\n (108.1) | \n\n (0.5) | \n\n (30.1) | \n\n (1,322.4) | \n
| \n Depreciation | \n\n (118.0) | \n\n (45.0) | \n\n (0.4) | \n\n (21.8) | \n\n (185.3) | \n
| \n Reversal of impairment | \n\n 163.4 | \n\n - | \n\n - | \n\n - | \n\n 163.4 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.0) | \n\n 0.1 | \n\n 0.1 | \n
| \n As at 31 December 2023 | \n\n (1,138.4) | \n\n (153.1) | \n\n (0.9) | \n\n (51.8) | \n\n (1,344.2) | \n
| \n Net book value at 31 December 2023 | \n\n 1,867.6 | \n\n 83.9 | \n\n 1.8 | \n\n 59.7 | \n\n 2,013.0 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
For more information about Right-of-use assets, refer to Note 18 - Leases.
Grants received
The Group have received USD 12.7 million from the Norwegian NOx fund in 2023 (USD 6.4 million in 2022). The grants are recognised as a deduction of additions presented in the table above.
Depreciation drilling units
Deepsea Atlantic is depreciated from 4\u00a0August\u00a02009, Deepsea Stavanger is depreciated from 16\u00a0September 2010, Deepsea Aberdeen is depreciated from 21 April 2015, and Deepsea Nordkapp is depreciated from 10 May 2019.
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
Reversal of impairment losses recognised in prior periods
Mobile drilling units impaired in previous periods, are assessed for reversal of the impairment whenever there are indicators that the impairment loss previously recognised no longer exist or has decreased. Odfjell Drilling did per 30 September 2023 identify indications that there are significant favourable effects in the market environment, leading to changes in the estimate
used to determine the recoverable amount when the rigs were impaired. These changes mainly impact the expected future day rates.
On the basis of the identified indicators of impairment reversal, Odfjell Drilling assessed the two impaired drilling rigs for impairment reversal.
Based on the estimated recoverable amount for the previously impaired rigs, the Group has recognised reversal of impairment of USD 71 million for Deepsea Atlantic and USD 92 million for Deepsea Stavanger as at 30 September 2023.
This is a reversal of all previous impairment for these rigs. The carrying amount for the rigs is now equal to the amount that would have been determined, net of depreciation, had no impairment loss been recognised in prior periods.
The key assumptions used in the tests are listed in the table below
| \n Key assumptions | \n\n Deepsea Atlantic | \n\n Deepsea Stavanger | \n
| \n Weighted Average Cost of Capital (WACC) | \n\n 11.0% | \n\n 11.0% | \n
| \n Pre-tax discount rate | \n\n 12.1% | \n\n 12.1% | \n
| \n Estimated firm contract days | \n\n 984 | \n\n 2,101 | \n
| \n Estimated average day rate for firm periods (USD thousand) | \n\n 396 | \n\n 398 | \n
| \n Future base case day rates (USD thousand) | \n\n 450 | \n\n 450 | \n
| \n Future base case OPEX day rates (USD thousand) | \n\n 160 | \n\n 160 | \n
| \n Financial utilisation in periods without firm contract | \n\n 95% | \n\n 95% | \n
Sensitivity analysis - all amounts in USD million
| \n Estimated impairment write-down if: | \n\n \n | \n\n Deepsea Atlantic | \n\n Deepsea Stavanger | \n
| \n \u2022WACC increased by | \n\n 1,5 pp | \n\n - | \n\n - | \n
| \n \u2022WACC increased by | \n\n 3,0 pp | \n\n 4 | \n\n 15 | \n
| \n \u2022Day rate level decreased by * | \n\n 10% | \n\n - | \n\n - | \n
| \n \u2022Day rate level decreased by * | \n\n 20% | \n\n 61 | \n\n 11 | \n
| \n \u2022Normalised opex level increased by | \n\n 10% | \n\n - | \n\n - | \n
| \n \u2022Normalised opex level increased by | \n\n 20% | \n\n 1 | \n\n 12 | \n
| \n \u2022Financial utilisation in normalised period decreased by | \n\n 10 pp | \n\n - | \n\n - | \n
| \n \u2022Financial utilisation in normalised period decreased by | \n\n 20 pp | \n\n 61 | \n\n 18 | \n
| \n\n | \n
Significant estimation uncertainty
There is estimation uncertainty in the estimation of value in use / estimated recoverable amount as described above related to reversal of impairment.
There is also estimation uncertainty in the evaluation of useful lifetime of the mobile drilling units. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Management evaluates both external and internal sources of information when assessing remaining useful lifetime, including estimated effects of the climate change and the shift to renewable energy sources.
Significant judgement exercised
Management exercises significant judgement in determining whether there are any indicators 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 as at 31 December 2023.
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 less cost of disposal for mobile drilling units after a 30 year useful lifetime. 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.
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.
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
The Group have received USD 12.7 million from the Norwegian NOx fund in 2023 (USD 6.4 million in 2022). The grants are recognised as a deduction of additions presented in the table above.
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.
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 2023
| \n USD million | \n\n Mobile drilling units | \n\n Periodic maintenance | \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 At 1 January 2023 | \n\n 2,979.1 | \n\n 185.2 | \n\n 2.2 | \n\n 93.9 | \n\n 3,260.3 | \n
| \n Additions | \n\n 26.9 | \n\n 51.8 | \n\n 0.6 | \n\n 19.7 | \n\n 98.9 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n - | \n\n (0.0) | \n\n (2.1) | \n\n (2.1) | \n
| \n Cost as at 31 December 2023 | \n\n 3,006.0 | \n\n 237.0 | \n\n 2.7 | \n\n 111.5 | \n\n 3,357.2 | \n
| \n Accumulated depreciation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n (1,183.8) | \n\n (108.1) | \n\n (0.5) | \n\n (30.1) | \n\n (1,322.4) | \n
| \n Depreciation | \n\n (118.0) | \n\n (45.0) | \n\n (0.4) | \n\n (21.8) | \n\n (185.3) | \n
| \n Reversal of impairment | \n\n 163.4 | \n\n - | \n\n - | \n\n - | \n\n 163.4 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n (0.0) | \n\n 0.1 | \n\n 0.1 | \n
| \n As at 31 December 2023 | \n\n (1,138.4) | \n\n (153.1) | \n\n (0.9) | \n\n (51.8) | \n\n (1,344.2) | \n
| \n Net book value at 31 December 2023 | \n\n 1,867.6 | \n\n 83.9 | \n\n 1.8 | \n\n 59.7 | \n\n 2,013.0 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
For more information about Right-of-use assets, refer to Note 18 - Leases.
Grants received
The Group have received USD 12.7 million from the Norwegian NOx fund in 2023 (USD 6.4 million in 2022). The grants are recognised as a deduction of additions presented in the table above.
Depreciation drilling units
Deepsea Atlantic is depreciated from 4\u00a0August\u00a02009, Deepsea Stavanger is depreciated from 16\u00a0September 2010, Deepsea Aberdeen is depreciated from 21 April 2015, and Deepsea Nordkapp is depreciated from 10 May 2019.
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
Reversal of impairment losses recognised in prior periods
Mobile drilling units impaired in previous periods, are assessed for reversal of the impairment whenever there are indicators that the impairment loss previously recognised no longer exist or has decreased. Odfjell Drilling did per 30 September 2023 identify indications that there are significant favourable effects in the market environment, leading to changes in the estimate
used to determine the recoverable amount when the rigs were impaired. These changes mainly impact the expected future day rates.
On the basis of the identified indicators of impairment reversal, Odfjell Drilling assessed the two impaired drilling rigs for impairment reversal.
Based on the estimated recoverable amount for the previously impaired rigs, the Group has recognised reversal of impairment of USD 71 million for Deepsea Atlantic and USD 92 million for Deepsea Stavanger as at 30 September 2023.
This is a reversal of all previous impairment for these rigs. The carrying amount for the rigs is now equal to the amount that would have been determined, net of depreciation, had no impairment loss been recognised in prior periods.
The key assumptions used in the tests are listed in the table below
| \n Key assumptions | \n\n Deepsea Atlantic | \n\n Deepsea Stavanger | \n
| \n Weighted Average Cost of Capital (WACC) | \n\n 11.0% | \n\n 11.0% | \n
| \n Pre-tax discount rate | \n\n 12.1% | \n\n 12.1% | \n
| \n Estimated firm contract days | \n\n 984 | \n\n 2,101 | \n
| \n Estimated average day rate for firm periods (USD thousand) | \n\n 396 | \n\n 398 | \n
| \n Future base case day rates (USD thousand) | \n\n 450 | \n\n 450 | \n
| \n Future base case OPEX day rates (USD thousand) | \n\n 160 | \n\n 160 | \n
| \n Financial utilisation in periods without firm contract | \n\n 95% | \n\n 95% | \n
Sensitivity analysis - all amounts in USD million
| \n Estimated impairment write-down if: | \n\n \n | \n\n Deepsea Atlantic | \n\n Deepsea Stavanger | \n
| \n \u2022WACC increased by | \n\n 1,5 pp | \n\n - | \n\n - | \n
| \n \u2022WACC increased by | \n\n 3,0 pp | \n\n 4 | \n\n 15 | \n
| \n \u2022Day rate level decreased by * | \n\n 10% | \n\n - | \n\n - | \n
| \n \u2022Day rate level decreased by * | \n\n 20% | \n\n 61 | \n\n 11 | \n
| \n \u2022Normalised opex level increased by | \n\n 10% | \n\n - | \n\n - | \n
| \n \u2022Normalised opex level increased by | \n\n 20% | \n\n 1 | \n\n 12 | \n
| \n \u2022Financial utilisation in normalised period decreased by | \n\n 10 pp | \n\n - | \n\n - | \n
| \n \u2022Financial utilisation in normalised period decreased by | \n\n 20 pp | \n\n 61 | \n\n 18 | \n
| \n\n | \n
Significant estimation uncertainty
There is estimation uncertainty in the estimation of value in use / estimated recoverable amount as described above related to reversal of impairment.
There is also estimation uncertainty in the evaluation of useful lifetime of the mobile drilling units. The estimated useful life of the rig could change, resulting in different depreciation amounts in the future. Management evaluates both external and internal sources of information when assessing remaining useful lifetime, including estimated effects of the climate change and the shift to renewable energy sources.
Significant judgement exercised
Management exercises significant judgement in determining whether there are any indicators 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 as at 31 December 2023.
Note 11Intangible assets
Specification and movements 2023
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n 3.0 | \n\n 0.7 | \n\n 3.6 | \n
| \n Currency translation differences | \n\n (0.1) | \n\n (0.0) | \n\n (0.1) | \n
| \n Cost as at 31 December 2023 | \n\n 2.9 | \n\n 0.7 | \n\n 3.5 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n - | \n\n (0.3) | \n\n (0.3) | \n
| \n Amortisation | \n\n \n | \n\n (0.3) | \n\n (0.3) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n (0.0) | \n
| \n As at 31 December 2023 | \n\n - | \n\n (0.5) | \n\n (0.5) | \n
| \n Net book value at 31 December 2023 | \n\n 2.9 | \n\n 0.1 | \n\n 3.0 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n
The intangible assets are not material for the Group, and no further information is therefore disclosed.
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.
Note 11Intangible assets
Specification and movements 2023
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n 3.0 | \n\n 0.7 | \n\n 3.6 | \n
| \n Currency translation differences | \n\n (0.1) | \n\n (0.0) | \n\n (0.1) | \n
| \n Cost as at 31 December 2023 | \n\n 2.9 | \n\n 0.7 | \n\n 3.5 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n - | \n\n (0.3) | \n\n (0.3) | \n
| \n Amortisation | \n\n \n | \n\n (0.3) | \n\n (0.3) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n (0.0) | \n
| \n As at 31 December 2023 | \n\n - | \n\n (0.5) | \n\n (0.5) | \n
| \n Net book value at 31 December 2023 | \n\n 2.9 | \n\n 0.1 | \n\n 3.0 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n
The intangible assets are not material for the Group, and no further information is therefore disclosed.
Note 11Intangible assets
Specification and movements 2023
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n 3.0 | \n\n 0.7 | \n\n 3.6 | \n
| \n Currency translation differences | \n\n (0.1) | \n\n (0.0) | \n\n (0.1) | \n
| \n Cost as at 31 December 2023 | \n\n 2.9 | \n\n 0.7 | \n\n 3.5 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n - | \n\n (0.3) | \n\n (0.3) | \n
| \n Amortisation | \n\n \n | \n\n (0.3) | \n\n (0.3) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n (0.0) | \n
| \n As at 31 December 2023 | \n\n - | \n\n (0.5) | \n\n (0.5) | \n
| \n Net book value at 31 December 2023 | \n\n 2.9 | \n\n 0.1 | \n\n 3.0 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n
The intangible assets are not material for the Group, and no further information is therefore disclosed.
Note 11Intangible assets
Specification and movements 2023
| \n USD million | \n\n Goodwill | \n\n Software | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n 3.0 | \n\n 0.7 | \n\n 3.6 | \n
| \n Currency translation differences | \n\n (0.1) | \n\n (0.0) | \n\n (0.1) | \n
| \n Cost as at 31 December 2023 | \n\n 2.9 | \n\n 0.7 | \n\n 3.5 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2023 | \n\n - | \n\n (0.3) | \n\n (0.3) | \n
| \n Amortisation | \n\n \n | \n\n (0.3) | \n\n (0.3) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n (0.0) | \n
| \n As at 31 December 2023 | \n\n - | \n\n (0.5) | \n\n (0.5) | \n
| \n Net book value at 31 December 2023 | \n\n 2.9 | \n\n 0.1 | \n\n 3.0 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n
The intangible assets are not material for the Group, and no further information is therefore disclosed.
Note 12Other assets
Other current assets
| \n USD million | \n\n Note | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 1.6 | \n\n 2.4 | \n
| \n Investment in 9.875% USD bond HMH Holding b.v. | \n\n \n | \n\n 1.6 | \n\n - | \n
| \n Prepaid expenses | \n\n \n | \n\n 8.0 | \n\n 4.3 | \n
| \n Assets from contract costs | \n\n\n | \n\n 1.4 | \n\n 3.7 | \n
| \n Income tax receivables | \n\n \n | \n\n 0.6 | \n\n 0.1 | \n
| \n VAT receivables | \n\n \n | \n\n 0.3 | \n\n 1.8 | \n
| \n Other current receivables | \n\n \n | \n\n 3.0 | \n\n 0.9 | \n
| \n Total other current assets | \n\n \n | \n\n 16.6 | \n\n 13.3 | \n
Assets from contract costs
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Asset recognised at 31 December from costs incurred to fulfil a contract | \n\n\n | \n\n 1.4 | \n\n 3.7 | \n
| \n Amortisation recognised as cost of providing services during the period | \n\n \n | \n\n 2.3 | \n\n 4.9 | \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 current assets
| \n USD million | \n\n Note | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 1.6 | \n\n 2.4 | \n
| \n Investment in 9.875% USD bond HMH Holding b.v. | \n\n \n | \n\n 1.6 | \n\n - | \n
| \n Prepaid expenses | \n\n \n | \n\n 8.0 | \n\n 4.3 | \n
| \n Assets from contract costs | \n\n\n | \n\n 1.4 | \n\n 3.7 | \n
| \n Income tax receivables | \n\n \n | \n\n 0.6 | \n\n 0.1 | \n
| \n VAT receivables | \n\n \n | \n\n 0.3 | \n\n 1.8 | \n
| \n Other current receivables | \n\n \n | \n\n 3.0 | \n\n 0.9 | \n
| \n Total other current assets | \n\n \n | \n\n 16.6 | \n\n 13.3 | \n
Other current assets
| \n USD million | \n\n Note | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 1.6 | \n\n 2.4 | \n
| \n Investment in 9.875% USD bond HMH Holding b.v. | \n\n \n | \n\n 1.6 | \n\n - | \n
| \n Prepaid expenses | \n\n \n | \n\n 8.0 | \n\n 4.3 | \n
| \n Assets from contract costs | \n\n\n | \n\n 1.4 | \n\n 3.7 | \n
| \n Income tax receivables | \n\n \n | \n\n 0.6 | \n\n 0.1 | \n
| \n VAT receivables | \n\n \n | \n\n 0.3 | \n\n 1.8 | \n
| \n Other current receivables | \n\n \n | \n\n 3.0 | \n\n 0.9 | \n
| \n Total other current assets | \n\n \n | \n\n 16.6 | \n\n 13.3 | \n
Assets from contract costs
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Asset recognised at 31 December from costs incurred to fulfil a contract | \n\n\n | \n\n 1.4 | \n\n 3.7 | \n
| \n Amortisation recognised as cost of providing services during the period | \n\n \n | \n\n 2.3 | \n\n 4.9 | \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 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
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
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 the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
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
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.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a \u00a0modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.\u00a0
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
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.
Significant estimation uncertainty
The Group 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 23 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
Warrant liabilities are Level 3 derivatives held at fair value through profit or loss. The Group has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. No changes have been made as of 31 December 2022 related to the warrant agreements, nor to the modelling technique used to calculate fair value, other than an adjustment of the number of warrants and exercise price as explained in Note 23. Changes in book value relate to fair value changes.
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 2.4 | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 7.5 | \n
| \n \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Investment in bonds | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.4 | \n\n 8.6 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 100.0 | \n\n 91.0 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 3.0 | \n\n 0.9 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 129.2 | \n\n 157.2 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 243.8 | \n\n 267.7 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n\n | \n\n 2 | \n\n 0.0 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n 1.3 | \n\n - | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n \n | \n\n \n | \n\n 0.2 | \n\n \n | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n - | \n\n 2.8 | \n
| \n Warrant liabilities - Other current liabilities | \n\n\n | \n\n 3 | \n\n 4.2 | \n\n \n | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 561.8 | \n\n 529.0 | \n
| \n \u2022Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 149.6 | \n\n 313.5 | \n
| \n \u2022Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 38.4 | \n\n 41.7 | \n
| \n \u2022Current lease liabilities | \n\n\n | \n\n \n | \n\n 24.9 | \n\n 26.5 | \n
| \n \u2022Trade payables | \n\n \n | \n\n \n | \n\n 48.9 | \n\n 35.8 | \n
| \n \u2022Other current liabilities | \n\n\n | \n\n \n | \n\n 33.5 | \n\n 27.9 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 862.9 | \n\n 977.2 | \n
The fair value of financial assets and liabilities at amortised cost is not materially different from their carrying amount.
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. Fees related to revolving credit facilities are amortised on a straight-line basis over the period which the credit facility is available.
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 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Borrowings | \n\n 518.9 | \n\n 141.4 | \n\n 660.3 | \n\n 483.5 | \n\n 289.9 | \n\n 773.4 | \n
| \n Transaction cost, unamortised | \n\n (9.3) | \n\n - | \n\n (9.3) | \n\n (3.3) | \n\n (1.8) | \n\n (5.1) | \n
| \n Seller's credit | \n\n 52.2 | \n\n - | \n\n 52.2 | \n\n 48.8 | \n\n 20.0 | \n\n 68.8 | \n
| \n Accrued interest expenses | \n\n - | \n\n 8.1 | \n\n 8.1 | \n\n - | \n\n 5.4 | \n\n 5.4 | \n
| \n Carrying amounts interest-bearing borrowings | \n\n 561.8 | \n\n 149.6 | \n\n 711.4 | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \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 2023 | \n\n 2023 | \n\n 2023 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Carrying amount as at 1 January | \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
| \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 547.1 | \n\n - | \n\n 547.1 | \n\n 219.2 | \n\n 25.0 | \n\n 244.2 | \n
| \n Paid transaction costs related to amendments and new borrowings | \n\n (12.2) | \n\n - | \n\n (12.2) | \n\n (2.2) | \n\n (0.6) | \n\n (2.7) | \n
| \n Repayment borrowings and seller's credit | \n\n (434.6) | \n\n (245.5) | \n\n (680.2) | \n\n (125.0) | \n\n (192.1) | \n\n (317.1) | \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 - | \n\n - | \n\n - | \n\n (125.3) | \n\n (25.6) | \n\n (150.9) | \n
| \n Seller's Credit | \n\n - | \n\n - | \n\n - | \n\n 20.0 | \n\n - | \n\n 20.0 | \n
| \n Reclassified | \n\n (75.4) | \n\n 75.4 | \n\n - | \n\n (342.6) | \n\n 342.6 | \n\n - | \n
| \n Change in transaction cost, unamortised | \n\n 7.9 | \n\n - | \n\n 7.9 | \n\n 6.3 | \n\n 0.0 | \n\n 6.3 | \n
| \n Change in accrued interest cost | \n\n - | \n\n 6.2 | \n\n 6.2 | \n\n - | \n\n 3.0 | \n\n 3.0 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n - | \n\n 3.2 | \n\n (0.0) | \n\n 3.2 | \n
| \n Carrying amount as at 31 December | \n\n 561.8 | \n\n 149.6 | \n\n 711.4 | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \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 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Within 3 months | \n\n - | \n\n 64.5 | \n\n 64.5 | \n\n - | \n\n 19.6 | \n\n 19.6 | \n
| \n Between 3 and 6 months | \n\n - | \n\n 32.3 | \n\n 32.3 | \n\n - | \n\n 45.6 | \n\n 45.6 | \n
| \n Between 6 and 9 months | \n\n - | \n\n 12.3 | \n\n 12.3 | \n\n - | \n\n 19.6 | \n\n 19.6 | \n
| \n Between 9 months and 1 year | \n\n - | \n\n 32.3 | \n\n 32.3 | \n\n - | \n\n 225.2 | \n\n 225.2 | \n
| \n Between 1 and 2 years | \n\n 91.2 | \n\n - | \n\n 91.2 | \n\n 437.3 | \n\n - | \n\n 437.3 | \n
| \n Between 2 and 3 years | \n\n 93.3 | \n\n - | \n\n 93.3 | \n\n 95.0 | \n\n - | \n\n 95.0 | \n
| \n Between 3 and 4 years | \n\n 93.3 | \n\n - | \n\n 93.3 | \n\n - | \n\n - | \n\n - | \n
| \n Between 4 and 5 years | \n\n 284.8 | \n\n - | \n\n 284.8 | \n\n - | \n\n - | \n\n - | \n
| \n Beyond 5 years | \n\n 8.6 | \n\n - | \n\n 8.6 | \n\n - | \n\n - | \n\n - | \n
| \n Total contractual amounts | \n\n 571.1 | \n\n 141.4 | \n\n 712.6 | \n\n 532.3 | \n\n 309.9 | \n\n 842.2 | \n
The table above analyses Odfjell Drilling's financial liabilities into relevant groupings based on the remaining instalments and payments due at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual cash flows. Refer to Note 22 and Note 23 for further information regarding liquidity risk and interest risk.
Refinancing
Odfjell Drilling has in the first half of 2023 completed its planned refinancing through the issuance of a secured bond and through amending, extending and securing bank facilities.
The new bank facilities carry a floating average interest rate of Secured Overnight Financing Rate (SOFR) + 324 basis points.
The Odfjell Rig III Ltd senior secured bond
The company issued a USD 390 million secured bond maturing in May 2028. The bond has a fixed interest of 9.25% p.a. and semi-annual instalments of USD 20 million. The bond is secured by standard first lien security related to the Deepsea Aberdeen and Deepsea Atlantic, as well as guaranteed by Odfjell Drilling Ltd and various subsidiaries.
Odfjell Drilling Ltd. currently holds USD 7 million of the bond. The bond liability in the consolidated balance sheet at 31 December 2023 is therefore USD 363 million.
The Odfjell Rig III Ltd. bank facility
The remaining contractual amount of USD 107 million of the old facility was repaid in June 2023.
The Odfjell Invest Ltd. facilities
Remaining contractual amount for the old senior bank facility of USD 220 million and USD 100 million for the junior facility was repaid in June 2023.
A new USD 300 million bank facility on Deepsea Stavanger, maturing in February 2028, was secured in Q2 2023. The facility consisted of a USD 125 million term loan tranche and a USD 175 million reducing revolving credit facility (\"RCF\").
USD 43 million was drawn on the RCF in June 2023. In September 2023 USD 26 million was repaid, and in October 2023, the remaining USD 17 million was repaid.
The term loan, less scheduled instalment of USD 3.6 million, was made available 5 October 2023. At 31 December 2023, the remaining contractual amount of the term loan amounts to USD 118 million.
The Odfjell Rig V Ltd. facility
The facility with a remaining contractual amount of USD 197 million was amended and extended to January 2029.
Remaining contractual amount of USD 180 million as at 31 December 2023 for the bank facility.
Repayment of seller's credit
USD 20 million was repaid in June 2023.
Repayment of Direct loan
USD 95 million was repaid in October 2023.
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
Odfjell Drilling has USD 165 million available on the RCF facility as per 31 December 2023.
Covenants
The main financial covenants are listed in the table below. The covenants are calculated based on Odfjell Drilling Ltd consolidated financial statements.
| \n Financial covenants | \n\n The Odfjell Rig III Ltd senior secured bond | \n\n The Odfjell Invest Ltd. RCF and Term loan | \n\n The Odfjell Rig V Ltd. Facility | \n
| \n Equity | \n\n n/a | \n\n \u2265 USD 600m | \n\n \u2265 USD 600m | \n
| \n Equity ratio | \n\n \u2265 30% | \n\n \u2265 30% | \n\n \u2265 30% | \n
| \n Total liquidity | \n\n n/a | \n\n \u2265 7.5% of Interest-bearing debt | \n\n \u2265 5% of Interest-bearing debt | \n
| \n Free liquidity | \n\n \u2265 USD 50m | \n\n \u2265 USD 50m | \n\n \u2265 USD 50m | \n
| \n Current ratio | \n\n \u2265 1.0x | \n\n \u2265 1.0x | \n\n \u2265 1.0x | \n
| \n Leverage ratio | \n\n n/a | \n\n \u2264 3.0x | \n\n \u2264 5.0x | \n
The Odfjell Drilling Group is compliant with all financial covenants as at 31 December 2023.
Distribution restrictions
The main distribution restrictions are listed in the table below.
| \n Distribution restrictions | \n\n The Odfjell Rig III Ltd senior secured bond | \n\n The Odfjell Invest Ltd. RCF and Term loan | \n\n The Odfjell Rig V Ltd. Facility | \n
| \n Leverage ratio | \n\n \u2264 3.00 (reducing to 2.00 from December 2025) | \n\n \u2264 3.0x | \n\n \u2264 3.0x | \n
| \n Total cash (including undrawn RCF) | \n\n \u00a0\u2265 $150 million (reducing to $100 million after completion of the Company\u2019s final Special Periodic Survey in H1 2025) | \n\n n/a | \n\n n/a | \n
| \n Free cash | \n\n n/a | \n\n \u2265 $75 million | \n\n \u2265 $75 million | \n
Note 22Liquidity risk
The Group's policy regarding the management of the cash positions has three main objectives:
\u2022Matching of surplus funds against borrowing requirements.
\u2022Secure a high level of liquidity in order to meet future plans of the Group, with a targeted minimum of two months cash flow at all times.
\u2022Limitation of credit risks.
Investments may only be made in securities with a rating of Investment grade, BAA (Moodys) , BBB- (Standard and Poors and Fitch IBCA) or better. The Board can approve deviations on a case by case basis.
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
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 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 129 million in addition to available drawing facilities of USD 165 million at the end of 2023. This is deemed to be sufficient funding for the Group\u2019s current activity levels and committed capital expenditures during 2024.
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.
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 - 31.12.2023
| \n USD million | \n\n Less than | \n\n 6 - 12 months | \n\n Between 1 | \n\n Between 2 | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying | \n
| \n Interest-bearing borrowings | \n\n 127.1 | \n\n 72.0 | \n\n 140.0 | \n\n 557.9 | \n\n 8.7 | \n\n 905.8 | \n\n 711.4 | \n
| \n Lease liabilities | \n\n 12.2 | \n\n 12.9 | \n\n 16.4 | \n\n 21.2 | \n\n 10.5 | \n\n 73.1 | \n\n 63.3 | \n
| \n Trade payables | \n\n 48.9 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 48.9 | \n\n 48.9 | \n
| \n Other current payables | \n\n 33.5 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 33.5 | \n\n 33.5 | \n
Maturity of financial liabilities - 31.12.2022
| \n USD million | \n\n Less than | \n\n 6 - 12 months | \n\n Between 1 | \n\n Between 2 | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying | \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
Note 23Market 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 2024, as all units in the fleet has medium to long-term contracts.
Contract status and currency exposure in rig rates
The Deepsea Atlantic was drilling on the Johan Sverdrup Phase II development during 2023, where it will continue until it begins its campaign on the Rosebank field, offshore UK. Current drilling contracts are expected to take firm operations through the first half year of 2026. The day rate for drilling on the Johan Sverdrup consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day. The drilling contract for the Rosebank field include a GBP element intended to cover GBP operating costs. In addition, the Group has entered into forward exchange contracts to hedge some of the residual currency exposure.
During the year, the Deepsea Stavanger was working on various exploration projects for Equinor. The Deepsea Stavanger has firm contract commitments with Equinor until the end of 2024, whereafter it will move onto a new contract with Aker BP expected to take firm operations through 2029. 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 was on contract in 2023 with Equinor, on the Breidablikk and Svalin fields, offshore Norway. Deepsea Aberdeen is expected to continue its work on Breidablikk until at least the end of 2025. 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 Nordkapp was working with Aker BP throughout 2023 and will continue to work with Aker BP until at least 2027. 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
Following an assessment of climate risks and opportunities, both physical and transitional risks in the short, medium and long term, were prioritised. The most significant transition risks, 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, or they are expected to be settled in the normal operating cycle.
The Group has the following derivative financial instruments in the following line items in the balance sheet:
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 - | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n - | \n\n 7.5 | \n
| \n Total non-current derivative financial instruments asset | \n\n - | \n\n 7.5 | \n
| \n Current assets | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n - | \n\n 2.4 | \n
| \n Foreign exchange contracts - cash flow hedges under hedge accounting | \n\n 1.6 | \n\n - | \n
| \n Total current derivative financial instruments asset | \n\n 1.6 | \n\n 2.4 | \n
| \n Non-current liabilities | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n (0.8) | \n\n - | \n
| \n Other Interest rate instruments - cash flow hedges under hedge accounting | \n\n (0.6) | \n\n \n | \n
| \n Warrant liability - at fair value through profit or loss | \n\n - | \n\n (2.8) | \n
| \n Total non-current derivative financial instruments liabilities | \n\n (1.3) | \n\n (2.8) | \n
| \n Current liabilities | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n (0.0) | \n\n - | \n
| \n Foreign exchange contracts - cash flow hedges under hedge accounting | \n\n (0.2) | \n\n - | \n
| \n Warrant liability - at fair value through profit or loss | \n\n (4.2) | \n\n - | \n
| \n Total current derivative financial instruments liabilities | \n\n (4.4) | \n\n - | \n
The Group's hedging reserves disclosed in Note 26 - 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 2022 | \n\n 0.6 | \n\n (2.9) | \n\n (2.3) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n (0.3) | \n\n 12.8 | \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 7.7 | \n\n 7.7 | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n 1.5 | \n\n (0.8) | \n\n 0.6 | \n
| \n Reclassified from OCI to profit or loss | \n\n - | \n\n (8.2) | \n\n (8.2) | \n
| \n Closing balance 31 December 2023 | \n\n 1.5 | \n\n (1.3) | \n\n 0.1 | \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 31.12.2023 | \n\n 31.12.2022 | \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 - | \n\n (0.1) | \n
| \n Gain from settlement of swaps | \n\n - | \n\n 12.1 | \n
| \n Change in fair value | \n\n - | \n\n (5.0) | \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 2.4 | \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 (1.4) | \n\n (1.9) | \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 - 31.12.2023
| \n USD million | \n\n NOK | \n\n GBP | \n\n USD | \n
| \n Cash and cash equivalents | \n\n (4.8) | \n\n 2.8 | \n\n 29.2 | \n
| \n Trade receivables | \n\n 7.5 | \n\n 0.1 | \n\n 36.3 | \n
| \n Contract assets | \n\n - | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (19.3) | \n\n - | \n\n (17.0) | \n
| \n Trade payables | \n\n (5.4) | \n\n (0.5) | \n\n (3.7) | \n
| \n Other current payables | \n\n (0.2) | \n\n (2.3) | \n\n (3.2) | \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 6.3 | \n\n - | \n\n - | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n - | \n\n 6.4 | \n\n - | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n 64.3 | \n\n - | \n\n - | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n 41.0 | \n\n 25.4 | \n\n - | \n
Foreign exchange risk - Exposure - 31.12.2022
| \n USD million | \n\n NOK | \n\n GBP | \n\n USD | \n
| \n Cash and cash equivalents | \n\n 71.2 | \n\n 0.9 | \n\n 12.6 | \n
| \n Trade receivables | \n\n 2.5 | \n\n 0.1 | \n\n 20.8 | \n
| \n Contract assets | \n\n - | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (11.2) | \n\n - | \n\n (26.3) | \n
| \n Trade payables | \n\n (1.1) | \n\n (0.2) | \n\n (6.6) | \n
| \n Other current payables | \n\n (0.2) | \n\n (0.0) | \n\n (0.6) | \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 currency contracts
| \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 31.12.2023 | \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 64.1 | \n\n 15.04.2024 | \n\n n/a | \n\n 0.09831 | \n\n (0.0) | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n GBP | \n\n 5.0 | \n\n 15.04.2024 | \n\n n/a | \n\n 1.26027 | \n\n * | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 257.5 | \n\n 16.06.2024-17.08.2026 | \n\n 1:1 | \n\n 0.09831 | \n\n (0.2) | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n GBP | \n\n 20.0 | \n\n 16.06.2024-17.08.2026 | \n\n 1:1 | \n\n 1.26582 | \n\n * | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 128.8 | \n\n 24.01.2024-22.08.2024 | \n\n 1:1 | \n\n 0.09709 | \n\n 0.4 | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 136.9 | \n\n 24.01.2024-22.08.2024 | \n\n 1:1 | \n\n 0.09132 | \n\n (0.1) | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 267.8 | \n\n 24.06.2024-26.08.2025 | \n\n 1:1 | \n\n 0.09524 | \n\n 1.9 | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 280.6 | \n\n 24.06.2024-26.08.2025 | \n\n 1:1 | \n\n 0.09087 | \n\n (0.6) | \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\n | \n
The aggregate net foreign exchange gains/losses recognised in profit or loss were:
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Net currency gain / (loss) included in finance costs | \n\n (8.6) | \n\n (3.6) | \n
As shown in the table above, the Group is primarily exposed 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 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n
| \n Cash and cash equivalents | \n\n 5.7 | \n\n (9.8) | \n\n 3.1 | \n\n (5.3) | \n\n (3.8) | \n\n 6.5 | \n
| \n Current receivables | \n\n 6.0 | \n\n 3.0 | \n\n 2.9 | \n\n 1.7 | \n\n (2.8) | \n\n (2.0) | \n
| \n Current liabilities | \n\n 0.2 | \n\n (3.5) | \n\n 0.1 | \n\n (1.9) | \n\n (0.1) | \n\n 2.3 | \n
| \n Net effect on profit before tax | \n\n 11.8 | \n\n (10.2) | \n\n 6.1 | \n\n (5.6) | \n\n (6.7) | \n\n 6.8 | \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 interest rate swap agreements as well as interest Floor and Caps instruments at 31 December 2023. 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 2023 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 2023 is approximately 60%.
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 31.12.2023 was 8.7%, 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 31.12.2023 the Group held the following USD interest rate instruments:
| \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 Interest rate swaps - Cash flow hedges under hedge accounting | \n\n 58.9 | \n\n 2028 | \n\n 1:1 | \n\n 4.1620% | \n\n (0.8) | \n
| \n Synthetic instruments - Cash flow hedges under hedge accounting | \n\n 58.9 | \n\n 2028 | \n\n 1:1 | \n\n * | \n\n (0.6) | \n
| \n\n | \n
Caps and Floors are financial instruments used to manage interest rate risk. A cap is a type of interest rate derivative that sets a maximum limit, or cap, on the interest rate that can be paid. The Group have entered into two cap contracts to protect to the Group against interest rate increases beyond 5.5%. A floor is the opposite of a cap. It sets a minimum limit, or floor, on the interest rate that can be received. The Group has entered into two floors instruments with an interest rate of 2.88% and 3.0125% respectively.
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
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 31.12.2023 | \n\n % of total loans | \n\n 31.12.2022 | \n\n % of total loans | \n
| \n Variable rate borrowings | \n\n 283.7 | \n\n 40% | \n\n 471.8 | \n\n 56% | \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 - | \n\n 0% | \n\n 213.8 | \n\n 25% | \n
| \n 1-5 years | \n\n 428.9 | \n\n 60% | \n\n 156.6 | \n\n 19% | \n
| \n Later than 5 years | \n\n - | \n\n 0% | \n\n - | \n\n 0% | \n
| \n Total contractual amounts* | \n\n 712.6 | \n\n 100% | \n\n 842.2 | \n\n 100% | \n
| \n\n | \n
Interest rate sensitivity
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 3 million for the next 12 months as at 31 December 2023, compared to USD 5 million at 31\u00a0December 2022.
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.
No warrants have been exercised in 2022 or 2023.
In accordance with Accounting Standards, 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 2023
\u2022Share price: NOK 39.40
\u2022Volatility of share price: 33.30%
\u2022Risk-free interest rate: 4.35%
\u2022USD/NOK exchange rate: 10.1724
\u2022Dividend yield: 6.2%
\u2022No tranches have been exercised
Based on the valuation, fair value of the warrant liability is estimated to be NOK 43 million / USD 4.2 million as at 31 December 2023 (NOK 28 million / USD 2.8 million as at 31 December 2022).
The negative change in fair value in 2023 of USD 1.4 million (negative change of USD 1.9 million in 2022) was recognised as part of Other financial items.
Note 24Credit 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.
The maximum exposure regarding trade receivables is the carrying amount of USD 100\u00a0million.
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 expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2023 or 31 December 2022 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables
The Group has not recognised any impairment losses in 2022 or 2023, and the expected loss rate is set to 0.
No provision for impairment losses is recognised as at 31 December 2023.
The ageing of the trade receivables - 31.12.2023
| \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 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2023 | \n
| \n Not due | \n\n 0.0% | \n\n 92.6 | \n\n - | \n\n 92.6 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 7.4 | \n\n - | \n\n 7.4 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n - | \n\n - | \n\n - | \n
| \n Over 6 months | \n\n 0.0% | \n\n - | \n\n - | \n\n - | \n
| \n Total | \n\n \n | \n\n 100.0 | \n\n - | \n\n 100.0 | \n
Contract assets - 2023
| \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 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2023 | \n
| \n Not due | \n\n 0.0% | \n\n 8.4 | \n\n - | \n\n 8.4 | \n
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
Note 27Securities and mortgages
Liabilities secured by mortgage
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Non current liabilities - contractual amounts | \n\n 571.1 | \n\n 532.3 | \n
| \n Current liabilities | \n\n 149.6 | \n\n 315.3 | \n
| \n Total | \n\n 720.7 | \n\n 847.6 | \n
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.
That cost is recognised in personnel expenses together with a corresponding increase in equity, over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group\u2019s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
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. On 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.
On 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. In 2023 a further 400,000 options were allocated at a strike price of NOK 26.61 per share.
The options can only be exercised in five equal tranches, with vesting periods of one to five years. The options may be exercised in the exercise period starting at vesting date and ending five working days after. Any options not exercised in the first tranches can be rolled forward to the next tranches. Any options not exercised by 2\u00a0July\u00a02027 / 5 February 2028 will be terminated.
Overview of outstanding options:
| \n Overview of outstanding options: | \n\n 2023 | \n\n 2022 | \n
| \n Outstanding options 1.1 | \n\n 1,450,000 | \n\n 960,000 | \n
| \n Options granted | \n\n 400,000 | \n\n 1,450,000 | \n
| \n Options forfeited | \n\n - | \n\n - | \n
| \n Options exercised | \n\n \n | \n\n (960,000) | \n
| \n Options expired | \n\n - | \n\n - | \n
| \n Outstanding options 31.12 | \n\n 1,850,000 | \n\n 1,450,000 | \n
| \n Of which exercisable | \n\n 290,000 | \n\n - | \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, while the fair value of options granted in 2023 is NOK 10.32 The total cost of the share option plan is calculated based on the fair value x options granted. The total cost equals NOK 20.6 million (approximately USD 2 million) and is recognised over the period until January 2028.
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 / NOK 26.375 on the grant date.
\u2022The strike price per option was NOK 23.37 / NOK 26.61.
\u2022The expected price volatility of the company's shares was set to 50% / 40% based on historical volatility adjusted for expected changes.
\u2022The expiry date was set to 28 June 2027 / 1 February 2028.
\u2022The expected dividend yield was set to 0%.
\u2022The risk-free interest rate was set to 3.67% / 2.938%
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
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
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 the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
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
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.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a \u00a0modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.\u00a0
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
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.
Significant estimation uncertainty
The Group 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 23 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
Warrant liabilities are Level 3 derivatives held at fair value through profit or loss. The Group has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. No changes have been made as of 31 December 2022 related to the warrant agreements, nor to the modelling technique used to calculate fair value, other than an adjustment of the number of warrants and exercise price as explained in Note 23. Changes in book value relate to fair value changes.
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 2.4 | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 7.5 | \n
| \n \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Investment in bonds | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.4 | \n\n 8.6 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 100.0 | \n\n 91.0 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 3.0 | \n\n 0.9 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 129.2 | \n\n 157.2 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 243.8 | \n\n 267.7 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n\n | \n\n 2 | \n\n 0.0 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n 1.3 | \n\n - | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n \n | \n\n \n | \n\n 0.2 | \n\n \n | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n - | \n\n 2.8 | \n
| \n Warrant liabilities - Other current liabilities | \n\n\n | \n\n 3 | \n\n 4.2 | \n\n \n | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 561.8 | \n\n 529.0 | \n
| \n \u2022Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 149.6 | \n\n 313.5 | \n
| \n \u2022Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 38.4 | \n\n 41.7 | \n
| \n \u2022Current lease liabilities | \n\n\n | \n\n \n | \n\n 24.9 | \n\n 26.5 | \n
| \n \u2022Trade payables | \n\n \n | \n\n \n | \n\n 48.9 | \n\n 35.8 | \n
| \n \u2022Other current liabilities | \n\n\n | \n\n \n | \n\n 33.5 | \n\n 27.9 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 862.9 | \n\n 977.2 | \n
The fair value of financial assets and liabilities at amortised cost is not materially different from their carrying amount.
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
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
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 the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
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
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.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a \u00a0modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.\u00a0
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
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.
Significant estimation uncertainty
The Group 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 23 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
Warrant liabilities are Level 3 derivatives held at fair value through profit or loss. The Group has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. No changes have been made as of 31 December 2022 related to the warrant agreements, nor to the modelling technique used to calculate fair value, other than an adjustment of the number of warrants and exercise price as explained in Note 23. Changes in book value relate to fair value changes.
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 2.4 | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 7.5 | \n
| \n \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Investment in bonds | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.4 | \n\n 8.6 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 100.0 | \n\n 91.0 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 3.0 | \n\n 0.9 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 129.2 | \n\n 157.2 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 243.8 | \n\n 267.7 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n\n | \n\n 2 | \n\n 0.0 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n 1.3 | \n\n - | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n \n | \n\n \n | \n\n 0.2 | \n\n \n | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n - | \n\n 2.8 | \n
| \n Warrant liabilities - Other current liabilities | \n\n\n | \n\n 3 | \n\n 4.2 | \n\n \n | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 561.8 | \n\n 529.0 | \n
| \n \u2022Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 149.6 | \n\n 313.5 | \n
| \n \u2022Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 38.4 | \n\n 41.7 | \n
| \n \u2022Current lease liabilities | \n\n\n | \n\n \n | \n\n 24.9 | \n\n 26.5 | \n
| \n \u2022Trade payables | \n\n \n | \n\n \n | \n\n 48.9 | \n\n 35.8 | \n
| \n \u2022Other current liabilities | \n\n\n | \n\n \n | \n\n 33.5 | \n\n 27.9 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 862.9 | \n\n 977.2 | \n
The fair value of financial assets and liabilities at amortised cost is not materially different from their carrying amount.
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 2023
\u2022Share price: NOK 39.40
\u2022Volatility of share price: 33.30%
\u2022Risk-free interest rate: 4.35%
\u2022USD/NOK exchange rate: 10.1724
\u2022Dividend yield: 6.2%
Based on the valuation, fair value of the warrant liability is estimated to be NOK 43 million / USD 4.2 million as at 31 December 2023 (NOK 28 million / USD 2.8 million as at 31 December 2022).
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.
That cost is recognised in personnel expenses together with a corresponding increase in equity, over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group\u2019s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
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. On 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.
On 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. In 2023 a further 400,000 options were allocated at a strike price of NOK 26.61 per share.
The options can only be exercised in five equal tranches, with vesting periods of one to five years. The options may be exercised in the exercise period starting at vesting date and ending five working days after. Any options not exercised in the first tranches can be rolled forward to the next tranches. Any options not exercised by 2\u00a0July\u00a02027 / 5 February 2028 will be terminated.
Overview of outstanding options:
| \n Overview of outstanding options: | \n\n 2023 | \n\n 2022 | \n
| \n Outstanding options 1.1 | \n\n 1,450,000 | \n\n 960,000 | \n
| \n Options granted | \n\n 400,000 | \n\n 1,450,000 | \n
| \n Options forfeited | \n\n - | \n\n - | \n
| \n Options exercised | \n\n \n | \n\n (960,000) | \n
| \n Options expired | \n\n - | \n\n - | \n
| \n Outstanding options 31.12 | \n\n 1,850,000 | \n\n 1,450,000 | \n
| \n Of which exercisable | \n\n 290,000 | \n\n - | \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, while the fair value of options granted in 2023 is NOK 10.32 The total cost of the share option plan is calculated based on the fair value x options granted. The total cost equals NOK 20.6 million (approximately USD 2 million) and is recognised over the period until January 2028.
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 / NOK 26.375 on the grant date.
\u2022The strike price per option was NOK 23.37 / NOK 26.61.
\u2022The expected price volatility of the company's shares was set to 50% / 40% based on historical volatility adjusted for expected changes.
\u2022The expiry date was set to 28 June 2027 / 1 February 2028.
\u2022The expected dividend yield was set to 0%.
\u2022The risk-free interest rate was set to 3.67% / 2.938%
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
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
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 the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
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
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.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a \u00a0modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.\u00a0
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
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.
Significant estimation uncertainty
The Group 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 23 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
Warrant liabilities are Level 3 derivatives held at fair value through profit or loss. The Group has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. No changes have been made as of 31 December 2022 related to the warrant agreements, nor to the modelling technique used to calculate fair value, other than an adjustment of the number of warrants and exercise price as explained in Note 23. Changes in book value relate to fair value changes.
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 2.4 | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 7.5 | \n
| \n \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Investment in bonds | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.4 | \n\n 8.6 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 100.0 | \n\n 91.0 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 3.0 | \n\n 0.9 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 129.2 | \n\n 157.2 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 243.8 | \n\n 267.7 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n\n | \n\n 2 | \n\n 0.0 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n 1.3 | \n\n - | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n \n | \n\n \n | \n\n 0.2 | \n\n \n | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n - | \n\n 2.8 | \n
| \n Warrant liabilities - Other current liabilities | \n\n\n | \n\n 3 | \n\n 4.2 | \n\n \n | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 561.8 | \n\n 529.0 | \n
| \n \u2022Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 149.6 | \n\n 313.5 | \n
| \n \u2022Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 38.4 | \n\n 41.7 | \n
| \n \u2022Current lease liabilities | \n\n\n | \n\n \n | \n\n 24.9 | \n\n 26.5 | \n
| \n \u2022Trade payables | \n\n \n | \n\n \n | \n\n 48.9 | \n\n 35.8 | \n
| \n \u2022Other current liabilities | \n\n\n | \n\n \n | \n\n 33.5 | \n\n 27.9 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 862.9 | \n\n 977.2 | \n
The fair value of financial assets and liabilities at amortised cost is not materially different from their carrying amount.
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
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
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 the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
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
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.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a \u00a0modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.\u00a0
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
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.
Significant estimation uncertainty
The Group 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 23 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
Warrant liabilities are Level 3 derivatives held at fair value through profit or loss. The Group has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. No changes have been made as of 31 December 2022 related to the warrant agreements, nor to the modelling technique used to calculate fair value, other than an adjustment of the number of warrants and exercise price as explained in Note 23. Changes in book value relate to fair value changes.
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 2.4 | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 7.5 | \n
| \n \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Investment in bonds | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.4 | \n\n 8.6 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 100.0 | \n\n 91.0 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 3.0 | \n\n 0.9 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 129.2 | \n\n 157.2 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 243.8 | \n\n 267.7 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n\n | \n\n 2 | \n\n 0.0 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n 1.3 | \n\n - | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n \n | \n\n \n | \n\n 0.2 | \n\n \n | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n - | \n\n 2.8 | \n
| \n Warrant liabilities - Other current liabilities | \n\n\n | \n\n 3 | \n\n 4.2 | \n\n \n | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 561.8 | \n\n 529.0 | \n
| \n \u2022Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 149.6 | \n\n 313.5 | \n
| \n \u2022Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 38.4 | \n\n 41.7 | \n
| \n \u2022Current lease liabilities | \n\n\n | \n\n \n | \n\n 24.9 | \n\n 26.5 | \n
| \n \u2022Trade payables | \n\n \n | \n\n \n | \n\n 48.9 | \n\n 35.8 | \n
| \n \u2022Other current liabilities | \n\n\n | \n\n \n | \n\n 33.5 | \n\n 27.9 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 862.9 | \n\n 977.2 | \n
The fair value of financial assets and liabilities at amortised cost is not materially different from their carrying amount.
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, or they are expected to be settled in the normal operating cycle.
The Group has the following derivative financial instruments in the following line items in the balance sheet:
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 - | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n - | \n\n 7.5 | \n
| \n Total non-current derivative financial instruments asset | \n\n - | \n\n 7.5 | \n
| \n Current assets | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n - | \n\n 2.4 | \n
| \n Foreign exchange contracts - cash flow hedges under hedge accounting | \n\n 1.6 | \n\n - | \n
| \n Total current derivative financial instruments asset | \n\n 1.6 | \n\n 2.4 | \n
| \n Non-current liabilities | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n (0.8) | \n\n - | \n
| \n Other Interest rate instruments - cash flow hedges under hedge accounting | \n\n (0.6) | \n\n \n | \n
| \n Warrant liability - at fair value through profit or loss | \n\n - | \n\n (2.8) | \n
| \n Total non-current derivative financial instruments liabilities | \n\n (1.3) | \n\n (2.8) | \n
| \n Current liabilities | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n (0.0) | \n\n - | \n
| \n Foreign exchange contracts - cash flow hedges under hedge accounting | \n\n (0.2) | \n\n - | \n
| \n Warrant liability - at fair value through profit or loss | \n\n (4.2) | \n\n - | \n
| \n Total current derivative financial instruments liabilities | \n\n (4.4) | \n\n - | \n
The Group's hedging reserves disclosed in Note 26 - 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 2022 | \n\n 0.6 | \n\n (2.9) | \n\n (2.3) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n (0.3) | \n\n 12.8 | \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 7.7 | \n\n 7.7 | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n 1.5 | \n\n (0.8) | \n\n 0.6 | \n
| \n Reclassified from OCI to profit or loss | \n\n - | \n\n (8.2) | \n\n (8.2) | \n
| \n Closing balance 31 December 2023 | \n\n 1.5 | \n\n (1.3) | \n\n 0.1 | \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 31.12.2023 | \n\n 31.12.2022 | \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 - | \n\n (0.1) | \n
| \n Gain from settlement of swaps | \n\n - | \n\n 12.1 | \n
| \n Change in fair value | \n\n - | \n\n (5.0) | \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 2.4 | \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 (1.4) | \n\n (1.9) | \n
Foreign currency contracts
| \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 31.12.2023 | \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 64.1 | \n\n 15.04.2024 | \n\n n/a | \n\n 0.09831 | \n\n (0.0) | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n GBP | \n\n 5.0 | \n\n 15.04.2024 | \n\n n/a | \n\n 1.26027 | \n\n * | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 257.5 | \n\n 16.06.2024-17.08.2026 | \n\n 1:1 | \n\n 0.09831 | \n\n (0.2) | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n GBP | \n\n 20.0 | \n\n 16.06.2024-17.08.2026 | \n\n 1:1 | \n\n 1.26582 | \n\n * | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 128.8 | \n\n 24.01.2024-22.08.2024 | \n\n 1:1 | \n\n 0.09709 | \n\n 0.4 | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 136.9 | \n\n 24.01.2024-22.08.2024 | \n\n 1:1 | \n\n 0.09132 | \n\n (0.1) | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 267.8 | \n\n 24.06.2024-26.08.2025 | \n\n 1:1 | \n\n 0.09524 | \n\n 1.9 | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 280.6 | \n\n 24.06.2024-26.08.2025 | \n\n 1:1 | \n\n 0.09087 | \n\n (0.6) | \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\n | \n
As of 31.12.2023 the Group held the following USD interest rate instruments:
| \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 Interest rate swaps - Cash flow hedges under hedge accounting | \n\n 58.9 | \n\n 2028 | \n\n 1:1 | \n\n 4.1620% | \n\n (0.8) | \n
| \n Synthetic instruments - Cash flow hedges under hedge accounting | \n\n 58.9 | \n\n 2028 | \n\n 1:1 | \n\n * | \n\n (0.6) | \n
| \n\n | \n
Caps and Floors are financial instruments used to manage interest rate risk. A cap is a type of interest rate derivative that sets a maximum limit, or cap, on the interest rate that can be paid. The Group have entered into two cap contracts to protect to the Group against interest rate increases beyond 5.5%. A floor is the opposite of a cap. It sets a minimum limit, or floor, on the interest rate that can be received. The Group has entered into two floors instruments with an interest rate of 2.88% and 3.0125% respectively.
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
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.
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
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
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 the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
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
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.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a \u00a0modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.\u00a0
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
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.
Significant estimation uncertainty
The Group 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 23 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
Warrant liabilities are Level 3 derivatives held at fair value through profit or loss. The Group has calculated fair value of the warrant liability using a modelling technique with Monte Carlo simulation together with judgement regarding modelling assumptions. No changes have been made as of 31 December 2022 related to the warrant agreements, nor to the modelling technique used to calculate fair value, other than an adjustment of the number of warrants and exercise price as explained in Note 23. Changes in book value relate to fair value changes.
The Group had the following financial instruments at each reporting period:
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 2.4 | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n - | \n\n 7.5 | \n
| \n \u2022Foreign exchange forward contracts - Other current assets | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Investment in bonds | \n\n\n | \n\n 2 | \n\n 1.6 | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Contract assets | \n\n\n | \n\n \n | \n\n 8.4 | \n\n 8.6 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 100.0 | \n\n 91.0 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 3.0 | \n\n 0.9 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 129.2 | \n\n 157.2 | \n
| \n Total assets as at 31.12 | \n\n \n | \n\n \n | \n\n 243.8 | \n\n 267.7 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 not designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n\n | \n\n 2 | \n\n 0.0 | \n\n - | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Interest rate swaps - Other non-current liabilities | \n\n\n | \n\n 2 | \n\n 1.3 | \n\n - | \n
| \n \u2022Foreign exchange forward contracts - Other current liabilities | \n\n \n | \n\n \n | \n\n 0.2 | \n\n \n | \n
| \n Warrant liabilities - Other non-current liabilities | \n\n\n | \n\n 3 | \n\n - | \n\n 2.8 | \n
| \n Warrant liabilities - Other current liabilities | \n\n\n | \n\n 3 | \n\n 4.2 | \n\n \n | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n \u2022Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 561.8 | \n\n 529.0 | \n
| \n \u2022Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 149.6 | \n\n 313.5 | \n
| \n \u2022Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 38.4 | \n\n 41.7 | \n
| \n \u2022Current lease liabilities | \n\n\n | \n\n \n | \n\n 24.9 | \n\n 26.5 | \n
| \n \u2022Trade payables | \n\n \n | \n\n \n | \n\n 48.9 | \n\n 35.8 | \n
| \n \u2022Other current liabilities | \n\n\n | \n\n \n | \n\n 33.5 | \n\n 27.9 | \n
| \n Total liabilities as at 31.12. | \n\n \n | \n\n \n | \n\n 862.9 | \n\n 977.2 | \n
The fair value of financial assets and liabilities at amortised cost is not materially different from their carrying amount.
Based on the valuation, fair value of the warrant liability is estimated to be NOK 43 million / USD 4.2 million as at 31 December 2023 (NOK 28 million / USD 2.8 million as at 31 December 2022).
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.
That cost is recognised in personnel expenses together with a corresponding increase in equity, over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group\u2019s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
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. On 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.
On 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. In 2023 a further 400,000 options were allocated at a strike price of NOK 26.61 per share.
The options can only be exercised in five equal tranches, with vesting periods of one to five years. The options may be exercised in the exercise period starting at vesting date and ending five working days after. Any options not exercised in the first tranches can be rolled forward to the next tranches. Any options not exercised by 2\u00a0July\u00a02027 / 5 February 2028 will be terminated.
Overview of outstanding options:
| \n Overview of outstanding options: | \n\n 2023 | \n\n 2022 | \n
| \n Outstanding options 1.1 | \n\n 1,450,000 | \n\n 960,000 | \n
| \n Options granted | \n\n 400,000 | \n\n 1,450,000 | \n
| \n Options forfeited | \n\n - | \n\n - | \n
| \n Options exercised | \n\n \n | \n\n (960,000) | \n
| \n Options expired | \n\n - | \n\n - | \n
| \n Outstanding options 31.12 | \n\n 1,850,000 | \n\n 1,450,000 | \n
| \n Of which exercisable | \n\n 290,000 | \n\n - | \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, while the fair value of options granted in 2023 is NOK 10.32 The total cost of the share option plan is calculated based on the fair value x options granted. The total cost equals NOK 20.6 million (approximately USD 2 million) and is recognised over the period until January 2028.
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 / NOK 26.375 on the grant date.
\u2022The strike price per option was NOK 23.37 / NOK 26.61.
\u2022The expected price volatility of the company's shares was set to 50% / 40% based on historical volatility adjusted for expected changes.
\u2022The expiry date was set to 28 June 2027 / 1 February 2028.
\u2022The expected dividend yield was set to 0%.
\u2022The risk-free interest rate was set to 3.67% / 2.938%
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
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
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 the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
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
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.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a \u00a0modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.\u00a0
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
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.
Significant estimation uncertainty
The Group 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 23 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. Fees related to revolving credit facilities are amortised on a straight-line basis over the period which the credit facility is available.
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, or they are expected to be settled in the normal operating cycle.
Financial assets
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Financial liabilities
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
Financial assets
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
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 the HMH Holding b.v. bond investment held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
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.
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, or they are expected to be settled in the normal operating cycle.
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
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.
When the contractual cash flows of financial liabilities such as borrowings are renegotiated or otherwise modified and the renegotiation or modification does not quality for derecognition, the gross carrying amount is recalculated and a \u00a0modification gain or loss is recognised in profit or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the original effective interest rate. Any costs or fees incurred adjust the carrying amount of the modified liability and are amortised over the remaining term of the modified liability.\u00a0
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. Fees related to revolving credit facilities are amortised on a straight-line basis over the period which the credit facility is available.
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. Fees related to revolving credit facilities are amortised on a straight-line basis over the period which the credit facility is available.
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 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Borrowings | \n\n 518.9 | \n\n 141.4 | \n\n 660.3 | \n\n 483.5 | \n\n 289.9 | \n\n 773.4 | \n
| \n Transaction cost, unamortised | \n\n (9.3) | \n\n - | \n\n (9.3) | \n\n (3.3) | \n\n (1.8) | \n\n (5.1) | \n
| \n Seller's credit | \n\n 52.2 | \n\n - | \n\n 52.2 | \n\n 48.8 | \n\n 20.0 | \n\n 68.8 | \n
| \n Accrued interest expenses | \n\n - | \n\n 8.1 | \n\n 8.1 | \n\n - | \n\n 5.4 | \n\n 5.4 | \n
| \n Carrying amounts interest-bearing borrowings | \n\n 561.8 | \n\n 149.6 | \n\n 711.4 | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \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 2023 | \n\n 2023 | \n\n 2023 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Carrying amount as at 1 January | \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
| \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 547.1 | \n\n - | \n\n 547.1 | \n\n 219.2 | \n\n 25.0 | \n\n 244.2 | \n
| \n Paid transaction costs related to amendments and new borrowings | \n\n (12.2) | \n\n - | \n\n (12.2) | \n\n (2.2) | \n\n (0.6) | \n\n (2.7) | \n
| \n Repayment borrowings and seller's credit | \n\n (434.6) | \n\n (245.5) | \n\n (680.2) | \n\n (125.0) | \n\n (192.1) | \n\n (317.1) | \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 - | \n\n - | \n\n - | \n\n (125.3) | \n\n (25.6) | \n\n (150.9) | \n
| \n Seller's Credit | \n\n - | \n\n - | \n\n - | \n\n 20.0 | \n\n - | \n\n 20.0 | \n
| \n Reclassified | \n\n (75.4) | \n\n 75.4 | \n\n - | \n\n (342.6) | \n\n 342.6 | \n\n - | \n
| \n Change in transaction cost, unamortised | \n\n 7.9 | \n\n - | \n\n 7.9 | \n\n 6.3 | \n\n 0.0 | \n\n 6.3 | \n
| \n Change in accrued interest cost | \n\n - | \n\n 6.2 | \n\n 6.2 | \n\n - | \n\n 3.0 | \n\n 3.0 | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n - | \n\n 3.2 | \n\n (0.0) | \n\n 3.2 | \n
| \n Carrying amount as at 31 December | \n\n 561.8 | \n\n 149.6 | \n\n 711.4 | \n\n 529.0 | \n\n 313.5 | \n\n 842.5 | \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 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n\n 31.12.2022 | \n
| \n Within 3 months | \n\n - | \n\n 64.5 | \n\n 64.5 | \n\n - | \n\n 19.6 | \n\n 19.6 | \n
| \n Between 3 and 6 months | \n\n - | \n\n 32.3 | \n\n 32.3 | \n\n - | \n\n 45.6 | \n\n 45.6 | \n
| \n Between 6 and 9 months | \n\n - | \n\n 12.3 | \n\n 12.3 | \n\n - | \n\n 19.6 | \n\n 19.6 | \n
| \n Between 9 months and 1 year | \n\n - | \n\n 32.3 | \n\n 32.3 | \n\n - | \n\n 225.2 | \n\n 225.2 | \n
| \n Between 1 and 2 years | \n\n 91.2 | \n\n - | \n\n 91.2 | \n\n 437.3 | \n\n - | \n\n 437.3 | \n
| \n Between 2 and 3 years | \n\n 93.3 | \n\n - | \n\n 93.3 | \n\n 95.0 | \n\n - | \n\n 95.0 | \n
| \n Between 3 and 4 years | \n\n 93.3 | \n\n - | \n\n 93.3 | \n\n - | \n\n - | \n\n - | \n
| \n Between 4 and 5 years | \n\n 284.8 | \n\n - | \n\n 284.8 | \n\n - | \n\n - | \n\n - | \n
| \n Beyond 5 years | \n\n 8.6 | \n\n - | \n\n 8.6 | \n\n - | \n\n - | \n\n - | \n
| \n Total contractual amounts | \n\n 571.1 | \n\n 141.4 | \n\n 712.6 | \n\n 532.3 | \n\n 309.9 | \n\n 842.2 | \n
The table above analyses Odfjell Drilling's financial liabilities into relevant groupings based on the remaining instalments and payments due at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual cash flows. Refer to Note 22 and Note 23 for further information regarding liquidity risk and interest risk.
Refinancing
Odfjell Drilling has in the first half of 2023 completed its planned refinancing through the issuance of a secured bond and through amending, extending and securing bank facilities.
The new bank facilities carry a floating average interest rate of Secured Overnight Financing Rate (SOFR) + 324 basis points.
The Odfjell Rig III Ltd senior secured bond
The company issued a USD 390 million secured bond maturing in May 2028. The bond has a fixed interest of 9.25% p.a. and semi-annual instalments of USD 20 million. The bond is secured by standard first lien security related to the Deepsea Aberdeen and Deepsea Atlantic, as well as guaranteed by Odfjell Drilling Ltd and various subsidiaries.
Odfjell Drilling Ltd. currently holds USD 7 million of the bond. The bond liability in the consolidated balance sheet at 31 December 2023 is therefore USD 363 million.
The Odfjell Rig III Ltd. bank facility
The remaining contractual amount of USD 107 million of the old facility was repaid in June 2023.
The Odfjell Invest Ltd. facilities
Remaining contractual amount for the old senior bank facility of USD 220 million and USD 100 million for the junior facility was repaid in June 2023.
A new USD 300 million bank facility on Deepsea Stavanger, maturing in February 2028, was secured in Q2 2023. The facility consisted of a USD 125 million term loan tranche and a USD 175 million reducing revolving credit facility (\"RCF\").
USD 43 million was drawn on the RCF in June 2023. In September 2023 USD 26 million was repaid, and in October 2023, the remaining USD 17 million was repaid.
The term loan, less scheduled instalment of USD 3.6 million, was made available 5 October 2023. At 31 December 2023, the remaining contractual amount of the term loan amounts to USD 118 million.
The Odfjell Rig V Ltd. facility
The facility with a remaining contractual amount of USD 197 million was amended and extended to January 2029.
Remaining contractual amount of USD 180 million as at 31 December 2023 for the bank facility.
Repayment of seller's credit
USD 20 million was repaid in June 2023.
Repayment of Direct loan
USD 95 million was repaid in October 2023.
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
Odfjell Drilling has USD 165 million available on the RCF facility as per 31 December 2023.
Covenants
The main financial covenants are listed in the table below. The covenants are calculated based on Odfjell Drilling Ltd consolidated financial statements.
| \n Financial covenants | \n\n The Odfjell Rig III Ltd senior secured bond | \n\n The Odfjell Invest Ltd. RCF and Term loan | \n\n The Odfjell Rig V Ltd. Facility | \n
| \n Equity | \n\n n/a | \n\n \u2265 USD 600m | \n\n \u2265 USD 600m | \n
| \n Equity ratio | \n\n \u2265 30% | \n\n \u2265 30% | \n\n \u2265 30% | \n
| \n Total liquidity | \n\n n/a | \n\n \u2265 7.5% of Interest-bearing debt | \n\n \u2265 5% of Interest-bearing debt | \n
| \n Free liquidity | \n\n \u2265 USD 50m | \n\n \u2265 USD 50m | \n\n \u2265 USD 50m | \n
| \n Current ratio | \n\n \u2265 1.0x | \n\n \u2265 1.0x | \n\n \u2265 1.0x | \n
| \n Leverage ratio | \n\n n/a | \n\n \u2264 3.0x | \n\n \u2264 5.0x | \n
The Odfjell Drilling Group is compliant with all financial covenants as at 31 December 2023.
Distribution restrictions
The main distribution restrictions are listed in the table below.
| \n Distribution restrictions | \n\n The Odfjell Rig III Ltd senior secured bond | \n\n The Odfjell Invest Ltd. RCF and Term loan | \n\n The Odfjell Rig V Ltd. Facility | \n
| \n Leverage ratio | \n\n \u2264 3.00 (reducing to 2.00 from December 2025) | \n\n \u2264 3.0x | \n\n \u2264 3.0x | \n
| \n Total cash (including undrawn RCF) | \n\n \u00a0\u2265 $150 million (reducing to $100 million after completion of the Company\u2019s final Special Periodic Survey in H1 2025) | \n\n n/a | \n\n n/a | \n
| \n Free cash | \n\n n/a | \n\n \u2265 $75 million | \n\n \u2265 $75 million | \n
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. Fees related to revolving credit facilities are amortised on a straight-line basis over the period which the credit facility is available.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
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.
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 liabilities are classified as current liabilities as they are expected to be settled in the normal operating cycle.
Contract balances specification
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Contract assets | \n\n 8.4 | \n\n 8.6 | \n
| \n Contract liabilities | \n\n (22.1) | \n\n (13.7) | \n
The contract assets as at 31 December 2023 and 31 December 2022 are related to the management agreement with CIMC Raffles regarding management and operation of the Deepsea Yantai. Accrued revenue for the services provided during transit and first mobilisation is payable at the expiry or the termination of the management agreement, or will be offset in the purchase price of the rig, should Odfjell Drilling purchase the unit.
Set out below is the amount of revenue recognised from:
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Amounts included in contract liabilities at the beginning of the year | \n\n 10.8 | \n\n 15.6 | \n
| \n Performance obligations satisfied in the previous years | \n\n 7.2 | \n\n 3.3 | \n
Assets from contract costs
| \n USD million | \n\n Note | \n\n 2023 | \n\n 2022 | \n
| \n Asset recognised at 31 December from costs incurred to fulfil a contract | \n\n\n | \n\n 1.4 | \n\n 3.7 | \n
| \n Amortisation recognised as cost of providing services during the period | \n\n \n | \n\n 2.3 | \n\n 4.9 | \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.
The asset is amortised on a straight-line basis over the term of the specific contract it relates to, consistent with the pattern of recognition of the associated revenue.
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 31.12.2023 | \n\n 31.12.2022 | \n
| \n Trade receivables | \n\n \n | \n\n 79.1 | \n\n 47.4 | \n
| \n Earned, not yet invoiced operating revenues | \n\n \n | \n\n 20.8 | \n\n 43.7 | \n
| \n Loss allowance | \n\n\n | \n\n - | \n\n - | \n
| \n Trade receivables - net | \n\n \n | \n\n 100.0 | \n\n 91.0 | \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 31.12.2023 | \n\n 31.12.2022 | \n
| \n Cash in bank | \n\n 56.8 | \n\n 46.2 | \n
| \n Time deposits | \n\n 54.0 | \n\n 89.4 | \n
| \n Retention accounts * | \n\n 8.4 | \n\n 13.2 | \n
| \n Restricted bank deposits ** | \n\n 9.9 | \n\n 8.4 | \n
| \n Total cash and cash equivalents | \n\n 129.2 | \n\n 157.2 | \n
| \n\n | \n||
| \n\n | \n
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Cash in bank | \n\n 56.8 | \n\n 46.2 | \n
| \n Time deposits | \n\n 54.0 | \n\n 89.4 | \n
| \n Retention accounts * | \n\n 8.4 | \n\n 13.2 | \n
| \n Restricted bank deposits ** | \n\n 9.9 | \n\n 8.4 | \n
| \n Total cash and cash equivalents | \n\n 129.2 | \n\n 157.2 | \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.
The lease payments are discounted using the lessee\u2019s incremental borrowing rate. 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.
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 exercised
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.
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.
As at 31 December 2023, potential future cash outflows of USD 53 million (not discounted) have not been included in the lease liability because it is not reasonable certain that these leases will be extended (or not terminated).
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 2023 | \n\n 2023 | \n\n 2023 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \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 41.2 | \n\n 52.7 | \n\n 93.9 | \n\n 60.0 | \n\n - | \n\n 60.0 | \n
| \n Additions | \n\n 1.6 | \n\n 18.0 | \n\n 19.7 | \n\n 3.8 | \n\n 38.2 | \n\n 42.0 | \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 Disposals | \n\n - | \n\n - | \n\n - | \n\n - | \n\n (1.3) | \n\n (1.3) | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n - | \n\n (18.2) | \n\n - | \n\n (18.2) | \n
| \n Currency translation differences | \n\n (1.2) | \n\n (0.9) | \n\n (2.1) | \n\n (4.5) | \n\n (0.8) | \n\n (5.3) | \n
| \n Cost as at 31 December | \n\n 41.6 | \n\n 69.9 | \n\n 111.5 | \n\n 41.2 | \n\n 52.7 | \n\n 93.9 | \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 (13.0) | \n\n (17.0) | \n\n (30.1) | \n\n (16.5) | \n\n - | \n\n (16.5) | \n
| \n Depreciation from continuing operations | \n\n (3.6) | \n\n (18.1) | \n\n (21.8) | \n\n (3.6) | \n\n (15.8) | \n\n (19.5) | \n
| \n Depreciation from discontinued operations | \n\n - | \n\n - | \n\n - | \n\n (0.2) | \n\n - | \n\n (0.2) | \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 - | \n\n - | \n\n - | \n\n 1.3 | \n\n 1.3 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n - | \n\n 6.2 | \n\n - | \n\n 6.2 | \n
| \n Currency translation differences | \n\n 0.3 | \n\n (0.2) | \n\n 0.1 | \n\n 1.2 | \n\n 0.2 | \n\n 1.4 | \n
| \n As at 31 December | \n\n (16.4) | \n\n (35.3) | \n\n (51.8) | \n\n (13.0) | \n\n (17.0) | \n\n (30.1) | \n
| \n Net book value at 31 December | \n\n 25.2 | \n\n 34.5 | \n\n 59.7 | \n\n 28.1 | \n\n 35.7 | \n\n 63.8 | \n
Lease liabilities
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Non-current | \n\n 38.4 | \n\n 41.7 | \n
| \n Current | \n\n 24.9 | \n\n 26.5 | \n
| \n Total | \n\n 63.3 | \n\n 68.2 | \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 2023 | \n\n 2023 | \n\n 2023 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Carrying amount as at 1 January | \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
| \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 (22.7) | \n\n (22.7) | \n\n - | \n\n (18.6) | \n\n (18.6) | \n
| \n Payments for the interest portion of the lease liability | \n\n - | \n\n (4.6) | \n\n (4.6) | \n\n - | \n\n (4.3) | \n\n (4.3) | \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 19.7 | \n\n - | \n\n 19.7 | \n\n 42.1 | \n\n - | \n\n 42.1 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n 13.9 | \n\n - | \n\n 13.9 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n - | \n\n (9.4) | \n\n (2.6) | \n\n (12.0) | \n
| \n Interest expense on lease liabilities | \n\n 4.2 | \n\n - | \n\n 4.2 | \n\n 4.3 | \n\n - | \n\n 4.3 | \n
| \n Reclassified | \n\n (26.3) | \n\n 26.3 | \n\n - | \n\n (45.4) | \n\n 45.4 | \n\n - | \n
| \n Currency exchange differences | \n\n (0.9) | \n\n (0.6) | \n\n (1.5) | \n\n (2.1) | \n\n (1.1) | \n\n (3.2) | \n
| \n Carrying amount as at 31 December | \n\n 38.4 | \n\n 24.9 | \n\n 63.3 | \n\n 41.7 | \n\n 26.5 | \n\n 68.2 | \n
Rental costs for exemptions
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Expenses relating to short-term leases | \n\n 15.3 | \n\n 20.4 | \n
| \n Expenses relating to low value items | \n\n - | \n\n - | \n
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.
The lease payments are discounted using the lessee\u2019s incremental borrowing rate. 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.
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 2023 | \n\n 2023 | \n\n 2023 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Carrying amount as at 1 January | \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
| \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 (22.7) | \n\n (22.7) | \n\n - | \n\n (18.6) | \n\n (18.6) | \n
| \n Payments for the interest portion of the lease liability | \n\n - | \n\n (4.6) | \n\n (4.6) | \n\n - | \n\n (4.3) | \n\n (4.3) | \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 19.7 | \n\n - | \n\n 19.7 | \n\n 42.1 | \n\n - | \n\n 42.1 | \n
| \n Additions due to previously eliminated inter-segment leases | \n\n - | \n\n - | \n\n - | \n\n 13.9 | \n\n - | \n\n 13.9 | \n
| \n Disposal through distribution of operations to shareholders | \n\n - | \n\n - | \n\n - | \n\n (9.4) | \n\n (2.6) | \n\n (12.0) | \n
| \n Interest expense on lease liabilities | \n\n 4.2 | \n\n - | \n\n 4.2 | \n\n 4.3 | \n\n - | \n\n 4.3 | \n
| \n Reclassified | \n\n (26.3) | \n\n 26.3 | \n\n - | \n\n (45.4) | \n\n 45.4 | \n\n - | \n
| \n Currency exchange differences | \n\n (0.9) | \n\n (0.6) | \n\n (1.5) | \n\n (2.1) | \n\n (1.1) | \n\n (3.2) | \n
| \n Carrying amount as at 31 December | \n\n 38.4 | \n\n 24.9 | \n\n 63.3 | \n\n 41.7 | \n\n 26.5 | \n\n 68.2 | \n
Defined contribution plans
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 2023 and 2022 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
The Norwegian subsidiaries in the Group with employees are required to have a civil service pension scheme according to the Norwegian Act relating to mandatory occupational pensions. These subsidiaries have pension schemes in accordance with the requirements in this Act.
Note 20Other liabilities
Other current liabilities specification
| \n USD million | \n\n Note | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 4.4 | \n\n - | \n
| \n Social security and other taxes | \n\n \n | \n\n 20.4 | \n\n 13.4 | \n
| \n Accrued salaries, holiday pay and employee bonus | \n\n \n | \n\n 16.9 | \n\n 15.2 | \n
| \n Other payables and financial liabilities | \n\n \n | \n\n 2.2 | \n\n 5.0 | \n
| \n Other accrued expenses | \n\n \n | \n\n 14.4 | \n\n 7.7 | \n
| \n Total other current liabilities | \n\n \n | \n\n 58.4 | \n\n 41.3 | \n
Refer to Note 28 - Contingencies for further information about accounting policy for provisions and accruals, as well as significant judgement applied and estimation uncertainty.
Note 20Other liabilities
Other current liabilities specification
| \n USD million | \n\n Note | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 4.4 | \n\n - | \n
| \n Social security and other taxes | \n\n \n | \n\n 20.4 | \n\n 13.4 | \n
| \n Accrued salaries, holiday pay and employee bonus | \n\n \n | \n\n 16.9 | \n\n 15.2 | \n
| \n Other payables and financial liabilities | \n\n \n | \n\n 2.2 | \n\n 5.0 | \n
| \n Other accrued expenses | \n\n \n | \n\n 14.4 | \n\n 7.7 | \n
| \n Total other current liabilities | \n\n \n | \n\n 58.4 | \n\n 41.3 | \n
Note 20Other liabilities
Other current liabilities specification
| \n USD million | \n\n Note | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Derivative financial instruments | \n\n\n | \n\n 4.4 | \n\n - | \n
| \n Social security and other taxes | \n\n \n | \n\n 20.4 | \n\n 13.4 | \n
| \n Accrued salaries, holiday pay and employee bonus | \n\n \n | \n\n 16.9 | \n\n 15.2 | \n
| \n Other payables and financial liabilities | \n\n \n | \n\n 2.2 | \n\n 5.0 | \n
| \n Other accrued expenses | \n\n \n | \n\n 14.4 | \n\n 7.7 | \n
| \n Total other current liabilities | \n\n \n | \n\n 58.4 | \n\n 41.3 | \n
Refer to Note 28 - Contingencies for further information about accounting policy for provisions and accruals, as well as significant judgement applied and estimation uncertainty.
Note 21Financial 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 comprises securing the Group 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 31.12.2023 | \n\n 31.12.2022 | \n
| \n Equity | \n\n 1,394.0 | \n\n 1,208.5 | \n
| \n Total assets | \n\n 2,308.8 | \n\n 2,219.3 | \n
| \n Equity ratio | \n\n 60% | \n\n 54% | \n
| \n Cash and cash equivalents excl.restricted capital | \n\n 119.3 | \n\n 148.8 | \n
| \n Available drawing facilities | \n\n 165.0 | \n\n - | \n
| \n Total available liquidity | \n\n 284.3 | \n\n 148.8 | \n
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 comprises securing the Group 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.
| \n \n | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Equity | \n\n 1,394.0 | \n\n 1,208.5 | \n
| \n Total assets | \n\n 2,308.8 | \n\n 2,219.3 | \n
| \n Equity ratio | \n\n 60% | \n\n 54% | \n
| \n Cash and cash equivalents excl.restricted capital | \n\n 119.3 | \n\n 148.8 | \n
| \n Available drawing facilities | \n\n 165.0 | \n\n - | \n
| \n Total available liquidity | \n\n 284.3 | \n\n 148.8 | \n
Note 22Liquidity risk
The Group's policy regarding the management of the cash positions has three main objectives:
\u2022Matching of surplus funds against borrowing requirements.
\u2022Secure a high level of liquidity in order to meet future plans of the Group, with a targeted minimum of two months cash flow at all times.
\u2022Limitation of credit risks.
Investments may only be made in securities with a rating of Investment grade, BAA (Moodys) , BBB- (Standard and Poors and Fitch IBCA) or better. The Board can approve deviations on a case by case basis.
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
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 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 129 million in addition to available drawing facilities of USD 165 million at the end of 2023. This is deemed to be sufficient funding for the Group\u2019s current activity levels and committed capital expenditures during 2024.
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.
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 - 31.12.2023
| \n USD million | \n\n Less than | \n\n 6 - 12 months | \n\n Between 1 | \n\n Between 2 | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying | \n
| \n Interest-bearing borrowings | \n\n 127.1 | \n\n 72.0 | \n\n 140.0 | \n\n 557.9 | \n\n 8.7 | \n\n 905.8 | \n\n 711.4 | \n
| \n Lease liabilities | \n\n 12.2 | \n\n 12.9 | \n\n 16.4 | \n\n 21.2 | \n\n 10.5 | \n\n 73.1 | \n\n 63.3 | \n
| \n Trade payables | \n\n 48.9 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 48.9 | \n\n 48.9 | \n
| \n Other current payables | \n\n 33.5 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 33.5 | \n\n 33.5 | \n
Maturity of financial liabilities - 31.12.2022
| \n USD million | \n\n Less than | \n\n 6 - 12 months | \n\n Between 1 | \n\n Between 2 | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying | \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
Note 23Market 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 2024, as all units in the fleet has medium to long-term contracts.
Contract status and currency exposure in rig rates
The Deepsea Atlantic was drilling on the Johan Sverdrup Phase II development during 2023, where it will continue until it begins its campaign on the Rosebank field, offshore UK. Current drilling contracts are expected to take firm operations through the first half year of 2026. The day rate for drilling on the Johan Sverdrup consists of a USD element and a NOK element, where the NOK element is typically covering the NOK operating costs per day. The drilling contract for the Rosebank field include a GBP element intended to cover GBP operating costs. In addition, the Group has entered into forward exchange contracts to hedge some of the residual currency exposure.
During the year, the Deepsea Stavanger was working on various exploration projects for Equinor. The Deepsea Stavanger has firm contract commitments with Equinor until the end of 2024, whereafter it will move onto a new contract with Aker BP expected to take firm operations through 2029. 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 was on contract in 2023 with Equinor, on the Breidablikk and Svalin fields, offshore Norway. Deepsea Aberdeen is expected to continue its work on Breidablikk until at least the end of 2025. 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 Nordkapp was working with Aker BP throughout 2023 and will continue to work with Aker BP until at least 2027. 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
Following an assessment of climate risks and opportunities, both physical and transitional risks in the short, medium and long term, were prioritised. The most significant transition risks, 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, or they are expected to be settled in the normal operating cycle.
The Group has the following derivative financial instruments in the following line items in the balance sheet:
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \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 - | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n - | \n\n 7.5 | \n
| \n Total non-current derivative financial instruments asset | \n\n - | \n\n 7.5 | \n
| \n Current assets | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n - | \n\n 2.4 | \n
| \n Foreign exchange contracts - cash flow hedges under hedge accounting | \n\n 1.6 | \n\n - | \n
| \n Total current derivative financial instruments asset | \n\n 1.6 | \n\n 2.4 | \n
| \n Non-current liabilities | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n (0.8) | \n\n - | \n
| \n Other Interest rate instruments - cash flow hedges under hedge accounting | \n\n (0.6) | \n\n \n | \n
| \n Warrant liability - at fair value through profit or loss | \n\n - | \n\n (2.8) | \n
| \n Total non-current derivative financial instruments liabilities | \n\n (1.3) | \n\n (2.8) | \n
| \n Current liabilities | \n\n \n | \n\n \n | \n
| \n Foreign exchange contracts - at fair value through profit or loss | \n\n (0.0) | \n\n - | \n
| \n Foreign exchange contracts - cash flow hedges under hedge accounting | \n\n (0.2) | \n\n - | \n
| \n Warrant liability - at fair value through profit or loss | \n\n (4.2) | \n\n - | \n
| \n Total current derivative financial instruments liabilities | \n\n (4.4) | \n\n - | \n
The Group's hedging reserves disclosed in Note 26 - 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 2022 | \n\n 0.6 | \n\n (2.9) | \n\n (2.3) | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n (0.3) | \n\n 12.8 | \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 7.7 | \n\n 7.7 | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n 1.5 | \n\n (0.8) | \n\n 0.6 | \n
| \n Reclassified from OCI to profit or loss | \n\n - | \n\n (8.2) | \n\n (8.2) | \n
| \n Closing balance 31 December 2023 | \n\n 1.5 | \n\n (1.3) | \n\n 0.1 | \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 31.12.2023 | \n\n 31.12.2022 | \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 - | \n\n (0.1) | \n
| \n Gain from settlement of swaps | \n\n - | \n\n 12.1 | \n
| \n Change in fair value | \n\n - | \n\n (5.0) | \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 2.4 | \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 (1.4) | \n\n (1.9) | \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 - 31.12.2023
| \n USD million | \n\n NOK | \n\n GBP | \n\n USD | \n
| \n Cash and cash equivalents | \n\n (4.8) | \n\n 2.8 | \n\n 29.2 | \n
| \n Trade receivables | \n\n 7.5 | \n\n 0.1 | \n\n 36.3 | \n
| \n Contract assets | \n\n - | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (19.3) | \n\n - | \n\n (17.0) | \n
| \n Trade payables | \n\n (5.4) | \n\n (0.5) | \n\n (3.7) | \n
| \n Other current payables | \n\n (0.2) | \n\n (2.3) | \n\n (3.2) | \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 6.3 | \n\n - | \n\n - | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n - | \n\n 6.4 | \n\n - | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n 64.3 | \n\n - | \n\n - | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n 41.0 | \n\n 25.4 | \n\n - | \n
Foreign exchange risk - Exposure - 31.12.2022
| \n USD million | \n\n NOK | \n\n GBP | \n\n USD | \n
| \n Cash and cash equivalents | \n\n 71.2 | \n\n 0.9 | \n\n 12.6 | \n
| \n Trade receivables | \n\n 2.5 | \n\n 0.1 | \n\n 20.8 | \n
| \n Contract assets | \n\n - | \n\n - | \n\n - | \n
| \n Interest-bearing borrowings | \n\n - | \n\n - | \n\n - | \n
| \n Lease liabilities | \n\n (11.2) | \n\n - | \n\n (26.3) | \n
| \n Trade payables | \n\n (1.1) | \n\n (0.2) | \n\n (6.6) | \n
| \n Other current payables | \n\n (0.2) | \n\n (0.0) | \n\n (0.6) | \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 currency contracts
| \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 31.12.2023 | \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 64.1 | \n\n 15.04.2024 | \n\n n/a | \n\n 0.09831 | \n\n (0.0) | \n
| \n Sell foreign currency (at fair value through profit or loss\u200b) | \n\n GBP | \n\n 5.0 | \n\n 15.04.2024 | \n\n n/a | \n\n 1.26027 | \n\n * | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 257.5 | \n\n 16.06.2024-17.08.2026 | \n\n 1:1 | \n\n 0.09831 | \n\n (0.2) | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n GBP | \n\n 20.0 | \n\n 16.06.2024-17.08.2026 | \n\n 1:1 | \n\n 1.26582 | \n\n * | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 128.8 | \n\n 24.01.2024-22.08.2024 | \n\n 1:1 | \n\n 0.09709 | \n\n 0.4 | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 136.9 | \n\n 24.01.2024-22.08.2024 | \n\n 1:1 | \n\n 0.09132 | \n\n (0.1) | \n
| \n Buy foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 267.8 | \n\n 24.06.2024-26.08.2025 | \n\n 1:1 | \n\n 0.09524 | \n\n 1.9 | \n
| \n Sell foreign currency (cash flow hedges under hedge accounting) | \n\n NOK | \n\n 280.6 | \n\n 24.06.2024-26.08.2025 | \n\n 1:1 | \n\n 0.09087 | \n\n (0.6) | \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\n | \n
The aggregate net foreign exchange gains/losses recognised in profit or loss were:
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Net currency gain / (loss) included in finance costs | \n\n (8.6) | \n\n (3.6) | \n
As shown in the table above, the Group is primarily exposed 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 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n\n 2023 | \n\n 2022 | \n
| \n Cash and cash equivalents | \n\n 5.7 | \n\n (9.8) | \n\n 3.1 | \n\n (5.3) | \n\n (3.8) | \n\n 6.5 | \n
| \n Current receivables | \n\n 6.0 | \n\n 3.0 | \n\n 2.9 | \n\n 1.7 | \n\n (2.8) | \n\n (2.0) | \n
| \n Current liabilities | \n\n 0.2 | \n\n (3.5) | \n\n 0.1 | \n\n (1.9) | \n\n (0.1) | \n\n 2.3 | \n
| \n Net effect on profit before tax | \n\n 11.8 | \n\n (10.2) | \n\n 6.1 | \n\n (5.6) | \n\n (6.7) | \n\n 6.8 | \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 interest rate swap agreements as well as interest Floor and Caps instruments at 31 December 2023. 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 2023 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 2023 is approximately 60%.
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 31.12.2023 was 8.7%, 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 31.12.2023 the Group held the following USD interest rate instruments:
| \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 Interest rate swaps - Cash flow hedges under hedge accounting | \n\n 58.9 | \n\n 2028 | \n\n 1:1 | \n\n 4.1620% | \n\n (0.8) | \n
| \n Synthetic instruments - Cash flow hedges under hedge accounting | \n\n 58.9 | \n\n 2028 | \n\n 1:1 | \n\n * | \n\n (0.6) | \n
| \n\n | \n
Caps and Floors are financial instruments used to manage interest rate risk. A cap is a type of interest rate derivative that sets a maximum limit, or cap, on the interest rate that can be paid. The Group have entered into two cap contracts to protect to the Group against interest rate increases beyond 5.5%. A floor is the opposite of a cap. It sets a minimum limit, or floor, on the interest rate that can be received. The Group has entered into two floors instruments with an interest rate of 2.88% and 3.0125% respectively.
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
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 31.12.2023 | \n\n % of total loans | \n\n 31.12.2022 | \n\n % of total loans | \n
| \n Variable rate borrowings | \n\n 283.7 | \n\n 40% | \n\n 471.8 | \n\n 56% | \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 - | \n\n 0% | \n\n 213.8 | \n\n 25% | \n
| \n 1-5 years | \n\n 428.9 | \n\n 60% | \n\n 156.6 | \n\n 19% | \n
| \n Later than 5 years | \n\n - | \n\n 0% | \n\n - | \n\n 0% | \n
| \n Total contractual amounts* | \n\n 712.6 | \n\n 100% | \n\n 842.2 | \n\n 100% | \n
| \n\n | \n
Interest rate sensitivity
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 3 million for the next 12 months as at 31 December 2023, compared to USD 5 million at 31\u00a0December 2022.
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.
No warrants have been exercised in 2022 or 2023.
In accordance with Accounting Standards, 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 2023
\u2022Share price: NOK 39.40
\u2022Volatility of share price: 33.30%
\u2022Risk-free interest rate: 4.35%
\u2022USD/NOK exchange rate: 10.1724
\u2022Dividend yield: 6.2%
\u2022No tranches have been exercised
Based on the valuation, fair value of the warrant liability is estimated to be NOK 43 million / USD 4.2 million as at 31 December 2023 (NOK 28 million / USD 2.8 million as at 31 December 2022).
The negative change in fair value in 2023 of USD 1.4 million (negative change of USD 1.9 million in 2022) was recognised as part of Other financial items.
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, or they are expected to be settled in the normal operating cycle.
In accordance with Accounting Standards, 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 24Credit 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.
The maximum exposure regarding trade receivables is the carrying amount of USD 100\u00a0million.
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 expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2023 or 31 December 2022 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables
The Group has not recognised any impairment losses in 2022 or 2023, and the expected loss rate is set to 0.
No provision for impairment losses is recognised as at 31 December 2023.
The ageing of the trade receivables - 31.12.2023
| \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 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2023 | \n
| \n Not due | \n\n 0.0% | \n\n 92.6 | \n\n - | \n\n 92.6 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 7.4 | \n\n - | \n\n 7.4 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n - | \n\n - | \n\n - | \n
| \n Over 6 months | \n\n 0.0% | \n\n - | \n\n - | \n\n - | \n
| \n Total | \n\n \n | \n\n 100.0 | \n\n - | \n\n 100.0 | \n
Contract assets - 2023
| \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 31.12.2023 | \n\n 31.12.2023 | \n\n 31.12.2023 | \n
| \n Not due | \n\n 0.0% | \n\n 8.4 | \n\n - | \n\n 8.4 | \n
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
Note 25Share 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 as at 1 January 2023 | \n\n 236,783,202 | \n\n USD 0.01 | \n\n 2,368 | \n
| \n Listed shares / Common shares issued as at 31 December 2023 | \n\n 236,783,202 | \n\n USD 0.01 | \n\n 2,368 | \n
| \n Preference shares issued as at 1 January 2023 | \n\n 16,123,125 | \n\n USD 0.01 | \n\n 161 | \n
| \n Cancellation of preference shares | \n\n (16,123,125) | \n\n USD 0.01 | \n\n (161) | \n
| \n Total issued pREFERENCE shares as at 31 December 2023 | \n\n - | \n\n \n | \n\n - | \n
| \n Total share capital | \n\n \n | \n\n \n | \n\n 2,368 | \n
Common shares
Authorised, not issued shares was 63,216,798 as at 31 December 2023. There are no changes in issued common shares in 2023. All issued shares are fully paid.
The Group has not acquired any of its own common shares in 2023, 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.
The Company\u2019s common shares are freely transferable in Norway, provided\u00a0however, that the Bye-laws\u00a0include a right for the Board to decline to register a transfer of any share in the register of members, (or if\u00a0required, refuse to direct any registrar appointed by the Company to transfer any interest in a share) where such transfer would result in 50% or more of the Company's shares or votes being held, controlled or owned directly or indirectly by individuals or legal persons resident for tax purposes in Norway (or, alternatively, such shares or votes being effectively connected to a Norwegian business activity).
Preference shares
29 November 2022, the Group repurchased the issued preference shares. In Q4 2023, the Odfjell Drilling Ltd cancelled the 16,123,125 treasury preference shares.
As per 31 December 2023 the Group does not hold any treasury shares.
Treasury shares - accounting policy
Shares that are bought back are recorded in a separate treasury stock account with the share capital amount. Premium to par value is shown as an adjustment to share premium. Discount to par value is shown as an adjustment to retained earnings. The repurchase of shares is viewed as a temporary reduction in shareholders\u2019 equity. The treasury stock account is kept active until the share are resold or cancelled.
Cash dividend paid in 2023
22 August 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in September 2023. 1 November 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in November 2023.
Total dividend payments in 2023 was 0.12 USD per share equal to approximately USD 28.4\u00a0million.
| \n Largest common shareholders at 31 December 2023 | \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 Merrill Lynch Prof. Clearing Corp. | \n\n Nominee | \n\n 7,371,649 | \n\n 3.11% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 4,120,330 | \n\n 1.74% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 3,677,753 | \n\n 1.55% | \n
| \n Verdipapirfondet Storebrand Norge | \n\n Ordinary | \n\n 3,398,356 | \n\n 1.44% | \n
| \n Goldman Sachs International | \n\n Nominee | \n\n 3,118,587 | \n\n 1.32% | \n
| \n Citibank | \n\n Nominee | \n\n 1,919,859 | \n\n 0.81% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 1,868,620 | \n\n 0.79% | \n
| \n J.P. Morgan SE | \n\n Nominee | \n\n 1,773,571 | \n\n 0.75% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,700,648 | \n\n 0.72% | \n
| \n The Northern Trust Comp | \n\n Nominee | \n\n 1,599,543 | \n\n 0.68% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,587,480 | \n\n 0.67% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,542,382 | \n\n 0.65% | \n
| \n Brown Brothers Harriman & Co. | \n\n Nominee | \n\n 1,535,318 | \n\n 0.65% | \n
| \n Verdipapirfondet DNB SMB | \n\n Ordinary | \n\n 1,136,902 | \n\n 0.48% | \n
| \n The Northern Trust Comp | \n\n Nominee | \n\n 1,131,810 | \n\n 0.48% | \n
| \n BNP Paribas | \n\n Nominee | \n\n 1,119,571 | \n\n 0.47% | \n
| \n J.P. Morgan Securities PLC | \n\n Ordinary | \n\n 1,119,289 | \n\n 0.47% | \n
| \n Nordnet Livsforsikring AS | \n\n Ordinary | \n\n 1,116,714 | \n\n 0.47% | \n
| \n CACEIS Bank | \n\n Nominee | \n\n 1,026,002 | \n\n 0.43% | \n
| \n Total 20 largest common shareholders | \n\n \n | \n\n 184,816,765 | \n\n 78.05% | \n
| \n Other common shareholders | \n\n \n | \n\n 51,966,437 | \n\n 21.95% | \n
| \n Total common shareholders | \n\n \n | \n\n 236,783,202 | \n\n 100.00% | \n
Note 26Other 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 2022 | \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 Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 0.6 | \n\n - | \n\n - | \n\n - | \n\n 0.6 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n (8.2) | \n\n - | \n\n - | \n\n - | \n\n (8.2) | \n
| \n Deferred taxes cashflow hedges | \n\n \n | \n\n (0.0) | \n\n \n | \n\n \n | \n\n \n | \n\n (0.0) | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n (0.5) | \n\n - | \n\n - | \n\n (0.5) | \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 At 31 December 2023 | \n\n \n | \n\n 0.1 | \n\n (57.0) | \n\n 2.2 | \n\n (34.5) | \n\n (89.2) | \n
Note 25Share 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 as at 1 January 2023 | \n\n 236,783,202 | \n\n USD 0.01 | \n\n 2,368 | \n
| \n Listed shares / Common shares issued as at 31 December 2023 | \n\n 236,783,202 | \n\n USD 0.01 | \n\n 2,368 | \n
| \n Preference shares issued as at 1 January 2023 | \n\n 16,123,125 | \n\n USD 0.01 | \n\n 161 | \n
| \n Cancellation of preference shares | \n\n (16,123,125) | \n\n USD 0.01 | \n\n (161) | \n
| \n Total issued pREFERENCE shares as at 31 December 2023 | \n\n - | \n\n \n | \n\n - | \n
| \n Total share capital | \n\n \n | \n\n \n | \n\n 2,368 | \n
Common shares
Authorised, not issued shares was 63,216,798 as at 31 December 2023. There are no changes in issued common shares in 2023. All issued shares are fully paid.
The Group has not acquired any of its own common shares in 2023, 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.
The Company\u2019s common shares are freely transferable in Norway, provided\u00a0however, that the Bye-laws\u00a0include a right for the Board to decline to register a transfer of any share in the register of members, (or if\u00a0required, refuse to direct any registrar appointed by the Company to transfer any interest in a share) where such transfer would result in 50% or more of the Company's shares or votes being held, controlled or owned directly or indirectly by individuals or legal persons resident for tax purposes in Norway (or, alternatively, such shares or votes being effectively connected to a Norwegian business activity).
Preference shares
29 November 2022, the Group repurchased the issued preference shares. In Q4 2023, the Odfjell Drilling Ltd cancelled the 16,123,125 treasury preference shares.
As per 31 December 2023 the Group does not hold any treasury shares.
Treasury shares - accounting policy
Shares that are bought back are recorded in a separate treasury stock account with the share capital amount. Premium to par value is shown as an adjustment to share premium. Discount to par value is shown as an adjustment to retained earnings. The repurchase of shares is viewed as a temporary reduction in shareholders\u2019 equity. The treasury stock account is kept active until the share are resold or cancelled.
Cash dividend paid in 2023
22 August 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in September 2023. 1 November 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in November 2023.
Total dividend payments in 2023 was 0.12 USD per share equal to approximately USD 28.4\u00a0million.
| \n Largest common shareholders at 31 December 2023 | \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 Merrill Lynch Prof. Clearing Corp. | \n\n Nominee | \n\n 7,371,649 | \n\n 3.11% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 4,120,330 | \n\n 1.74% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 3,677,753 | \n\n 1.55% | \n
| \n Verdipapirfondet Storebrand Norge | \n\n Ordinary | \n\n 3,398,356 | \n\n 1.44% | \n
| \n Goldman Sachs International | \n\n Nominee | \n\n 3,118,587 | \n\n 1.32% | \n
| \n Citibank | \n\n Nominee | \n\n 1,919,859 | \n\n 0.81% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 1,868,620 | \n\n 0.79% | \n
| \n J.P. Morgan SE | \n\n Nominee | \n\n 1,773,571 | \n\n 0.75% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,700,648 | \n\n 0.72% | \n
| \n The Northern Trust Comp | \n\n Nominee | \n\n 1,599,543 | \n\n 0.68% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,587,480 | \n\n 0.67% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,542,382 | \n\n 0.65% | \n
| \n Brown Brothers Harriman & Co. | \n\n Nominee | \n\n 1,535,318 | \n\n 0.65% | \n
| \n Verdipapirfondet DNB SMB | \n\n Ordinary | \n\n 1,136,902 | \n\n 0.48% | \n
| \n The Northern Trust Comp | \n\n Nominee | \n\n 1,131,810 | \n\n 0.48% | \n
| \n BNP Paribas | \n\n Nominee | \n\n 1,119,571 | \n\n 0.47% | \n
| \n J.P. Morgan Securities PLC | \n\n Ordinary | \n\n 1,119,289 | \n\n 0.47% | \n
| \n Nordnet Livsforsikring AS | \n\n Ordinary | \n\n 1,116,714 | \n\n 0.47% | \n
| \n CACEIS Bank | \n\n Nominee | \n\n 1,026,002 | \n\n 0.43% | \n
| \n Total 20 largest common shareholders | \n\n \n | \n\n 184,816,765 | \n\n 78.05% | \n
| \n Other common shareholders | \n\n \n | \n\n 51,966,437 | \n\n 21.95% | \n
| \n Total common shareholders | \n\n \n | \n\n 236,783,202 | \n\n 100.00% | \n
Note 25Share 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 as at 1 January 2023 | \n\n 236,783,202 | \n\n USD 0.01 | \n\n 2,368 | \n
| \n Listed shares / Common shares issued as at 31 December 2023 | \n\n 236,783,202 | \n\n USD 0.01 | \n\n 2,368 | \n
| \n Preference shares issued as at 1 January 2023 | \n\n 16,123,125 | \n\n USD 0.01 | \n\n 161 | \n
| \n Cancellation of preference shares | \n\n (16,123,125) | \n\n USD 0.01 | \n\n (161) | \n
| \n Total issued pREFERENCE shares as at 31 December 2023 | \n\n - | \n\n \n | \n\n - | \n
| \n Total share capital | \n\n \n | \n\n \n | \n\n 2,368 | \n
Common shares
Authorised, not issued shares was 63,216,798 as at 31 December 2023. There are no changes in issued common shares in 2023. All issued shares are fully paid.
The Group has not acquired any of its own common shares in 2023, 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.
The Company\u2019s common shares are freely transferable in Norway, provided\u00a0however, that the Bye-laws\u00a0include a right for the Board to decline to register a transfer of any share in the register of members, (or if\u00a0required, refuse to direct any registrar appointed by the Company to transfer any interest in a share) where such transfer would result in 50% or more of the Company's shares or votes being held, controlled or owned directly or indirectly by individuals or legal persons resident for tax purposes in Norway (or, alternatively, such shares or votes being effectively connected to a Norwegian business activity).
Preference shares
29 November 2022, the Group repurchased the issued preference shares. In Q4 2023, the Odfjell Drilling Ltd cancelled the 16,123,125 treasury preference shares.
As per 31 December 2023 the Group does not hold any treasury shares.
Treasury shares - accounting policy
Shares that are bought back are recorded in a separate treasury stock account with the share capital amount. Premium to par value is shown as an adjustment to share premium. Discount to par value is shown as an adjustment to retained earnings. The repurchase of shares is viewed as a temporary reduction in shareholders\u2019 equity. The treasury stock account is kept active until the share are resold or cancelled.
Cash dividend paid in 2023
22 August 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in September 2023. 1 November 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in November 2023.
Total dividend payments in 2023 was 0.12 USD per share equal to approximately USD 28.4\u00a0million.
| \n Largest common shareholders at 31 December 2023 | \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 Merrill Lynch Prof. Clearing Corp. | \n\n Nominee | \n\n 7,371,649 | \n\n 3.11% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 4,120,330 | \n\n 1.74% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 3,677,753 | \n\n 1.55% | \n
| \n Verdipapirfondet Storebrand Norge | \n\n Ordinary | \n\n 3,398,356 | \n\n 1.44% | \n
| \n Goldman Sachs International | \n\n Nominee | \n\n 3,118,587 | \n\n 1.32% | \n
| \n Citibank | \n\n Nominee | \n\n 1,919,859 | \n\n 0.81% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 1,868,620 | \n\n 0.79% | \n
| \n J.P. Morgan SE | \n\n Nominee | \n\n 1,773,571 | \n\n 0.75% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,700,648 | \n\n 0.72% | \n
| \n The Northern Trust Comp | \n\n Nominee | \n\n 1,599,543 | \n\n 0.68% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,587,480 | \n\n 0.67% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 1,542,382 | \n\n 0.65% | \n
| \n Brown Brothers Harriman & Co. | \n\n Nominee | \n\n 1,535,318 | \n\n 0.65% | \n
| \n Verdipapirfondet DNB SMB | \n\n Ordinary | \n\n 1,136,902 | \n\n 0.48% | \n
| \n The Northern Trust Comp | \n\n Nominee | \n\n 1,131,810 | \n\n 0.48% | \n
| \n BNP Paribas | \n\n Nominee | \n\n 1,119,571 | \n\n 0.47% | \n
| \n J.P. Morgan Securities PLC | \n\n Ordinary | \n\n 1,119,289 | \n\n 0.47% | \n
| \n Nordnet Livsforsikring AS | \n\n Ordinary | \n\n 1,116,714 | \n\n 0.47% | \n
| \n CACEIS Bank | \n\n Nominee | \n\n 1,026,002 | \n\n 0.43% | \n
| \n Total 20 largest common shareholders | \n\n \n | \n\n 184,816,765 | \n\n 78.05% | \n
| \n Other common shareholders | \n\n \n | \n\n 51,966,437 | \n\n 21.95% | \n
| \n Total common shareholders | \n\n \n | \n\n 236,783,202 | \n\n 100.00% | \n
Treasury shares - accounting policy
Cash dividend paid in 2023
22 August 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in September 2023. 1 November 2023, the Board of Directors approved a dividend distribution of 0.06 USD per share, equal to approximately USD 14.2 million, which was paid in November 2023.
Total dividend payments in 2023 was 0.12 USD per share equal to approximately USD 28.4\u00a0million.
Note 26Other 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 2022 | \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 Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 0.6 | \n\n - | \n\n - | \n\n - | \n\n 0.6 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n (8.2) | \n\n - | \n\n - | \n\n - | \n\n (8.2) | \n
| \n Deferred taxes cashflow hedges | \n\n \n | \n\n (0.0) | \n\n \n | \n\n \n | \n\n \n | \n\n (0.0) | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n (0.5) | \n\n - | \n\n - | \n\n (0.5) | \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 At 31 December 2023 | \n\n \n | \n\n 0.1 | \n\n (57.0) | \n\n 2.2 | \n\n (34.5) | \n\n (89.2) | \n
Note 27Securities and mortgages
Liabilities secured by mortgage
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Non current liabilities - contractual amounts | \n\n 571.1 | \n\n 532.3 | \n
| \n Current liabilities | \n\n 149.6 | \n\n 315.3 | \n
| \n Total | \n\n 720.7 | \n\n 847.6 | \n
Carrying amount of mortgaged assets:
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Property, plant and equipment | \n\n 2,013.0 | \n\n 1,937.9 | \n
| \n Receivables and contract assets | \n\n 125.0 | \n\n 112.9 | \n
| \n Bank deposits | \n\n 129.2 | \n\n 157.2 | \n
| \n Total | \n\n 2,267.1 | \n\n 2,208.0 | \n
| \n \n | \n\n The Odfjell Rig III Ltd senior secured bond | \n\n The Odfjell Invest Ltd. RCF and Term loan | \n\n The Odfjell Rig V Ltd. Facility | \n
| \n Guarantors | \n\n Odfjell Drilling Ltd and various subsidiaries | \n\n Odfjell Drilling Ltd and various subsidiaries | \n\n Odfjell Drilling Ltd and various subsidiaries | \n
| \n Collateral Rigs | \n\n Deepsea Aberdeen and Deepsea Atlantic | \n\n Deepsea Stavanger | \n\n Deepsea Nordkapp | \n
Note 28Contingencies
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 and related receivable
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 realisation of shares in 2017 was denied on the basis of the anti-avoidance rule developed as tax case law. Odfjell Offshore Ltd has appealed 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 NOK 307 million (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.
As stated above the Group's best judgement is that the tax case will be won by Odfjell Offshore Ltd. The Group has therefore not recognised a provision for the contingent indemnification liability. Consequently, the Group has recognised the upfront payment made as a non-current receivable that will be repaid if the legal appeal prevails.
There are no other material contingencies to be disclosed as per 31 December 2023.
Note 28Contingencies
Letter of indemnity and related receivable
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 realisation of shares in 2017 was denied on the basis of the anti-avoidance rule developed as tax case law. Odfjell Offshore Ltd has appealed 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 NOK 307 million (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.
As stated above the Group's best judgement is that the tax case will be won by Odfjell Offshore Ltd. The Group has therefore not recognised a provision for the contingent indemnification liability. Consequently, the Group has recognised the upfront payment made as a non-current receivable that will be repaid if the legal appeal prevails.
There are no other material contingencies to be disclosed as per 31 December 2023.
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 and related receivable
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 realisation of shares in 2017 was denied on the basis of the anti-avoidance rule developed as tax case law. Odfjell Offshore Ltd has appealed 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 NOK 307 million (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.
As stated above the Group's best judgement is that the tax case will be won by Odfjell Offshore Ltd. The Group has therefore not recognised a provision for the contingent indemnification liability. Consequently, the Group has recognised the upfront payment made as a non-current receivable that will be repaid if the legal appeal prevails.
There are no other material contingencies to be disclosed as per 31 December 2023.
Note 29Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Rig investments | \n\n 51.5 | \n\n 46.7 | \n
| \n Total | \n\n 51.5 | \n\n 46.7 | \n
The major part of committed capital expenditure as at 31 December 2023 is related to the new BOP for the rig Deepsea Atlantic, as well as the upcoming periodic maintenance for Deepsea Atlantic and Deepsea Nordkapp.
Letter of indemnity and related receivable
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 realisation of shares in 2017 was denied on the basis of the anti-avoidance rule developed as tax case law. Odfjell Offshore Ltd has appealed 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 NOK 307 million (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.
As stated above the Group's best judgement is that the tax case will be won by Odfjell Offshore Ltd. The Group has therefore not recognised a provision for the contingent indemnification liability. Consequently, the Group has recognised the upfront payment made as a non-current receivable that will be repaid if the legal appeal prevails.
There are no other material contingencies to be disclosed as per 31 December 2023.
Note 29Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
| \n USD million | \n\n 31.12.2023 | \n\n 31.12.2022 | \n
| \n Rig investments | \n\n 51.5 | \n\n 46.7 | \n
| \n Total | \n\n 51.5 | \n\n 46.7 | \n
The major part of committed capital expenditure as at 31 December 2023 is related to the new BOP for the rig Deepsea Atlantic, as well as the upcoming periodic maintenance for Deepsea Atlantic and Deepsea Nordkapp.
Note 30Subsidiaries
Material subsidiaries
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Owner-ship 2023 | \n\n Owner-ship 2022 | \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 Malta | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Rig III Ltd. * | \n\n Bermuda | \n\n Malta | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Drilling Malta Ltd. | \n\n Malta | \n\n Malta | \n\n USD | \n\n 100 | \n\n - | \n\n Holding company | \n
| \n Odfjell Rig V Ltd. ** | \n\n England | \n\n Malta | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Odfjell Drilling Shetland Ltd. ** | \n\n Scotland | \n\n Malta | \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 Malta | \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 Malta | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \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 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 / Canada | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Deep Sea Rig AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n - | \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 USD | \n\n 100 | \n\n 100 | \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\n | \n||||||
| \n\n | \n
The company'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 company, and the proportion of ownership interests held equals the voting rights held by the company.
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 2023 | \n\n Owner-ship 2022 | \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
Note 30Subsidiaries
Material subsidiaries
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Owner-ship 2023 | \n\n Owner-ship 2022 | \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 Malta | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Rig III Ltd. * | \n\n Bermuda | \n\n Malta | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company | \n
| \n Odfjell Drilling Malta Ltd. | \n\n Malta | \n\n Malta | \n\n USD | \n\n 100 | \n\n - | \n\n Holding company | \n
| \n Odfjell Rig V Ltd. ** | \n\n England | \n\n Malta | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \n
| \n Odfjell Drilling Shetland Ltd. ** | \n\n Scotland | \n\n Malta | \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 Malta | \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 Malta | \n\n USD | \n\n 100 | \n\n 100 | \n\n Rig owning | \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 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 / Canada | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Deep Sea Rig AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n - | \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 USD | \n\n 100 | \n\n 100 | \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\n | \n||||||
| \n\n | \n
The company'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 company, and the proportion of ownership interests held equals the voting rights held by the company.
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 2023 | \n\n Owner-ship 2022 | \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
Note 31Related parties - transactions, receivables, liabilities and commitments
The Group had the following material transactions with related parties:
| \n USD million | \n\n Relation | \n\n 2023 | \n\n 2022 | \n
| \n Companies within the Odfjell Technology Ltd. Group | \n\n Related to main shareholder | \n\n 2.9 | \n\n 1.2 | \n
| \n Odfjell Oceanwind AS | \n\n Related to main shareholder | \n\n 0.5 | \n\n 0.5 | \n
| \n Odfjell Land As | \n\n Related to main shareholder | \n\n 0.4 | \n\n 0.6 | \n
| \n Total sales of services to related parties | \n\n 3.7 | \n\n 2.3 | \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 2023 | \n\n 2022 | \n
| \n Companies within the Odfjell Technology Ltd. Group | \n\n Related to main shareholder | \n\n 51.5 | \n\n 44.9 | \n
| \n Odfjell Oceanwind AS | \n\n Related to main shareholder | \n\n 0.1 | \n\n - | \n
| \n Total purchases from related parties | \n\n 51.6 | \n\n 44.9 | \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 31.12.2023 | \n\n 31.12.2022 | \n
| \n Trade receivables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n 0.3 | \n\n 0.5 | \n
| \n Other current receivables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n 0.4 | \n\n 0.0 | \n
| \n Trade payables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n (4.7) | \n\n (10.1) | \n
| \n Other current payables | \n\n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n (6.4) | \n\n (1.5) | \n
| \n Net current payables related parties | \n\n (10.4) | \n\n (11.0) | \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 31.12.2023 | \n\n 31.12.2022 | \n\n 2023 | \n\n 2022 | \n
| \n Odfjell Land AS | \n\n Related to main shareholder | \n\n Properties | \n\n 25.2 | \n\n 28.5 | \n\n 5.4 | \n\n 4.5 | \n
| \n Companies in Odfjell Technology Ltd Group | \n\n Related to main shareholder | \n\n Mooring and drilling equipment | \n\n 36.3 | \n\n 37.5 | \n\n 21.4 | \n\n 17.3 | \n
| \n Total | \n\n 61.5 | \n\n 66.0 | \n\n 26.8 | \n\n 21.8 | \n
Shareholdings by related parties
Helene Odfjell (Director), controls Odfjell Partners Holding Ltd, which owns 60.37% of the common shares in the Company as per 31 December 2023.
Simen Lieungh (Director) owns 20.000 shares (0.01%), Kjetil Gjersdal (CEO of Odfjell Drilling AS) and his close associate owns 42.450 shares (0.02%), while Frode Syslak (CFO of Odfjell Drilling AS) owns 25.000 shares (0.01%) in the Company as per 31 December 2023.
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 32 - Remuneration to the Board of Directors, key executive management and Group auditor.
Note 32Remuneration to the Board of Directors, key executive management and auditor
Details of salary, variable pay and other benefits provided to Group management in 2023:
| \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 - Odfjell Drilling AS | \n\n 443 | \n\n 338 | \n\n 25 | \n\n 17 | \n\n 161 | \n\n 985 | \n
| \n Frode Syslak | \n\n CFO - Odfjell Drilling AS | \n\n 209 | \n\n 151 | \n\n 13 | \n\n 12 | \n\n 86 | \n\n 471 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Drilling Ltd. | \n\n 103 | \n\n 25 | \n\n 6 | \n\n 5 | \n\n - | \n\n 139 | \n
| \n Total | \n\n \n | \n\n 755 | \n\n 515 | \n\n 44 | \n\n 34 | \n\n 247 | \n\n 1,595 | \n
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
The amounts listed as Salary, Bonus, and Other remuneration in the table above represent cash payments in 2023 and 2022. Refer to the Executive Remuneration Report for bonuses earned in 2023 and 2022.
Amounts listed as Pension premium and Expense share-based payments relates to the expense accounted for as personnel expenses in 2023 and 2022.
For details regarding the current incentive share option programme, refer to Note 33 - Share-based payments.
Fees paid to Board of non-executive directors:
| \n USD thousands | \n\n 2023 | \n\n 2022 | \n
| \n Simen Lieungh | \n\n 71 | \n\n 20 | \n
| \n Helene Odfjell | \n\n 40 | \n\n 69 | \n
| \n Harald Thorstein | \n\n 45 | \n\n 19 | \n
| \n Knut J. Hatleskog | \n\n 9 | \n\n - | \n
| \n Susanne Munch Thore | \n\n - | \n\n 36 | \n
| \n Alasdair Shiach | \n\n - | \n\n 33 | \n
| \n Thomas Marsoner | \n\n - | \n\n 53 | \n
| \n Total remuneration paid to Board of non-executive directors | \n\n 165 | \n\n 231 | \n
Note 32Remuneration to the Board of Directors, key executive management and auditor
Details of salary, variable pay and other benefits provided to Group management in 2023:
| \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 - Odfjell Drilling AS | \n\n 443 | \n\n 338 | \n\n 25 | \n\n 17 | \n\n 161 | \n\n 985 | \n
| \n Frode Syslak | \n\n CFO - Odfjell Drilling AS | \n\n 209 | \n\n 151 | \n\n 13 | \n\n 12 | \n\n 86 | \n\n 471 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Drilling Ltd. | \n\n 103 | \n\n 25 | \n\n 6 | \n\n 5 | \n\n - | \n\n 139 | \n
| \n Total | \n\n \n | \n\n 755 | \n\n 515 | \n\n 44 | \n\n 34 | \n\n 247 | \n\n 1,595 | \n
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
The amounts listed as Salary, Bonus, and Other remuneration in the table above represent cash payments in 2023 and 2022. Refer to the Executive Remuneration Report for bonuses earned in 2023 and 2022.
Amounts listed as Pension premium and Expense share-based payments relates to the expense accounted for as personnel expenses in 2023 and 2022.
For details regarding the current incentive share option programme, refer to Note 33 - Share-based payments.
Fees paid to Board of non-executive directors:
| \n USD thousands | \n\n 2023 | \n\n 2022 | \n
| \n Simen Lieungh | \n\n 71 | \n\n 20 | \n
| \n Helene Odfjell | \n\n 40 | \n\n 69 | \n
| \n Harald Thorstein | \n\n 45 | \n\n 19 | \n
| \n Knut J. Hatleskog | \n\n 9 | \n\n - | \n
| \n Susanne Munch Thore | \n\n - | \n\n 36 | \n
| \n Alasdair Shiach | \n\n - | \n\n 33 | \n
| \n Thomas Marsoner | \n\n - | \n\n 53 | \n
| \n Total remuneration paid to Board of non-executive directors | \n\n 165 | \n\n 231 | \n
Fees to the Group's auditor
| \n USD thousands | \n\n 2023 | \n\n 2022 | \n
| \n Audit | \n\n 308 | \n\n 369 | \n
| \n Other assurance services | \n\n 2 | \n\n - | \n
| \n Tax advisory fee | \n\n \n | \n\n \n | \n
| \n Fees for other services | \n\n 66 | \n\n 13 | \n
| \n Total remuneration to the Group's auditor | \n\n 376 | \n\n 383 | \n
All listed fees are net of VAT
Note 33Share-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. On 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.
On 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. In 2023 a further 400,000 options were allocated at a strike price of NOK 26.61 per share.
Overview of outstanding options:
| \n Overview of outstanding options: | \n\n 2023 | \n\n 2022 | \n
| \n Outstanding options 1.1 | \n\n 1,450,000 | \n\n 960,000 | \n
| \n Options granted | \n\n 400,000 | \n\n 1,450,000 | \n
| \n Options forfeited | \n\n - | \n\n - | \n
| \n Options exercised | \n\n \n | \n\n (960,000) | \n
| \n Options expired | \n\n - | \n\n - | \n
| \n Outstanding options 31.12 | \n\n 1,850,000 | \n\n 1,450,000 | \n
| \n Of which exercisable | \n\n 290,000 | \n\n - | \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, while the fair value of options granted in 2023 is NOK 10.32 The total cost of the share option plan is calculated based on the fair value x options granted. The total cost equals NOK 20.6 million (approximately USD 2 million) and is recognised over the period until January 2028.
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 / NOK 26.375 on the grant date.
\u2022The strike price per option was NOK 23.37 / NOK 26.61.
\u2022The expected price volatility of the company's shares was set to 50% / 40% based on historical volatility adjusted for expected changes.
\u2022The expiry date was set to 28 June 2027 / 1 February 2028.
\u2022The expected dividend yield was set to 0%.
\u2022The risk-free interest rate was set to 3.67% / 2.938%
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 34Earnings 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 23 - Market risk, and has in addition a share option plan for 1,850,000 common shares, see further description in Note 33 - Share-based payments. The warrants represent contingently issuable shares.
Neither the warrants nor the options affect the basic or diluted number of shares in 2022 or 2023.
| \n USD million | \n\n 2023 | \n\n 2022 | \n
| \n Profit/(loss) due to owners of the parent | \n\n 222.1 | \n\n 129.6 | \n
| \n Adjustment for dividends on preference shares | \n\n - | \n\n (8.3) | \n
| \n Profit/(loss) for the period due to holders of common shares | \n\n 222.1 | \n\n 121.3 | \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 222.1 | \n\n 121.3 | \n
| \n \n | \n\n 2023 | \n\n 2022 | \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 2023 | \n\n 2022 | \n
| \n Basic earnings per share (USD) | \n\n 0.938 | \n\n 0.512 | \n
| \n Diluted earnings per share (USD) | \n\n 0.938 | \n\n 0.512 | \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 222.1 | \n\n 74.6 | \n
| \n Diluted profit/(loss) for the period due to the holders of common shares | \n\n 222.1 | \n\n 74.6 | \n
| \n Basic earnings per share - continuing operations (USD) | \n\n 0.938 | \n\n 0.315 | \n
| \n Diluted earnings per share - continuing operations (USD) | \n\n 0.938 | \n\n 0.315 | \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 35Events after the reporting period