Notes to the Consolidated Financial Statements 2022
All amounts are in NOK million unless otherwise stated
Table of contents
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NOTE 1General information
Odfjell Technology Ltd. ('the Company') and its subsidiaries (together 'the Group') provide well services, drilling operations and engineering services.
Odfjell Technology, a limited liability company, is incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. Odfjell Technology Ltd's head office is at Bergen House, Crawpeel Road, Altens, Aberdeen, AB12 3LG, United Kingdom and the Company is tax resident in the United Kingdom.
The consolidated financial statements including notes for Odfjell Technology Ltd. for the year 2022 were approved by the Board of Directors on 20 April 2023.
NOTE 2Basis for preparing the consolidated financial statements
Background and formation of the Group
As part of a planned restructuring, Odfjell Technology Ltd., in February 2022 received equity contributions, including shares in two subsidiaries, from Odfjell Drilling Ltd. Following the successful issuing of new debt in the company, Odfjell Technology Ltd then on 1 March 2022 purchases shares in other relevant subsidiaries from Odfjell Drilling Ltd.
At the end of March 2022, the shares in Odfjell Technology Ltd were distributed to the shareholders in Odfjell Drilling Ltd. The ratio for the distribution was 6:1, i.e. 6 shares in Odfjell Drilling Ltd gave the holder 1 share in Odfjell Technology Ltd, rounded downwards to the closest whole share.
The shares in Odfjell Technology Ltd were listed on the Oslo Stock Exchange 29 March 2022. There was no public offering of shares in Odfjell Technology Ltd in connection with the Listing.
First-time consolidated financial statements
The consolidated financial statements ended 31 December 2022 comprise the income statement, statement of comprehensive income, statement of financial position, statement of cash flow, statement of changes in equity and note disclosures.
The consolidated financial statements of the Group for the year ended 31 December 2022 comply with IFRS as endorsed by the European Union (EU).
The first-time consolidated financial statements have been prepared in accordance with IFRS 1, First-time Adoption of International Financial Reporting Standards.
The legal formation of Odfjell Technology Ltd Group was completed on 1\u00a0March\u00a02022. The entire transaction is accounted for as a common control transaction outside the scope of IFRS 3 as Odfjell Drilling Ltd was sole shareholder of the company at the time of the transactions, and book values of assets and liabilities are continued in the consolidated accounts of Odfjell\u00a0Technology.
Principles used related to predecessor combined comparatives
Special purpose predecessor combined financial statements were prepared for the Odfjell Technology group in line with International Financial Reporting Standards as adopted by the European Union (IFRS (EU)) for the years ended 31\u00a0December 2020, 2019 and 2018. The predecessor combined financial statements are available on www.odfjelltechnology.com/investor/prospectus/
Until the formation of the Group, the accounting policies, principles of carve-out, combination and allocations as described in the predecessor combined financial statements were applied.
Applying predecessor accounting, Odfjell Technology Ltd., account for the transaction as if the combination had taken place prior to the comparative periods presented. The combined predecessor financial statements therefore present historical information as if Odfjell Technology Ltd and its subsidiaries were a part of the same group for all periods presented. The Group is of the opinion that presenting combined predecessor financial statements provide the most relevant information for users of the financial statements.
The carrying amounts of the assets and liabilities in the comparative periods are based on the predecessor values of Odfjell Drilling Ltd.
The perimeter of the accounts does not conform with the control notion in IFRS 10 Consolidated Financial Statements because Odfjell Technology Ltd., was not the parent company for the years covered by the predecessor consolidated combined financial statements.
The predecessor combined comparatives are otherwise prepared using the principles of IFRS 10, such as elimination of intra-group transactions and balances. Transactions with the remaining Odfjell Drilling Group have not been eliminated, as these are now regarded as external to the Odfjell Technology Group. These transactions are recognised based on intercompany agreements that were prevailing in the years reported. No adjustments are made to the predecessor values of income and expenses. The predecessor combined could differ from what would have been presented if Odfjell Technology operated as a separate group for all periods presented. See Note 34 for summary of transactions with Odfjell Drilling Group.
The predecessor combined comparatives include all entities over which Odfjell Technology Ltd., as at 1 March 2022 have the power to govern the financial and operating policies, generally accompanying a shareholding of more than half of the voting rights.
Earnings per share information for 2021 has been presented on a pro forma basis.
The accounting principles used in these consolidated financial statements are consistent with those used in the predecessor combined financial statements.
Presentation currency
The predecessor combined financial statements were prepared using USD as presentation currency, as these were carve-out financial statements based on the predecessor values of Odfjell\u00a0Drilling\u00a0Ltd.
The functional currency of the group's underlying business is mainly Norwegian Kroner (\"NOK\"). The board therefore believes that NOK financial reporting provides more relevant presentation of the group's financial position, funding and treasury function, financial performance and its cash flows. Odfjell Technology Ltd Group will therefore present its first-time consolidated financial statements in NOK.
The functional currencies of the group\u2019s subsidiaries (functional currencies referring to the currencies of the primary economic environments in which underlying businesses operate) remain unchanged and foreign exchange exposures will therefore be unaffected by the change, albeit that the effects of such exposures will be presented in NOK.
Opening balances and comparable figures
Opening balances as at 1 January 2021 have been restated to NOK based on the predecessor combined financial statement closing balance in USD as at 31\u00a0December 2020 using a NOK to USD exchange rate of 8.5326.
The comparative information in these financial statements prior to the legal formation of the group derive from the carve-out combined financial statements up to and including 31 December 2021.
Going concern
In the Group\u2019s view, factors that could cause actual results to differ materially from the outlook contained in these financial statements are the following: volatile oil and gas prices, global political changes regarding energy composition, competition within the oil and gas services industry, changes in clients\u2019 spending budgets and developments in the financial and fiscal markets.
Additionally, any unforeseen consequences of COVID-19 and other future pandemics may impact the financial result.
The Group does not expect to be materially affected by the situation in Ukraine as it has no direct businesses in Ukraine, Russia or Belarus.
The Group's refinancing risk is low, with a bond loan maturing in February 2026 and a rolling credit facility of USD 25 available until the same quarter.
Taking all relevant risk factors into consideration, the Board has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. Hence, the Group has adopted the going concern basis in preparing its consolidated financial statements.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments, debt and equity financial assets, plan assets in defined benefit pension plans and contingent consideration that have been measured at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where the assumptions and estimates are significant to the consolidated financial statements are disclosed in each relevant note.
New and amended standards and interpretations effective on 1 January 2022
\u2022 Onerous Contracts - Costs of Fulfilling a Contract (Amendments to IAS 37)
\u2022 Covid-19-Related Rent Concessions beyond 30 June 2021\u2013 amendments to IFRS 16.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries.
Subsidiaries are all entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Subsidiaries are listed in Note 32.
Profit or loss and each component of Other Comprehensive Income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group\u2019s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. The difference between fair value of any consideration paid, and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity.
If the Group loses control over a subsidiary, it de-recognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may indicate that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Any investment retained is recognised at fair value. The fair value is the initial carrying amount for the purpose of subsequently accounting for the retained interest as an associate, joint venture or financial asset.
Foreign currency translation
(a) Functional and presentation currency
Items included in the separate financial statements of each of the Group\u2019s entities are measured using the currency of the primary economic environment in which the entity operates (\u2018the functional currency\u2019). The Consolidated Financial Statements are presented in NOK (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 (NOK) are translated into the presentation currency as follows:
\u25aaAssets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u25aaIncome 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
\u25aaAll resulting exchange differences are recognised in other comprehensive income.
Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
The following are the most significant exchange rates used in the consolidation:
| \n \n | \n\n Average rate | \n\n Average rate | \n\n Closing rate | \n\n Closing rate | \n\n Opening rate | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n USD | \n\n 9.6197 | \n\n 8.5979 | \n\n 9.8573 | \n\n 8.8194 | \n\n 8.5326 | \n
| \n GBP | \n\n 11.8610 | \n\n 11.8269 | \n\n 11.8541 | \n\n 11.8875 | \n\n 11.6562 | \n
| \n EUR | \n\n 10.1128 | \n\n 10.1735 | \n\n 10.5138 | \n\n 9.9888 | \n\n 10.4703 | \n
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Statement of cash flows
The statement of cash flows is prepared under the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2022 and not early adopted
NOTE 3Significant events and transactions in the current reporting period
The financial position and performance of the group was particularly affected by the following events and transactions during the reporting period:
Financing secured
On 4 February 2022 Odfjell Technology successfully priced NOK 1.1 bn in senior secured bonds through a private placement. The bonds mature in February 2026 and bear interest of 3 months Nibor plus 700 basis points.
The company also secured a new USD 25 million super senior revolving credit facility.
Re-organisation completed
As of 1 March 2022, the re-organisation of the Odfjell Drilling group was completed, and Odfjell Technology obtained control of all the companies in the Odfjell\u00a0Technology Group. A cash payment of NOK 2.3 billion was made to obtain control, utilising funds from financing secured and proceeds from Odfjell Drilling cash pool.
Listing on the Oslo Stock Exchange
At the end of March 2022, the shares in Odfjell Technology Ltd (OTL) were distributed from Odfjell Drilling Ltd (ODL) to the shareholders of ODL.The shares in OTL were admitted for trading on the Oslo Stock Exchange 29\u00a0March 2022.
Equinor extends platform drilling contracts on Johan Sverdrup and Heidrun
On 16 February 2022, Equinor exercised a 2 year option on the platform drilling contracts for Heidrun and Johan Sverdrup. The contract work includes drilling operations, work-over campaigns, Plug & Abandonment activities and all preventative and corrective maintenance on the installations. The contract period is now firm until Q4 2024. This option is the first of three options of two years each.
Management services for West Linus
NOTE 4Critical 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 of these estimates and judgements are disclosed in the relevant notes.
\u25aaRevenue recognition (Note 6 - Revenue)
\u25aaRecognition of deferred tax asset for carried forward tax losses (Note 9 - Income Taxes)
\u25aaProvisions and contingent liabilities (Note 30 - Contingencies)
\u25aaDetermination of expected economic life of assets (Note 10 - Tangible fixed assets)
\u25aaDetermination of lease term and estimating the incremental borrowing rate (Note 19 - Leases)
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 well services, drilling operations and engineering services to the offshore oil and gas industry. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. Well Services, Operations and Project & Engineering have been determined as the operating segments.
Well Services
The Well Services segment provides casing and tubular running services (both automated and conventional), drilling tool and tubular rental services, specialist well intervention products and services for exploration wells and for production purposes.
Operations (previously Drilling Operations)
The name change from Drilling Operations to Operations is effective from January 2023. The main service offering of the Operations segment is production drilling and well completion on client's rigs. Other types of services offered are slot recovery, plug and abandonment, work-overs and maintenance activities. In this segment, the Group offers platform drilling services on both fixed production platforms and on floating production platforms with subsea blowout preventers (BOP) along with the management of and performance of the same services on leased Jack-up rigs.
Projects & Engineering (previously Engineering)
The name change from Engineering to Projects & Engineering is effective from January 2023. The segment offers engineering and integrity services, ranging from design and engineering to building supervision, project management and operational support for units in operation, newbuild projects, SPS/RS recertification projects and yard stays.
| \n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n\n Corporate / GBS | \n\n Eliminations | \n\n Consolidated | \n||||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n External segment revenue | \n\n 1,171.7 | \n\n 849.0 | \n\n 1,993.2 | \n\n 1,576.4 | \n\n 529.2 | \n\n 350.0 | \n\n 190.9 | \n\n 172.8 | \n\n - | \n\n - | \n\n 3,885.0 | \n\n 2,948.2 | \n
| \n Inter segment revenue | \n\n 193.7 | \n\n 146.9 | \n\n (89.5) | \n\n (70.7) | \n\n 51.9 | \n\n 8.3 | \n\n 172.2 | \n\n 156.4 | \n\n (328.3) | \n\n (240.9) | \n\n - | \n\n - | \n
| \n Total revenue | \n\n 1,365.4 | \n\n 995.9 | \n\n 1,903.8 | \n\n 1,505.7 | \n\n 581.0 | \n\n 358.3 | \n\n 363.0 | \n\n 329.2 | \n\n (328.3) | \n\n (240.9) | \n\n 3,885.0 | \n\n 2,948.2 | \n
| \n EBITDA | \n\n 485.3 | \n\n 257.9 | \n\n 157.2 | \n\n 100.9 | \n\n 72.1 | \n\n 20.3 | \n\n (42.1) | \n\n 8.3 | \n\n - | \n\n - | \n\n 672.5 | \n\n 387.4 | \n
| \n Depreciation and amortisation | \n\n (259.3) | \n\n (211.1) | \n\n (0.1) | \n\n (0.2) | \n\n (0.6) | \n\n (0.4) | \n\n (28.4) | \n\n (51.0) | \n\n - | \n\n - | \n\n (288.4) | \n\n (262.8) | \n
| \n EBIT | \n\n 226.0 | \n\n 46.9 | \n\n 157.1 | \n\n 100.7 | \n\n 71.5 | \n\n 19.8 | \n\n (70.5) | \n\n (42.7) | \n\n - | \n\n - | \n\n 384.1 | \n\n 124.6 | \n
| \n Share of profit (loss) from joint ventures and associates | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n (19.9) | \n\n (4.6) | \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 \n | \n\n \n | \n\n \n | \n\n \n | \n\n (138.0) | \n\n (17.2) | \n
| \n Profit / (loss) before tax - Consolidated Group | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n 226.2 | \n\n 102.8 | \n
Corporate / GBS covers overhead costs in the group as well as global business services (GBS). The GBS services are provided to segments within the group as well as to the Odfjell Drilling Group. The Group will continue to provide global business services to the Odfjell Drilling Group going forward.
NOTE 6Revenue
Accounting policy - Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over rendered services to the customer.
Sometimes, the Group receives short-term advances from customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Group has, as a practical expedient in IFRS, recognised the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The group has only operating leases as a lessor. Rental income is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. The lease term may vary from contract to contract, and only includes the non-cancellable period of the contract with the addition of optional renewable periods if the lessee is reasonably certain to extend. None of the existing contracts have optional periods included in the lease term. The lease term is reassessed when options to extend are exercised. Contingent rents are recognised as revenue in the period in which they are earned.
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations.
Well Services
The Well Services segment (OWS) provides casing and tubular running services (both automated and conventional), drilling tool and tubular rental services, specialist well intervention products and services for exploration wells and for production purposes.
Revenue for the rental services are recognised according to IFRS 16 Leases and is accounted for on a straight-line basis over the lease terms.
Services related to contracts with customers are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue is based on the transaction price in the contracts with customers, which is a combination of fees for equipment used, personnel on board and other pricing elements. Payment of the transaction price is usually due on a monthly basis. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Operations
The Operations segment provides integrated drilling and maintenance services for both fixed production platforms and on floating production platforms with subsea blowout preventers (BOP) along with the management of and performance of the same services on leased Jack-up rigs in the North Sea. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer.
Revenue is based on the transaction price in the contracts with customers. The main part of the transaction price is fixed day rates, which can vary depending on the phase of contract. Payment of the day rate based transaction price is usually due on a monthly basis. Some contracts may contain milestone payments or prepayment for maintenance services not yet performed. Refer to Note 15 - Contract balances.
The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Some 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.
Projects & Engineering
The Projects & Engineering segment offers engineering services, including design, project management and operation and support. The transaction prices in the contracts are mainly based on rates per hour, but the business area may from time to time have some lump sum projects. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Revenue specification
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Revenue from contracts with customers | \n\n 3,430.5 | \n\n 2,636.9 | \n
| \n Lease component in Well Services contracts | \n\n 454.0 | \n\n 310.6 | \n
| \n Other operating revenue | \n\n 0.4 | \n\n 0.8 | \n
| \n Operating revenue | \n\n 3,885.0 | \n\n 2,948.2 | \n
Revenue from single external customers (> 10% of revenues)
| \n NOK million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Customer 1 | \n\n 34 | \n\n 816.7 | \n\n 533.9 | \n
| \n Customer 2 | \n\n \n | \n\n 544.7 | \n\n 453.0 | \n
| \n Customer 3 | \n\n \n | \n\n 408.7 | \n\n 465.1 | \n
Disaggregation of revenue by primary geographical markets
| \n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n\n Corporate / GBS | \n\n Eliminations | \n\n Consolidated | \n||||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Norway | \n\n 759.0 | \n\n 554.2 | \n\n 1,176.6 | \n\n 969.1 | \n\n 521.5 | \n\n 323.8 | \n\n 312.1 | \n\n 279.2 | \n\n (222.7) | \n\n (159.0) | \n\n 2,546.5 | \n\n 1,967.3 | \n
| \n UK | \n\n 117.5 | \n\n 87.7 | \n\n 727.1 | \n\n 536.5 | \n\n 59.5 | \n\n 34.5 | \n\n 43.9 | \n\n 44.8 | \n\n (100.8) | \n\n (78.1) | \n\n 847.3 | \n\n 625.4 | \n
| \n Europe - other countries | \n\n 176.9 | \n\n 110.7 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 176.9 | \n\n 110.7 | \n
| \n Asia | \n\n 302.9 | \n\n 237.4 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 7.1 | \n\n 5.3 | \n\n (4.8) | \n\n (3.8) | \n\n 305.3 | \n\n 238.9 | \n
| \n Other geographical markets | \n\n 9.0 | \n\n 5.9 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 9.0 | \n\n 5.9 | \n
| \n Total operating revenue | \n\n 1,365.4 | \n\n 995.9 | \n\n 1,903.8 | \n\n 1,505.7 | \n\n 581.0 | \n\n 358.3 | \n\n 363.0 | \n\n 329.2 | \n\n (328.3) | \n\n (240.9) | \n\n 3,885.0 | \n\n 2,948.2 | \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 NOK million | \n\n Future minimum lease payments | \n\n Performance obligations | \n\n Total firm backlog | \n
| \n Within one year | \n\n 160 | \n\n 2,443 | \n\n 2,603 | \n
| \n Between one and two years | \n\n 142 | \n\n 1,612 | \n\n 1,754 | \n
| \n Between two and three years | \n\n 33 | \n\n 704 | \n\n 737 | \n
| \n Between three and four years | \n\n - | \n\n 271 | \n\n 271 | \n
| \n Between four and five years | \n\n - | \n\n 67 | \n\n 67 | \n
| \n After five years | \n\n - | \n\n 35 | \n\n 35 | \n
| \n Total | \n\n 335 | \n\n 5,132 | \n\n 5,467 | \n
NOTE 7Personnel Expenses
Specification
| \n NOK million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Salaries and wages | \n\n \n | \n\n 1,605.5 | \n\n 1,323.5 | \n
| \n Employer's national insurance contributions | \n\n \n | \n\n 218.2 | \n\n 178.0 | \n
| \n Pension expenses | \n\n\n | \n\n 104.9 | \n\n 85.6 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n 2.8 | \n\n - | \n
| \n Other benefits | \n\n \n | \n\n 90.0 | \n\n 71.0 | \n
| \n Hired personnel | \n\n \n | \n\n 360.1 | \n\n 238.9 | \n
| \n Total personnel expenses | \n\n \n | \n\n 2,381.6 | \n\n 1,897.0 | \n
| \n \n | \n\n \n | \n\n 2022 | \n\n 2021 | \n
| \n No. of employees (annual average) | \n\n \n | \n\n 1,966 | \n\n 1,701 | \n
NOTE 8Combined items, income statement
Other gains and losses
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Gain disposal of shares in subsidiaries due to loss of control * | \n\n - | \n\n 2.1 | \n
| \n Net gain on disposal of tangible fixed assets | \n\n 13.6 | \n\n 4.0 | \n
| \n Other gains and losses | \n\n 13.6 | \n\n 6.0 | \n
| \n\n | \n
Other operating expenses
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n 100.5 | \n\n 109.9 | \n
| \n Hired equipment | \n\n 90.9 | \n\n 90.5 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n 391.1 | \n\n 276.8 | \n
| \n Insurance | \n\n 5.2 | \n\n 2.7 | \n
| \n Freight and transport | \n\n 48.9 | \n\n 41.6 | \n
| \n Premises facility expenses | \n\n 47.8 | \n\n 40.3 | \n
| \n Travel and course expenses | \n\n 74.8 | \n\n 53.3 | \n
| \n Other operating and administrative expenses | \n\n 85.3 | \n\n 54.7 | \n
| \n Total other operating expenses | \n\n 844.5 | \n\n 669.8 | \n
Accounting policy - Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Interest expenses
| \n NOK million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n\n | \n\n 96.6 | \n\n - | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 4.5 | \n\n - | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 7.8 | \n\n 5.1 | \n
| \n Other interest expenses | \n\n \n | \n\n 1.8 | \n\n 0.9 | \n
| \n Total interest expenses | \n\n \n | \n\n 110.7 | \n\n 6.0 | \n
Other financial items
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n (31.8) | \n\n (16.6) | \n
| \n Other financial income | \n\n 0.1 | \n\n 1.4 | \n
| \n Other financial expenses | \n\n (1.6) | \n\n (0.9) | \n
| \n Total other financial items | \n\n (33.3) | \n\n (16.2) | \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. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax 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.
Withholding tax is the tax withheld on border-crossing gross income, generated in the Middle East and some other countries. Withholding tax is presented as tax expense in the income statement as this is a major, and often the total, part of the corporate income tax.
Significant judgement and estimation uncertainty
Odfjell Offshore Ltd, 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.
21 December 2022 Odfjell Offshore Ltd received a tax ruling from the Norwegian Tax Authorities where the tax loss of 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 will appeal the ruling, and the Group is still of the opinion that the most likely outcome of a court case is that the anti-avoidance rule should not be applicable and the denial of the tax loss should be revoked.
The Group made an upfront payment 1 February 2023 of NOK 307 million in taxes and interest for the financial years 2017 through to 2021. The amount was financed and refunded from Odfjell Drilling Ltd., as it is covered by the letter of indemnity issued 1 March 2022 to Odfjell Technology Ltd. Odfjell Drilling Ltd will hold the Company indemnified in respect of any liability that may occur in relation to the ongoing Odfjell Offshore Ltd tax case for the financial years 2017 through to 2021. This includes financing of prepayments to the Norwegian Tax Authorities, and funds for legal proceedings.
For the financial year 2022 income taxes payable for companies taxable in Norway amounts to NOK 36 million. Following the tax ruling in December 2022, the income taxes can no longer be offset by tax losses carried forward, and the Group will have to pay the amount in 2023. However, since the Group is still of the opinion that the most likely outcome of a court case is that the denial of the tax loss should be revoked, the Group has recognised a deferred tax asset equal to expected tax refund of NOK 36 million following at court case win.
Income tax expense
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Withholding tax paid / payable | \n\n (20.8) | \n\n (15.8) | \n
| \n Payable income tax expense | \n\n (30.7) | \n\n (33.6) | \n
| \n Net utilisation of unrecognised tax losses | \n\n 78.4 | \n\n 60.0 | \n
| \n Change in deferred tax assets and liabilities | \n\n (0.2) | \n\n (1.4) | \n
| \n Total income tax expense | \n\n 26.8 | \n\n 9.2 | \n
| \n Effective tax rate | \n\n -11.8 % | \n\n -8.9 % | \n
Tax reconciliation
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Profit before income tax expense | \n\n 226.2 | \n\n 102.8 | \n
| \n Tax calculated at domestic tax rates applicable to profits in respective countries* (including withholding tax) | \n\n (38.7) | \n\n (43.3) | \n
| \n Net utilisation of unrecognised tax losses | \n\n 78.4 | \n\n 60.0 | \n
| \n Effect of changes in tax rates | \n\n 0.1 | \n\n 0.2 | \n
| \n Effect of adjustments recognised related to prior periods | \n\n 5.3 | \n\n (2.1) | \n
| \n Effect of net non-taxable income / (expenses) | \n\n (18.2) | \n\n (5.6) | \n
| \n Income tax expense | \n\n 26.8 | \n\n 9.2 | \n
| \n\n | \n||
| \n\n | \n
Tax losses
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Unused tax losses for which no deferred tax asset has been recognised | \n\n 795.6 | \n\n 1,150.7 | \n\n 1,424.2 | \n
| \n Potential tax benefit (22%) | \n\n 175.5 | \n\n 253.8 | \n\n 313.8 | \n
The movement in unrecognised tax assets is as follows:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Unrecognised tax asset as at 01.01 | \n\n 253.8 | \n\n 313.8 | \n
| \n Net utilisation of unrecognised tax losses | \n\n (78.4) | \n\n (60.0) | \n
| \n Effect of changes in tax rates | \n\n - | \n\n 0.5 | \n
| \n Currency translation differences | \n\n 0.2 | \n\n (0.5) | \n
| \n Unrecognised tax asset as at 31.12 | \n\n 175.5 | \n\n 253.8 | \n
The Group has an unrecognised tax asset of NOK 176 million, which is mainly related to the challenged tax loss incurred by Odfjell Offshore Ltd as explained above.
For prior periods taxable profits within Norwegian subsidiaries in Odfjell Drilling Ltd Group have been offset in tax loss incurred by Odfjell Offshore Ltd. Subsequent of the spin-off, this will no longer be the case.
The gross movement on the deferred tax account is as follows:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 01.01 | \n\n 15.5 | \n\n 0.0 | \n
| \n Income statement charge | \n\n 35.4 | \n\n (1.4) | \n
| \n Change in deferred tax on other comprehensive income | \n\n 0.4 | \n\n 0.0 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n (0.0) | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 31.12 | \n\n 51.3 | \n\n 15.5 | \n
Deferred tax assets - Specification and movements
| \n NOK million | \n\n Tax losses | \n\n Current assets | \n\n Net pension liabilities | \n\n Fixed assets | \n\n Lease liabilities | \n\n Total | \n
| \n Opening balance 01.01.2021 | \n\n 0.4 | \n\n 1.8 | \n\n 10.9 | \n\n 2.5 | \n\n 9.5 | \n\n 25.2 | \n
| \n Income statement charge | \n\n (0.4) | \n\n (0.0) | \n\n (1.4) | \n\n 0.3 | \n\n 11.3 | \n\n 9.7 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.8 | \n\n - | \n\n - | \n\n 0.8 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n 0.0 | \n\n - | \n\n (0.0) | \n\n (0.0) | \n\n (0.0) | \n
| \n Closing balance 31.12.2021 | \n\n - | \n\n 1.8 | \n\n 10.3 | \n\n 2.8 | \n\n 20.8 | \n\n 35.7 | \n
| \n Income statement charge | \n\n 35.6 | \n\n 0.2 | \n\n (0.4) | \n\n (2.2) | \n\n 5.4 | \n\n 38.4 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.4 | \n\n - | \n\n - | \n\n 0.4 | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n - | \n\n 0.0 | \n\n 0.2 | \n\n 0.2 | \n
| \n Closing balance 31.12.2022 | \n\n 35.6 | \n\n 1.9 | \n\n 10.3 | \n\n 0.6 | \n\n 26.4 | \n\n 74.7 | \n
Deferred tax liabilities - Specification and movements
| \n NOK million | \n\n Deferred capital gains | \n\n Current assets | \n\n Right-of-use Assets | \n\n Total | \n
| \n Opening balance 01.01.2021 | \n\n (0.0) | \n\n - | \n\n (9.1) | \n\n (9.1) | \n
| \n Income statement charge | \n\n 0.0 | \n\n - | \n\n (11.1) | \n\n (11.1) | \n
| \n Currency translation differences | \n\n 0.0 | \n\n - | \n\n 0.0 | \n\n 0.0 | \n
| \n Closing balance 31.12.2021 | \n\n (0.0) | \n\n - | \n\n (20.2) | \n\n (20.2) | \n
| \n Income statement charge | \n\n 0.0 | \n\n (0.0) | \n\n (3.1) | \n\n (3.1) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n (0.2) | \n\n (0.2) | \n
| \n Closing balance 31.12.2022 | \n\n (0.0) | \n\n (0.0) | \n\n (23.4) | \n\n (23.4) | \n
Net book value of deferred taxes
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Deferred tax assets | \n\n 74.7 | \n\n 35.7 | \n\n 25.2 | \n
| \n Deferred tax liabilities offset in deferred tax assets | \n\n (23.4) | \n\n (20.2) | \n\n (9.1) | \n
| \n Net book value of deferred tax asset | \n\n 51.3 | \n\n 15.5 | \n\n 16.1 | \n
The income tax (charge)/credit relating to components of the other comprehensive income is as follows:
| \n \n | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After tax | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After tax | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Actuarial loss on post employment benefit obligations | \n\n 1.9 | \n\n 0.4 | \n\n 1.5 | \n\n 3.6 | \n\n 0.8 | \n\n 2.8 | \n
| \n Other comprehensive income | \n\n 1.9 | \n\n 0.4 | \n\n 1.5 | \n\n 3.6 | \n\n 0.8 | \n\n 2.8 | \n
| \n Deferred tax | \n\n \n | \n\n 0.4 | \n\n \n | \n\n \n | \n\n 0.8 | \n\n \n | \n
NOTE 10Tangible fixed assets
Accounting policy
Property, plant and equipment comprise mainly of, 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.
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, taking into account current and expected climate risk.
When assets are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting from their disposal is included in the income statement as other gains and losses.
Residual values for property, plant and equipment are estimated to be zero.
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). 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
Specification and movements
| \n \n | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n NOK million | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \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 \n | \n\n \n | \n
| \n At 1 January | \n\n 3,595.8 | \n\n 184.1 | \n\n 156.7 | \n\n 3,936.6 | \n\n 3,213.1 | \n\n 178.3 | \n\n 90.3 | \n\n 3,481.7 | \n
| \n Additions | \n\n 309.6 | \n\n 16.6 | \n\n 38.5 | \n\n 364.7 | \n\n 341.6 | \n\n 15.2 | \n\n 71.7 | \n\n 428.5 | \n
| \n Disposals | \n\n (198.3) | \n\n (10.0) | \n\n (10.9) | \n\n (219.2) | \n\n (61.7) | \n\n (9.2) | \n\n (5.0) | \n\n (75.9) | \n
| \n Currency translation differences | \n\n 383.4 | \n\n 3.9 | \n\n 2.5 | \n\n 389.7 | \n\n 102.8 | \n\n (0.2) | \n\n (0.4) | \n\n 102.3 | \n
| \n Cost as at 31 December | \n\n 4,090.4 | \n\n 194.7 | \n\n 186.7 | \n\n 4,471.9 | \n\n 3,595.8 | \n\n 184.1 | \n\n 156.7 | \n\n 3,936.6 | \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 \n | \n\n \n | \n
| \n At 1 January | \n\n (2,839.2) | \n\n (157.5) | \n\n (52.5) | \n\n (3,049.2) | \n\n (2,626.7) | \n\n (156.3) | \n\n (36.7) | \n\n (2,819.7) | \n
| \n Depreciation | \n\n (232.4) | \n\n (9.5) | \n\n (22.7) | \n\n (264.6) | \n\n (191.0) | \n\n (9.6) | \n\n (21.1) | \n\n (221.7) | \n
| \n Impairment | \n\n - | \n\n - | \n\n (8.5) | \n\n (8.5) | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 195.3 | \n\n 10.0 | \n\n 10.9 | \n\n 216.1 | \n\n 58.1 | \n\n 8.4 | \n\n 5.0 | \n\n 71.5 | \n
| \n Currency translation differences | \n\n (293.2) | \n\n (2.9) | \n\n (1.2) | \n\n (297.3) | \n\n (79.6) | \n\n 0.0 | \n\n 0.3 | \n\n (79.3) | \n
| \n As at 31 December | \n\n (3,169.5) | \n\n (160.0) | \n\n (73.9) | \n\n (3,403.4) | \n\n (2,839.2) | \n\n (157.5) | \n\n (52.5) | \n\n (3,049.2) | \n
| \n Net book value at 31 December | \n\n 921.0 | \n\n 34.7 | \n\n 112.8 | \n\n 1,068.4 | \n\n 756.6 | \n\n 26.6 | \n\n 104.2 | \n\n 887.4 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Accumulated impairment that may qualify for reversal in a later period related to right-of-use asset no longer in use and amount to NOK 8 million at 31 December 2022.
For more information about Right-of-use assets, refer to Note 19 - Leases.
Refer to Note 31 for information about capital commitments.
Significant judgement and estimation uncertainty
Management exercises judgement in determining the expected economic life of assets in the Well Services segment. Management uses knowledge of the oil industry and the estimated market development, as well as expected technological development as basis for determining useful life. The evaluation includes effects of the climate change and the shift to renewable energy sources.
Impairment of property, plant and equipment
NOTE 11Intangible assets
Accounting policy - Goodwill and Intangible assets
Accounting policy - Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
\u25aaThe technical feasibility of completing the intangible asset so that the asset will be available for use or sale
\u25aaIts intention to complete and its ability and intention to use or sell the asset
\u25aaHow the asset will generate future economic benefits
\u25aaThe availability of resources to complete the asset
\u25aaThe ability to measure reliably the expenditure during development
Specification and movements 2022
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Additions | \n\n - | \n\n 40.9 | \n\n - | \n\n 6.0 | \n\n 46.8 | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n 2.2 | \n\n 1.5 | \n\n 3.7 | \n
| \n Cost as at 31 December 2022 | \n\n 132.8 | \n\n 282.3 | \n\n 20.9 | \n\n 19.2 | \n\n 455.2 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Amortisation | \n\n - | \n\n (12.3) | \n\n (2.0) | \n\n (0.9) | \n\n (15.3) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n - | \n\n (0.7) | \n\n (0.7) | \n
| \n As at 31 December 2022 | \n\n - | \n\n (189.1) | \n\n (6.4) | \n\n (7.5) | \n\n (203.1) | \n
| \n Net book value at 31 December 2022 | \n\n 132.8 | \n\n 93.2 | \n\n 14.4 | \n\n 11.7 | \n\n 252.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 139.3 | \n\n 196.3 | \n\n 14.1 | \n\n 11.0 | \n\n 360.6 | \n
| \n Additions | \n\n - | \n\n 45.1 | \n\n 4.0 | \n\n 0.4 | \n\n 49.5 | \n
| \n Disposal due to loss of control of subsidiary * | \n\n (6.5) | \n\n \n | \n\n \n | \n\n - | \n\n (6.5) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n 0.6 | \n\n 0.4 | \n\n 0.9 | \n
| \n Cost as at 31 December 2021 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n - | \n\n (140.3) | \n\n (1.5) | \n\n (3.3) | \n\n (145.1) | \n
| \n Amortisation | \n\n - | \n\n (36.5) | \n\n (2.3) | \n\n (2.4) | \n\n (41.1) | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n (0.1) | \n\n (0.2) | \n\n (0.3) | \n
| \n As at 31 December 2021 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Net book value at 31 December 2021 | \n\n 132.8 | \n\n 64.7 | \n\n 14.8 | \n\n 5.9 | \n\n 218.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n
Internally developed assets
The carrying amount of internally developed assets include development expenses incurred in connection with developing a new drill-hole cleaning tool. The technology has been patented. The Group have documented that the new technology met the criteria for recognition in the balance sheet. The new tool is part of Well Services product line and is expected to generate future cash flow to support the book value as at 31\u00a0December 2022.
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Summary of goodwill allocation for each operating segment
| \n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n\n Total | \n||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n At 1 January | \n\n 36.4 | \n\n 36.4 | \n\n 86.7 | \n\n 86.7 | \n\n 9.7 | \n\n 16.2 | \n\n 132.8 | \n\n 139.3 | \n
| \n Disposal due to loss of control of subsidiary * | \n\n - | \n\n - | \n\n \n | \n\n - | \n\n - | \n\n (6.5) | \n\n - | \n\n (6.5) | \n
| \n Net book value at 31 December | \n\n 36.4 | \n\n 36.4 | \n\n 86.7 | \n\n 86.7 | \n\n 9.7 | \n\n 9.7 | \n\n 132.8 | \n\n 132.8 | \n
| \n\n | \n
These assumptions have been used for the analysis of each CGU within the operating segment.
| \n Key assumptions for value-in-use calculations | \n\n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n|||
| \n \n | \n\n \n | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n EBITDA margin in prognosis period | \n\n \n | \n\n 35-37% | \n\n 22% - 36% | \n\n 8% - 9% | \n\n 5% - 8% | \n\n 12% - 13% | \n\n 5% - 8% | \n
| \n Growth rate year 6 and forward | \n\n \n | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n
| \n Weighted Average Cost of Capital, pre-tax | \n\n \n | \n\n 12% | \n\n 12% | \n\n 9% | \n\n 10% | \n\n 10% | \n\n 10% | \n
Sensitivity analysis for goodwill impairment test as at 31.12.2022
The Group has performed sensitivity analysis for the goodwill impairment test by reducing operating income by one, five and ten percent and EBITDA margin by one, five and ten percentage points respectively for each of the segments.
Reducing EBITDA margin by ten percentage points indicated an impairment write-down of NOK 87 million in the Drilling Operations segment.
NOTE 12Other assets
Other non-current assets
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Deposits | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
| \n Total other non-current assets | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
Other current assets
| \n NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Prepaid expenses | \n\n \n | \n\n 55.7 | \n\n 40.2 | \n\n 31.5 | \n
| \n Income tax receivables | \n\n \n | \n\n 20.7 | \n\n 8.2 | \n\n 4.9 | \n
| \n VAT receivables | \n\n \n | \n\n 14.3 | \n\n 34.3 | \n\n 24.0 | \n
| \n Contract assets | \n\n\n | \n\n 0.9 | \n\n 4.9 | \n\n - | \n
| \n Other current receivables | \n\n\n | \n\n 24.9 | \n\n 37.9 | \n\n 17.3 | \n
| \n Total other current receivables and assets | \n\n \n | \n\n 116.4 | \n\n 125.6 | \n\n 77.7 | \n
NOTE 13Spare parts
NOTE 14Financial assets and liabilities
Accounting policies
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
The Group classify financial assets in the following categories:
\u25aaamortised cost,
\u25aafinancial assets at fair value through profit or loss (FVPL),
\u25aafinancial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at :
\u25aaamortised cost,,
\u25aafair value through profit or loss, or as
\u25aaderivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 18 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u25aaIn the principal market for the asset or liability , or
\u25aaIn the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
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:
\u25aaLevel 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
\u25aaLevel 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)
\u25aaLevel 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. Interest rate swaps are fair valued using forward rates extracted from observable yield curves. Interest rate swaps are recognised according to mark-to-market reports from external financial institutions.
The Group had the following financial instruments at each reporting period:
| \n NOK million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 10.8 | \n\n - | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n - | \n\n 91.7 | \n
| \n Current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n 1,308.8 | \n\n 1,413.7 | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 942.6 | \n\n 816.4 | \n\n 650.8 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 25.8 | \n\n 42.9 | \n\n 17.3 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n Total financial assets | \n\n \n | \n\n \n | \n\n 1,573.0 | \n\n 2,689.9 | \n\n 2,318.0 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 1,084.2 | \n\n - | \n\n - | \n
| \n Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 96.8 | \n\n 83.1 | \n\n 37.1 | \n
| \n Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 255.7 | \n\n - | \n\n - | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n \n | \n\n \n | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
| \n Current lease liabilities | \n\n\n | \n\n \n | \n\n 30.6 | \n\n 24.5 | \n\n 19.3 | \n
| \n Trade payables | \n\n \n | \n\n \n | \n\n 264.1 | \n\n 215.3 | \n\n 137.3 | \n
| \n Other current liabilities | \n\n\n | \n\n \n | \n\n 310.1 | \n\n 276.5 | \n\n 227.3 | \n
| \n Total financial liabilities | \n\n \n | \n\n \n | \n\n 2,041.5 | \n\n 750.9 | \n\n 475.4 | \n
NOTE 15Contract 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.
Accounting policies - Contract liabilities
Contract balances specification
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Contract assets | \n\n 0.9 | \n\n 4.9 | \n\n - | \n
| \n Contract liabilities | \n\n 63.0 | \n\n 50.5 | \n\n 35.1 | \n
The contract liabilities are mainly related to the Operations segment.
Set out below is the amount of revenue recognised from:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Amounts included in contract liabilities at the beginning of the year | \n\n 2.5 | \n\n 0.4 | \n
| \n Performance obligations satisfied in the previous years | \n\n 0.0 | \n\n 0.1 | \n
NOTE 16Trade 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 NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Trade receivables | \n\n \n | \n\n 504.3 | \n\n 511.4 | \n\n 463.8 | \n
| \n Earned, not yet invoiced operating revenues | \n\n \n | \n\n 452.7 | \n\n 317.5 | \n\n 196.7 | \n
| \n Loss allowance | \n\n 26 | \n\n (14.5) | \n\n (12.4) | \n\n (9.7) | \n
| \n Trade receivables - net | \n\n \n | \n\n 942.6 | \n\n 816.4 | \n\n 650.8 | \n
For information about currencies, ageing and loss allowance, refer to Note 26 - Credit risk.
NOTE 17Cash and cash equivalents
Accounting policy
Cash specification:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Cash in bank | \n\n 190.7 | \n\n 72.0 | \n\n 78.3 | \n
| \n Time deposits | \n\n 306.7 | \n\n 379.4 | \n\n - | \n
| \n Restricted bank deposits * | \n\n 62.7 | \n\n 46.5 | \n\n 44.2 | \n
| \n Total cash and cash equivalents | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n\n | \n
NOTE 18Interest-bearing borrowings
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Interest-bearing borrowings specification as at 31 December
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Bond loan | \n\n 1,100.0 | \n\n - | \n\n 1,100.0 | \n
| \n Bank borrowings | \n\n - | \n\n 246.4 | \n\n 246.4 | \n
| \n Transaction cost, unamortised | \n\n (15.8) | \n\n (3.9) | \n\n (19.7) | \n
| \n Accrued interest expenses | \n\n - | \n\n 13.2 | \n\n 13.2 | \n
| \n Carrying amounts interest-bearing borrowings | \n\n 1,084.2 | \n\n 255.7 | \n\n 1,340.0 | \n
Movements in interest-bearing borrowings
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Carrying amount as at 1 January | \n\n - | \n\n - | \n\n - | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n
| \n New borrowings | \n\n 1,100.0 | \n\n 219.7 | \n\n 1,319.7 | \n
| \n Paid transaction costs related to new borrowings | \n\n (19.2) | \n\n (5.0) | \n\n (24.2) | \n
| \n Non-cash flows: | \n\n \n | \n\n \n | \n\n \n | \n
| \n Reclassified | \n\n - | \n\n - | \n\n - | \n
| \n Change in transaction cost, unamortised | \n\n 3.5 | \n\n 1.0 | \n\n 4.5 | \n
| \n Change in accrued interest cost | \n\n - | \n\n 13.2 | \n\n 13.2 | \n
| \n Change due to currency revaluation | \n\n - | \n\n 26.7 | \n\n 26.7 | \n
| \n Carrying amount as at 31 December | \n\n 1,084.2 | \n\n 255.7 | \n\n 1,340.0 | \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 NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Maturity within 3 months | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 3 and 6 months | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 6 and 9 months | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 9 months and 1 year * | \n\n - | \n\n 246.4 | \n\n 246.4 | \n
| \n Maturity between 1 and 2 years | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 2 and 3 years | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 3 and 4 years | \n\n 1,100.0 | \n\n - | \n\n 1,100.0 | \n
| \n Maturity between 4 and 5 years | \n\n - | \n\n - | \n\n - | \n
| \n Maturity beyond 5 years | \n\n - | \n\n - | \n\n - | \n
| \n Total contractual amounts | \n\n 1,100.0 | \n\n 246.4 | \n\n 1,346.4 | \n
| \n\n | \n
Financing secured
On 4 February 2022 Odfjell Technology successfully priced NOK 1.1 bn in senior secured bonds through a private placement. The bonds mature in February 2026 and bear interest of 3 months Nibor plus 700 basis points.
The carrying amount and fair value of the non-current liabilities are as follows:
Available drawing facilities
Compliance with financial covenants as at 31.12.2022
The Odfjell Technology Group is compliant with all financial covenants as at 31 December 2022.
Financial covenants
The borrowing facilities in the Group include the following main covenants:
Odfjell Technology Ltd \u2013 NOK 1.100 million bond loan
The Group shall maintain minimum liquidity of USD 15 million (including undrawn amounts under the SSRCF), of which minimum USD 5 million in cash and cash equivalents.
Leverage ratio (net interest bearing debt to EBITDA) shall not exceed 4.00:1:00.
The ratio of current assets to current liabilities shall at all times be a minimum 1.00:1.00.
Odfjell Technology Ltd may pay dividends in an amount up to 50% of its consolidated net income in its previous financial year, subject to compliance with the incurrence test on a pro-forma basis. The incurrence test implies that the leverage ratio (net interest bearing debt to EBITDA) shall not exceed 3.00:1:00.
Odfjell Technology Ltd - USD 25 million SSRCF
The Group shall maintain minimum liquidity of the higher of USD 15 million and 10% of the interest bearing debt (excluding lease liabilities), in each case of which minimum USD 5 million shall be free and unrestricted cash.
Leverage ratio (net interest bearing debt to EBITDA) shall not exceed 3.75:1:00.
The ratio of current assets to current liabilities shall at all times be a minimum 1.00:1.00.
NOTE 19Leases
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. Rental contracts are typically made for fixed periods of 6 months to 10 years, but may have extension or termination options. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payment that are based on an index or a rate (initially measured using the index or rate as at the commencement date), amounts expected to be payable by the group under residual value guarantees, the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee\u2019s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease, e.g. term, country, currency and security.
The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs, and any restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset\u2019s useful life.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and smaller items of office equipment.
Significant judgement and estimation uncertainty
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group's business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
The Group cannot readily determine the interest rate implicit in the lease, therefore it uses its incremental borrowing rate (IBR) to measure lease liabilities. IBR is estimated using observable inputs, such as market interest rates, when available. It is required to make certain entity-specific estimates mentioned above.
The balance sheet shows the following amounts related to leases:
| \n \n | \n\n Properties | \n\n Other fixed assets | \n\n Total Right-of-use assets | \n\n Properties | \n\n Other fixed assets | \n\n Total Right-of-use assets | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January | \n\n 156.7 | \n\n - | \n\n 156.7 | \n\n 90.3 | \n\n - | \n\n 90.3 | \n
| \n Additions | \n\n 38.5 | \n\n \n | \n\n 38.5 | \n\n 71.7 | \n\n - | \n\n 71.7 | \n
| \n Disposals | \n\n (10.9) | \n\n \n | \n\n (10.9) | \n\n (5.0) | \n\n - | \n\n (5.0) | \n
| \n Currency translation differences | \n\n 2.5 | \n\n - | \n\n 2.5 | \n\n (0.4) | \n\n - | \n\n (0.4) | \n
| \n Cost as at 31 December | \n\n 186.7 | \n\n \n | \n\n 186.7 | \n\n 156.7 | \n\n - | \n\n 156.7 | \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 (52.5) | \n\n - | \n\n (52.5) | \n\n (36.7) | \n\n - | \n\n (36.7) | \n
| \n Depreciation | \n\n (22.7) | \n\n \n | \n\n (22.7) | \n\n (21.1) | \n\n - | \n\n (21.1) | \n
| \n Impairment loss | \n\n (8.5) | \n\n \n | \n\n (8.5) | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 10.9 | \n\n \n | \n\n 10.9 | \n\n 5.0 | \n\n - | \n\n 5.0 | \n
| \n Currency translation differences | \n\n (1.2) | \n\n - | \n\n (1.2) | \n\n 0.3 | \n\n - | \n\n 0.3 | \n
| \n As at 31 December | \n\n (73.9) | \n\n - | \n\n (73.9) | \n\n (52.5) | \n\n - | \n\n (52.5) | \n
| \n Net book value at 31 December | \n\n 112.8 | \n\n - | \n\n 112.8 | \n\n 104.2 | \n\n - | \n\n 104.2 | \n
Lease liabilities
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Non-current | \n\n 96.8 | \n\n 83.1 | \n\n 37.1 | \n
| \n Current | \n\n 30.6 | \n\n 24.5 | \n\n 19.3 | \n
| \n Total | \n\n 127.4 | \n\n 107.6 | \n\n 56.4 | \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 NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Carrying amount as at 1 January | \n\n 83.1 | \n\n 24.5 | \n\n 107.6 | \n\n 37.1 | \n\n 19.3 | \n\n 56.4 | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Payments for the principal portion of the lease liability | \n\n - | \n\n (20.5) | \n\n (20.5) | \n\n - | \n\n (21.2) | \n\n (21.2) | \n
| \n Payments for the interest portion of the lease liability | \n\n - | \n\n (7.4) | \n\n (7.4) | \n\n - | \n\n (4.4) | \n\n (4.4) | \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 38.5 | \n\n - | \n\n 38.5 | \n\n 71.7 | \n\n - | \n\n 71.7 | \n
| \n Interest expense on lease liabilities | \n\n 7.8 | \n\n - | \n\n 7.8 | \n\n 5.1 | \n\n - | \n\n 5.1 | \n
| \n Reclassified | \n\n (33.5) | \n\n 33.5 | \n\n - | \n\n (30.9) | \n\n 30.9 | \n\n - | \n
| \n Currency exchange differences | \n\n 0.9 | \n\n 0.5 | \n\n 1.4 | \n\n 0.0 | \n\n (0.1) | \n\n (0.1) | \n
| \n Carrying amount as at 31 December | \n\n 96.8 | \n\n 30.6 | \n\n 127.4 | \n\n 83.1 | \n\n 24.5 | \n\n 107.6 | \n
Rental costs for exemptions
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Expenses relating to short-term leases | \n\n 90.9 | \n\n 90.3 | \n
| \n Expenses relating to low value items | \n\n 6.6 | \n\n 4.1 | \n
Extension and termination options
Extension and termination options are included in a number of property and equipment leases across the group. These are used to maximise operational flexibility in terms of managing the assets used in the group's operations.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
Most extension options have not been included in the lease liability, because the group could replace the asset without significant cost of business disruption, or because the group is not certain it would need the asset in the option period.
NOTE 20Post-employment benefits
The Group has occupational pension plans in several countries established partly as defined benefit plans (in Norway), partly as multi-employer defined benefit plans accounted for as defined contribution plans (in Norway) and partly as defined contribution plans (in Norway and other countries). The pension plans are measured and presented according to IAS 19.
A number of the Norwegian subsidiaries in the Group 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.
Accounting policy
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the income statement.
Mortality index used in actuarial calculations is K2013.
Defined benefit pension plans
The Group has funded defined benefit pension schemes in four Norwegian companies covering a total of 28 active members and 18 pensioners as at 31 December 2022 (30 active members and 13 pensioners as at 31 December 2021). The scheme entitles employees to defined future benefits. These are mainly dependent on the number of years of service, the salary level at pensionable age and the size of benefits paid by the national insurance. The liabilities are covered through an insurance company.
In addition to the pension obligations that arises from the funded defined benefit plans, the Group\u2019s Norwegian companies have unfunded defined benefit obligations related to pensions and early retirement pensions. The early retirement pensions entitle staff to benefits (about NOK 111,000 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 2022 and 2021 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
Movements in the net defined benefit obligation
| \n \n | \n\n Present value of obligation | \n\n Fair value of plan assets | \n\n Total | \n\n Present value of obligation | \n\n Fair value of plan assets | \n\n Total | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n At 1 January | \n\n 149.5 | \n\n (102.7) | \n\n 46.8 | \n\n 144.1 | \n\n (94.4) | \n\n 49.7 | \n
| \n Current service cost | \n\n 8.4 | \n\n - | \n\n 8.4 | \n\n 6.9 | \n\n - | \n\n 6.9 | \n
| \n Loss on plan amendment, curtailment and settlement | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Interest expense/ (income) | \n\n 2.3 | \n\n (1.3) | \n\n 1.0 | \n\n 2.2 | \n\n (1.3) | \n\n 0.9 | \n
| \n Total amount recognised in profit or loss | \n\n 10.6 | \n\n (1.3) | \n\n 9.4 | \n\n 9.1 | \n\n (1.3) | \n\n 7.8 | \n
| \n Re-measurements: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n (Gain) from change in discount rate | \n\n (44.4) | \n\n - | \n\n (44.4) | \n\n - | \n\n - | \n\n - | \n
| \n (Gain) / loss from change in other financial assumptions | \n\n 33.2 | \n\n (0.2) | \n\n 33.0 | \n\n 6.1 | \n\n - | \n\n 6.1 | \n
| \n Experience (gain)/loss | \n\n 20.6 | \n\n (8.1) | \n\n 12.5 | \n\n (3.5) | \n\n 0.1 | \n\n (3.4) | \n
| \n Investment management cost | \n\n - | \n\n 0.8 | \n\n 0.8 | \n\n - | \n\n 0.9 | \n\n 0.9 | \n
| \n Total amount recognised in other comprehensive income | \n\n 9.4 | \n\n (7.5) | \n\n 1.9 | \n\n 2.6 | \n\n 1.0 | \n\n 3.6 | \n
| \n Contributions: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Employers | \n\n (1.1) | \n\n (7.5) | \n\n (8.5) | \n\n (1.3) | \n\n (9.5) | \n\n (10.9) | \n
| \n Payments from plans: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Benefit payments | \n\n (4.9) | \n\n 2.1 | \n\n (2.8) | \n\n (4.9) | \n\n 1.5 | \n\n (3.4) | \n
| \n At 31 December | \n\n 163.6 | \n\n (116.9) | \n\n 46.7 | \n\n 149.5 | \n\n (102.7) | \n\n 46.8 | \n
Estimated premium payments to funded defined benefit obligations in 2023 amounts to about NOK 10 million.
Amounts recognised in Statement of Financial Position
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Present value of funded obligations | \n\n 139.2 | \n\n 125.3 | \n\n 117.0 | \n
| \n Fair value of plan assets | \n\n (116.9) | \n\n (102.7) | \n\n (94.4) | \n
| \n Deficit of funded plans | \n\n 22.3 | \n\n 22.6 | \n\n 22.5 | \n
| \n Present value of unfunded obligations | \n\n 24.4 | \n\n 24.2 | \n\n 27.1 | \n
| \n Total deficit of defined benefit pension plans | \n\n 46.7 | \n\n 46.8 | \n\n 49.7 | \n
The significant actuarial assumptions were as follows:
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Discount rate | \n\n 3.20% | \n\n 1.50% | \n
| \n Salary growth rate | \n\n 3.75% | \n\n 2.50% | \n
| \n Expected growth in G (base social security amount) | \n\n 3.50% | \n\n 2.25% | \n
| \n Pension growth rate | \n\n 1.7%-3.5% | \n\n 0.0%-2.25% | \n
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions are:
| \n \n | \n\n Change in assumption by: | \n\n Impact on Present value of obligation: | \n\n Change in assumption by: | \n\n Impact on Present value of obligation: | \n||
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 31.12.2022 | \n\n 31.12.2021 | \n||
| \n Discount rate | \n\n +0.5% | \n\n (10.5) | \n\n (9.9) | \n\n -0.5% | \n\n 11.6 | \n\n 11.6 | \n
| \n Salary growth rate | \n\n +0.5% | \n\n 4.2 | \n\n 4.7 | \n\n -0.5% | \n\n (4.3) | \n\n (4.8) | \n
| \n Pension growth rate | \n\n +0.5% | \n\n 4.4 | \n\n 6.8 | \n\n -0.5% | \n\n (10.0) | \n\n (0.3) | \n
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practise, this is unlikely to occur, and changes in some of the assumptions may be correlated.
The fair value of plan assets is disaggregated by class as follows
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Shares | \n\n 11% | \n\n 10% | \n
| \n Short term bonds | \n\n 15% | \n\n 19% | \n
| \n Money market | \n\n 8% | \n\n 15% | \n
| \n Long term bonds | \n\n 32% | \n\n 25% | \n
| \n Loans & Receivables | \n\n 22% | \n\n 19% | \n
| \n Real estate | \n\n 11% | \n\n 10% | \n
| \n Other | \n\n 1% | \n\n 1% | \n
Total pension expenses included in personnel expenses are decomposed as per below:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Pension expenses (-net gain) from defined benefit scheme included in personnel expenses | \n\n 8.4 | \n\n 6.9 | \n
| \n Pension expenses from defined contribution schemes | \n\n 78.5 | \n\n 64.0 | \n
| \n Pension expenses from multi-employer plans accounted for as defined contribution schemes | \n\n 18.0 | \n\n 14.7 | \n
| \n Total pension expenses included in personnel expenses | \n\n 104.9 | \n\n 85.6 | \n
NOTE 21Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
NOTE 22Other liabilities
Other current liabilities specification
| \n NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Social security and other taxes | \n\n \n | \n\n 129.4 | \n\n 94.6 | \n\n 86.3 | \n
| \n Accrued salaries, holiday pay and employee bonus provisions | \n\n \n | \n\n 212.3 | \n\n 184.5 | \n\n 148.5 | \n
| \n Contract liabilities | \n\n\n | \n\n 25.1 | \n\n 1.2 | \n\n 0.4 | \n
| \n Other payables and financial liabilities | \n\n \n | \n\n 2.4 | \n\n 0.1 | \n\n 0.2 | \n
| \n Other accrued expenses | \n\n \n | \n\n 95.5 | \n\n 92.0 | \n\n 78.6 | \n
| \n Total other current liabilities | \n\n \n | \n\n 464.6 | \n\n 372.3 | \n\n 314.1 | \n
Refer to Note 30 - Contingencies for further information about accounting policy for provisions and accruals, as well as significant judgement applied and estimation uncertainty.
NOTE 23Financial 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 areas. Capital management should be such that the capital structure is sufficiently robust to withstand prolonged adverse conditions in significant risk factors, such as long-term down-cycles in our markets and unfavourable conditions in financial markets. Capital management also comprise securing the company to be in compliance with covenants on interest bearing debt. Reference is made to Note 18 - Interest-bearing borrowings which disclose information about covenants on long term interest bearing liabilities.
The Group will manage the capital structure and make adjustments to it, to maintain an optimal structure adapted to current economic conditions. In order to maintain or adjust the capital structure, the Group may adjust dividend payments, buy treasury shares, return capital to shareholders or issue new shares.
| \n \n | \n\n 31.12.2022 | \n
| \n Equity | \n\n 778.8 | \n
| \n Total assets | \n\n 3,114.9 | \n
| \n Equity ratio | \n\n 25% | \n
| \n Cash and cash equivalents excl.restricted capital | \n\n 497.4 | \n
| \n Available drawing facilities | \n\n - | \n
| \n Total available liquidity | \n\n 497.4 | \n
Deposits / placements
The liquidity management has four main objectives:
\u25aaMatching of surplus funds against borrowing requirements.
\u25aaSecure a high level of liquidity (a targeted minimum of two months operating expenses) in order to meet future plans of the Group.
\u25aaLimitation of credit risks.
\u25aaMaximise return on liquid assets.
Accordingly, investments may only be made in securities with a rating of Investment grade, BAA (Moodys) , BBB- (Standard and Poors and Fitch IBCA) or better.
A list of counter-party exposure limits is reported to the Board of Odfjell Drilling on a yearly basis.
The following instruments are allowed for short term placements;
\u25aaDeposits in banks
\u25aaLoans to companies/institutions/funds (like fixed or floating rate bonds, senior or subordinated debt)
\u25aaCertificates
\u25aaMoney-market funds
Working Capital
The company's policy is to have a positive working capital.
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 Technology Ltd. has established principles for risk management of foreign exchange risk, interest rate risk and use of derivative financial instruments.
NOTE 24Liquidity risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and to have sufficient cash or cash equivalents at any time to be able to finance its operations and investments in accordance with the Group's strategic plan.
With regular forecasts and liquidity analysis updates, the Group will ensure sufficient available liquidity to fulfil its duties at loan maturity, without unacceptable loss or risk of damaging the Group\u2019s reputation.
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping committed credit lines available.
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.
The Group held cash and cash equivalents amounting to NOK 560 million at the end of 2022. This is deemed to be sufficient funding for the Group\u2019s current activity levels and committed capital expenditures during 2023.
The liquidity risk is connected with the market risk and the re-contracting risk for the segments. The management continuously focuses on securing new profitable contracts to generate sufficient cash flow from operations, hence reducing the liquidity risk going forward.
Operating in more than 20 jurisdictions the Group do from time to time receive enquiries from authorities about compliance related matters. Refer to Note 30 regarding notice of decision received 1 October 2021 from HM Revenue and Customs. The Group has per 31 December 2022 not received any formal material assessment which is not disclosed in the financial statements.
Maturity of financial liabilities
The amounts disclosed in the table are the contractual non-discounted cash flows. The table include estimated interest payments for drawn facilities at the balance sheet date, based on the remaining period at the end of the reporting period to the contractual maturity date. The estimated interest payments include payments based on forward rates for the interest rate swaps.
Maturity of financial liabilities - 31.12.2022
| \n NOK million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Interest-bearing borrowings | \n\n 306.6 | \n\n 56.1 | \n\n 112.1 | \n\n 1,238.6 | \n\n - | \n\n 1,713.4 | \n\n 1,340.0 | \n
| \n Lease liabilities | \n\n 15.4 | \n\n 15.2 | \n\n 30.0 | \n\n 59.2 | \n\n 30.6 | \n\n 150.4 | \n\n 127.4 | \n
| \n Trade payables | \n\n 264.1 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 264.1 | \n\n 264.1 | \n
| \n Other current payables | \n\n 305.8 | \n\n 4.3 | \n\n - | \n\n - | \n\n - | \n\n 310.1 | \n\n 310.1 | \n
Maturity of financial liabilities - 31.12.2021
| \n NOK million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n 151.5 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 151.5 | \n\n 151.5 | \n
| \n Lease liabilities | \n\n 12.8 | \n\n 11.8 | \n\n 22.5 | \n\n 50.7 | \n\n 34.7 | \n\n 132.4 | \n\n 107.6 | \n
| \n Trade payables | \n\n 214.7 | \n\n 0.6 | \n\n - | \n\n - | \n\n - | \n\n 215.3 | \n\n 215.3 | \n
| \n Other current payables | \n\n 238.7 | \n\n 37.7 | \n\n - | \n\n - | \n\n - | \n\n 276.5 | \n\n 276.5 | \n
NOTE 25Market 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 oil service market has developed positively in recent years due to a strong focus on cost discipline and more efficient operations, combined with a healthier oil price development.
The focus on alternative energy sources and the overall future mix of energy remains strong. The transition into greener energy sources is expected to impact the energy market in the coming decades, however the need for continued exploration and production of oil and gas is viewed as vital, and it has become more apparent recently.
The general situation for the global oil service industry is expected to improve as a result of under investment in the oil and gas sector over the last 8 years. The supply of oil and gas is too low to meet the expected demand. Increase in investments and activity is vital to bridge the increasing energy demand as new energy sources take time to implement.
There is an increased appetite for field development and production spending across the segments.
Odfjell Technology has been successful in adding more backlog, due to our operational track record and strong client relationships, combined with a healthy balance sheet.
Well Services operates in a competitive market, but the increase in drilling activity and field investments is expected to increase demand for our services. The COVID-19 pandemic had an adverse effect in many of the regions Well Services operate in over the two last years, but the effects are now diminishing.
The market for our services in the Operations segment has been stable over the last decade. We have established a strong presence in the North Sea with efficient operations and strong client relationships, which we expect to capitalise on further. In addition, there are opportunities to expand Operations activities to other regions.
The Projects & Engineering market is improving both in existing deliverables and in green initiatives. We are well positioned to grow in existing services and further expand our portfolio of green services.
Climate Risk
During 2022, a project was undertaken with external advisors to raise awareness and assess the impacts of climate risks and opportunities. Cross-functional workshops were held to review the impact on the business from both physical and transitional risks in the short, medium and long term, prioritising risks for further deep dives.
The most significant transition risks identified, along with mitigating actions were:
\u25aa Increased resources, skills and tools required to measure, track and report on climate data, leading to increased costs. In house expertise being developed, gap analysis being conducted, and software tools will be researched.
\u25aa Impact on the ability to attract and retain talent, increasing costs. Training programmes to be reviewed and increase focus on communicating our sustainable activities.
\u25aa Changes in consumer behaviours will reduce the demand for oil and gas and therefore revenue. This will be addressed through diversification of our client portfolio and services to support the energy transition.
\u25aaCost of and access to capital may go up as banks move to low carbon portfolios, leading to increased interest costs. Consider green funding resources for investments and diversify to low carbon portfolio.
The most significant physical risks identified, along with mitigating actions were:
\u25aa Impact 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.
\u25aaHeat, floods and tropical storms may increase in certain geographies we operate in, damaging infrastructure and increasing costs. Business continuity plans, remote working and reviews of locations required to address risk.
\u25aa Heat stress will impact employees and equipment working outside in certain locations. Health tracking and storage of equipment to be monitored.
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:
\u25aaThere is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u25aaThe effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u25aaThe 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:
\u25aaThe 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.
\u25aaAmounts 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.
The group has the following derivative financial instruments in the following line items in the balance sheet:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non-current assets | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n 10.8 | \n\n 0.0 | \n
| \n Total non-current derivative financial instruments asset | \n\n 10.8 | \n\n 0.0 | \n
The group's hedging reserves disclosed in Note 28 - Other reserves related to the following instruments:
Cash flow hedging reserves
| \n NOK million | \n\n Interest rate swaps | \n\n Total hedge reserves | \n
| \n Opening balance 1 January 2021 | \n\n - | \n\n - | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n - | \n\n - | \n
| \n Reclassified from OCI to profit or loss | \n\n - | \n\n - | \n
| \n Closing balance 31 December 2021 | \n\n - | \n\n - | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n 11.3 | \n\n 11.3 | \n
| \n Reclassified from OCI to profit or loss | \n\n (0.5) | \n\n (0.5) | \n
| \n Closing balance 31 December 2022 | \n\n 10.8 | \n\n 10.8 | \n
Foreign exchange risk
The consolidated material subsidiaries' reporting and functional currencies are NOK, USD, GBP and EUR.
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 as the customer contracts are denominated in multiple currencies with cost mainly in local currency, while capital expenditure is in USD.
The Group seeks to minimise these risks through natural hedging by balancing the currency in and out flow and will use financial hedging instruments if required.
The group\u2019s exposure to foreign currency risk at the end of the reporting period, expressed in NOK, was as follows:
Foreign exchange risk - Exposure - 31.12.2022
| \n NOK million | \n\n USD | \n\n NOK | \n
| \n Cash and cash equivalents | \n\n 132.3 | \n\n - | \n
| \n Trade receivables | \n\n 65.8 | \n\n 8.5 | \n
| \n Interest-bearing borrowings | \n\n (244.1) | \n\n - | \n
| \n Trade payables | \n\n (23.8) | \n\n (5.7) | \n
| \n Other current payables | \n\n (2.6) | \n\n (10.6) | \n
Foreign exchange risk - Exposure - 31.12.2021
| \n NOK million | \n\n USD | \n\n NOK | \n
| \n Cash and cash equivalents | \n\n 12.7 | \n\n 300.1 | \n
| \n Current interest-bearing receivables Odfjell Drilling Group | \n\n - | \n\n 90.2 | \n
| \n Trade receivables | \n\n 34.1 | \n\n 19.7 | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n (151.1) | \n\n (44.9) | \n
| \n Trade payables | \n\n (42.1) | \n\n (1.1) | \n
| \n Other current payables | \n\n (15.2) | \n\n (4.8) | \n
The aggregate net foreign exchange gains/losses recognised in profit or loss were:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) included in finance costs | \n\n (31.8) | \n\n (16.6) | \n
The Group's profit or loss is primarily exposed to changes in USD/NOK exchange rates.
The sensitivity shown in table below is calculated based on USD balances in companies with NOK as functional currency, and NOK balances in companies with USD as functional currency.
Sensitivity to changes in USD/NOK exchange rates
| \n Sensitivity to changes in USD/NOK exchange rates | \n\n USD is strengthened by 20 % against NOK | \n\n USD is strengthened by 10 % against NOK | \n\n USD is weakened by 10 % against NOK | \n\n USD is weakened by 20 % against NOK | \n||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Cash and cash equivalents | \n\n 3.4 | \n\n (60.0) | \n\n 1.7 | \n\n (30.0) | \n\n (1.7) | \n\n 30.0 | \n\n (3.4) | \n\n 60.0 | \n
| \n Current receivables | \n\n 1.3 | \n\n (11.4) | \n\n 0.6 | \n\n (5.7) | \n\n (0.6) | \n\n 5.7 | \n\n (1.3) | \n\n 11.4 | \n
| \n Current liabilities | \n\n (48.8) | \n\n (20.7) | \n\n (24.4) | \n\n (10.4) | \n\n 24.4 | \n\n 10.4 | \n\n 48.8 | \n\n 20.7 | \n
| \n Net effect on profit before tax | \n\n (44.2) | \n\n (92.2) | \n\n (22.1) | \n\n (46.1) | \n\n 22.1 | \n\n 46.1 | \n\n 44.2 | \n\n 92.2 | \n
Interest rate risk
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's borrowing 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.
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.
The Group had 2 interest rate swap agreements at 31 December 2022. Quoted mark-to-market values from financial institutions have been used to determine the fair value of the swap agreements at the end of the year. The instruments were documented as cash flow hedges and changes in fair value were recognised in other comprehensive income (cash flow hedging).
Including interest rate swaps entered into, the fixed-rate portion of the group\u2019s interest bearing debt per 31 December 2022 is approximately 29%.
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 at 31 December 2022 was about 9.7% 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.
As of 31.12.2022 the Group held the following interest rate swaps:
| \n NOK million | \n\n Interest | \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 NOK Nibor | \n\n 275.0 | \n\n 2026 | \n\n 1:1 | \n\n 2.0700% | \n\n 9.0 | \n
| \n Cash flow hedges under hedge accounting | \n\n NOK Nibor | \n\n 110.0 | \n\n 2026 | \n\n 1:1 | \n\n 2.6140% | \n\n 1.7 | \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 NOK million | \n\n 31.12.2022 | \n\n % of total loans | \n
| \n Variable rate borrowings - NOK NIBOR | \n\n 715.0 | \n\n 53% | \n
| \n Variable rate borrowings - USD SOFR | \n\n 246.4 | \n\n 18% | \n
| \n Fixed rate borrowings - repricing or maturity dates: | \n\n \n | \n\n \n | \n
| \n Less than 1 year | \n\n - | \n\n 0% | \n
| \n 1-5 years | \n\n 385.0 | \n\n 29% | \n
| \n Later than 5 years | \n\n - | \n\n 0% | \n
| \n Total contractual amounts | \n\n 1,346.4 | \n\n 100% | \n
The result of the calculation on sensitivities returns the following expected values (incl. interest rate swaps entered into as at 31 December):
If interest rate is increased by 1.0 %, the effect would be an increase in financing costs of NOK 10 million for the next 12 months as at 31 December 2022
Interest rate benchmark reform
The Company will not be affected by the interest rate benchmark reform, as it does not have any USD LIBOR exposure, and the NOK NIBOR will remain.
NOTE 26Credit 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.
Further description
The Group operates in three core business areas: Well Services (OWS), Operations and Projects & Engineering. The market for the Group\u2019s services is the offshore oil and gas industry, and the customers consist primarily of major integrated oil companies, independent oil and gas producers and government owned oil companies. The Group performs ongoing credit evaluations of the customers and generally does not request material collateral.
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents, marketable securities, other receivables and certain derivatives instruments receivable amount, the Group\u2019s exposure to credit risk arises from default of the counter-party, with a maximum exposure equal to the carrying amount of these instruments. However, the Group believes this risk is limited as the counter-parties mainly have a high credit quality.
During 2022, the Group has continued its focus on credit risk in general related to the uncertain conditions in some geographical markets. The maximum exposure regarding trade receivables is the carrying amount of NOK 943 million.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to non-billed work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The ageing of the trade receivables - 31.12.2022
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n NOK 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 781.9 | \n\n - | \n\n 781.9 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 105.4 | \n\n - | \n\n 105.4 | \n
| \n 3 to 6 months | \n\n 2.7% | \n\n 9.6 | \n\n (0.3) | \n\n 9.3 | \n
| \n Over 6 months | \n\n 23.6% | \n\n 60.2 | \n\n (14.2) | \n\n 46.0 | \n
| \n Total | \n\n \n | \n\n 957.0 | \n\n (14.5) | \n\n 942.6 | \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 NOK 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 0.9 | \n\n - | \n\n 0.9 | \n
The ageing of the trade receivables - 31.12.2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n NOK million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 689.8 | \n\n - | \n\n 689.8 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 74.1 | \n\n - | \n\n 74.1 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n 7.0 | \n\n - | \n\n 7.0 | \n
| \n Over 6 months | \n\n 21.4% | \n\n 57.9 | \n\n (12.4) | \n\n 45.5 | \n
| \n Total | \n\n \n | \n\n 828.8 | \n\n (12.4) | \n\n 816.4 | \n
Contract assets - 2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n NOK million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 4.9 | \n\n - | \n\n 4.9 | \n
Movements in loss allowance / the provision for impairment of trade receivables and contract assets are as follows:
| \n \n | \n\n Trade receivables | \n\n Contract assets | \n||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Loss allowance as at 1 January | \n\n 12.4 | \n\n 9.7 | \n\n - | \n\n - | \n
| \n Utilised | \n\n (2.6) | \n\n (0.6) | \n\n - | \n\n - | \n
| \n Released provision | \n\n (0.0) | \n\n (2.3) | \n\n - | \n\n - | \n
| \n New provisions | \n\n 3.6 | \n\n 5.6 | \n\n - | \n\n - | \n
| \n Translation differences | \n\n 1.1 | \n\n 0.0 | \n\n - | \n\n - | \n
| \n Loss allowance as at 31 December | \n\n 14.5 | \n\n 12.4 | \n\n - | \n\n - | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net gain (loss) related to trade receivables | \n\n (3.7) | \n\n (3.3) | \n
NOTE 27Share capital and shareholder information
| \n \n | \n\n No.of shares | \n\n Nominal value | \n\n Share capital - USD thousands | \n
| \n Common shares issued as at 31 December 2022 | \n\n 39,463,867 | \n\n USD 0.01 | \n\n 394.6 | \n
| \n Largest common shareholders at 31 December 2022 | \n\n Account type | \n\n Holding | \n\n % of shares | \n
| \n Odfjell Technology Holding Ltd. | \n\n Ordinary | \n\n 23,825,396 | \n\n 60.37% | \n
| \n J.P. Morgan Securities Plc | \n\n Nominee | \n\n 2,087,476 | \n\n 5.29% | \n
| \n Goldman Sachs International | \n\n Nominee | \n\n 1,312,878 | \n\n 3.33% | \n
| \n BNP Paribas | \n\n Nominee | \n\n 983,781 | \n\n 2.49% | \n
| \n Space AS | \n\n Ordinary | \n\n 725,262 | \n\n 1.84% | \n
| \n UBS AG | \n\n Nominee | \n\n 556,413 | \n\n 1.41% | \n
| \n Kontrari AS | \n\n Ordinary | \n\n 500,000 | \n\n 1.27% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 496,391 | \n\n 1.26% | \n
| \n Skandinaviska Enskilda Banken AB | \n\n Nominee | \n\n 384,735 | \n\n 0.97% | \n
| \n Citibank, N.A. | \n\n Nominee | \n\n 350,214 | \n\n 0.89% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 288,848 | \n\n 0.73% | \n
| \n Brown Brothers Harriman & Co. | \n\n Nominee | \n\n 266,069 | \n\n 0.67% | \n
| \n Nordnet Livsforsikring AS | \n\n Ordinary | \n\n 252,670 | \n\n 0.64% | \n
| \n Toluma Norden AS | \n\n Ordinary | \n\n 250,000 | \n\n 0.63% | \n
| \n AS Clipper | \n\n Ordinary | \n\n 249,758 | \n\n 0.63% | \n
| \n BNP Paribas | \n\n Nominee | \n\n 211,304 | \n\n 0.54% | \n
| \n Nordea Bank Abp | \n\n Nominee | \n\n 200,000 | \n\n 0.51% | \n
| \n Karsten Ellingsen AS | \n\n Ordinary | \n\n 194,500 | \n\n 0.49% | \n
| \n Verdipapirfondet Heimdal Tinde | \n\n Ordinary | \n\n 177,278 | \n\n 0.45% | \n
| \n Ulsmo Finans AS | \n\n Ordinary | \n\n 140,000 | \n\n 0.35% | \n
| \n Total 20 largest common shareholders | \n\n \n | \n\n 33,452,973 | \n\n 84.77% | \n
| \n Other common shareholders | \n\n \n | \n\n 6,010,894 | \n\n 15.23% | \n
| \n Total common shareholders | \n\n \n | \n\n 39,463,867 | \n\n 100.00% | \n
Common shares
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.
Accounting policy - Cash dividend
Cash dividend paid in 2022
As part of re-organisation prior to the split of Odfjell Drilling Ltd Group, a company now part of the Odfjell Technology Ltd Group paid a cash dividend of USD 20 million, approximately NOK 177 million to Odfjell Drilling Ltd Group.
NOTE 28Other reserves
| \n NOK million | \n\n Note | \n\n Cash flow hedges | \n\n Translation differences | \n\n Share-Option plan | \n\n Total | \n
| \n At 1 January 2021 | \n\n \n | \n\n - | \n\n 563.4 | \n\n - | \n\n 563.4 | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n 82.1 | \n\n - | \n\n 82.1 | \n
| \n At 31 December 2021 | \n\n \n | \n\n - | \n\n 645.4 | \n\n - | \n\n 645.4 | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 11.3 | \n\n - | \n\n - | \n\n 11.3 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n (0.5) | \n\n - | \n\n - | \n\n (0.5) | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n 140.6 | \n\n - | \n\n 140.6 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n 2.8 | \n\n 2.8 | \n
| \n At 31 December 2022 | \n\n \n | \n\n 10.8 | \n\n 786.0 | \n\n 2.8 | \n\n 799.7 | \n
NOTE 29Securities and mortgages
Liabilities secured by mortgage
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non current liabilities - contractual amounts | \n\n 1,100.0 | \n\n - | \n
| \n Current liabilities | \n\n 259.6 | \n\n - | \n
| \n Total | \n\n 1,359.6 | \n\n - | \n
Carrying amount of mortgaged assets:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Property, plant and equipment | \n\n 1,068.4 | \n\n - | \n
| \n Spare parts | \n\n 29.3 | \n\n \n | \n
| \n Receivables and contract assets | \n\n 1,059.0 | \n\n - | \n
| \n Bank deposits | \n\n 560.1 | \n\n - | \n
| \n Total | \n\n 2,716.9 | \n\n - | \n
Odfjell Technology Ltd \u2013 NOK 1.100 million bond loan and USD 25 million Senior Secured Rolling Credit Facility
As security for the loans, substantially all of the assets of Odfjell Technology Ltd., and its subsidiaries have been pledged in favour of the lenders.
NOTE 30Contingencies
Accounting policy - Provisions, contingent liabilities and contingent assets
A provision is recognised when an obligation exists (legal or constructive) as a result of a past event, it is probable that an economic settlement will be required as a consequence of the obligation, and a reliable estimate can be made of the amount of the obligation.
The best estimate of the expenditure required to settle the obligation is recognised as a provision. When the effect is material, the provision is discounted using a market based pre-tax discount rate.
Contingent liabilities and contingent assets are not recognised. Contingent liabilities are disclosed unless the possibility of an economic settlement as a consequence of the obligation is remote. Contingent assets are disclosed where an economic settlement as a consequence of the asset is probable.
Significant judgement and estimation uncertainty
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.
A Group subsidiary is subject to challenges by HM Revenue and Customs (\u201cHMRC\u201d) on the historical application of National Insurance Contributions (\u201cNICs\u201d) to workers in the UK Continental Shelf. 1 October 2021, a decision was issued by HMRC against Odfjell Technology (UK) Ltd \"OT UK\u201d (Previously Odfjell Drilling (UK) Ltd) in respect of the historic application of NICs. OT UK has appealed against the decision and no payment has been made to HMRC pending the outcome of the first level appeal. A final verdict is not expected in the short to medium term. Management, taking into consideration advice from independent legal and tax specialists, believes that the most probable outcome is that no outflow of resources embodying economic benefits will be required to settle the obligation, and accordingly, no provision has been recognised. The potential exposure to OT UK in relation to NICs and interest should it be unsuccessful in defending its position is approximately NOK 280\u00a0million.
Refer to Note 9 Income Taxes for information about the Odfjell Offshore Ltd tax case.
NOTE 31Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Well Service equipment | \n\n 88.3 | \n\n 196.2 | \n
| \n Total | \n\n 88.3 | \n\n 196.2 | \n
NOTE 32Subsidiaries
Material subsidiaries
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Ownership 2022 | \n\n Ownership 2021 * | \n\n Principal activities | \n
| \n Odfjell Technology Invest Ltd. (previous Odfjell Partners Invest) | \n\n Bermuda | \n\n United Arab Emirates | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company / Well services equipment owner | \n
| \n Odfjell Well Services II Ltd. | \n\n Bermuda | \n\n Kurdistan | \n\n USD | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Services (Thailand) FLC | \n\n Thailand | \n\n Thailand | \n\n THB | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Cooperatief U.A. | \n\n Netherlands | \n\n Europe | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services SRL | \n\n Romania | \n\n Europe | \n\n RON | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Arabia Drilling Services LLC | \n\n Saudi Arabia | \n\n Saudi Arabia | \n\n USD | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Service (UK) Ltd. | \n\n Scotland | \n\n UK | \n\n GBP | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Norway AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Ltd. | \n\n British Virgin Islands | \n\n United Arab Emirates | \n\n USD | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Platform Drilling AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Holding company / Drilling operations and Engineering | \n
| \n Odfjell Operations AS (previous Odfjell Drilling Management) | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Technology (UK) Ltd. (previous Odfjell Drilling (UK)) | \n\n Scotland | \n\n UK | \n\n GBP | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Offshore Ltd. | \n\n Bermuda | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Engineering AS (previous Drilling Technology) | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Engineering | \n
| \n Odfjell Energy Crewing AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Offshore crewing rig inspection and installation services | \n
| \n Odfjell Technology AS (previous Odfjell Global Business Services) | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Group Business Services | \n
| \n Odfjell Drilling Philippines Corporation | \n\n Philippines | \n\n Philippines | \n\n PHP | \n\n 100 | \n\n 100 | \n\n Group Business Services | \n
| \n\n | \n
The group's principal subsidiaries are set out in table above. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group.
Other subsidiaries included in the consolidated group financial statements:
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Ownership 2022 | \n\n Ownership 2021 * | \n\n Principal activities | \n
| \n Odfjell Well Services Ltda | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Drilling Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Gestao de Perfurancoes do Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Energy (Malaysia) SDN BHD | \n\n Malaysia | \n\n Malaysia | \n\n \n | \n\n 100 | \n\n n/a | \n\n No activity | \n
| \n Odfjell Well Services (Malaysia) SDN BHD | \n\n Malaysia | \n\n Malaysia | \n\n \n | \n\n 100 | \n\n n/a | \n\n No activity | \n
| \n\n | \n
NOTE 33Investments in joint ventures and associates
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.
Joint ventures
| \n Company | \n\n Acquisition/ formation date | \n\n Registered office | \n\n Principal place of business | \n\n Voting and owning interest 31.12.2022 | \n\n Voting and owning interest 31.12.2021 | \n
| \n Odfjell Oceanwind AS | \n\n 2020 | \n\n Oslo, Norway | \n\n Bergen, Norway | \n\n 21.1% | \n\n 15.2%* | \n
| \n\n | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Book value as at 1.1. | \n\n 4.3 | \n\n - | \n
| \n Investments * | \n\n - | \n\n 6.9 | \n
| \n Share of profit after tax | \n\n (19.9) | \n\n (4.6) | \n
| \n Disposals ** | \n\n - | \n\n 2.0 | \n
| \n Capital contributions | \n\n 30.0 | \n\n - | \n
| \n Mandatory convertible loan | \n\n 35.6 | \n\n - | \n
| \n Book value as at 31.12 | \n\n 50.0 | \n\n 4.3 | \n
| \n\n | \n||
| \n\n | \n
Odfjell Oceanwind AS does not have observable market values in form of market price or similar.
Mandatory convertible loan
15 November 2022 the Company signed a loan agreement with Odfjell Oceanwind AS and subsequently paid out NOK 35 million. The loan is subordinated and runs with 5% interest and without instalment until maturity 23 November 2023. At maturity the loan and interest shall mandatory be converted to shares. The subscription price is dependent on whether or not an equity capitalisation have been carried out prior to conversion.
In accordance with IAS 28, the mandatory convertible loan is accounted for as part of the investment in the joint venture.
Description of the business in Odfjell Oceanwind AS
Odfjell Oceanwind offers services through the full lifecycle of a floating offshore wind project from in house staff, based on standardised\u00a0solutions. Services include applications, front end engineering and design, project management, construction, assembly and installation follow-up, operations and maintenance planning and execution and other related services.
The table below shows the condensed financial information of Odfjell Oceanwind AS, based on 100%
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Total revenue | \n\n 16.7 | \n\n 4.5 | \n
| \n Total operating expenses | \n\n (124.7) | \n\n (38.1) | \n
| \n Net financial items | \n\n (0.3) | \n\n (0.1) | \n
| \n Net profit/(loss) | \n\n (108.3) | \n\n (33.7) | \n
| \n Current assets | \n\n 70.4 | \n\n 5.7 | \n
| \n -whereof cash and cash equivalents | \n\n 65.5 | \n\n 2.9 | \n
| \n Non-current assets | \n\n - | \n\n - | \n
| \n Current liabilities | \n\n 65.7 | \n\n 4.3 | \n
| \n Non-current liabilities | \n\n - | \n\n - | \n
| \n Equity | \n\n 4.7 | \n\n 1.3 | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n The company's share of equity | \n\n 1.0 | \n\n 0.2 | \n
| \n Goodwill | \n\n 13.4 | \n\n 4.1 | \n
| \n Mandatory convertible loan | \n\n 35.6 | \n\n - | \n
| \n Book value as at 31.12 | \n\n 50.0 | \n\n 4.3 | \n
NOTE 34Related parties - transactions, receivables, liabilities and commitments
The Group had the following material transactions with related parties:
| \n NOK million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Odfjell Oceanwind AS | \n\n Joint-venture | \n\n 30.5 | \n\n 9.4 | \n
| \n Companies within the Odfjell Drilling Ltd. Group | \n\n Related to main shareholder | \n\n 816.7 | \n\n 533.9 | \n
| \n Total sales of services to related parties | \n\n \n | \n\n 847.2 | \n\n 543.3 | \n
Sales of services include casing and rental services, engineering services, personnel hire, administration services and business support.
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Well Services | \n\n 374.7 | \n\n 162.5 | \n
| \n Drilling operations | \n\n 0.0 | \n\n 0.8 | \n
| \n Engineering | \n\n 290.4 | \n\n 205.1 | \n
| \n Corporate / GBS | \n\n 182.0 | \n\n 174.9 | \n
| \n Total operating revenue to related parties | \n\n 847.2 | \n\n 543.3 | \n
| \n NOK million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Companies within the Odfjell Drilling Ltd. Group | \n\n Related to main shareholder | \n\n 35.0 | \n\n 79.4 | \n
| \n Total operating expenses to related parties | \n\n \n | \n\n 35.0 | \n\n 79.4 | \n
| \n NOK million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Odfjell Drilling Ltd. | \n\n Related to main shareholder | \n\n 0.8 | \n\n 5.1 | \n
| \n Odfjell Oceanwind AS | \n\n Joint-venture | \n\n 0.2 | \n\n \n | \n
| \n Total interest income from related parties | \n\n \n | \n\n 1.0 | \n\n 5.1 | \n
The Group had the following receivables and liabilities to related parties
| \n NOK million | \n\n Relation | \n\n Type | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Odfjell Drilling Ltd. | \n\n Related to main shareholder | \n\n Loan | \n\n - | \n\n - | \n\n 91.7 | \n
| \n Total non-current interest-bearing receivables related parties | \n\n \n | \n\n \n | \n\n - | \n\n - | \n\n 91.7 | \n
| \n NOK million | \n\n Relation | \n\n Type | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Odfjell Drilling Ltd. | \n\n Related to main shareholder | \n\n Loan | \n\n - | \n\n 100.0 | \n\n - | \n
| \n Odfjell Drilling Services Ltd. | \n\n Related to main shareholder | \n\n Cash pool | \n\n - | \n\n 1,208.8 | \n\n 1,413.7 | \n
| \n Current interest-bearing receivables related parties | \n\n \n | \n\n \n | \n\n - | \n\n 1,308.8 | \n\n 1,413.7 | \n
| \n NOK million | \n\n Relation | \n\n Type | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Odfjell Drilling Services Ltd. | \n\n Related to main shareholder | \n\n Cash pool | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
| \n Current interest-bearing payables related parties | \n\n \n | \n\n \n | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
Cash pool
Other current receivables and liabilities related parties
As a part of the day-to-day running of the business, the group have the following current receivables and liabilities towards companies in the Odfjell Drilling group. All receivables and liabilities have less than one year maturity.
| \n NOK million | \n\n Related party | \n\n Relation | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Trade receivables | \n\n Companies in Odfjell Drilling Ltd Group | \n\n Related to main shareholder | \n\n 119.2 | \n\n 142.8 | \n\n 106.2 | \n
| \n Other current receivables | \n\n Companies in Odfjell Drilling Ltd Group | \n\n Related to main shareholder | \n\n 9.4 | \n\n 4.3 | \n\n 10.1 | \n
| \n Trade payables | \n\n Companies in Odfjell Drilling Ltd Group | \n\n Related to main shareholder | \n\n (3.8) | \n\n (8.0) | \n\n (9.6) | \n
| \n Other current payables | \n\n Companies in Odfjell Drilling Ltd Group | \n\n Related to main shareholder | \n\n (5.8) | \n\n (5.5) | \n\n (9.0) | \n
| \n Net current payables related parties | \n\n 119.1 | \n\n 133.6 | \n\n 97.7 | \n
Shareholdings by related parties
Chair of the Board, Helene Odfjell, controls Odfjell Technology Holding Ltd., which owns 60.37% of the common shares.
Victor Vadaneaux (Director) controls 16,563 (0.04%) of the common shares, and Susanne Munch Thore (Director) controls 500 (0.00%) of the common shares in the company as per 31 December 2022
NOTE 35Remuneration to the Board of Directors, key executive management and auditor
Details of salary, variable pay and other benefits provided to Group management in 2022:
| \n NOK thousands | \n\n \n | \n\n Salary | \n\n Bonus | \n\n Pension premium | \n\n Other remuneration | \n\n Expense share-based payments | \n\n Total | \n
| \n Simen Lieungh | \n\n CEO from 29 March 2022 - Odfjell Technology AS | \n\n 4,018 | \n\n - | \n\n 99 | \n\n 175 | \n\n 1,367 | \n\n 5,659 | \n
| \n Jone Torstensen | \n\n CFO from 29 March 2022 - Odfjell Technology AS | \n\n 2,009 | \n\n - | \n\n 100 | \n\n 174 | \n\n 456 | \n\n 2,738 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Technology Ltd. | \n\n 689 | \n\n 119 | \n\n 36 | \n\n 40 | \n\n - | \n\n 883 | \n
| \n Total | \n\n \n | \n\n 6,715 | \n\n 119 | \n\n 235 | \n\n 389 | \n\n 1,822 | \n\n 9,280 | \n
The amounts listed as Salary, Bonus, and Other remuneration in the table above represent cash payments in 2022. Refer to the Executive Remuneration Report for bonuses earned in 2022.
Amounts listed as Pension premium and Expense share-based payments relates to the expense accounted for as personnel expenses in 2022.
For details regarding incentive share option programme, refer to the Executive Remuneration Report and Note 36 - Share-based payments
Fees paid to Board of non-executive directors:
| \n NOK thousands | \n\n 2022 | \n\n 2021 | \n
| \n Helene Odfjell | \n\n 206 | \n\n - | \n
| \n Susanne Munch Thore | \n\n 122 | \n\n - | \n
| \n Alasdair Shiach | \n\n 109 | \n\n - | \n
| \n Victor Vadaneaux | \n\n 97 | \n\n - | \n
| \n Total remuneration to Board of non-executive directors | \n\n 534 | \n\n - | \n
Fees to the Group's auditor
| \n NOK thousands | \n\n 2022 | \n\n 2021 | \n
| \n Audit | \n\n 1,794 | \n\n 686 | \n
| \n Other assurance services | \n\n - | \n\n 90 | \n
| \n Tax advisory fee | \n\n - | \n\n - | \n
| \n Fees for other services | \n\n 185 | \n\n - | \n
| \n Total remuneration to the Group's auditor | \n\n 1,978 | \n\n 776 | \n
In addition to fees to the Group's auditor listed in the table above, audit fees paid to other auditors for statutory audits of subsidiaries amount to NOK 505 thousands in 2022 (NOK 390 thousands in 2021).
NOTE 36Share-based payments
Accounting principle
The company have a 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:
27 June 2022, the Company implemented a long term incentive plan. A total of 1,995,000 options have been awarded to certain of its employees at strike prices ranging from NOK 22.31 to NOK 24.13 per share.
Overview of outstanding options:
| \n Overview of outstanding options: | \n\n 2022 | \n\n 2021 | \n
| \n Outstanding options 1.1 | \n\n - | \n\n - | \n
| \n Options granted | \n\n 1,995,000 | \n\n - | \n
| \n Options forfeited | \n\n - | \n\n - | \n
| \n Options exercised | \n\n - | \n\n - | \n
| \n Options expired | \n\n - | \n\n - | \n
| \n Outstanding options 31.12 | \n\n 1,995,000 | \n\n - | \n
| \n Of which exercisable | \n\n - | \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 9.07. The total cost of the share option plan is calculated based on the fair value 1,995,000 options granted. The total cost equals approximately NOK 18 million and is recognised over the period until August 2025.
The calculations are based on the following assumptions:
\u25aaThe share price on the grant dates were set to the stock exchange price on the grant dates (27 June 2022, 15 August 2022 and 1 September 2022).
\u25aaThe strike price per options were a weighted average of NOK 22.75.
\u25aaThe expected price volatility of the company's shares was set to 55% based on historical volatility adjusted for expected changes.
\u25aaThe expiry date was set to 4 July 2025, 22 August 2025 and 8 September 2025.
\u25aaThe expected dividend yield was set to 0%.
\u25aaThe risk-free interest rate was set to 3.67%
NOTE 37Earnings 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 a share option plan for 1,995,000 common shares, see further description in Note 36 - Share-based payments.
The options do not affect the basic or diluted number of shares in 2021 or 2022.
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Profit/(loss) due to owners of the parent | \n\n 253.0 | \n\n 116.5 | \n
| \n Diluted profit/(loss) for the period due to the holders of common shares | \n\n 253.0 | \n\n 116.5 | \n
| \n \n | \n\n 2022 * | \n\n 2021 * | \n
| \n Weighted average number of common shares in issue | \n\n 39,463,867 | \n\n 39,463,867 | \n
| \n Effects of dilutive potential common shares: | \n\n \n | \n\n \n | \n
| \n Share option plan | \n\n - | \n\n - | \n
| \n Diluted average number of shares outstanding | \n\n 39,463,867 | \n\n 39,463,867 | \n
| \n\n | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n
| \n Basic earnings per share (NOK) | \n\n 6.410 | \n\n 2.951 | \n
| \n Diluted earnings per share (NOK) | \n\n 6.410 | \n\n 2.951 | \n
NOTE 38Events after the reporting period
All amounts are in NOK million unless otherwise stated
NOTE 1General information
Odfjell Technology Ltd. ('the Company') and its subsidiaries (together 'the Group') provide well services, drilling operations and engineering services.
Odfjell Technology, a limited liability company, is incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. Odfjell Technology Ltd's head office is at Bergen House, Crawpeel Road, Altens, Aberdeen, AB12 3LG, United Kingdom and the Company is tax resident in the United Kingdom.
The consolidated financial statements including notes for Odfjell Technology Ltd. for the year 2022 were approved by the Board of Directors on 20 April 2023.
The consolidated financial statements ended 31 December 2022 comprise the income statement, statement of comprehensive income, statement of financial position, statement of cash flow, statement of changes in equity and note disclosures.
The consolidated financial statements including notes for Odfjell Technology Ltd. for the year 2022 were approved by the Board of Directors on 20 April 2023.
NOTE 34Related parties - transactions, receivables, liabilities and commitments
The Group had the following material transactions with related parties:
| \n NOK million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Odfjell Oceanwind AS | \n\n Joint-venture | \n\n 30.5 | \n\n 9.4 | \n
| \n Companies within the Odfjell Drilling Ltd. Group | \n\n Related to main shareholder | \n\n 816.7 | \n\n 533.9 | \n
| \n Total sales of services to related parties | \n\n \n | \n\n 847.2 | \n\n 543.3 | \n
Sales of services include casing and rental services, engineering services, personnel hire, administration services and business support.
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Well Services | \n\n 374.7 | \n\n 162.5 | \n
| \n Drilling operations | \n\n 0.0 | \n\n 0.8 | \n
| \n Engineering | \n\n 290.4 | \n\n 205.1 | \n
| \n Corporate / GBS | \n\n 182.0 | \n\n 174.9 | \n
| \n Total operating revenue to related parties | \n\n 847.2 | \n\n 543.3 | \n
| \n NOK million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Companies within the Odfjell Drilling Ltd. Group | \n\n Related to main shareholder | \n\n 35.0 | \n\n 79.4 | \n
| \n Total operating expenses to related parties | \n\n \n | \n\n 35.0 | \n\n 79.4 | \n
| \n NOK million | \n\n Relation | \n\n 2022 | \n\n 2021 | \n
| \n Odfjell Drilling Ltd. | \n\n Related to main shareholder | \n\n 0.8 | \n\n 5.1 | \n
| \n Odfjell Oceanwind AS | \n\n Joint-venture | \n\n 0.2 | \n\n \n | \n
| \n Total interest income from related parties | \n\n \n | \n\n 1.0 | \n\n 5.1 | \n
The Group had the following receivables and liabilities to related parties
| \n NOK million | \n\n Relation | \n\n Type | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Odfjell Drilling Ltd. | \n\n Related to main shareholder | \n\n Loan | \n\n - | \n\n - | \n\n 91.7 | \n
| \n Total non-current interest-bearing receivables related parties | \n\n \n | \n\n \n | \n\n - | \n\n - | \n\n 91.7 | \n
| \n NOK million | \n\n Relation | \n\n Type | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Odfjell Drilling Ltd. | \n\n Related to main shareholder | \n\n Loan | \n\n - | \n\n 100.0 | \n\n - | \n
| \n Odfjell Drilling Services Ltd. | \n\n Related to main shareholder | \n\n Cash pool | \n\n - | \n\n 1,208.8 | \n\n 1,413.7 | \n
| \n Current interest-bearing receivables related parties | \n\n \n | \n\n \n | \n\n - | \n\n 1,308.8 | \n\n 1,413.7 | \n
| \n NOK million | \n\n Relation | \n\n Type | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Odfjell Drilling Services Ltd. | \n\n Related to main shareholder | \n\n Cash pool | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
| \n Current interest-bearing payables related parties | \n\n \n | \n\n \n | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
Cash pool
Other current receivables and liabilities related parties
As a part of the day-to-day running of the business, the group have the following current receivables and liabilities towards companies in the Odfjell Drilling group. All receivables and liabilities have less than one year maturity.
| \n NOK million | \n\n Related party | \n\n Relation | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Trade receivables | \n\n Companies in Odfjell Drilling Ltd Group | \n\n Related to main shareholder | \n\n 119.2 | \n\n 142.8 | \n\n 106.2 | \n
| \n Other current receivables | \n\n Companies in Odfjell Drilling Ltd Group | \n\n Related to main shareholder | \n\n 9.4 | \n\n 4.3 | \n\n 10.1 | \n
| \n Trade payables | \n\n Companies in Odfjell Drilling Ltd Group | \n\n Related to main shareholder | \n\n (3.8) | \n\n (8.0) | \n\n (9.6) | \n
| \n Other current payables | \n\n Companies in Odfjell Drilling Ltd Group | \n\n Related to main shareholder | \n\n (5.8) | \n\n (5.5) | \n\n (9.0) | \n
| \n Net current payables related parties | \n\n 119.1 | \n\n 133.6 | \n\n 97.7 | \n
Shareholdings by related parties
Chair of the Board, Helene Odfjell, controls Odfjell Technology Holding Ltd., which owns 60.37% of the common shares.
Victor Vadaneaux (Director) controls 16,563 (0.04%) of the common shares, and Susanne Munch Thore (Director) controls 500 (0.00%) of the common shares in the company as per 31 December 2022
NOTE 35Remuneration to the Board of Directors, key executive management and auditor
Details of salary, variable pay and other benefits provided to Group management in 2022:
| \n NOK thousands | \n\n \n | \n\n Salary | \n\n Bonus | \n\n Pension premium | \n\n Other remuneration | \n\n Expense share-based payments | \n\n Total | \n
| \n Simen Lieungh | \n\n CEO from 29 March 2022 - Odfjell Technology AS | \n\n 4,018 | \n\n - | \n\n 99 | \n\n 175 | \n\n 1,367 | \n\n 5,659 | \n
| \n Jone Torstensen | \n\n CFO from 29 March 2022 - Odfjell Technology AS | \n\n 2,009 | \n\n - | \n\n 100 | \n\n 174 | \n\n 456 | \n\n 2,738 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Technology Ltd. | \n\n 689 | \n\n 119 | \n\n 36 | \n\n 40 | \n\n - | \n\n 883 | \n
| \n Total | \n\n \n | \n\n 6,715 | \n\n 119 | \n\n 235 | \n\n 389 | \n\n 1,822 | \n\n 9,280 | \n
The amounts listed as Salary, Bonus, and Other remuneration in the table above represent cash payments in 2022. Refer to the Executive Remuneration Report for bonuses earned in 2022.
Amounts listed as Pension premium and Expense share-based payments relates to the expense accounted for as personnel expenses in 2022.
For details regarding incentive share option programme, refer to the Executive Remuneration Report and Note 36 - Share-based payments
Fees paid to Board of non-executive directors:
| \n NOK thousands | \n\n 2022 | \n\n 2021 | \n
| \n Helene Odfjell | \n\n 206 | \n\n - | \n
| \n Susanne Munch Thore | \n\n 122 | \n\n - | \n
| \n Alasdair Shiach | \n\n 109 | \n\n - | \n
| \n Victor Vadaneaux | \n\n 97 | \n\n - | \n
| \n Total remuneration to Board of non-executive directors | \n\n 534 | \n\n - | \n
NOTE 2Basis for preparing the consolidated financial statements
Background and formation of the Group
As part of a planned restructuring, Odfjell Technology Ltd., in February 2022 received equity contributions, including shares in two subsidiaries, from Odfjell Drilling Ltd. Following the successful issuing of new debt in the company, Odfjell Technology Ltd then on 1 March 2022 purchases shares in other relevant subsidiaries from Odfjell Drilling Ltd.
At the end of March 2022, the shares in Odfjell Technology Ltd were distributed to the shareholders in Odfjell Drilling Ltd. The ratio for the distribution was 6:1, i.e. 6 shares in Odfjell Drilling Ltd gave the holder 1 share in Odfjell Technology Ltd, rounded downwards to the closest whole share.
The shares in Odfjell Technology Ltd were listed on the Oslo Stock Exchange 29 March 2022. There was no public offering of shares in Odfjell Technology Ltd in connection with the Listing.
First-time consolidated financial statements
The consolidated financial statements ended 31 December 2022 comprise the income statement, statement of comprehensive income, statement of financial position, statement of cash flow, statement of changes in equity and note disclosures.
The consolidated financial statements of the Group for the year ended 31 December 2022 comply with IFRS as endorsed by the European Union (EU).
The first-time consolidated financial statements have been prepared in accordance with IFRS 1, First-time Adoption of International Financial Reporting Standards.
The legal formation of Odfjell Technology Ltd Group was completed on 1\u00a0March\u00a02022. The entire transaction is accounted for as a common control transaction outside the scope of IFRS 3 as Odfjell Drilling Ltd was sole shareholder of the company at the time of the transactions, and book values of assets and liabilities are continued in the consolidated accounts of Odfjell\u00a0Technology.
Principles used related to predecessor combined comparatives
Special purpose predecessor combined financial statements were prepared for the Odfjell Technology group in line with International Financial Reporting Standards as adopted by the European Union (IFRS (EU)) for the years ended 31\u00a0December 2020, 2019 and 2018. The predecessor combined financial statements are available on www.odfjelltechnology.com/investor/prospectus/
Until the formation of the Group, the accounting policies, principles of carve-out, combination and allocations as described in the predecessor combined financial statements were applied.
Applying predecessor accounting, Odfjell Technology Ltd., account for the transaction as if the combination had taken place prior to the comparative periods presented. The combined predecessor financial statements therefore present historical information as if Odfjell Technology Ltd and its subsidiaries were a part of the same group for all periods presented. The Group is of the opinion that presenting combined predecessor financial statements provide the most relevant information for users of the financial statements.
The carrying amounts of the assets and liabilities in the comparative periods are based on the predecessor values of Odfjell Drilling Ltd.
The perimeter of the accounts does not conform with the control notion in IFRS 10 Consolidated Financial Statements because Odfjell Technology Ltd., was not the parent company for the years covered by the predecessor consolidated combined financial statements.
The predecessor combined comparatives are otherwise prepared using the principles of IFRS 10, such as elimination of intra-group transactions and balances. Transactions with the remaining Odfjell Drilling Group have not been eliminated, as these are now regarded as external to the Odfjell Technology Group. These transactions are recognised based on intercompany agreements that were prevailing in the years reported. No adjustments are made to the predecessor values of income and expenses. The predecessor combined could differ from what would have been presented if Odfjell Technology operated as a separate group for all periods presented. See Note 34 for summary of transactions with Odfjell Drilling Group.
The predecessor combined comparatives include all entities over which Odfjell Technology Ltd., as at 1 March 2022 have the power to govern the financial and operating policies, generally accompanying a shareholding of more than half of the voting rights.
Earnings per share information for 2021 has been presented on a pro forma basis.
The accounting principles used in these consolidated financial statements are consistent with those used in the predecessor combined financial statements.
Presentation currency
The predecessor combined financial statements were prepared using USD as presentation currency, as these were carve-out financial statements based on the predecessor values of Odfjell\u00a0Drilling\u00a0Ltd.
The functional currency of the group's underlying business is mainly Norwegian Kroner (\"NOK\"). The board therefore believes that NOK financial reporting provides more relevant presentation of the group's financial position, funding and treasury function, financial performance and its cash flows. Odfjell Technology Ltd Group will therefore present its first-time consolidated financial statements in NOK.
The functional currencies of the group\u2019s subsidiaries (functional currencies referring to the currencies of the primary economic environments in which underlying businesses operate) remain unchanged and foreign exchange exposures will therefore be unaffected by the change, albeit that the effects of such exposures will be presented in NOK.
Opening balances and comparable figures
Opening balances as at 1 January 2021 have been restated to NOK based on the predecessor combined financial statement closing balance in USD as at 31\u00a0December 2020 using a NOK to USD exchange rate of 8.5326.
The comparative information in these financial statements prior to the legal formation of the group derive from the carve-out combined financial statements up to and including 31 December 2021.
Going concern
In the Group\u2019s view, factors that could cause actual results to differ materially from the outlook contained in these financial statements are the following: volatile oil and gas prices, global political changes regarding energy composition, competition within the oil and gas services industry, changes in clients\u2019 spending budgets and developments in the financial and fiscal markets.
Additionally, any unforeseen consequences of COVID-19 and other future pandemics may impact the financial result.
The Group does not expect to be materially affected by the situation in Ukraine as it has no direct businesses in Ukraine, Russia or Belarus.
The Group's refinancing risk is low, with a bond loan maturing in February 2026 and a rolling credit facility of USD 25 available until the same quarter.
Taking all relevant risk factors into consideration, the Board has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. Hence, the Group has adopted the going concern basis in preparing its consolidated financial statements.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments, debt and equity financial assets, plan assets in defined benefit pension plans and contingent consideration that have been measured at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where the assumptions and estimates are significant to the consolidated financial statements are disclosed in each relevant note.
New and amended standards and interpretations effective on 1 January 2022
\u2022 Onerous Contracts - Costs of Fulfilling a Contract (Amendments to IAS 37)
\u2022 Covid-19-Related Rent Concessions beyond 30 June 2021\u2013 amendments to IFRS 16.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries.
Subsidiaries are all entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Subsidiaries are listed in Note 32.
Profit or loss and each component of Other Comprehensive Income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group\u2019s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. The difference between fair value of any consideration paid, and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity.
If the Group loses control over a subsidiary, it de-recognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may indicate that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Any investment retained is recognised at fair value. The fair value is the initial carrying amount for the purpose of subsequently accounting for the retained interest as an associate, joint venture or financial asset.
Foreign currency translation
(a) Functional and presentation currency
Items included in the separate financial statements of each of the Group\u2019s entities are measured using the currency of the primary economic environment in which the entity operates (\u2018the functional currency\u2019). The Consolidated Financial Statements are presented in NOK (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 (NOK) are translated into the presentation currency as follows:
\u25aaAssets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u25aaIncome 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
\u25aaAll resulting exchange differences are recognised in other comprehensive income.
Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
The following are the most significant exchange rates used in the consolidation:
| \n \n | \n\n Average rate | \n\n Average rate | \n\n Closing rate | \n\n Closing rate | \n\n Opening rate | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n USD | \n\n 9.6197 | \n\n 8.5979 | \n\n 9.8573 | \n\n 8.8194 | \n\n 8.5326 | \n
| \n GBP | \n\n 11.8610 | \n\n 11.8269 | \n\n 11.8541 | \n\n 11.8875 | \n\n 11.6562 | \n
| \n EUR | \n\n 10.1128 | \n\n 10.1735 | \n\n 10.5138 | \n\n 9.9888 | \n\n 10.4703 | \n
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Statement of cash flows
The statement of cash flows is prepared under the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2022 and not early adopted
The consolidated financial statements of the Group for the year ended 31 December 2022 comply with IFRS as endorsed by the European Union (EU).
The first-time consolidated financial statements have been prepared in accordance with IFRS 1, First-time Adoption of International Financial Reporting Standards.
Presentation currency
The predecessor combined financial statements were prepared using USD as presentation currency, as these were carve-out financial statements based on the predecessor values of Odfjell\u00a0Drilling\u00a0Ltd.
The functional currency of the group's underlying business is mainly Norwegian Kroner (\"NOK\"). The board therefore believes that NOK financial reporting provides more relevant presentation of the group's financial position, funding and treasury function, financial performance and its cash flows. Odfjell Technology Ltd Group will therefore present its first-time consolidated financial statements in NOK.
The functional currencies of the group\u2019s subsidiaries (functional currencies referring to the currencies of the primary economic environments in which underlying businesses operate) remain unchanged and foreign exchange exposures will therefore be unaffected by the change, albeit that the effects of such exposures will be presented in NOK.
Presentation currency
The predecessor combined financial statements were prepared using USD as presentation currency, as these were carve-out financial statements based on the predecessor values of Odfjell\u00a0Drilling\u00a0Ltd.
The functional currency of the group's underlying business is mainly Norwegian Kroner (\"NOK\"). The board therefore believes that NOK financial reporting provides more relevant presentation of the group's financial position, funding and treasury function, financial performance and its cash flows. Odfjell Technology Ltd Group will therefore present its first-time consolidated financial statements in NOK.
The functional currencies of the group\u2019s subsidiaries (functional currencies referring to the currencies of the primary economic environments in which underlying businesses operate) remain unchanged and foreign exchange exposures will therefore be unaffected by the change, albeit that the effects of such exposures will be presented in NOK.
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 (NOK) are translated into the presentation currency as follows:
\u25aaAssets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u25aaIncome 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
\u25aaAll 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 Average rate | \n\n Closing rate | \n\n Closing rate | \n\n Opening rate | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n USD | \n\n 9.6197 | \n\n 8.5979 | \n\n 9.8573 | \n\n 8.8194 | \n\n 8.5326 | \n
| \n GBP | \n\n 11.8610 | \n\n 11.8269 | \n\n 11.8541 | \n\n 11.8875 | \n\n 11.6562 | \n
| \n EUR | \n\n 10.1128 | \n\n 10.1735 | \n\n 10.5138 | \n\n 9.9888 | \n\n 10.4703 | \n
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Statement of cash flows
The statement of cash flows is prepared under the indirect method. Cash and cash equivalents include cash, bank deposits and other monetary instruments with a maturity of less than three months at the date of purchase.
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.
Accounting policy - Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over rendered services to the customer.
Sometimes, the Group receives short-term advances from customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Group has, as a practical expedient in IFRS, recognised the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The group has only operating leases as a lessor. Rental income is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. The lease term may vary from contract to contract, and only includes the non-cancellable period of the contract with the addition of optional renewable periods if the lessee is reasonably certain to extend. None of the existing contracts have optional periods included in the lease term. The lease term is reassessed when options to extend are exercised. Contingent rents are recognised as revenue in the period in which they are earned.
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations.
Well Services
The Well Services segment (OWS) provides casing and tubular running services (both automated and conventional), drilling tool and tubular rental services, specialist well intervention products and services for exploration wells and for production purposes.
Revenue for the rental services are recognised according to IFRS 16 Leases and is accounted for on a straight-line basis over the lease terms.
Services related to contracts with customers are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue is based on the transaction price in the contracts with customers, which is a combination of fees for equipment used, personnel on board and other pricing elements. Payment of the transaction price is usually due on a monthly basis. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Operations
The Operations segment provides integrated drilling and maintenance services for both fixed production platforms and on floating production platforms with subsea blowout preventers (BOP) along with the management of and performance of the same services on leased Jack-up rigs in the North Sea. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer.
Revenue is based on the transaction price in the contracts with customers. The main part of the transaction price is fixed day rates, which can vary depending on the phase of contract. Payment of the day rate based transaction price is usually due on a monthly basis. Some contracts may contain milestone payments or prepayment for maintenance services not yet performed. Refer to Note 15 - Contract balances.
The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Some 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.
Projects & Engineering
The Projects & Engineering segment offers engineering services, including design, project management and operation and support. The transaction prices in the contracts are mainly based on rates per hour, but the business area may from time to time have some lump sum projects. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Accounting policy - Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
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. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax 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.
Withholding tax is the tax withheld on border-crossing gross income, generated in the Middle East and some other countries. Withholding tax is presented as tax expense in the income statement as this is a major, and often the total, part of the corporate income tax.
Accounting policy
Property, plant and equipment comprise mainly of, 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.
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, taking into account current and expected climate risk.
When assets are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting from their disposal is included in the income statement as other gains and losses.
Residual values for property, plant and equipment are estimated to be zero.
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). Value in use represents the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Non-financial assets, other than goodwill, that have suffered an impairment, are reviewed for reversal of the impairment whenever events or changes in circumstances indicate that the impairment loss recognised in prior periods may no longer exist or may have decreased.
Accounting policy - Goodwill and Intangible assets
Accounting policy - Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
\u25aaThe technical feasibility of completing the intangible asset so that the asset will be available for use or sale
\u25aaIts intention to complete and its ability and intention to use or sell the asset
\u25aaHow the asset will generate future economic benefits
\u25aaThe availability of resources to complete the asset
\u25aaThe ability to measure reliably the expenditure during development
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
NOTE 13Spare parts
Accounting policies
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
The Group classify financial assets in the following categories:
\u25aaamortised cost,
\u25aafinancial assets at fair value through profit or loss (FVPL),
\u25aafinancial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at :
\u25aaamortised cost,,
\u25aafair value through profit or loss, or as
\u25aaderivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 18 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u25aaIn the principal market for the asset or liability , or
\u25aaIn the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
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:
\u25aaLevel 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
\u25aaLevel 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)
\u25aaLevel 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. Interest rate swaps are fair valued using forward rates extracted from observable yield curves. Interest rate swaps are recognised according to mark-to-market reports from external financial institutions.
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.
Accounting policies - Contract liabilities
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
Cash specification:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Cash in bank | \n\n 190.7 | \n\n 72.0 | \n\n 78.3 | \n
| \n Time deposits | \n\n 306.7 | \n\n 379.4 | \n\n - | \n
| \n Restricted bank deposits * | \n\n 62.7 | \n\n 46.5 | \n\n 44.2 | \n
| \n Total cash and cash equivalents | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n\n | \n
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
The group\u2019s leasing activities as a lessee and how these are accounted for
This note relates to the Group as a lessee only.
The Group leases various offices, workshops and warehouses. Rental contracts are typically made for fixed periods of 6 months to 10 years, but may have extension or termination options. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payment that are based on an index or a rate (initially measured using the index or rate as at the commencement date), amounts expected to be payable by the group under residual value guarantees, the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee\u2019s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease, e.g. term, country, currency and security.
The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising 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.
The Group has occupational pension plans in several countries established partly as defined benefit plans (in Norway), partly as multi-employer defined benefit plans accounted for as defined contribution plans (in Norway) and partly as defined contribution plans (in Norway and other countries). The pension plans are measured and presented according to IAS 19.
Accounting policy
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the income statement.
Mortality index used in actuarial calculations is K2013.
The Group has contractual pension agreement (CPA) schemes in Norway established in multi-employer plans. These multi-employer plans are defined benefit plans, but the Group does not have access to the necessary information for the accounting years 2022 and 2021 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
NOTE 21Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
\u25aaThere is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u25aaThe effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u25aaThe 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:
\u25aaThe 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.
\u25aaAmounts 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.
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.
Accounting policy - Cash dividend
Accounting policy - Provisions, contingent liabilities and contingent assets
A provision is recognised when an obligation exists (legal or constructive) as a result of a past event, it is probable that an economic settlement will be required as a consequence of the obligation, and a reliable estimate can be made of the amount of the obligation.
The best estimate of the expenditure required to settle the obligation is recognised as a provision. When the effect is material, the provision is discounted using a market based pre-tax discount rate.
Contingent liabilities and contingent assets are not recognised. Contingent liabilities are disclosed unless the possibility of an economic settlement as a consequence of the obligation is remote. Contingent assets are disclosed where an economic settlement as a consequence of the asset is probable.
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Accounting principle
The company have a 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.
Going concern
In the Group\u2019s view, factors that could cause actual results to differ materially from the outlook contained in these financial statements are the following: volatile oil and gas prices, global political changes regarding energy composition, competition within the oil and gas services industry, changes in clients\u2019 spending budgets and developments in the financial and fiscal markets.
Additionally, any unforeseen consequences of COVID-19 and other future pandemics may impact the financial result.
The Group does not expect to be materially affected by the situation in Ukraine as it has no direct businesses in Ukraine, Russia or Belarus.
The Group's refinancing risk is low, with a bond loan maturing in February 2026 and a rolling credit facility of USD 25 available until the same quarter.
Taking all relevant risk factors 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.
Subsidiaries are all entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Subsidiaries are listed in Note 32.
Profit or loss and each component of Other Comprehensive Income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group\u2019s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. The difference between fair value of any consideration paid, and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity.
If the Group loses control over a subsidiary, it de-recognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may indicate that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Any investment retained is recognised at fair value. The fair value is the initial carrying amount for the purpose of subsequently accounting for the retained interest as an associate, joint venture or financial asset.
Foreign currency 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 (NOK) are translated into the presentation currency as follows:
\u25aaAssets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u25aaIncome 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
\u25aaAll 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 Average rate | \n\n Closing rate | \n\n Closing rate | \n\n Opening rate | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n USD | \n\n 9.6197 | \n\n 8.5979 | \n\n 9.8573 | \n\n 8.8194 | \n\n 8.5326 | \n
| \n GBP | \n\n 11.8610 | \n\n 11.8269 | \n\n 11.8541 | \n\n 11.8875 | \n\n 11.6562 | \n
| \n EUR | \n\n 10.1128 | \n\n 10.1735 | \n\n 10.5138 | \n\n 9.9888 | \n\n 10.4703 | \n
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 (NOK) are translated into the presentation currency as follows:
\u25aaAssets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
\u25aaIncome 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
\u25aaAll 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 Average rate | \n\n Closing rate | \n\n Closing rate | \n\n Opening rate | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n USD | \n\n 9.6197 | \n\n 8.5979 | \n\n 9.8573 | \n\n 8.8194 | \n\n 8.5326 | \n
| \n GBP | \n\n 11.8610 | \n\n 11.8269 | \n\n 11.8541 | \n\n 11.8875 | \n\n 11.6562 | \n
| \n EUR | \n\n 10.1128 | \n\n 10.1735 | \n\n 10.5138 | \n\n 9.9888 | \n\n 10.4703 | \n
The aggregate net foreign exchange gains/losses recognised in profit or loss were:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) included in finance costs | \n\n (31.8) | \n\n (16.6) | \n
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle, when it is held primarily for the purpose of trading, when it is expected to be realised within twelve months after the reporting period, or when it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when it is expected to be settled in the normal operating cycle, when it is held primarily for the purpose of trading, when it is due to be settled within twelve months after the reporting period, or when there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Group classifies all other liabilities as non-current.
Accounting policies - Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Accounting policies - Contract 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.
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.
NOTE 4Critical 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 of these estimates and judgements are disclosed in the relevant notes.
\u25aaRevenue recognition (Note 6 - Revenue)
\u25aaRecognition of deferred tax asset for carried forward tax losses (Note 9 - Income Taxes)
\u25aaProvisions and contingent liabilities (Note 30 - Contingencies)
\u25aaDetermination of expected economic life of assets (Note 10 - Tangible fixed assets)
\u25aaDetermination of lease term and estimating the incremental borrowing rate (Note 19 - Leases)
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations.
Significant judgement and estimation uncertainty
Odfjell Offshore Ltd, 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.
21 December 2022 Odfjell Offshore Ltd received a tax ruling from the Norwegian Tax Authorities where the tax loss of 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 will appeal the ruling, and the Group is still of the opinion that the most likely outcome of a court case is that the anti-avoidance rule should not be applicable and the denial of the tax loss should be revoked.
The Group made an upfront payment 1 February 2023 of NOK 307 million in taxes and interest for the financial years 2017 through to 2021. The amount was financed and refunded from Odfjell Drilling Ltd., as it is covered by the letter of indemnity issued 1 March 2022 to Odfjell Technology Ltd. Odfjell Drilling Ltd will hold the Company indemnified in respect of any liability that may occur in relation to the ongoing Odfjell Offshore Ltd tax case for the financial years 2017 through to 2021. This includes financing of prepayments to the Norwegian Tax Authorities, and funds for legal proceedings.
For the financial year 2022 income taxes payable for companies taxable in Norway amounts to NOK 36 million. Following the tax ruling in December 2022, the income taxes can no longer be offset by tax losses carried forward, and the Group will have to pay the amount in 2023. However, since the Group is still of the opinion that the most likely outcome of a court case is that the denial of the tax loss should be revoked, the Group has recognised a deferred tax asset equal to expected tax refund of NOK 36 million following at court case win.
Significant judgement and estimation uncertainty
Management exercises judgement in determining the expected economic life of assets in the Well Services segment. Management uses knowledge of the oil industry and the estimated market development, as well as expected technological development as basis for determining useful life. The evaluation includes effects of the climate change and the shift to renewable energy sources.
Significant judgement and estimation uncertainty
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group's business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
NOTE 4Critical 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 of these estimates and judgements are disclosed in the relevant notes.
\u25aaRevenue recognition (Note 6 - Revenue)
\u25aaRecognition of deferred tax asset for carried forward tax losses (Note 9 - Income Taxes)
\u25aaProvisions and contingent liabilities (Note 30 - Contingencies)
\u25aaDetermination of expected economic life of assets (Note 10 - Tangible fixed assets)
\u25aaDetermination of lease term and estimating the incremental borrowing rate (Note 19 - Leases)
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are listed below. Detailed information of these estimates and judgements are disclosed in the relevant notes.
\u25aaRevenue recognition (Note 6 - Revenue)
\u25aaRecognition of deferred tax asset for carried forward tax losses (Note 9 - Income Taxes)
\u25aaProvisions and contingent liabilities (Note 30 - Contingencies)
\u25aaDetermination of expected economic life of assets (Note 10 - Tangible fixed assets)
\u25aaDetermination of lease term and estimating the incremental borrowing rate (Note 19 - Leases)
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 well services, drilling operations and engineering services to the offshore oil and gas industry. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. Well Services, Operations and Project & Engineering have been determined as the operating segments.
Well Services
The Well Services segment provides casing and tubular running services (both automated and conventional), drilling tool and tubular rental services, specialist well intervention products and services for exploration wells and for production purposes.
Operations (previously Drilling Operations)
The name change from Drilling Operations to Operations is effective from January 2023. The main service offering of the Operations segment is production drilling and well completion on client's rigs. Other types of services offered are slot recovery, plug and abandonment, work-overs and maintenance activities. In this segment, the Group offers platform drilling services on both fixed production platforms and on floating production platforms with subsea blowout preventers (BOP) along with the management of and performance of the same services on leased Jack-up rigs.
Projects & Engineering (previously Engineering)
The name change from Engineering to Projects & Engineering is effective from January 2023. The segment offers engineering and integrity services, ranging from design and engineering to building supervision, project management and operational support for units in operation, newbuild projects, SPS/RS recertification projects and yard stays.
| \n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n\n Corporate / GBS | \n\n Eliminations | \n\n Consolidated | \n||||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n External segment revenue | \n\n 1,171.7 | \n\n 849.0 | \n\n 1,993.2 | \n\n 1,576.4 | \n\n 529.2 | \n\n 350.0 | \n\n 190.9 | \n\n 172.8 | \n\n - | \n\n - | \n\n 3,885.0 | \n\n 2,948.2 | \n
| \n Inter segment revenue | \n\n 193.7 | \n\n 146.9 | \n\n (89.5) | \n\n (70.7) | \n\n 51.9 | \n\n 8.3 | \n\n 172.2 | \n\n 156.4 | \n\n (328.3) | \n\n (240.9) | \n\n - | \n\n - | \n
| \n Total revenue | \n\n 1,365.4 | \n\n 995.9 | \n\n 1,903.8 | \n\n 1,505.7 | \n\n 581.0 | \n\n 358.3 | \n\n 363.0 | \n\n 329.2 | \n\n (328.3) | \n\n (240.9) | \n\n 3,885.0 | \n\n 2,948.2 | \n
| \n EBITDA | \n\n 485.3 | \n\n 257.9 | \n\n 157.2 | \n\n 100.9 | \n\n 72.1 | \n\n 20.3 | \n\n (42.1) | \n\n 8.3 | \n\n - | \n\n - | \n\n 672.5 | \n\n 387.4 | \n
| \n Depreciation and amortisation | \n\n (259.3) | \n\n (211.1) | \n\n (0.1) | \n\n (0.2) | \n\n (0.6) | \n\n (0.4) | \n\n (28.4) | \n\n (51.0) | \n\n - | \n\n - | \n\n (288.4) | \n\n (262.8) | \n
| \n EBIT | \n\n 226.0 | \n\n 46.9 | \n\n 157.1 | \n\n 100.7 | \n\n 71.5 | \n\n 19.8 | \n\n (70.5) | \n\n (42.7) | \n\n - | \n\n - | \n\n 384.1 | \n\n 124.6 | \n
| \n Share of profit (loss) from joint ventures and associates | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n (19.9) | \n\n (4.6) | \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 \n | \n\n \n | \n\n \n | \n\n \n | \n\n (138.0) | \n\n (17.2) | \n
| \n Profit / (loss) before tax - Consolidated Group | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n 226.2 | \n\n 102.8 | \n
Corporate / GBS covers overhead costs in the group as well as global business services (GBS). The GBS services are provided to segments within the group as well as to the Odfjell Drilling Group. The Group will continue to provide global business services to the Odfjell Drilling Group going forward.
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.
NOTE 6Revenue
Accounting policy - Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over rendered services to the customer.
Sometimes, the Group receives short-term advances from customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Group has, as a practical expedient in IFRS, recognised the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The group has only operating leases as a lessor. Rental income is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. The lease term may vary from contract to contract, and only includes the non-cancellable period of the contract with the addition of optional renewable periods if the lessee is reasonably certain to extend. None of the existing contracts have optional periods included in the lease term. The lease term is reassessed when options to extend are exercised. Contingent rents are recognised as revenue in the period in which they are earned.
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations.
Well Services
The Well Services segment (OWS) provides casing and tubular running services (both automated and conventional), drilling tool and tubular rental services, specialist well intervention products and services for exploration wells and for production purposes.
Revenue for the rental services are recognised according to IFRS 16 Leases and is accounted for on a straight-line basis over the lease terms.
Services related to contracts with customers are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue is based on the transaction price in the contracts with customers, which is a combination of fees for equipment used, personnel on board and other pricing elements. Payment of the transaction price is usually due on a monthly basis. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Operations
The Operations segment provides integrated drilling and maintenance services for both fixed production platforms and on floating production platforms with subsea blowout preventers (BOP) along with the management of and performance of the same services on leased Jack-up rigs in the North Sea. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer.
Revenue is based on the transaction price in the contracts with customers. The main part of the transaction price is fixed day rates, which can vary depending on the phase of contract. Payment of the day rate based transaction price is usually due on a monthly basis. Some contracts may contain milestone payments or prepayment for maintenance services not yet performed. Refer to Note 15 - Contract balances.
The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Some 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.
Projects & Engineering
The Projects & Engineering segment offers engineering services, including design, project management and operation and support. The transaction prices in the contracts are mainly based on rates per hour, but the business area may from time to time have some lump sum projects. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Revenue specification
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Revenue from contracts with customers | \n\n 3,430.5 | \n\n 2,636.9 | \n
| \n Lease component in Well Services contracts | \n\n 454.0 | \n\n 310.6 | \n
| \n Other operating revenue | \n\n 0.4 | \n\n 0.8 | \n
| \n Operating revenue | \n\n 3,885.0 | \n\n 2,948.2 | \n
Revenue from single external customers (> 10% of revenues)
| \n NOK million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Customer 1 | \n\n 34 | \n\n 816.7 | \n\n 533.9 | \n
| \n Customer 2 | \n\n \n | \n\n 544.7 | \n\n 453.0 | \n
| \n Customer 3 | \n\n \n | \n\n 408.7 | \n\n 465.1 | \n
Disaggregation of revenue by primary geographical markets
| \n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n\n Corporate / GBS | \n\n Eliminations | \n\n Consolidated | \n||||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Norway | \n\n 759.0 | \n\n 554.2 | \n\n 1,176.6 | \n\n 969.1 | \n\n 521.5 | \n\n 323.8 | \n\n 312.1 | \n\n 279.2 | \n\n (222.7) | \n\n (159.0) | \n\n 2,546.5 | \n\n 1,967.3 | \n
| \n UK | \n\n 117.5 | \n\n 87.7 | \n\n 727.1 | \n\n 536.5 | \n\n 59.5 | \n\n 34.5 | \n\n 43.9 | \n\n 44.8 | \n\n (100.8) | \n\n (78.1) | \n\n 847.3 | \n\n 625.4 | \n
| \n Europe - other countries | \n\n 176.9 | \n\n 110.7 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 176.9 | \n\n 110.7 | \n
| \n Asia | \n\n 302.9 | \n\n 237.4 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 7.1 | \n\n 5.3 | \n\n (4.8) | \n\n (3.8) | \n\n 305.3 | \n\n 238.9 | \n
| \n Other geographical markets | \n\n 9.0 | \n\n 5.9 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 9.0 | \n\n 5.9 | \n
| \n Total operating revenue | \n\n 1,365.4 | \n\n 995.9 | \n\n 1,903.8 | \n\n 1,505.7 | \n\n 581.0 | \n\n 358.3 | \n\n 363.0 | \n\n 329.2 | \n\n (328.3) | \n\n (240.9) | \n\n 3,885.0 | \n\n 2,948.2 | \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 NOK million | \n\n Future minimum lease payments | \n\n Performance obligations | \n\n Total firm backlog | \n
| \n Within one year | \n\n 160 | \n\n 2,443 | \n\n 2,603 | \n
| \n Between one and two years | \n\n 142 | \n\n 1,612 | \n\n 1,754 | \n
| \n Between two and three years | \n\n 33 | \n\n 704 | \n\n 737 | \n
| \n Between three and four years | \n\n - | \n\n 271 | \n\n 271 | \n
| \n Between four and five years | \n\n - | \n\n 67 | \n\n 67 | \n
| \n After five years | \n\n - | \n\n 35 | \n\n 35 | \n
| \n Total | \n\n 335 | \n\n 5,132 | \n\n 5,467 | \n
Set out below is the amount of revenue recognised from:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Amounts included in contract liabilities at the beginning of the year | \n\n 2.5 | \n\n 0.4 | \n
| \n Performance obligations satisfied in the previous years | \n\n 0.0 | \n\n 0.1 | \n
Accounting policy - Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The group recognises revenue when it transfers control over rendered services to the customer.
Sometimes, the Group receives short-term advances from customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.
The Group has, as a practical expedient in IFRS, recognised the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognised is one year or less.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The group has only operating leases as a lessor. Rental income is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. The lease term may vary from contract to contract, and only includes the non-cancellable period of the contract with the addition of optional renewable periods if the lessee is reasonably certain to extend. None of the existing contracts have optional periods included in the lease term. The lease term is reassessed when options to extend are exercised. Contingent rents are recognised as revenue in the period in which they are earned.
Significant judgement and estimation uncertainty
There is use of judgement in the Group's revenue recognition, and the judgement items include whether to include any incentive bonus elements in the transaction price, and to estimate included variable considerations.
Well Services
The Well Services segment (OWS) provides casing and tubular running services (both automated and conventional), drilling tool and tubular rental services, specialist well intervention products and services for exploration wells and for production purposes.
Revenue for the rental services are recognised according to IFRS 16 Leases and is accounted for on a straight-line basis over the lease terms.
Services related to contracts with customers are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue is based on the transaction price in the contracts with customers, which is a combination of fees for equipment used, personnel on board and other pricing elements. Payment of the transaction price is usually due on a monthly basis. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Operations
The Operations segment provides integrated drilling and maintenance services for both fixed production platforms and on floating production platforms with subsea blowout preventers (BOP) along with the management of and performance of the same services on leased Jack-up rigs in the North Sea. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer.
Revenue is based on the transaction price in the contracts with customers. The main part of the transaction price is fixed day rates, which can vary depending on the phase of contract. Payment of the day rate based transaction price is usually due on a monthly basis. Some contracts may contain milestone payments or prepayment for maintenance services not yet performed. Refer to Note 15 - Contract balances.
The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Some 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.
Projects & Engineering
The Projects & Engineering segment offers engineering services, including design, project management and operation and support. The transaction prices in the contracts are mainly based on rates per hour, but the business area may from time to time have some lump sum projects. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Well Services
The Well Services segment (OWS) provides casing and tubular running services (both automated and conventional), drilling tool and tubular rental services, specialist well intervention products and services for exploration wells and for production purposes.
Services related to contracts with customers are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue is based on the transaction price in the contracts with customers, which is a combination of fees for equipment used, personnel on board and other pricing elements. Payment of the transaction price is usually due on a monthly basis. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Operations
The Operations segment provides integrated drilling and maintenance services for both fixed production platforms and on floating production platforms with subsea blowout preventers (BOP) along with the management of and performance of the same services on leased Jack-up rigs in the North Sea. Services are provided as a series of distinct services that are substantially the same and have the same pattern of transfer to the customer.
Revenue is based on the transaction price in the contracts with customers. The main part of the transaction price is fixed day rates, which can vary depending on the phase of contract. Payment of the day rate based transaction price is usually due on a monthly basis. Some contracts may contain milestone payments or prepayment for maintenance services not yet performed. Refer to Note 15 - Contract balances.
The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Some 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.
The Projects & Engineering segment offers engineering services, including design, project management and operation and support. The transaction prices in the contracts are mainly based on rates per hour, but the business area may from time to time have some lump sum projects. The Group generally recognise revenue over time because of the continuous transfer of control to the customer. The period for recognising revenue is generally equal to the contract period.
Revenue specification
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Revenue from contracts with customers | \n\n 3,430.5 | \n\n 2,636.9 | \n
| \n Lease component in Well Services contracts | \n\n 454.0 | \n\n 310.6 | \n
| \n Other operating revenue | \n\n 0.4 | \n\n 0.8 | \n
| \n Operating revenue | \n\n 3,885.0 | \n\n 2,948.2 | \n
Disaggregation of revenue by primary geographical markets
| \n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n\n Corporate / GBS | \n\n Eliminations | \n\n Consolidated | \n||||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Norway | \n\n 759.0 | \n\n 554.2 | \n\n 1,176.6 | \n\n 969.1 | \n\n 521.5 | \n\n 323.8 | \n\n 312.1 | \n\n 279.2 | \n\n (222.7) | \n\n (159.0) | \n\n 2,546.5 | \n\n 1,967.3 | \n
| \n UK | \n\n 117.5 | \n\n 87.7 | \n\n 727.1 | \n\n 536.5 | \n\n 59.5 | \n\n 34.5 | \n\n 43.9 | \n\n 44.8 | \n\n (100.8) | \n\n (78.1) | \n\n 847.3 | \n\n 625.4 | \n
| \n Europe - other countries | \n\n 176.9 | \n\n 110.7 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 176.9 | \n\n 110.7 | \n
| \n Asia | \n\n 302.9 | \n\n 237.4 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 7.1 | \n\n 5.3 | \n\n (4.8) | \n\n (3.8) | \n\n 305.3 | \n\n 238.9 | \n
| \n Other geographical markets | \n\n 9.0 | \n\n 5.9 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 9.0 | \n\n 5.9 | \n
| \n Total operating revenue | \n\n 1,365.4 | \n\n 995.9 | \n\n 1,903.8 | \n\n 1,505.7 | \n\n 581.0 | \n\n 358.3 | \n\n 363.0 | \n\n 329.2 | \n\n (328.3) | \n\n (240.9) | \n\n 3,885.0 | \n\n 2,948.2 | \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 NOK million | \n\n Future minimum lease payments | \n\n Performance obligations | \n\n Total firm backlog | \n
| \n Within one year | \n\n 160 | \n\n 2,443 | \n\n 2,603 | \n
| \n Between one and two years | \n\n 142 | \n\n 1,612 | \n\n 1,754 | \n
| \n Between two and three years | \n\n 33 | \n\n 704 | \n\n 737 | \n
| \n Between three and four years | \n\n - | \n\n 271 | \n\n 271 | \n
| \n Between four and five years | \n\n - | \n\n 67 | \n\n 67 | \n
| \n After five years | \n\n - | \n\n 35 | \n\n 35 | \n
| \n Total | \n\n 335 | \n\n 5,132 | \n\n 5,467 | \n
Set out below is the amount of revenue recognised from:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Amounts included in contract liabilities at the beginning of the year | \n\n 2.5 | \n\n 0.4 | \n
| \n Performance obligations satisfied in the previous years | \n\n 0.0 | \n\n 0.1 | \n
NOTE 7Personnel Expenses
Specification
| \n NOK million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Salaries and wages | \n\n \n | \n\n 1,605.5 | \n\n 1,323.5 | \n
| \n Employer's national insurance contributions | \n\n \n | \n\n 218.2 | \n\n 178.0 | \n
| \n Pension expenses | \n\n\n | \n\n 104.9 | \n\n 85.6 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n 2.8 | \n\n - | \n
| \n Other benefits | \n\n \n | \n\n 90.0 | \n\n 71.0 | \n
| \n Hired personnel | \n\n \n | \n\n 360.1 | \n\n 238.9 | \n
| \n Total personnel expenses | \n\n \n | \n\n 2,381.6 | \n\n 1,897.0 | \n
NOTE 20Post-employment benefits
The Group has occupational pension plans in several countries established partly as defined benefit plans (in Norway), partly as multi-employer defined benefit plans accounted for as defined contribution plans (in Norway) and partly as defined contribution plans (in Norway and other countries). The pension plans are measured and presented according to IAS 19.
A number of the Norwegian subsidiaries in the Group 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.
Accounting policy
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the income statement.
Mortality index used in actuarial calculations is K2013.
Defined benefit pension plans
The Group has funded defined benefit pension schemes in four Norwegian companies covering a total of 28 active members and 18 pensioners as at 31 December 2022 (30 active members and 13 pensioners as at 31 December 2021). The scheme entitles employees to defined future benefits. These are mainly dependent on the number of years of service, the salary level at pensionable age and the size of benefits paid by the national insurance. The liabilities are covered through an insurance company.
In addition to the pension obligations that arises from the funded defined benefit plans, the Group\u2019s Norwegian companies have unfunded defined benefit obligations related to pensions and early retirement pensions. The early retirement pensions entitle staff to benefits (about NOK 111,000 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 2022 and 2021 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
Movements in the net defined benefit obligation
| \n \n | \n\n Present value of obligation | \n\n Fair value of plan assets | \n\n Total | \n\n Present value of obligation | \n\n Fair value of plan assets | \n\n Total | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n At 1 January | \n\n 149.5 | \n\n (102.7) | \n\n 46.8 | \n\n 144.1 | \n\n (94.4) | \n\n 49.7 | \n
| \n Current service cost | \n\n 8.4 | \n\n - | \n\n 8.4 | \n\n 6.9 | \n\n - | \n\n 6.9 | \n
| \n Loss on plan amendment, curtailment and settlement | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Interest expense/ (income) | \n\n 2.3 | \n\n (1.3) | \n\n 1.0 | \n\n 2.2 | \n\n (1.3) | \n\n 0.9 | \n
| \n Total amount recognised in profit or loss | \n\n 10.6 | \n\n (1.3) | \n\n 9.4 | \n\n 9.1 | \n\n (1.3) | \n\n 7.8 | \n
| \n Re-measurements: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n (Gain) from change in discount rate | \n\n (44.4) | \n\n - | \n\n (44.4) | \n\n - | \n\n - | \n\n - | \n
| \n (Gain) / loss from change in other financial assumptions | \n\n 33.2 | \n\n (0.2) | \n\n 33.0 | \n\n 6.1 | \n\n - | \n\n 6.1 | \n
| \n Experience (gain)/loss | \n\n 20.6 | \n\n (8.1) | \n\n 12.5 | \n\n (3.5) | \n\n 0.1 | \n\n (3.4) | \n
| \n Investment management cost | \n\n - | \n\n 0.8 | \n\n 0.8 | \n\n - | \n\n 0.9 | \n\n 0.9 | \n
| \n Total amount recognised in other comprehensive income | \n\n 9.4 | \n\n (7.5) | \n\n 1.9 | \n\n 2.6 | \n\n 1.0 | \n\n 3.6 | \n
| \n Contributions: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Employers | \n\n (1.1) | \n\n (7.5) | \n\n (8.5) | \n\n (1.3) | \n\n (9.5) | \n\n (10.9) | \n
| \n Payments from plans: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Benefit payments | \n\n (4.9) | \n\n 2.1 | \n\n (2.8) | \n\n (4.9) | \n\n 1.5 | \n\n (3.4) | \n
| \n At 31 December | \n\n 163.6 | \n\n (116.9) | \n\n 46.7 | \n\n 149.5 | \n\n (102.7) | \n\n 46.8 | \n
Estimated premium payments to funded defined benefit obligations in 2023 amounts to about NOK 10 million.
Amounts recognised in Statement of Financial Position
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Present value of funded obligations | \n\n 139.2 | \n\n 125.3 | \n\n 117.0 | \n
| \n Fair value of plan assets | \n\n (116.9) | \n\n (102.7) | \n\n (94.4) | \n
| \n Deficit of funded plans | \n\n 22.3 | \n\n 22.6 | \n\n 22.5 | \n
| \n Present value of unfunded obligations | \n\n 24.4 | \n\n 24.2 | \n\n 27.1 | \n
| \n Total deficit of defined benefit pension plans | \n\n 46.7 | \n\n 46.8 | \n\n 49.7 | \n
The significant actuarial assumptions were as follows:
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Discount rate | \n\n 3.20% | \n\n 1.50% | \n
| \n Salary growth rate | \n\n 3.75% | \n\n 2.50% | \n
| \n Expected growth in G (base social security amount) | \n\n 3.50% | \n\n 2.25% | \n
| \n Pension growth rate | \n\n 1.7%-3.5% | \n\n 0.0%-2.25% | \n
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions are:
| \n \n | \n\n Change in assumption by: | \n\n Impact on Present value of obligation: | \n\n Change in assumption by: | \n\n Impact on Present value of obligation: | \n||
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 31.12.2022 | \n\n 31.12.2021 | \n||
| \n Discount rate | \n\n +0.5% | \n\n (10.5) | \n\n (9.9) | \n\n -0.5% | \n\n 11.6 | \n\n 11.6 | \n
| \n Salary growth rate | \n\n +0.5% | \n\n 4.2 | \n\n 4.7 | \n\n -0.5% | \n\n (4.3) | \n\n (4.8) | \n
| \n Pension growth rate | \n\n +0.5% | \n\n 4.4 | \n\n 6.8 | \n\n -0.5% | \n\n (10.0) | \n\n (0.3) | \n
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practise, this is unlikely to occur, and changes in some of the assumptions may be correlated.
The fair value of plan assets is disaggregated by class as follows
| \n \n | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Shares | \n\n 11% | \n\n 10% | \n
| \n Short term bonds | \n\n 15% | \n\n 19% | \n
| \n Money market | \n\n 8% | \n\n 15% | \n
| \n Long term bonds | \n\n 32% | \n\n 25% | \n
| \n Loans & Receivables | \n\n 22% | \n\n 19% | \n
| \n Real estate | \n\n 11% | \n\n 10% | \n
| \n Other | \n\n 1% | \n\n 1% | \n
Total pension expenses included in personnel expenses are decomposed as per below:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Pension expenses (-net gain) from defined benefit scheme included in personnel expenses | \n\n 8.4 | \n\n 6.9 | \n
| \n Pension expenses from defined contribution schemes | \n\n 78.5 | \n\n 64.0 | \n
| \n Pension expenses from multi-employer plans accounted for as defined contribution schemes | \n\n 18.0 | \n\n 14.7 | \n
| \n Total pension expenses included in personnel expenses | \n\n 104.9 | \n\n 85.6 | \n
| \n \n | \n\n \n | \n\n 2022 | \n\n 2021 | \n
| \n No. of employees (annual average) | \n\n \n | \n\n 1,966 | \n\n 1,701 | \n
NOTE 8Combined items, income statement
Other gains and losses
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Gain disposal of shares in subsidiaries due to loss of control * | \n\n - | \n\n 2.1 | \n
| \n Net gain on disposal of tangible fixed assets | \n\n 13.6 | \n\n 4.0 | \n
| \n Other gains and losses | \n\n 13.6 | \n\n 6.0 | \n
| \n\n | \n
Other operating expenses
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n 100.5 | \n\n 109.9 | \n
| \n Hired equipment | \n\n 90.9 | \n\n 90.5 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n 391.1 | \n\n 276.8 | \n
| \n Insurance | \n\n 5.2 | \n\n 2.7 | \n
| \n Freight and transport | \n\n 48.9 | \n\n 41.6 | \n
| \n Premises facility expenses | \n\n 47.8 | \n\n 40.3 | \n
| \n Travel and course expenses | \n\n 74.8 | \n\n 53.3 | \n
| \n Other operating and administrative expenses | \n\n 85.3 | \n\n 54.7 | \n
| \n Total other operating expenses | \n\n 844.5 | \n\n 669.8 | \n
NOTE 8Combined items, income statement
Other gains and losses
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Gain disposal of shares in subsidiaries due to loss of control * | \n\n - | \n\n 2.1 | \n
| \n Net gain on disposal of tangible fixed assets | \n\n 13.6 | \n\n 4.0 | \n
| \n Other gains and losses | \n\n 13.6 | \n\n 6.0 | \n
| \n\n | \n
Other operating expenses
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n 100.5 | \n\n 109.9 | \n
| \n Hired equipment | \n\n 90.9 | \n\n 90.5 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n 391.1 | \n\n 276.8 | \n
| \n Insurance | \n\n 5.2 | \n\n 2.7 | \n
| \n Freight and transport | \n\n 48.9 | \n\n 41.6 | \n
| \n Premises facility expenses | \n\n 47.8 | \n\n 40.3 | \n
| \n Travel and course expenses | \n\n 74.8 | \n\n 53.3 | \n
| \n Other operating and administrative expenses | \n\n 85.3 | \n\n 54.7 | \n
| \n Total other operating expenses | \n\n 844.5 | \n\n 669.8 | \n
Other gains and losses
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Gain disposal of shares in subsidiaries due to loss of control * | \n\n - | \n\n 2.1 | \n
| \n Net gain on disposal of tangible fixed assets | \n\n 13.6 | \n\n 4.0 | \n
| \n Other gains and losses | \n\n 13.6 | \n\n 6.0 | \n
| \n\n | \n
Other operating expenses
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n 100.5 | \n\n 109.9 | \n
| \n Hired equipment | \n\n 90.9 | \n\n 90.5 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n 391.1 | \n\n 276.8 | \n
| \n Insurance | \n\n 5.2 | \n\n 2.7 | \n
| \n Freight and transport | \n\n 48.9 | \n\n 41.6 | \n
| \n Premises facility expenses | \n\n 47.8 | \n\n 40.3 | \n
| \n Travel and course expenses | \n\n 74.8 | \n\n 53.3 | \n
| \n Other operating and administrative expenses | \n\n 85.3 | \n\n 54.7 | \n
| \n Total other operating expenses | \n\n 844.5 | \n\n 669.8 | \n
Other operating expenses
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Hired services | \n\n 100.5 | \n\n 109.9 | \n
| \n Hired equipment | \n\n 90.9 | \n\n 90.5 | \n
| \n Repair and maintenance, inspection, tools, fixtures and fittings | \n\n 391.1 | \n\n 276.8 | \n
| \n Insurance | \n\n 5.2 | \n\n 2.7 | \n
| \n Freight and transport | \n\n 48.9 | \n\n 41.6 | \n
| \n Premises facility expenses | \n\n 47.8 | \n\n 40.3 | \n
| \n Travel and course expenses | \n\n 74.8 | \n\n 53.3 | \n
| \n Other operating and administrative expenses | \n\n 85.3 | \n\n 54.7 | \n
| \n Total other operating expenses | \n\n 844.5 | \n\n 669.8 | \n
Accounting policy - Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Interest expenses
| \n NOK million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n\n | \n\n 96.6 | \n\n - | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 4.5 | \n\n - | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 7.8 | \n\n 5.1 | \n
| \n Other interest expenses | \n\n \n | \n\n 1.8 | \n\n 0.9 | \n
| \n Total interest expenses | \n\n \n | \n\n 110.7 | \n\n 6.0 | \n
Accounting policy - Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Interest expenses
| \n NOK million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n\n | \n\n 96.6 | \n\n - | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 4.5 | \n\n - | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 7.8 | \n\n 5.1 | \n
| \n Other interest expenses | \n\n \n | \n\n 1.8 | \n\n 0.9 | \n
| \n Total interest expenses | \n\n \n | \n\n 110.7 | \n\n 6.0 | \n
Interest expenses
| \n NOK million | \n\n Note | \n\n 2022 | \n\n 2021 | \n
| \n Interest expenses borrowings | \n\n\n | \n\n 96.6 | \n\n - | \n
| \n Amortised transaction costs borrowings | \n\n\n | \n\n 4.5 | \n\n - | \n
| \n Interest expenses lease liabilities | \n\n\n | \n\n 7.8 | \n\n 5.1 | \n
| \n Other interest expenses | \n\n \n | \n\n 1.8 | \n\n 0.9 | \n
| \n Total interest expenses | \n\n \n | \n\n 110.7 | \n\n 6.0 | \n
Other financial items
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n (31.8) | \n\n (16.6) | \n
| \n Other financial income | \n\n 0.1 | \n\n 1.4 | \n
| \n Other financial expenses | \n\n (1.6) | \n\n (0.9) | \n
| \n Total other financial items | \n\n (33.3) | \n\n (16.2) | \n
Other financial items
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n (31.8) | \n\n (16.6) | \n
| \n Other financial income | \n\n 0.1 | \n\n 1.4 | \n
| \n Other financial expenses | \n\n (1.6) | \n\n (0.9) | \n
| \n Total other financial items | \n\n (33.3) | \n\n (16.2) | \n
Other financial items
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net currency gain / (loss) | \n\n (31.8) | \n\n (16.6) | \n
| \n Other financial income | \n\n 0.1 | \n\n 1.4 | \n
| \n Other financial expenses | \n\n (1.6) | \n\n (0.9) | \n
| \n Total other financial items | \n\n (33.3) | \n\n (16.2) | \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. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax 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.
Withholding tax is the tax withheld on border-crossing gross income, generated in the Middle East and some other countries. Withholding tax is presented as tax expense in the income statement as this is a major, and often the total, part of the corporate income tax.
Significant judgement and estimation uncertainty
Odfjell Offshore Ltd, 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.
21 December 2022 Odfjell Offshore Ltd received a tax ruling from the Norwegian Tax Authorities where the tax loss of 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 will appeal the ruling, and the Group is still of the opinion that the most likely outcome of a court case is that the anti-avoidance rule should not be applicable and the denial of the tax loss should be revoked.
The Group made an upfront payment 1 February 2023 of NOK 307 million in taxes and interest for the financial years 2017 through to 2021. The amount was financed and refunded from Odfjell Drilling Ltd., as it is covered by the letter of indemnity issued 1 March 2022 to Odfjell Technology Ltd. Odfjell Drilling Ltd will hold the Company indemnified in respect of any liability that may occur in relation to the ongoing Odfjell Offshore Ltd tax case for the financial years 2017 through to 2021. This includes financing of prepayments to the Norwegian Tax Authorities, and funds for legal proceedings.
For the financial year 2022 income taxes payable for companies taxable in Norway amounts to NOK 36 million. Following the tax ruling in December 2022, the income taxes can no longer be offset by tax losses carried forward, and the Group will have to pay the amount in 2023. However, since the Group is still of the opinion that the most likely outcome of a court case is that the denial of the tax loss should be revoked, the Group has recognised a deferred tax asset equal to expected tax refund of NOK 36 million following at court case win.
Income tax expense
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Withholding tax paid / payable | \n\n (20.8) | \n\n (15.8) | \n
| \n Payable income tax expense | \n\n (30.7) | \n\n (33.6) | \n
| \n Net utilisation of unrecognised tax losses | \n\n 78.4 | \n\n 60.0 | \n
| \n Change in deferred tax assets and liabilities | \n\n (0.2) | \n\n (1.4) | \n
| \n Total income tax expense | \n\n 26.8 | \n\n 9.2 | \n
| \n Effective tax rate | \n\n -11.8 % | \n\n -8.9 % | \n
Tax reconciliation
| \n USD million | \n\n 2022 | \n\n 2021 | \n
| \n Profit before income tax expense | \n\n 226.2 | \n\n 102.8 | \n
| \n Tax calculated at domestic tax rates applicable to profits in respective countries* (including withholding tax) | \n\n (38.7) | \n\n (43.3) | \n
| \n Net utilisation of unrecognised tax losses | \n\n 78.4 | \n\n 60.0 | \n
| \n Effect of changes in tax rates | \n\n 0.1 | \n\n 0.2 | \n
| \n Effect of adjustments recognised related to prior periods | \n\n 5.3 | \n\n (2.1) | \n
| \n Effect of net non-taxable income / (expenses) | \n\n (18.2) | \n\n (5.6) | \n
| \n Income tax expense | \n\n 26.8 | \n\n 9.2 | \n
| \n\n | \n||
| \n\n | \n
Tax losses
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Unused tax losses for which no deferred tax asset has been recognised | \n\n 795.6 | \n\n 1,150.7 | \n\n 1,424.2 | \n
| \n Potential tax benefit (22%) | \n\n 175.5 | \n\n 253.8 | \n\n 313.8 | \n
The movement in unrecognised tax assets is as follows:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Unrecognised tax asset as at 01.01 | \n\n 253.8 | \n\n 313.8 | \n
| \n Net utilisation of unrecognised tax losses | \n\n (78.4) | \n\n (60.0) | \n
| \n Effect of changes in tax rates | \n\n - | \n\n 0.5 | \n
| \n Currency translation differences | \n\n 0.2 | \n\n (0.5) | \n
| \n Unrecognised tax asset as at 31.12 | \n\n 175.5 | \n\n 253.8 | \n
The Group has an unrecognised tax asset of NOK 176 million, which is mainly related to the challenged tax loss incurred by Odfjell Offshore Ltd as explained above.
For prior periods taxable profits within Norwegian subsidiaries in Odfjell Drilling Ltd Group have been offset in tax loss incurred by Odfjell Offshore Ltd. Subsequent of the spin-off, this will no longer be the case.
The gross movement on the deferred tax account is as follows:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 01.01 | \n\n 15.5 | \n\n 0.0 | \n
| \n Income statement charge | \n\n 35.4 | \n\n (1.4) | \n
| \n Change in deferred tax on other comprehensive income | \n\n 0.4 | \n\n 0.0 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n (0.0) | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 31.12 | \n\n 51.3 | \n\n 15.5 | \n
Deferred tax assets - Specification and movements
| \n NOK million | \n\n Tax losses | \n\n Current assets | \n\n Net pension liabilities | \n\n Fixed assets | \n\n Lease liabilities | \n\n Total | \n
| \n Opening balance 01.01.2021 | \n\n 0.4 | \n\n 1.8 | \n\n 10.9 | \n\n 2.5 | \n\n 9.5 | \n\n 25.2 | \n
| \n Income statement charge | \n\n (0.4) | \n\n (0.0) | \n\n (1.4) | \n\n 0.3 | \n\n 11.3 | \n\n 9.7 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.8 | \n\n - | \n\n - | \n\n 0.8 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n 0.0 | \n\n - | \n\n (0.0) | \n\n (0.0) | \n\n (0.0) | \n
| \n Closing balance 31.12.2021 | \n\n - | \n\n 1.8 | \n\n 10.3 | \n\n 2.8 | \n\n 20.8 | \n\n 35.7 | \n
| \n Income statement charge | \n\n 35.6 | \n\n 0.2 | \n\n (0.4) | \n\n (2.2) | \n\n 5.4 | \n\n 38.4 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.4 | \n\n - | \n\n - | \n\n 0.4 | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n - | \n\n 0.0 | \n\n 0.2 | \n\n 0.2 | \n
| \n Closing balance 31.12.2022 | \n\n 35.6 | \n\n 1.9 | \n\n 10.3 | \n\n 0.6 | \n\n 26.4 | \n\n 74.7 | \n
Deferred tax liabilities - Specification and movements
| \n NOK million | \n\n Deferred capital gains | \n\n Current assets | \n\n Right-of-use Assets | \n\n Total | \n
| \n Opening balance 01.01.2021 | \n\n (0.0) | \n\n - | \n\n (9.1) | \n\n (9.1) | \n
| \n Income statement charge | \n\n 0.0 | \n\n - | \n\n (11.1) | \n\n (11.1) | \n
| \n Currency translation differences | \n\n 0.0 | \n\n - | \n\n 0.0 | \n\n 0.0 | \n
| \n Closing balance 31.12.2021 | \n\n (0.0) | \n\n - | \n\n (20.2) | \n\n (20.2) | \n
| \n Income statement charge | \n\n 0.0 | \n\n (0.0) | \n\n (3.1) | \n\n (3.1) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n (0.2) | \n\n (0.2) | \n
| \n Closing balance 31.12.2022 | \n\n (0.0) | \n\n (0.0) | \n\n (23.4) | \n\n (23.4) | \n
Net book value of deferred taxes
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Deferred tax assets | \n\n 74.7 | \n\n 35.7 | \n\n 25.2 | \n
| \n Deferred tax liabilities offset in deferred tax assets | \n\n (23.4) | \n\n (20.2) | \n\n (9.1) | \n
| \n Net book value of deferred tax asset | \n\n 51.3 | \n\n 15.5 | \n\n 16.1 | \n
The income tax (charge)/credit relating to components of the other comprehensive income is as follows:
| \n \n | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After tax | \n\n Before tax | \n\n Tax (charge)/ credit | \n\n After tax | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Actuarial loss on post employment benefit obligations | \n\n 1.9 | \n\n 0.4 | \n\n 1.5 | \n\n 3.6 | \n\n 0.8 | \n\n 2.8 | \n
| \n Other comprehensive income | \n\n 1.9 | \n\n 0.4 | \n\n 1.5 | \n\n 3.6 | \n\n 0.8 | \n\n 2.8 | \n
| \n Deferred tax | \n\n \n | \n\n 0.4 | \n\n \n | \n\n \n | \n\n 0.8 | \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. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax 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.
Withholding tax is the tax withheld on border-crossing gross income, generated in the Middle East and some other countries. Withholding tax is presented as tax expense in the income statement as this is a major, and often the total, part of the corporate income tax.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax 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.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax 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.
Tax losses
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Unused tax losses for which no deferred tax asset has been recognised | \n\n 795.6 | \n\n 1,150.7 | \n\n 1,424.2 | \n
| \n Potential tax benefit (22%) | \n\n 175.5 | \n\n 253.8 | \n\n 313.8 | \n
The movement in unrecognised tax assets is as follows:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Unrecognised tax asset as at 01.01 | \n\n 253.8 | \n\n 313.8 | \n
| \n Net utilisation of unrecognised tax losses | \n\n (78.4) | \n\n (60.0) | \n
| \n Effect of changes in tax rates | \n\n - | \n\n 0.5 | \n
| \n Currency translation differences | \n\n 0.2 | \n\n (0.5) | \n
| \n Unrecognised tax asset as at 31.12 | \n\n 175.5 | \n\n 253.8 | \n
The Group has an unrecognised tax asset of NOK 176 million, which is mainly related to the challenged tax loss incurred by Odfjell Offshore Ltd as explained above.
For prior periods taxable profits within Norwegian subsidiaries in Odfjell Drilling Ltd Group have been offset in tax loss incurred by Odfjell Offshore Ltd. Subsequent of the spin-off, this will no longer be the case.
The gross movement on the deferred tax account is as follows:
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 01.01 | \n\n 15.5 | \n\n 0.0 | \n
| \n Income statement charge | \n\n 35.4 | \n\n (1.4) | \n
| \n Change in deferred tax on other comprehensive income | \n\n 0.4 | \n\n 0.0 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n (0.0) | \n
| \n Net deferred tax assets/(deferred tax liabilities) at 31.12 | \n\n 51.3 | \n\n 15.5 | \n
Deferred tax assets - Specification and movements
| \n NOK million | \n\n Tax losses | \n\n Current assets | \n\n Net pension liabilities | \n\n Fixed assets | \n\n Lease liabilities | \n\n Total | \n
| \n Opening balance 01.01.2021 | \n\n 0.4 | \n\n 1.8 | \n\n 10.9 | \n\n 2.5 | \n\n 9.5 | \n\n 25.2 | \n
| \n Income statement charge | \n\n (0.4) | \n\n (0.0) | \n\n (1.4) | \n\n 0.3 | \n\n 11.3 | \n\n 9.7 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.8 | \n\n - | \n\n - | \n\n 0.8 | \n
| \n Currency translation differences | \n\n 0.0 | \n\n 0.0 | \n\n - | \n\n (0.0) | \n\n (0.0) | \n\n (0.0) | \n
| \n Closing balance 31.12.2021 | \n\n - | \n\n 1.8 | \n\n 10.3 | \n\n 2.8 | \n\n 20.8 | \n\n 35.7 | \n
| \n Income statement charge | \n\n 35.6 | \n\n 0.2 | \n\n (0.4) | \n\n (2.2) | \n\n 5.4 | \n\n 38.4 | \n
| \n Change in deferred tax on other comprehensive income | \n\n - | \n\n - | \n\n 0.4 | \n\n - | \n\n - | \n\n 0.4 | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n - | \n\n 0.0 | \n\n 0.2 | \n\n 0.2 | \n
| \n Closing balance 31.12.2022 | \n\n 35.6 | \n\n 1.9 | \n\n 10.3 | \n\n 0.6 | \n\n 26.4 | \n\n 74.7 | \n
Deferred tax liabilities - Specification and movements
| \n NOK million | \n\n Deferred capital gains | \n\n Current assets | \n\n Right-of-use Assets | \n\n Total | \n
| \n Opening balance 01.01.2021 | \n\n (0.0) | \n\n - | \n\n (9.1) | \n\n (9.1) | \n
| \n Income statement charge | \n\n 0.0 | \n\n - | \n\n (11.1) | \n\n (11.1) | \n
| \n Currency translation differences | \n\n 0.0 | \n\n - | \n\n 0.0 | \n\n 0.0 | \n
| \n Closing balance 31.12.2021 | \n\n (0.0) | \n\n - | \n\n (20.2) | \n\n (20.2) | \n
| \n Income statement charge | \n\n 0.0 | \n\n (0.0) | \n\n (3.1) | \n\n (3.1) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n (0.2) | \n\n (0.2) | \n
| \n Closing balance 31.12.2022 | \n\n (0.0) | \n\n (0.0) | \n\n (23.4) | \n\n (23.4) | \n
Net book value of deferred taxes
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Deferred tax assets | \n\n 74.7 | \n\n 35.7 | \n\n 25.2 | \n
| \n Deferred tax liabilities offset in deferred tax assets | \n\n (23.4) | \n\n (20.2) | \n\n (9.1) | \n
| \n Net book value of deferred tax asset | \n\n 51.3 | \n\n 15.5 | \n\n 16.1 | \n
NOTE 10Tangible fixed assets
Accounting policy
Property, plant and equipment comprise mainly of, 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.
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, taking into account current and expected climate risk.
When assets are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting from their disposal is included in the income statement as other gains and losses.
Residual values for property, plant and equipment are estimated to be zero.
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). 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
Specification and movements
| \n \n | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n NOK million | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \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 \n | \n\n \n | \n
| \n At 1 January | \n\n 3,595.8 | \n\n 184.1 | \n\n 156.7 | \n\n 3,936.6 | \n\n 3,213.1 | \n\n 178.3 | \n\n 90.3 | \n\n 3,481.7 | \n
| \n Additions | \n\n 309.6 | \n\n 16.6 | \n\n 38.5 | \n\n 364.7 | \n\n 341.6 | \n\n 15.2 | \n\n 71.7 | \n\n 428.5 | \n
| \n Disposals | \n\n (198.3) | \n\n (10.0) | \n\n (10.9) | \n\n (219.2) | \n\n (61.7) | \n\n (9.2) | \n\n (5.0) | \n\n (75.9) | \n
| \n Currency translation differences | \n\n 383.4 | \n\n 3.9 | \n\n 2.5 | \n\n 389.7 | \n\n 102.8 | \n\n (0.2) | \n\n (0.4) | \n\n 102.3 | \n
| \n Cost as at 31 December | \n\n 4,090.4 | \n\n 194.7 | \n\n 186.7 | \n\n 4,471.9 | \n\n 3,595.8 | \n\n 184.1 | \n\n 156.7 | \n\n 3,936.6 | \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 \n | \n\n \n | \n
| \n At 1 January | \n\n (2,839.2) | \n\n (157.5) | \n\n (52.5) | \n\n (3,049.2) | \n\n (2,626.7) | \n\n (156.3) | \n\n (36.7) | \n\n (2,819.7) | \n
| \n Depreciation | \n\n (232.4) | \n\n (9.5) | \n\n (22.7) | \n\n (264.6) | \n\n (191.0) | \n\n (9.6) | \n\n (21.1) | \n\n (221.7) | \n
| \n Impairment | \n\n - | \n\n - | \n\n (8.5) | \n\n (8.5) | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 195.3 | \n\n 10.0 | \n\n 10.9 | \n\n 216.1 | \n\n 58.1 | \n\n 8.4 | \n\n 5.0 | \n\n 71.5 | \n
| \n Currency translation differences | \n\n (293.2) | \n\n (2.9) | \n\n (1.2) | \n\n (297.3) | \n\n (79.6) | \n\n 0.0 | \n\n 0.3 | \n\n (79.3) | \n
| \n As at 31 December | \n\n (3,169.5) | \n\n (160.0) | \n\n (73.9) | \n\n (3,403.4) | \n\n (2,839.2) | \n\n (157.5) | \n\n (52.5) | \n\n (3,049.2) | \n
| \n Net book value at 31 December | \n\n 921.0 | \n\n 34.7 | \n\n 112.8 | \n\n 1,068.4 | \n\n 756.6 | \n\n 26.6 | \n\n 104.2 | \n\n 887.4 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Accumulated impairment that may qualify for reversal in a later period related to right-of-use asset no longer in use and amount to NOK 8 million at 31 December 2022.
For more information about Right-of-use assets, refer to Note 19 - Leases.
Refer to Note 31 for information about capital commitments.
Significant judgement and estimation uncertainty
Management exercises judgement in determining the expected economic life of assets in the Well Services segment. Management uses knowledge of the oil industry and the estimated market development, as well as expected technological development as basis for determining useful life. The evaluation includes effects of the climate change and the shift to renewable energy sources.
Impairment of property, plant and equipment
Accounting policy
Property, plant and equipment comprise mainly of, 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.
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, taking into account current and expected climate risk.
When assets are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting from their disposal is included in the income statement as other gains and losses.
Residual values for property, plant and equipment are estimated to be zero.
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). 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
| \n \n | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n NOK million | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \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 \n | \n\n \n | \n
| \n At 1 January | \n\n 3,595.8 | \n\n 184.1 | \n\n 156.7 | \n\n 3,936.6 | \n\n 3,213.1 | \n\n 178.3 | \n\n 90.3 | \n\n 3,481.7 | \n
| \n Additions | \n\n 309.6 | \n\n 16.6 | \n\n 38.5 | \n\n 364.7 | \n\n 341.6 | \n\n 15.2 | \n\n 71.7 | \n\n 428.5 | \n
| \n Disposals | \n\n (198.3) | \n\n (10.0) | \n\n (10.9) | \n\n (219.2) | \n\n (61.7) | \n\n (9.2) | \n\n (5.0) | \n\n (75.9) | \n
| \n Currency translation differences | \n\n 383.4 | \n\n 3.9 | \n\n 2.5 | \n\n 389.7 | \n\n 102.8 | \n\n (0.2) | \n\n (0.4) | \n\n 102.3 | \n
| \n Cost as at 31 December | \n\n 4,090.4 | \n\n 194.7 | \n\n 186.7 | \n\n 4,471.9 | \n\n 3,595.8 | \n\n 184.1 | \n\n 156.7 | \n\n 3,936.6 | \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 \n | \n\n \n | \n
| \n At 1 January | \n\n (2,839.2) | \n\n (157.5) | \n\n (52.5) | \n\n (3,049.2) | \n\n (2,626.7) | \n\n (156.3) | \n\n (36.7) | \n\n (2,819.7) | \n
| \n Depreciation | \n\n (232.4) | \n\n (9.5) | \n\n (22.7) | \n\n (264.6) | \n\n (191.0) | \n\n (9.6) | \n\n (21.1) | \n\n (221.7) | \n
| \n Impairment | \n\n - | \n\n - | \n\n (8.5) | \n\n (8.5) | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 195.3 | \n\n 10.0 | \n\n 10.9 | \n\n 216.1 | \n\n 58.1 | \n\n 8.4 | \n\n 5.0 | \n\n 71.5 | \n
| \n Currency translation differences | \n\n (293.2) | \n\n (2.9) | \n\n (1.2) | \n\n (297.3) | \n\n (79.6) | \n\n 0.0 | \n\n 0.3 | \n\n (79.3) | \n
| \n As at 31 December | \n\n (3,169.5) | \n\n (160.0) | \n\n (73.9) | \n\n (3,403.4) | \n\n (2,839.2) | \n\n (157.5) | \n\n (52.5) | \n\n (3,049.2) | \n
| \n Net book value at 31 December | \n\n 921.0 | \n\n 34.7 | \n\n 112.8 | \n\n 1,068.4 | \n\n 756.6 | \n\n 26.6 | \n\n 104.2 | \n\n 887.4 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2022
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Additions | \n\n - | \n\n 40.9 | \n\n - | \n\n 6.0 | \n\n 46.8 | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n 2.2 | \n\n 1.5 | \n\n 3.7 | \n
| \n Cost as at 31 December 2022 | \n\n 132.8 | \n\n 282.3 | \n\n 20.9 | \n\n 19.2 | \n\n 455.2 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Amortisation | \n\n - | \n\n (12.3) | \n\n (2.0) | \n\n (0.9) | \n\n (15.3) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n - | \n\n (0.7) | \n\n (0.7) | \n
| \n As at 31 December 2022 | \n\n - | \n\n (189.1) | \n\n (6.4) | \n\n (7.5) | \n\n (203.1) | \n
| \n Net book value at 31 December 2022 | \n\n 132.8 | \n\n 93.2 | \n\n 14.4 | \n\n 11.7 | \n\n 252.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 139.3 | \n\n 196.3 | \n\n 14.1 | \n\n 11.0 | \n\n 360.6 | \n
| \n Additions | \n\n - | \n\n 45.1 | \n\n 4.0 | \n\n 0.4 | \n\n 49.5 | \n
| \n Disposal due to loss of control of subsidiary * | \n\n (6.5) | \n\n \n | \n\n \n | \n\n - | \n\n (6.5) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n 0.6 | \n\n 0.4 | \n\n 0.9 | \n
| \n Cost as at 31 December 2021 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n - | \n\n (140.3) | \n\n (1.5) | \n\n (3.3) | \n\n (145.1) | \n
| \n Amortisation | \n\n - | \n\n (36.5) | \n\n (2.3) | \n\n (2.4) | \n\n (41.1) | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n (0.1) | \n\n (0.2) | \n\n (0.3) | \n
| \n As at 31 December 2021 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Net book value at 31 December 2021 | \n\n 132.8 | \n\n 64.7 | \n\n 14.8 | \n\n 5.9 | \n\n 218.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n
Impairment 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). 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). 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.
Specification and movements
| \n \n | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n NOK million | \n\n Well Services equipment | \n\n Other fixed assets | \n\n Right-of-use assets | \n\n Total fixed assets | \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 \n | \n\n \n | \n
| \n At 1 January | \n\n 3,595.8 | \n\n 184.1 | \n\n 156.7 | \n\n 3,936.6 | \n\n 3,213.1 | \n\n 178.3 | \n\n 90.3 | \n\n 3,481.7 | \n
| \n Additions | \n\n 309.6 | \n\n 16.6 | \n\n 38.5 | \n\n 364.7 | \n\n 341.6 | \n\n 15.2 | \n\n 71.7 | \n\n 428.5 | \n
| \n Disposals | \n\n (198.3) | \n\n (10.0) | \n\n (10.9) | \n\n (219.2) | \n\n (61.7) | \n\n (9.2) | \n\n (5.0) | \n\n (75.9) | \n
| \n Currency translation differences | \n\n 383.4 | \n\n 3.9 | \n\n 2.5 | \n\n 389.7 | \n\n 102.8 | \n\n (0.2) | \n\n (0.4) | \n\n 102.3 | \n
| \n Cost as at 31 December | \n\n 4,090.4 | \n\n 194.7 | \n\n 186.7 | \n\n 4,471.9 | \n\n 3,595.8 | \n\n 184.1 | \n\n 156.7 | \n\n 3,936.6 | \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 \n | \n\n \n | \n
| \n At 1 January | \n\n (2,839.2) | \n\n (157.5) | \n\n (52.5) | \n\n (3,049.2) | \n\n (2,626.7) | \n\n (156.3) | \n\n (36.7) | \n\n (2,819.7) | \n
| \n Depreciation | \n\n (232.4) | \n\n (9.5) | \n\n (22.7) | \n\n (264.6) | \n\n (191.0) | \n\n (9.6) | \n\n (21.1) | \n\n (221.7) | \n
| \n Impairment | \n\n - | \n\n - | \n\n (8.5) | \n\n (8.5) | \n\n - | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 195.3 | \n\n 10.0 | \n\n 10.9 | \n\n 216.1 | \n\n 58.1 | \n\n 8.4 | \n\n 5.0 | \n\n 71.5 | \n
| \n Currency translation differences | \n\n (293.2) | \n\n (2.9) | \n\n (1.2) | \n\n (297.3) | \n\n (79.6) | \n\n 0.0 | \n\n 0.3 | \n\n (79.3) | \n
| \n As at 31 December | \n\n (3,169.5) | \n\n (160.0) | \n\n (73.9) | \n\n (3,403.4) | \n\n (2,839.2) | \n\n (157.5) | \n\n (52.5) | \n\n (3,049.2) | \n
| \n Net book value at 31 December | \n\n 921.0 | \n\n 34.7 | \n\n 112.8 | \n\n 1,068.4 | \n\n 756.6 | \n\n 26.6 | \n\n 104.2 | \n\n 887.4 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Impairment of property, plant and equipment
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). 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.
NOTE 11Intangible assets
Accounting policy - Goodwill and Intangible assets
Specification and movements 2022
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Additions | \n\n - | \n\n 40.9 | \n\n - | \n\n 6.0 | \n\n 46.8 | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n 2.2 | \n\n 1.5 | \n\n 3.7 | \n
| \n Cost as at 31 December 2022 | \n\n 132.8 | \n\n 282.3 | \n\n 20.9 | \n\n 19.2 | \n\n 455.2 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Amortisation | \n\n - | \n\n (12.3) | \n\n (2.0) | \n\n (0.9) | \n\n (15.3) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n - | \n\n (0.7) | \n\n (0.7) | \n
| \n As at 31 December 2022 | \n\n - | \n\n (189.1) | \n\n (6.4) | \n\n (7.5) | \n\n (203.1) | \n
| \n Net book value at 31 December 2022 | \n\n 132.8 | \n\n 93.2 | \n\n 14.4 | \n\n 11.7 | \n\n 252.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 139.3 | \n\n 196.3 | \n\n 14.1 | \n\n 11.0 | \n\n 360.6 | \n
| \n Additions | \n\n - | \n\n 45.1 | \n\n 4.0 | \n\n 0.4 | \n\n 49.5 | \n
| \n Disposal due to loss of control of subsidiary * | \n\n (6.5) | \n\n \n | \n\n \n | \n\n - | \n\n (6.5) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n 0.6 | \n\n 0.4 | \n\n 0.9 | \n
| \n Cost as at 31 December 2021 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n - | \n\n (140.3) | \n\n (1.5) | \n\n (3.3) | \n\n (145.1) | \n
| \n Amortisation | \n\n - | \n\n (36.5) | \n\n (2.3) | \n\n (2.4) | \n\n (41.1) | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n (0.1) | \n\n (0.2) | \n\n (0.3) | \n
| \n As at 31 December 2021 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Net book value at 31 December 2021 | \n\n 132.8 | \n\n 64.7 | \n\n 14.8 | \n\n 5.9 | \n\n 218.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n
Internally developed assets
The carrying amount of internally developed assets include development expenses incurred in connection with developing a new drill-hole cleaning tool. The technology has been patented. The Group have documented that the new technology met the criteria for recognition in the balance sheet. The new tool is part of Well Services product line and is expected to generate future cash flow to support the book value as at 31\u00a0December 2022.
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Summary of goodwill allocation for each operating segment
| \n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n\n Total | \n||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n At 1 January | \n\n 36.4 | \n\n 36.4 | \n\n 86.7 | \n\n 86.7 | \n\n 9.7 | \n\n 16.2 | \n\n 132.8 | \n\n 139.3 | \n
| \n Disposal due to loss of control of subsidiary * | \n\n - | \n\n - | \n\n \n | \n\n - | \n\n - | \n\n (6.5) | \n\n - | \n\n (6.5) | \n
| \n Net book value at 31 December | \n\n 36.4 | \n\n 36.4 | \n\n 86.7 | \n\n 86.7 | \n\n 9.7 | \n\n 9.7 | \n\n 132.8 | \n\n 132.8 | \n
| \n\n | \n
These assumptions have been used for the analysis of each CGU within the operating segment.
| \n Key assumptions for value-in-use calculations | \n\n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n|||
| \n \n | \n\n \n | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n EBITDA margin in prognosis period | \n\n \n | \n\n 35-37% | \n\n 22% - 36% | \n\n 8% - 9% | \n\n 5% - 8% | \n\n 12% - 13% | \n\n 5% - 8% | \n
| \n Growth rate year 6 and forward | \n\n \n | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n
| \n Weighted Average Cost of Capital, pre-tax | \n\n \n | \n\n 12% | \n\n 12% | \n\n 9% | \n\n 10% | \n\n 10% | \n\n 10% | \n
Sensitivity analysis for goodwill impairment test as at 31.12.2022
The Group has performed sensitivity analysis for the goodwill impairment test by reducing operating income by one, five and ten percent and EBITDA margin by one, five and ten percentage points respectively for each of the segments.
Reducing EBITDA margin by ten percentage points indicated an impairment write-down of NOK 87 million in the Drilling Operations segment.
Accounting policy - Goodwill and Intangible assets
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Summary of goodwill allocation for each operating segment
| \n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n\n Total | \n||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n At 1 January | \n\n 36.4 | \n\n 36.4 | \n\n 86.7 | \n\n 86.7 | \n\n 9.7 | \n\n 16.2 | \n\n 132.8 | \n\n 139.3 | \n
| \n Disposal due to loss of control of subsidiary * | \n\n - | \n\n - | \n\n \n | \n\n - | \n\n - | \n\n (6.5) | \n\n - | \n\n (6.5) | \n
| \n Net book value at 31 December | \n\n 36.4 | \n\n 36.4 | \n\n 86.7 | \n\n 86.7 | \n\n 9.7 | \n\n 9.7 | \n\n 132.8 | \n\n 132.8 | \n
| \n\n | \n
These assumptions have been used for the analysis of each CGU within the operating segment.
| \n Key assumptions for value-in-use calculations | \n\n \n | \n\n Well Services | \n\n Operations | \n\n Projects & Engineering | \n|||
| \n \n | \n\n \n | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n EBITDA margin in prognosis period | \n\n \n | \n\n 35-37% | \n\n 22% - 36% | \n\n 8% - 9% | \n\n 5% - 8% | \n\n 12% - 13% | \n\n 5% - 8% | \n
| \n Growth rate year 6 and forward | \n\n \n | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n\n 0.0% | \n
| \n Weighted Average Cost of Capital, pre-tax | \n\n \n | \n\n 12% | \n\n 12% | \n\n 9% | \n\n 10% | \n\n 10% | \n\n 10% | \n
Sensitivity analysis for goodwill impairment test as at 31.12.2022
The Group has performed sensitivity analysis for the goodwill impairment test by reducing operating income by one, five and ten percent and EBITDA margin by one, five and ten percentage points respectively for each of the segments.
Reducing EBITDA margin by ten percentage points indicated an impairment write-down of NOK 87 million in the Drilling Operations segment.
Impairment tests for goodwill - Accounting principle
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Specification and movements 2022
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Additions | \n\n - | \n\n 40.9 | \n\n - | \n\n 6.0 | \n\n 46.8 | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n 2.2 | \n\n 1.5 | \n\n 3.7 | \n
| \n Cost as at 31 December 2022 | \n\n 132.8 | \n\n 282.3 | \n\n 20.9 | \n\n 19.2 | \n\n 455.2 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Amortisation | \n\n - | \n\n (12.3) | \n\n (2.0) | \n\n (0.9) | \n\n (15.3) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n - | \n\n (0.7) | \n\n (0.7) | \n
| \n As at 31 December 2022 | \n\n - | \n\n (189.1) | \n\n (6.4) | \n\n (7.5) | \n\n (203.1) | \n
| \n Net book value at 31 December 2022 | \n\n 132.8 | \n\n 93.2 | \n\n 14.4 | \n\n 11.7 | \n\n 252.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 139.3 | \n\n 196.3 | \n\n 14.1 | \n\n 11.0 | \n\n 360.6 | \n
| \n Additions | \n\n - | \n\n 45.1 | \n\n 4.0 | \n\n 0.4 | \n\n 49.5 | \n
| \n Disposal due to loss of control of subsidiary * | \n\n (6.5) | \n\n \n | \n\n \n | \n\n - | \n\n (6.5) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n 0.6 | \n\n 0.4 | \n\n 0.9 | \n
| \n Cost as at 31 December 2021 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n - | \n\n (140.3) | \n\n (1.5) | \n\n (3.3) | \n\n (145.1) | \n
| \n Amortisation | \n\n - | \n\n (36.5) | \n\n (2.3) | \n\n (2.4) | \n\n (41.1) | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n (0.1) | \n\n (0.2) | \n\n (0.3) | \n
| \n As at 31 December 2021 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Net book value at 31 December 2021 | \n\n 132.8 | \n\n 64.7 | \n\n 14.8 | \n\n 5.9 | \n\n 218.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n
Internally developed assets
The carrying amount of internally developed assets include development expenses incurred in connection with developing a new drill-hole cleaning tool. The technology has been patented. The Group have documented that the new technology met the criteria for recognition in the balance sheet. The new tool is part of Well Services product line and is expected to generate future cash flow to support the book value as at 31\u00a0December 2022.
Accounting policy - Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
\u25aaThe technical feasibility of completing the intangible asset so that the asset will be available for use or sale
\u25aaIts intention to complete and its ability and intention to use or sell the asset
\u25aaHow the asset will generate future economic benefits
\u25aaThe availability of resources to complete the asset
\u25aaThe ability to measure reliably the expenditure during development
Specification and movements 2022
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Additions | \n\n - | \n\n 40.9 | \n\n - | \n\n 6.0 | \n\n 46.8 | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n 2.2 | \n\n 1.5 | \n\n 3.7 | \n
| \n Cost as at 31 December 2022 | \n\n 132.8 | \n\n 282.3 | \n\n 20.9 | \n\n 19.2 | \n\n 455.2 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2022 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Amortisation | \n\n - | \n\n (12.3) | \n\n (2.0) | \n\n (0.9) | \n\n (15.3) | \n
| \n Currency translation differences | \n\n - | \n\n - | \n\n - | \n\n (0.7) | \n\n (0.7) | \n
| \n As at 31 December 2022 | \n\n - | \n\n (189.1) | \n\n (6.4) | \n\n (7.5) | \n\n (203.1) | \n
| \n Net book value at 31 December 2022 | \n\n 132.8 | \n\n 93.2 | \n\n 14.4 | \n\n 11.7 | \n\n 252.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
Specification and movements 2021
| \n NOK million | \n\n Goodwill | \n\n Software | \n\n Patents and acquired R&D | \n\n Internally developed assets | \n\n Total intangible assets | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n 139.3 | \n\n 196.3 | \n\n 14.1 | \n\n 11.0 | \n\n 360.6 | \n
| \n Additions | \n\n - | \n\n 45.1 | \n\n 4.0 | \n\n 0.4 | \n\n 49.5 | \n
| \n Disposal due to loss of control of subsidiary * | \n\n (6.5) | \n\n \n | \n\n \n | \n\n - | \n\n (6.5) | \n
| \n Currency translation differences | \n\n - | \n\n (0.0) | \n\n 0.6 | \n\n 0.4 | \n\n 0.9 | \n
| \n Cost as at 31 December 2021 | \n\n 132.8 | \n\n 241.4 | \n\n 18.7 | \n\n 11.7 | \n\n 404.6 | \n
| \n Accumulated amortisation and impairment | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January 2021 | \n\n - | \n\n (140.3) | \n\n (1.5) | \n\n (3.3) | \n\n (145.1) | \n
| \n Amortisation | \n\n - | \n\n (36.5) | \n\n (2.3) | \n\n (2.4) | \n\n (41.1) | \n
| \n Currency translation differences | \n\n - | \n\n 0.0 | \n\n (0.1) | \n\n (0.2) | \n\n (0.3) | \n
| \n As at 31 December 2021 | \n\n - | \n\n (176.8) | \n\n (3.9) | \n\n (5.9) | \n\n (186.5) | \n
| \n Net book value at 31 December 2021 | \n\n 132.8 | \n\n 64.7 | \n\n 14.8 | \n\n 5.9 | \n\n 218.1 | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n\n\n | \n
| \n\n | \n
Internally developed assets
The carrying amount of internally developed assets include development expenses incurred in connection with developing a new drill-hole cleaning tool. The technology has been patented. The Group have documented that the new technology met the criteria for recognition in the balance sheet. The new tool is part of Well Services product line and is expected to generate future cash flow to support the book value as at 31\u00a0December 2022.
Accounting policy - Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:
\u25aaThe technical feasibility of completing the intangible asset so that the asset will be available for use or sale
\u25aaIts intention to complete and its ability and intention to use or sell the asset
\u25aaHow the asset will generate future economic benefits
\u25aaThe availability of resources to complete the asset
\u25aaThe ability to measure reliably the expenditure during development
NOTE 12Other assets
Other non-current assets
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Deposits | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
| \n Total other non-current assets | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
Other current assets
| \n NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Prepaid expenses | \n\n \n | \n\n 55.7 | \n\n 40.2 | \n\n 31.5 | \n
| \n Income tax receivables | \n\n \n | \n\n 20.7 | \n\n 8.2 | \n\n 4.9 | \n
| \n VAT receivables | \n\n \n | \n\n 14.3 | \n\n 34.3 | \n\n 24.0 | \n
| \n Contract assets | \n\n\n | \n\n 0.9 | \n\n 4.9 | \n\n - | \n
| \n Other current receivables | \n\n\n | \n\n 24.9 | \n\n 37.9 | \n\n 17.3 | \n
| \n Total other current receivables and assets | \n\n \n | \n\n 116.4 | \n\n 125.6 | \n\n 77.7 | \n
NOTE 12Other assets
Other non-current assets
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Deposits | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
| \n Total other non-current assets | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
NOTE 12Other assets
Other current assets
| \n NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Prepaid expenses | \n\n \n | \n\n 55.7 | \n\n 40.2 | \n\n 31.5 | \n
| \n Income tax receivables | \n\n \n | \n\n 20.7 | \n\n 8.2 | \n\n 4.9 | \n
| \n VAT receivables | \n\n \n | \n\n 14.3 | \n\n 34.3 | \n\n 24.0 | \n
| \n Contract assets | \n\n\n | \n\n 0.9 | \n\n 4.9 | \n\n - | \n
| \n Other current receivables | \n\n\n | \n\n 24.9 | \n\n 37.9 | \n\n 17.3 | \n
| \n Total other current receivables and assets | \n\n \n | \n\n 116.4 | \n\n 125.6 | \n\n 77.7 | \n
Other current assets
| \n NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Prepaid expenses | \n\n \n | \n\n 55.7 | \n\n 40.2 | \n\n 31.5 | \n
| \n Income tax receivables | \n\n \n | \n\n 20.7 | \n\n 8.2 | \n\n 4.9 | \n
| \n VAT receivables | \n\n \n | \n\n 14.3 | \n\n 34.3 | \n\n 24.0 | \n
| \n Contract assets | \n\n\n | \n\n 0.9 | \n\n 4.9 | \n\n - | \n
| \n Other current receivables | \n\n\n | \n\n 24.9 | \n\n 37.9 | \n\n 17.3 | \n
| \n Total other current receivables and assets | \n\n \n | \n\n 116.4 | \n\n 125.6 | \n\n 77.7 | \n
NOTE 13Spare parts
NOTE 13Spare parts
NOTE 14Financial assets and liabilities
Accounting policies
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
The Group classify financial assets in the following categories:
\u25aaamortised cost,
\u25aafinancial assets at fair value through profit or loss (FVPL),
\u25aafinancial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at :
\u25aaamortised cost,,
\u25aafair value through profit or loss, or as
\u25aaderivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 18 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u25aaIn the principal market for the asset or liability , or
\u25aaIn the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
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:
\u25aaLevel 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
\u25aaLevel 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)
\u25aaLevel 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. Interest rate swaps are fair valued using forward rates extracted from observable yield curves. Interest rate swaps are recognised according to mark-to-market reports from external financial institutions.
The Group had the following financial instruments at each reporting period:
| \n NOK million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 10.8 | \n\n - | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n - | \n\n 91.7 | \n
| \n Current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n 1,308.8 | \n\n 1,413.7 | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 942.6 | \n\n 816.4 | \n\n 650.8 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 25.8 | \n\n 42.9 | \n\n 17.3 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n Total financial assets | \n\n \n | \n\n \n | \n\n 1,573.0 | \n\n 2,689.9 | \n\n 2,318.0 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 1,084.2 | \n\n - | \n\n - | \n
| \n Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 96.8 | \n\n 83.1 | \n\n 37.1 | \n
| \n Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 255.7 | \n\n - | \n\n - | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n \n | \n\n \n | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
| \n Current lease liabilities | \n\n\n | \n\n \n | \n\n 30.6 | \n\n 24.5 | \n\n 19.3 | \n
| \n Trade payables | \n\n \n | \n\n \n | \n\n 264.1 | \n\n 215.3 | \n\n 137.3 | \n
| \n Other current liabilities | \n\n\n | \n\n \n | \n\n 310.1 | \n\n 276.5 | \n\n 227.3 | \n
| \n Total financial liabilities | \n\n \n | \n\n \n | \n\n 2,041.5 | \n\n 750.9 | \n\n 475.4 | \n
NOTE 18Interest-bearing borrowings
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Interest-bearing borrowings specification as at 31 December
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Bond loan | \n\n 1,100.0 | \n\n - | \n\n 1,100.0 | \n
| \n Bank borrowings | \n\n - | \n\n 246.4 | \n\n 246.4 | \n
| \n Transaction cost, unamortised | \n\n (15.8) | \n\n (3.9) | \n\n (19.7) | \n
| \n Accrued interest expenses | \n\n - | \n\n 13.2 | \n\n 13.2 | \n
| \n Carrying amounts interest-bearing borrowings | \n\n 1,084.2 | \n\n 255.7 | \n\n 1,340.0 | \n
Movements in interest-bearing borrowings
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Carrying amount as at 1 January | \n\n - | \n\n - | \n\n - | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n
| \n New borrowings | \n\n 1,100.0 | \n\n 219.7 | \n\n 1,319.7 | \n
| \n Paid transaction costs related to new borrowings | \n\n (19.2) | \n\n (5.0) | \n\n (24.2) | \n
| \n Non-cash flows: | \n\n \n | \n\n \n | \n\n \n | \n
| \n Reclassified | \n\n - | \n\n - | \n\n - | \n
| \n Change in transaction cost, unamortised | \n\n 3.5 | \n\n 1.0 | \n\n 4.5 | \n
| \n Change in accrued interest cost | \n\n - | \n\n 13.2 | \n\n 13.2 | \n
| \n Change due to currency revaluation | \n\n - | \n\n 26.7 | \n\n 26.7 | \n
| \n Carrying amount as at 31 December | \n\n 1,084.2 | \n\n 255.7 | \n\n 1,340.0 | \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 NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Maturity within 3 months | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 3 and 6 months | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 6 and 9 months | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 9 months and 1 year * | \n\n - | \n\n 246.4 | \n\n 246.4 | \n
| \n Maturity between 1 and 2 years | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 2 and 3 years | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 3 and 4 years | \n\n 1,100.0 | \n\n - | \n\n 1,100.0 | \n
| \n Maturity between 4 and 5 years | \n\n - | \n\n - | \n\n - | \n
| \n Maturity beyond 5 years | \n\n - | \n\n - | \n\n - | \n
| \n Total contractual amounts | \n\n 1,100.0 | \n\n 246.4 | \n\n 1,346.4 | \n
| \n\n | \n
Financing secured
On 4 February 2022 Odfjell Technology successfully priced NOK 1.1 bn in senior secured bonds through a private placement. The bonds mature in February 2026 and bear interest of 3 months Nibor plus 700 basis points.
The carrying amount and fair value of the non-current liabilities are as follows:
Available drawing facilities
Compliance with financial covenants as at 31.12.2022
The Odfjell Technology Group is compliant with all financial covenants as at 31 December 2022.
Financial covenants
The borrowing facilities in the Group include the following main covenants:
Odfjell Technology Ltd \u2013 NOK 1.100 million bond loan
The Group shall maintain minimum liquidity of USD 15 million (including undrawn amounts under the SSRCF), of which minimum USD 5 million in cash and cash equivalents.
Leverage ratio (net interest bearing debt to EBITDA) shall not exceed 4.00:1:00.
The ratio of current assets to current liabilities shall at all times be a minimum 1.00:1.00.
Odfjell Technology Ltd may pay dividends in an amount up to 50% of its consolidated net income in its previous financial year, subject to compliance with the incurrence test on a pro-forma basis. The incurrence test implies that the leverage ratio (net interest bearing debt to EBITDA) shall not exceed 3.00:1:00.
Odfjell Technology Ltd - USD 25 million SSRCF
The Group shall maintain minimum liquidity of the higher of USD 15 million and 10% of the interest bearing debt (excluding lease liabilities), in each case of which minimum USD 5 million shall be free and unrestricted cash.
Leverage ratio (net interest bearing debt to EBITDA) shall not exceed 3.75:1:00.
The ratio of current assets to current liabilities shall at all times be a minimum 1.00:1.00.
NOTE 24Liquidity risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and to have sufficient cash or cash equivalents at any time to be able to finance its operations and investments in accordance with the Group's strategic plan.
With regular forecasts and liquidity analysis updates, the Group will ensure sufficient available liquidity to fulfil its duties at loan maturity, without unacceptable loss or risk of damaging the Group\u2019s reputation.
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping committed credit lines available.
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.
The Group held cash and cash equivalents amounting to NOK 560 million at the end of 2022. This is deemed to be sufficient funding for the Group\u2019s current activity levels and committed capital expenditures during 2023.
The liquidity risk is connected with the market risk and the re-contracting risk for the segments. The management continuously focuses on securing new profitable contracts to generate sufficient cash flow from operations, hence reducing the liquidity risk going forward.
Operating in more than 20 jurisdictions the Group do from time to time receive enquiries from authorities about compliance related matters. Refer to Note 30 regarding notice of decision received 1 October 2021 from HM Revenue and Customs. The Group has per 31 December 2022 not received any formal material assessment which is not disclosed in the financial statements.
Maturity of financial liabilities
The amounts disclosed in the table are the contractual non-discounted cash flows. The table include estimated interest payments for drawn facilities at the balance sheet date, based on the remaining period at the end of the reporting period to the contractual maturity date. The estimated interest payments include payments based on forward rates for the interest rate swaps.
Maturity of financial liabilities - 31.12.2022
| \n NOK million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Interest-bearing borrowings | \n\n 306.6 | \n\n 56.1 | \n\n 112.1 | \n\n 1,238.6 | \n\n - | \n\n 1,713.4 | \n\n 1,340.0 | \n
| \n Lease liabilities | \n\n 15.4 | \n\n 15.2 | \n\n 30.0 | \n\n 59.2 | \n\n 30.6 | \n\n 150.4 | \n\n 127.4 | \n
| \n Trade payables | \n\n 264.1 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 264.1 | \n\n 264.1 | \n
| \n Other current payables | \n\n 305.8 | \n\n 4.3 | \n\n - | \n\n - | \n\n - | \n\n 310.1 | \n\n 310.1 | \n
Maturity of financial liabilities - 31.12.2021
| \n NOK million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n 151.5 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 151.5 | \n\n 151.5 | \n
| \n Lease liabilities | \n\n 12.8 | \n\n 11.8 | \n\n 22.5 | \n\n 50.7 | \n\n 34.7 | \n\n 132.4 | \n\n 107.6 | \n
| \n Trade payables | \n\n 214.7 | \n\n 0.6 | \n\n - | \n\n - | \n\n - | \n\n 215.3 | \n\n 215.3 | \n
| \n Other current payables | \n\n 238.7 | \n\n 37.7 | \n\n - | \n\n - | \n\n - | \n\n 276.5 | \n\n 276.5 | \n
NOTE 25Market 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 oil service market has developed positively in recent years due to a strong focus on cost discipline and more efficient operations, combined with a healthier oil price development.
The focus on alternative energy sources and the overall future mix of energy remains strong. The transition into greener energy sources is expected to impact the energy market in the coming decades, however the need for continued exploration and production of oil and gas is viewed as vital, and it has become more apparent recently.
The general situation for the global oil service industry is expected to improve as a result of under investment in the oil and gas sector over the last 8 years. The supply of oil and gas is too low to meet the expected demand. Increase in investments and activity is vital to bridge the increasing energy demand as new energy sources take time to implement.
There is an increased appetite for field development and production spending across the segments.
Odfjell Technology has been successful in adding more backlog, due to our operational track record and strong client relationships, combined with a healthy balance sheet.
Well Services operates in a competitive market, but the increase in drilling activity and field investments is expected to increase demand for our services. The COVID-19 pandemic had an adverse effect in many of the regions Well Services operate in over the two last years, but the effects are now diminishing.
The market for our services in the Operations segment has been stable over the last decade. We have established a strong presence in the North Sea with efficient operations and strong client relationships, which we expect to capitalise on further. In addition, there are opportunities to expand Operations activities to other regions.
The Projects & Engineering market is improving both in existing deliverables and in green initiatives. We are well positioned to grow in existing services and further expand our portfolio of green services.
Climate Risk
During 2022, a project was undertaken with external advisors to raise awareness and assess the impacts of climate risks and opportunities. Cross-functional workshops were held to review the impact on the business from both physical and transitional risks in the short, medium and long term, prioritising risks for further deep dives.
The most significant transition risks identified, along with mitigating actions were:
\u25aa Increased resources, skills and tools required to measure, track and report on climate data, leading to increased costs. In house expertise being developed, gap analysis being conducted, and software tools will be researched.
\u25aa Impact on the ability to attract and retain talent, increasing costs. Training programmes to be reviewed and increase focus on communicating our sustainable activities.
\u25aa Changes in consumer behaviours will reduce the demand for oil and gas and therefore revenue. This will be addressed through diversification of our client portfolio and services to support the energy transition.
\u25aaCost of and access to capital may go up as banks move to low carbon portfolios, leading to increased interest costs. Consider green funding resources for investments and diversify to low carbon portfolio.
The most significant physical risks identified, along with mitigating actions were:
\u25aa Impact 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.
\u25aaHeat, floods and tropical storms may increase in certain geographies we operate in, damaging infrastructure and increasing costs. Business continuity plans, remote working and reviews of locations required to address risk.
\u25aa Heat stress will impact employees and equipment working outside in certain locations. Health tracking and storage of equipment to be monitored.
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:
\u25aaThere is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u25aaThe effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u25aaThe 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:
\u25aaThe 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.
\u25aaAmounts 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.
The group has the following derivative financial instruments in the following line items in the balance sheet:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non-current assets | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n 10.8 | \n\n 0.0 | \n
| \n Total non-current derivative financial instruments asset | \n\n 10.8 | \n\n 0.0 | \n
The group's hedging reserves disclosed in Note 28 - Other reserves related to the following instruments:
Cash flow hedging reserves
| \n NOK million | \n\n Interest rate swaps | \n\n Total hedge reserves | \n
| \n Opening balance 1 January 2021 | \n\n - | \n\n - | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n - | \n\n - | \n
| \n Reclassified from OCI to profit or loss | \n\n - | \n\n - | \n
| \n Closing balance 31 December 2021 | \n\n - | \n\n - | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n 11.3 | \n\n 11.3 | \n
| \n Reclassified from OCI to profit or loss | \n\n (0.5) | \n\n (0.5) | \n
| \n Closing balance 31 December 2022 | \n\n 10.8 | \n\n 10.8 | \n
Foreign exchange risk
The consolidated material subsidiaries' reporting and functional currencies are NOK, USD, GBP and EUR.
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 as the customer contracts are denominated in multiple currencies with cost mainly in local currency, while capital expenditure is in USD.
The Group seeks to minimise these risks through natural hedging by balancing the currency in and out flow and will use financial hedging instruments if required.
The group\u2019s exposure to foreign currency risk at the end of the reporting period, expressed in NOK, was as follows:
Foreign exchange risk - Exposure - 31.12.2022
| \n NOK million | \n\n USD | \n\n NOK | \n
| \n Cash and cash equivalents | \n\n 132.3 | \n\n - | \n
| \n Trade receivables | \n\n 65.8 | \n\n 8.5 | \n
| \n Interest-bearing borrowings | \n\n (244.1) | \n\n - | \n
| \n Trade payables | \n\n (23.8) | \n\n (5.7) | \n
| \n Other current payables | \n\n (2.6) | \n\n (10.6) | \n
Foreign exchange risk - Exposure - 31.12.2021
| \n NOK million | \n\n USD | \n\n NOK | \n
| \n Cash and cash equivalents | \n\n 12.7 | \n\n 300.1 | \n
| \n Current interest-bearing receivables Odfjell Drilling Group | \n\n - | \n\n 90.2 | \n
| \n Trade receivables | \n\n 34.1 | \n\n 19.7 | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n (151.1) | \n\n (44.9) | \n
| \n Trade payables | \n\n (42.1) | \n\n (1.1) | \n
| \n Other current payables | \n\n (15.2) | \n\n (4.8) | \n
The Group's profit or loss is primarily exposed to changes in USD/NOK exchange rates.
The sensitivity shown in table below is calculated based on USD balances in companies with NOK as functional currency, and NOK balances in companies with USD as functional currency.
Sensitivity to changes in USD/NOK exchange rates
| \n Sensitivity to changes in USD/NOK exchange rates | \n\n USD is strengthened by 20 % against NOK | \n\n USD is strengthened by 10 % against NOK | \n\n USD is weakened by 10 % against NOK | \n\n USD is weakened by 20 % against NOK | \n||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Cash and cash equivalents | \n\n 3.4 | \n\n (60.0) | \n\n 1.7 | \n\n (30.0) | \n\n (1.7) | \n\n 30.0 | \n\n (3.4) | \n\n 60.0 | \n
| \n Current receivables | \n\n 1.3 | \n\n (11.4) | \n\n 0.6 | \n\n (5.7) | \n\n (0.6) | \n\n 5.7 | \n\n (1.3) | \n\n 11.4 | \n
| \n Current liabilities | \n\n (48.8) | \n\n (20.7) | \n\n (24.4) | \n\n (10.4) | \n\n 24.4 | \n\n 10.4 | \n\n 48.8 | \n\n 20.7 | \n
| \n Net effect on profit before tax | \n\n (44.2) | \n\n (92.2) | \n\n (22.1) | \n\n (46.1) | \n\n 22.1 | \n\n 46.1 | \n\n 44.2 | \n\n 92.2 | \n
Interest rate risk
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's borrowing 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.
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.
The Group had 2 interest rate swap agreements at 31 December 2022. Quoted mark-to-market values from financial institutions have been used to determine the fair value of the swap agreements at the end of the year. The instruments were documented as cash flow hedges and changes in fair value were recognised in other comprehensive income (cash flow hedging).
Including interest rate swaps entered into, the fixed-rate portion of the group\u2019s interest bearing debt per 31 December 2022 is approximately 29%.
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 at 31 December 2022 was about 9.7% 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.
As of 31.12.2022 the Group held the following interest rate swaps:
| \n NOK million | \n\n Interest | \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 NOK Nibor | \n\n 275.0 | \n\n 2026 | \n\n 1:1 | \n\n 2.0700% | \n\n 9.0 | \n
| \n Cash flow hedges under hedge accounting | \n\n NOK Nibor | \n\n 110.0 | \n\n 2026 | \n\n 1:1 | \n\n 2.6140% | \n\n 1.7 | \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 NOK million | \n\n 31.12.2022 | \n\n % of total loans | \n
| \n Variable rate borrowings - NOK NIBOR | \n\n 715.0 | \n\n 53% | \n
| \n Variable rate borrowings - USD SOFR | \n\n 246.4 | \n\n 18% | \n
| \n Fixed rate borrowings - repricing or maturity dates: | \n\n \n | \n\n \n | \n
| \n Less than 1 year | \n\n - | \n\n 0% | \n
| \n 1-5 years | \n\n 385.0 | \n\n 29% | \n
| \n Later than 5 years | \n\n - | \n\n 0% | \n
| \n Total contractual amounts | \n\n 1,346.4 | \n\n 100% | \n
The result of the calculation on sensitivities returns the following expected values (incl. interest rate swaps entered into as at 31 December):
If interest rate is increased by 1.0 %, the effect would be an increase in financing costs of NOK 10 million for the next 12 months as at 31 December 2022
Interest rate benchmark reform
The Company will not be affected by the interest rate benchmark reform, as it does not have any USD LIBOR exposure, and the NOK NIBOR will remain.
NOTE 26Credit risk
Further description
The Group operates in three core business areas: Well Services (OWS), Operations and Projects & Engineering. The market for the Group\u2019s services is the offshore oil and gas industry, and the customers consist primarily of major integrated oil companies, independent oil and gas producers and government owned oil companies. The Group performs ongoing credit evaluations of the customers and generally does not request material collateral.
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents, marketable securities, other receivables and certain derivatives instruments receivable amount, the Group\u2019s exposure to credit risk arises from default of the counter-party, with a maximum exposure equal to the carrying amount of these instruments. However, the Group believes this risk is limited as the counter-parties mainly have a high credit quality.
During 2022, the Group has continued its focus on credit risk in general related to the uncertain conditions in some geographical markets. The maximum exposure regarding trade receivables is the carrying amount of NOK 943 million.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to non-billed work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The ageing of the trade receivables - 31.12.2022
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n NOK 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 781.9 | \n\n - | \n\n 781.9 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 105.4 | \n\n - | \n\n 105.4 | \n
| \n 3 to 6 months | \n\n 2.7% | \n\n 9.6 | \n\n (0.3) | \n\n 9.3 | \n
| \n Over 6 months | \n\n 23.6% | \n\n 60.2 | \n\n (14.2) | \n\n 46.0 | \n
| \n Total | \n\n \n | \n\n 957.0 | \n\n (14.5) | \n\n 942.6 | \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 NOK 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 0.9 | \n\n - | \n\n 0.9 | \n
The ageing of the trade receivables - 31.12.2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n NOK million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 689.8 | \n\n - | \n\n 689.8 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 74.1 | \n\n - | \n\n 74.1 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n 7.0 | \n\n - | \n\n 7.0 | \n
| \n Over 6 months | \n\n 21.4% | \n\n 57.9 | \n\n (12.4) | \n\n 45.5 | \n
| \n Total | \n\n \n | \n\n 828.8 | \n\n (12.4) | \n\n 816.4 | \n
Contract assets - 2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n NOK million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 4.9 | \n\n - | \n\n 4.9 | \n
Movements in loss allowance / the provision for impairment of trade receivables and contract assets are as follows:
| \n \n | \n\n Trade receivables | \n\n Contract assets | \n||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Loss allowance as at 1 January | \n\n 12.4 | \n\n 9.7 | \n\n - | \n\n - | \n
| \n Utilised | \n\n (2.6) | \n\n (0.6) | \n\n - | \n\n - | \n
| \n Released provision | \n\n (0.0) | \n\n (2.3) | \n\n - | \n\n - | \n
| \n New provisions | \n\n 3.6 | \n\n 5.6 | \n\n - | \n\n - | \n
| \n Translation differences | \n\n 1.1 | \n\n 0.0 | \n\n - | \n\n - | \n
| \n Loss allowance as at 31 December | \n\n 14.5 | \n\n 12.4 | \n\n - | \n\n - | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net gain (loss) related to trade receivables | \n\n (3.7) | \n\n (3.3) | \n
NOTE 29Securities and mortgages
Liabilities secured by mortgage
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non current liabilities - contractual amounts | \n\n 1,100.0 | \n\n - | \n
| \n Current liabilities | \n\n 259.6 | \n\n - | \n
| \n Total | \n\n 1,359.6 | \n\n - | \n
Odfjell Technology Ltd \u2013 NOK 1.100 million bond loan and USD 25 million Senior Secured Rolling Credit Facility
As security for the loans, substantially all of the assets of Odfjell Technology Ltd., and its subsidiaries have been pledged in favour of the lenders.
Accounting policies
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
The Group classify financial assets in the following categories:
\u25aaamortised cost,
\u25aafinancial assets at fair value through profit or loss (FVPL),
\u25aafinancial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at :
\u25aaamortised cost,,
\u25aafair value through profit or loss, or as
\u25aaderivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 18 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u25aaIn the principal market for the asset or liability , or
\u25aaIn the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
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:
\u25aaLevel 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
\u25aaLevel 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)
\u25aaLevel 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. Interest rate swaps are fair valued using forward rates extracted from observable yield curves. Interest rate swaps are recognised according to mark-to-market reports from external financial institutions.
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks, respectively.
Derivatives are recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash-flow hedges). At the date of the hedging transaction, the Group's documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
\u25aaThere is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u25aaThe effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u25aaThe 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:
\u25aaThe 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.
\u25aaAmounts 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.
Financial assets
The Group classify financial assets in the following categories:
\u25aaamortised cost,
\u25aafinancial assets at fair value through profit or loss (FVPL),
\u25aafinancial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial assets are de-recognised when the contractual rights to the cash flows from the financial assets expire or are transferred. Realised gains and losses arise from financial assets not designated for hedging, are recognised in the income statement as financial item in the period they occur.
Financial assets
The Group classify financial assets in the following categories:
\u25aaamortised cost,
\u25aafinancial assets at fair value through profit or loss (FVPL),
\u25aafinancial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at :
\u25aaamortised cost,,
\u25aafair value through profit or loss, or as
\u25aaderivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group had the following financial instruments at each reporting period:
| \n NOK million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 10.8 | \n\n - | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n - | \n\n 91.7 | \n
| \n Current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n 1,308.8 | \n\n 1,413.7 | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 942.6 | \n\n 816.4 | \n\n 650.8 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 25.8 | \n\n 42.9 | \n\n 17.3 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n Total financial assets | \n\n \n | \n\n \n | \n\n 1,573.0 | \n\n 2,689.9 | \n\n 2,318.0 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 1,084.2 | \n\n - | \n\n - | \n
| \n Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 96.8 | \n\n 83.1 | \n\n 37.1 | \n
| \n Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 255.7 | \n\n - | \n\n - | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n \n | \n\n \n | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
| \n Current lease liabilities | \n\n\n | \n\n \n | \n\n 30.6 | \n\n 24.5 | \n\n 19.3 | \n
| \n Trade payables | \n\n \n | \n\n \n | \n\n 264.1 | \n\n 215.3 | \n\n 137.3 | \n
| \n Other current liabilities | \n\n\n | \n\n \n | \n\n 310.1 | \n\n 276.5 | \n\n 227.3 | \n
| \n Total financial liabilities | \n\n \n | \n\n \n | \n\n 2,041.5 | \n\n 750.9 | \n\n 475.4 | \n
Financial assets
The Group classify financial assets in the following categories:
\u25aaamortised cost,
\u25aafinancial assets at fair value through profit or loss (FVPL),
\u25aafinancial assets at fair value through other comprehensive income (FVOCI)
Management determines the classification of financial assets at their initial recognition.
Derivatives are valued at fair value through profit or loss (FVPL) unless designated as hedges.
Debt instruments like loans and receivables held to receive payment of principal and interest are valued at amortised costs. The group has applied the practical expedient under IFRS 9 and are measuring the initial recognition of trade receivables at the transaction price determined under IFRS 15.
Debt instruments like bonds held to receive profit from sale in addition to interest are valued at fair value through profit and loss (FVPL).
Equity instruments like investments in shares are valued at fair value through profit and loss (FVPL).
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in the income statement in the period they occur.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at :
\u25aaamortised cost,,
\u25aafair value through profit or loss, or as
\u25aaderivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
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:
\u25aaThere is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u25aaThe effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u25aaThe 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:
\u25aaThe 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.
\u25aaAmounts 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.
The group has the following derivative financial instruments in the following line items in the balance sheet:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non-current assets | \n\n \n | \n\n \n | \n
| \n Interest rate swaps - cash flow hedges under hedge accounting | \n\n 10.8 | \n\n 0.0 | \n
| \n Total non-current derivative financial instruments asset | \n\n 10.8 | \n\n 0.0 | \n
The group's hedging reserves disclosed in Note 28 - Other reserves related to the following instruments:
Cash flow hedging reserves
| \n NOK million | \n\n Interest rate swaps | \n\n Total hedge reserves | \n
| \n Opening balance 1 January 2021 | \n\n - | \n\n - | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n - | \n\n - | \n
| \n Reclassified from OCI to profit or loss | \n\n - | \n\n - | \n
| \n Closing balance 31 December 2021 | \n\n - | \n\n - | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n 11.3 | \n\n 11.3 | \n
| \n Reclassified from OCI to profit or loss | \n\n (0.5) | \n\n (0.5) | \n
| \n Closing balance 31 December 2022 | \n\n 10.8 | \n\n 10.8 | \n
As of 31.12.2022 the Group held the following interest rate swaps:
| \n NOK million | \n\n Interest | \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 NOK Nibor | \n\n 275.0 | \n\n 2026 | \n\n 1:1 | \n\n 2.0700% | \n\n 9.0 | \n
| \n Cash flow hedges under hedge accounting | \n\n NOK Nibor | \n\n 110.0 | \n\n 2026 | \n\n 1:1 | \n\n 2.6140% | \n\n 1.7 | \n
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities subsequently measured at :
\u25aaamortised cost,,
\u25aafair value through profit or loss, or as
\u25aaderivatives designated as hedging instruments in an effective hedge.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Group\u2019s financial liabilities include trade and other payables, borrowings and derivative financial instruments.
The Group's financial liabilities at fair value through profit or loss include derivative financial instruments not designated as hedging instruments in hedge relationship as defined by IFRS 9.
The loans and borrowings category is the most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised as well as through the EIR amortisation process. Refer to further information in Note 18 - Interest-bearing borrowings.
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
NOTE 18Interest-bearing borrowings
Accounting policy
Borrowings are financial liabilities recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Interest-bearing borrowings specification as at 31 December
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Bond loan | \n\n 1,100.0 | \n\n - | \n\n 1,100.0 | \n
| \n Bank borrowings | \n\n - | \n\n 246.4 | \n\n 246.4 | \n
| \n Transaction cost, unamortised | \n\n (15.8) | \n\n (3.9) | \n\n (19.7) | \n
| \n Accrued interest expenses | \n\n - | \n\n 13.2 | \n\n 13.2 | \n
| \n Carrying amounts interest-bearing borrowings | \n\n 1,084.2 | \n\n 255.7 | \n\n 1,340.0 | \n
Movements in interest-bearing borrowings
| \n \n | \n\n Non-current | \n\n Current | \n\n Total | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Carrying amount as at 1 January | \n\n - | \n\n - | \n\n - | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n
| \n New borrowings | \n\n 1,100.0 | \n\n 219.7 | \n\n 1,319.7 | \n
| \n Paid transaction costs related to new borrowings | \n\n (19.2) | \n\n (5.0) | \n\n (24.2) | \n
| \n Non-cash flows: | \n\n \n | \n\n \n | \n\n \n | \n
| \n Reclassified | \n\n - | \n\n - | \n\n - | \n
| \n Change in transaction cost, unamortised | \n\n 3.5 | \n\n 1.0 | \n\n 4.5 | \n
| \n Change in accrued interest cost | \n\n - | \n\n 13.2 | \n\n 13.2 | \n
| \n Change due to currency revaluation | \n\n - | \n\n 26.7 | \n\n 26.7 | \n
| \n Carrying amount as at 31 December | \n\n 1,084.2 | \n\n 255.7 | \n\n 1,340.0 | \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 NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n
| \n Maturity within 3 months | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 3 and 6 months | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 6 and 9 months | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 9 months and 1 year * | \n\n - | \n\n 246.4 | \n\n 246.4 | \n
| \n Maturity between 1 and 2 years | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 2 and 3 years | \n\n - | \n\n - | \n\n - | \n
| \n Maturity between 3 and 4 years | \n\n 1,100.0 | \n\n - | \n\n 1,100.0 | \n
| \n Maturity between 4 and 5 years | \n\n - | \n\n - | \n\n - | \n
| \n Maturity beyond 5 years | \n\n - | \n\n - | \n\n - | \n
| \n Total contractual amounts | \n\n 1,100.0 | \n\n 246.4 | \n\n 1,346.4 | \n
| \n\n | \n
Financing secured
On 4 February 2022 Odfjell Technology successfully priced NOK 1.1 bn in senior secured bonds through a private placement. The bonds mature in February 2026 and bear interest of 3 months Nibor plus 700 basis points.
The carrying amount and fair value of the non-current liabilities are as follows:
Available drawing facilities
Compliance with financial covenants as at 31.12.2022
The Odfjell Technology Group is compliant with all financial covenants as at 31 December 2022.
Financial covenants
The borrowing facilities in the Group include the following main covenants:
Odfjell Technology Ltd \u2013 NOK 1.100 million bond loan
The Group shall maintain minimum liquidity of USD 15 million (including undrawn amounts under the SSRCF), of which minimum USD 5 million in cash and cash equivalents.
Leverage ratio (net interest bearing debt to EBITDA) shall not exceed 4.00:1:00.
The ratio of current assets to current liabilities shall at all times be a minimum 1.00:1.00.
Odfjell Technology Ltd may pay dividends in an amount up to 50% of its consolidated net income in its previous financial year, subject to compliance with the incurrence test on a pro-forma basis. The incurrence test implies that the leverage ratio (net interest bearing debt to EBITDA) shall not exceed 3.00:1:00.
Odfjell Technology Ltd - USD 25 million SSRCF
The Group shall maintain minimum liquidity of the higher of USD 15 million and 10% of the interest bearing debt (excluding lease liabilities), in each case of which minimum USD 5 million shall be free and unrestricted cash.
Leverage ratio (net interest bearing debt to EBITDA) shall not exceed 3.75:1:00.
The ratio of current assets to current liabilities shall at all times be a minimum 1.00:1.00.
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.
Offsetting of financial instruments
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u25aaIn the principal market for the asset or liability , or
\u25aaIn the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
Valuation techniques used to derive Level 2 fair values
Level 2 derivatives held at fair value through profit or loss and hedging derivatives comprise interest rate swaps. Interest rate swaps are fair valued using forward rates extracted from observable yield curves. Interest rate swaps are recognised according to mark-to-market reports from external financial institutions.
The Group had the following financial instruments at each reporting period:
| \n NOK million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 10.8 | \n\n - | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n - | \n\n 91.7 | \n
| \n Current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n 1,308.8 | \n\n 1,413.7 | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 942.6 | \n\n 816.4 | \n\n 650.8 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 25.8 | \n\n 42.9 | \n\n 17.3 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n Total financial assets | \n\n \n | \n\n \n | \n\n 1,573.0 | \n\n 2,689.9 | \n\n 2,318.0 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 1,084.2 | \n\n - | \n\n - | \n
| \n Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 96.8 | \n\n 83.1 | \n\n 37.1 | \n
| \n Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 255.7 | \n\n - | \n\n - | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n \n | \n\n \n | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
| \n Current lease liabilities | \n\n\n | \n\n \n | \n\n 30.6 | \n\n 24.5 | \n\n 19.3 | \n
| \n Trade payables | \n\n \n | \n\n \n | \n\n 264.1 | \n\n 215.3 | \n\n 137.3 | \n
| \n Other current liabilities | \n\n\n | \n\n \n | \n\n 310.1 | \n\n 276.5 | \n\n 227.3 | \n
| \n Total financial liabilities | \n\n \n | \n\n \n | \n\n 2,041.5 | \n\n 750.9 | \n\n 475.4 | \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 9.07. The total cost of the share option plan is calculated based on the fair value 1,995,000 options granted. The total cost equals approximately NOK 18 million and is recognised over the period until August 2025.
The calculations are based on the following assumptions:
\u25aaThe share price on the grant dates were set to the stock exchange price on the grant dates (27 June 2022, 15 August 2022 and 1 September 2022).
\u25aaThe strike price per options were a weighted average of NOK 22.75.
\u25aaThe expected price volatility of the company's shares was set to 55% based on historical volatility adjusted for expected changes.
\u25aaThe expiry date was set to 4 July 2025, 22 August 2025 and 8 September 2025.
\u25aaThe expected dividend yield was set to 0%.
\u25aaThe risk-free interest rate was set to 3.67%
Fair value measurement
The Group measures financial instruments such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
\u25aaIn the principal market for the asset or liability , or
\u25aaIn the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described below, based on the lowest level input that is significant to the fair value measurement as a whole.
The Group had the following financial instruments at each reporting period:
| \n NOK million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 10.8 | \n\n - | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n - | \n\n 91.7 | \n
| \n Current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n 1,308.8 | \n\n 1,413.7 | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 942.6 | \n\n 816.4 | \n\n 650.8 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 25.8 | \n\n 42.9 | \n\n 17.3 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n Total financial assets | \n\n \n | \n\n \n | \n\n 1,573.0 | \n\n 2,689.9 | \n\n 2,318.0 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 1,084.2 | \n\n - | \n\n - | \n
| \n Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 96.8 | \n\n 83.1 | \n\n 37.1 | \n
| \n Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 255.7 | \n\n - | \n\n - | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n \n | \n\n \n | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
| \n Current lease liabilities | \n\n\n | \n\n \n | \n\n 30.6 | \n\n 24.5 | \n\n 19.3 | \n
| \n Trade payables | \n\n \n | \n\n \n | \n\n 264.1 | \n\n 215.3 | \n\n 137.3 | \n
| \n Other current liabilities | \n\n\n | \n\n \n | \n\n 310.1 | \n\n 276.5 | \n\n 227.3 | \n
| \n Total financial liabilities | \n\n \n | \n\n \n | \n\n 2,041.5 | \n\n 750.9 | \n\n 475.4 | \n
The Group had the following financial instruments at each reporting period:
| \n NOK million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Financial assets at fair value through profit or loss | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Derivatives designated as hedging instruments | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n - Interest rate swaps - Other non-current assets | \n\n\n | \n\n 2 | \n\n 10.8 | \n\n - | \n\n - | \n
| \n Other financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n - | \n\n 91.7 | \n
| \n Current interest-bearing receivables Odfjell Drilling Group | \n\n\n | \n\n \n | \n\n - | \n\n 1,308.8 | \n\n 1,413.7 | \n
| \n Other non-current receivables | \n\n\n | \n\n \n | \n\n 33.9 | \n\n 24.0 | \n\n 22.1 | \n
| \n Trade receivables | \n\n\n | \n\n \n | \n\n 942.6 | \n\n 816.4 | \n\n 650.8 | \n
| \n Other current receivables | \n\n\n | \n\n \n | \n\n 25.8 | \n\n 42.9 | \n\n 17.3 | \n
| \n Cash and cash equivalents | \n\n\n | \n\n \n | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n Total financial assets | \n\n \n | \n\n \n | \n\n 1,573.0 | \n\n 2,689.9 | \n\n 2,318.0 | \n
| \n USD million | \n\n Note | \n\n Level | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Other financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 1,084.2 | \n\n - | \n\n - | \n
| \n Non-current lease liabilities | \n\n\n | \n\n \n | \n\n 96.8 | \n\n 83.1 | \n\n 37.1 | \n
| \n Current interest-bearing borrowings | \n\n\n | \n\n \n | \n\n 255.7 | \n\n - | \n\n - | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n \n | \n\n \n | \n\n - | \n\n 151.5 | \n\n 54.4 | \n
| \n Current lease liabilities | \n\n\n | \n\n \n | \n\n 30.6 | \n\n 24.5 | \n\n 19.3 | \n
| \n Trade payables | \n\n \n | \n\n \n | \n\n 264.1 | \n\n 215.3 | \n\n 137.3 | \n
| \n Other current liabilities | \n\n\n | \n\n \n | \n\n 310.1 | \n\n 276.5 | \n\n 227.3 | \n
| \n Total financial liabilities | \n\n \n | \n\n \n | \n\n 2,041.5 | \n\n 750.9 | \n\n 475.4 | \n
NOTE 16Trade 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 NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Trade receivables | \n\n \n | \n\n 504.3 | \n\n 511.4 | \n\n 463.8 | \n
| \n Earned, not yet invoiced operating revenues | \n\n \n | \n\n 452.7 | \n\n 317.5 | \n\n 196.7 | \n
| \n Loss allowance | \n\n 26 | \n\n (14.5) | \n\n (12.4) | \n\n (9.7) | \n
| \n Trade receivables - net | \n\n \n | \n\n 942.6 | \n\n 816.4 | \n\n 650.8 | \n
For information about currencies, ageing and loss allowance, refer to Note 26 - Credit 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.
The contract liabilities are mainly related to the Operations segment.
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.
NOTE 17Cash and cash equivalents
Accounting policy
Cash specification:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Cash in bank | \n\n 190.7 | \n\n 72.0 | \n\n 78.3 | \n
| \n Time deposits | \n\n 306.7 | \n\n 379.4 | \n\n - | \n
| \n Restricted bank deposits * | \n\n 62.7 | \n\n 46.5 | \n\n 44.2 | \n
| \n Total cash and cash equivalents | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n\n | \n
Accounting policy
Cash specification:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Cash in bank | \n\n 190.7 | \n\n 72.0 | \n\n 78.3 | \n
| \n Time deposits | \n\n 306.7 | \n\n 379.4 | \n\n - | \n
| \n Restricted bank deposits * | \n\n 62.7 | \n\n 46.5 | \n\n 44.2 | \n
| \n Total cash and cash equivalents | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n\n | \n
Cash specification:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Cash in bank | \n\n 190.7 | \n\n 72.0 | \n\n 78.3 | \n
| \n Time deposits | \n\n 306.7 | \n\n 379.4 | \n\n - | \n
| \n Restricted bank deposits * | \n\n 62.7 | \n\n 46.5 | \n\n 44.2 | \n
| \n Total cash and cash equivalents | \n\n 560.1 | \n\n 497.8 | \n\n 122.5 | \n
| \n\n | \n
NOTE 19Leases
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. Rental contracts are typically made for fixed periods of 6 months to 10 years, but may have extension or termination options. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payment that are based on an index or a rate (initially measured using the index or rate as at the commencement date), amounts expected to be payable by the group under residual value guarantees, the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee\u2019s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease, e.g. term, country, currency and security.
The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, any initial direct costs, and any restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset\u2019s useful life.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and smaller items of office equipment.
Significant judgement and estimation uncertainty
The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group's business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
The Group cannot readily determine the interest rate implicit in the lease, therefore it uses its incremental borrowing rate (IBR) to measure lease liabilities. IBR is estimated using observable inputs, such as market interest rates, when available. It is required to make certain entity-specific estimates mentioned above.
The balance sheet shows the following amounts related to leases:
| \n \n | \n\n Properties | \n\n Other fixed assets | \n\n Total Right-of-use assets | \n\n Properties | \n\n Other fixed assets | \n\n Total Right-of-use assets | \n
| \n NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Cost | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n At 1 January | \n\n 156.7 | \n\n - | \n\n 156.7 | \n\n 90.3 | \n\n - | \n\n 90.3 | \n
| \n Additions | \n\n 38.5 | \n\n \n | \n\n 38.5 | \n\n 71.7 | \n\n - | \n\n 71.7 | \n
| \n Disposals | \n\n (10.9) | \n\n \n | \n\n (10.9) | \n\n (5.0) | \n\n - | \n\n (5.0) | \n
| \n Currency translation differences | \n\n 2.5 | \n\n - | \n\n 2.5 | \n\n (0.4) | \n\n - | \n\n (0.4) | \n
| \n Cost as at 31 December | \n\n 186.7 | \n\n \n | \n\n 186.7 | \n\n 156.7 | \n\n - | \n\n 156.7 | \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 (52.5) | \n\n - | \n\n (52.5) | \n\n (36.7) | \n\n - | \n\n (36.7) | \n
| \n Depreciation | \n\n (22.7) | \n\n \n | \n\n (22.7) | \n\n (21.1) | \n\n - | \n\n (21.1) | \n
| \n Impairment loss | \n\n (8.5) | \n\n \n | \n\n (8.5) | \n\n - | \n\n - | \n\n - | \n
| \n Disposals | \n\n 10.9 | \n\n \n | \n\n 10.9 | \n\n 5.0 | \n\n - | \n\n 5.0 | \n
| \n Currency translation differences | \n\n (1.2) | \n\n - | \n\n (1.2) | \n\n 0.3 | \n\n - | \n\n 0.3 | \n
| \n As at 31 December | \n\n (73.9) | \n\n - | \n\n (73.9) | \n\n (52.5) | \n\n - | \n\n (52.5) | \n
| \n Net book value at 31 December | \n\n 112.8 | \n\n - | \n\n 112.8 | \n\n 104.2 | \n\n - | \n\n 104.2 | \n
Lease liabilities
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Non-current | \n\n 96.8 | \n\n 83.1 | \n\n 37.1 | \n
| \n Current | \n\n 30.6 | \n\n 24.5 | \n\n 19.3 | \n
| \n Total | \n\n 127.4 | \n\n 107.6 | \n\n 56.4 | \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 NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Carrying amount as at 1 January | \n\n 83.1 | \n\n 24.5 | \n\n 107.6 | \n\n 37.1 | \n\n 19.3 | \n\n 56.4 | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Payments for the principal portion of the lease liability | \n\n - | \n\n (20.5) | \n\n (20.5) | \n\n - | \n\n (21.2) | \n\n (21.2) | \n
| \n Payments for the interest portion of the lease liability | \n\n - | \n\n (7.4) | \n\n (7.4) | \n\n - | \n\n (4.4) | \n\n (4.4) | \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 38.5 | \n\n - | \n\n 38.5 | \n\n 71.7 | \n\n - | \n\n 71.7 | \n
| \n Interest expense on lease liabilities | \n\n 7.8 | \n\n - | \n\n 7.8 | \n\n 5.1 | \n\n - | \n\n 5.1 | \n
| \n Reclassified | \n\n (33.5) | \n\n 33.5 | \n\n - | \n\n (30.9) | \n\n 30.9 | \n\n - | \n
| \n Currency exchange differences | \n\n 0.9 | \n\n 0.5 | \n\n 1.4 | \n\n 0.0 | \n\n (0.1) | \n\n (0.1) | \n
| \n Carrying amount as at 31 December | \n\n 96.8 | \n\n 30.6 | \n\n 127.4 | \n\n 83.1 | \n\n 24.5 | \n\n 107.6 | \n
Rental costs for exemptions
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Expenses relating to short-term leases | \n\n 90.9 | \n\n 90.3 | \n
| \n Expenses relating to low value items | \n\n 6.6 | \n\n 4.1 | \n
Extension and termination options
Extension and termination options are included in a number of property and equipment leases across the group. These are used to maximise operational flexibility in terms of managing the assets used in the group's operations.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
Most extension options have not been included in the lease liability, because the group could replace the asset without significant cost of business disruption, or because the group is not certain it would need the asset in the option period.
The group\u2019s leasing activities as a lessee and how these are accounted for
This note relates to the Group as a lessee only.
The Group leases various offices, workshops and warehouses. Rental contracts are typically made for fixed periods of 6 months to 10 years, but may have extension or termination options. Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payment that are based on an index or a rate (initially measured using the index or rate as at the commencement date), amounts expected to be payable by the group under residual value guarantees, the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee\u2019s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease, e.g. term, country, currency and security.
The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising 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 NOK million | \n\n 2022 | \n\n 2022 | \n\n 2022 | \n\n 2021 | \n\n 2021 | \n\n 2021 | \n
| \n Carrying amount as at 1 January | \n\n 83.1 | \n\n 24.5 | \n\n 107.6 | \n\n 37.1 | \n\n 19.3 | \n\n 56.4 | \n
| \n Cash flows: | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Payments for the principal portion of the lease liability | \n\n - | \n\n (20.5) | \n\n (20.5) | \n\n - | \n\n (21.2) | \n\n (21.2) | \n
| \n Payments for the interest portion of the lease liability | \n\n - | \n\n (7.4) | \n\n (7.4) | \n\n - | \n\n (4.4) | \n\n (4.4) | \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 38.5 | \n\n - | \n\n 38.5 | \n\n 71.7 | \n\n - | \n\n 71.7 | \n
| \n Interest expense on lease liabilities | \n\n 7.8 | \n\n - | \n\n 7.8 | \n\n 5.1 | \n\n - | \n\n 5.1 | \n
| \n Reclassified | \n\n (33.5) | \n\n 33.5 | \n\n - | \n\n (30.9) | \n\n 30.9 | \n\n - | \n
| \n Currency exchange differences | \n\n 0.9 | \n\n 0.5 | \n\n 1.4 | \n\n 0.0 | \n\n (0.1) | \n\n (0.1) | \n
| \n Carrying amount as at 31 December | \n\n 96.8 | \n\n 30.6 | \n\n 127.4 | \n\n 83.1 | \n\n 24.5 | \n\n 107.6 | \n
The Group has occupational pension plans in several countries established partly as defined benefit plans (in Norway), partly as multi-employer defined benefit plans accounted for as defined contribution plans (in Norway) and partly as defined contribution plans (in Norway and other countries). The pension plans are measured and presented according to IAS 19.
Accounting policy
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the income statement.
Mortality index used in actuarial calculations is K2013.
The Group has contractual pension agreement (CPA) schemes in Norway established in multi-employer plans. These multi-employer plans are defined benefit plans, but the Group does not have access to the necessary information for the accounting years 2022 and 2021 required to account for these plans as defined benefit plans, and the plans are therefore accounted for as defined contribution plans.
NOTE 21Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
NOTE 21Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
NOTE 22Other liabilities
Other current liabilities specification
| \n NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Social security and other taxes | \n\n \n | \n\n 129.4 | \n\n 94.6 | \n\n 86.3 | \n
| \n Accrued salaries, holiday pay and employee bonus provisions | \n\n \n | \n\n 212.3 | \n\n 184.5 | \n\n 148.5 | \n
| \n Contract liabilities | \n\n\n | \n\n 25.1 | \n\n 1.2 | \n\n 0.4 | \n
| \n Other payables and financial liabilities | \n\n \n | \n\n 2.4 | \n\n 0.1 | \n\n 0.2 | \n
| \n Other accrued expenses | \n\n \n | \n\n 95.5 | \n\n 92.0 | \n\n 78.6 | \n
| \n Total other current liabilities | \n\n \n | \n\n 464.6 | \n\n 372.3 | \n\n 314.1 | \n
Refer to Note 30 - Contingencies for further information about accounting policy for provisions and accruals, as well as significant judgement applied and estimation uncertainty.
NOTE 22Other liabilities
Other current liabilities specification
| \n NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Social security and other taxes | \n\n \n | \n\n 129.4 | \n\n 94.6 | \n\n 86.3 | \n
| \n Accrued salaries, holiday pay and employee bonus provisions | \n\n \n | \n\n 212.3 | \n\n 184.5 | \n\n 148.5 | \n
| \n Contract liabilities | \n\n\n | \n\n 25.1 | \n\n 1.2 | \n\n 0.4 | \n
| \n Other payables and financial liabilities | \n\n \n | \n\n 2.4 | \n\n 0.1 | \n\n 0.2 | \n
| \n Other accrued expenses | \n\n \n | \n\n 95.5 | \n\n 92.0 | \n\n 78.6 | \n
| \n Total other current liabilities | \n\n \n | \n\n 464.6 | \n\n 372.3 | \n\n 314.1 | \n
Refer to Note 30 - Contingencies for further information about accounting policy for provisions and accruals, as well as significant judgement applied and estimation uncertainty.
Other current liabilities specification
| \n NOK million | \n\n Note | \n\n 31.12.2022 | \n\n 31.12.2021 | \n\n 01.01.2021 | \n
| \n Social security and other taxes | \n\n \n | \n\n 129.4 | \n\n 94.6 | \n\n 86.3 | \n
| \n Accrued salaries, holiday pay and employee bonus provisions | \n\n \n | \n\n 212.3 | \n\n 184.5 | \n\n 148.5 | \n
| \n Contract liabilities | \n\n\n | \n\n 25.1 | \n\n 1.2 | \n\n 0.4 | \n
| \n Other payables and financial liabilities | \n\n \n | \n\n 2.4 | \n\n 0.1 | \n\n 0.2 | \n
| \n Other accrued expenses | \n\n \n | \n\n 95.5 | \n\n 92.0 | \n\n 78.6 | \n
| \n Total other current liabilities | \n\n \n | \n\n 464.6 | \n\n 372.3 | \n\n 314.1 | \n
NOTE 23Financial 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 areas. Capital management should be such that the capital structure is sufficiently robust to withstand prolonged adverse conditions in significant risk factors, such as long-term down-cycles in our markets and unfavourable conditions in financial markets. Capital management also comprise securing the company to be in compliance with covenants on interest bearing debt. Reference is made to Note 18 - Interest-bearing borrowings which disclose information about covenants on long term interest bearing liabilities.
The Group will manage the capital structure and make adjustments to it, to maintain an optimal structure adapted to current economic conditions. In order to maintain or adjust the capital structure, the Group may adjust dividend payments, buy treasury shares, return capital to shareholders or issue new shares.
| \n \n | \n\n 31.12.2022 | \n
| \n Equity | \n\n 778.8 | \n
| \n Total assets | \n\n 3,114.9 | \n
| \n Equity ratio | \n\n 25% | \n
| \n Cash and cash equivalents excl.restricted capital | \n\n 497.4 | \n
| \n Available drawing facilities | \n\n - | \n
| \n Total available liquidity | \n\n 497.4 | \n
Deposits / placements
The liquidity management has four main objectives:
\u25aaMatching of surplus funds against borrowing requirements.
\u25aaSecure a high level of liquidity (a targeted minimum of two months operating expenses) in order to meet future plans of the Group.
\u25aaLimitation of credit risks.
\u25aaMaximise return on liquid assets.
Accordingly, investments may only be made in securities with a rating of Investment grade, BAA (Moodys) , BBB- (Standard and Poors and Fitch IBCA) or better.
A list of counter-party exposure limits is reported to the Board of Odfjell Drilling on a yearly basis.
The following instruments are allowed for short term placements;
\u25aaDeposits in banks
\u25aaLoans to companies/institutions/funds (like fixed or floating rate bonds, senior or subordinated debt)
\u25aaCertificates
\u25aaMoney-market funds
Working Capital
The company's policy is to have a positive working capital.
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 Technology Ltd. has established 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 areas. Capital management should be such that the capital structure is sufficiently robust to withstand prolonged adverse conditions in significant risk factors, such as long-term down-cycles in our markets and unfavourable conditions in financial markets. Capital management also comprise securing the company to be in compliance with covenants on interest bearing debt. Reference is made to Note 18 - Interest-bearing borrowings which disclose information about covenants on long term interest bearing liabilities.
| \n \n | \n\n 31.12.2022 | \n
| \n Equity | \n\n 778.8 | \n
| \n Total assets | \n\n 3,114.9 | \n
| \n Equity ratio | \n\n 25% | \n
| \n Cash and cash equivalents excl.restricted capital | \n\n 497.4 | \n
| \n Available drawing facilities | \n\n - | \n
| \n Total available liquidity | \n\n 497.4 | \n
NOTE 24Liquidity risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of credit facilities and to have sufficient cash or cash equivalents at any time to be able to finance its operations and investments in accordance with the Group's strategic plan.
With regular forecasts and liquidity analysis updates, the Group will ensure sufficient available liquidity to fulfil its duties at loan maturity, without unacceptable loss or risk of damaging the Group\u2019s reputation.
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping committed credit lines available.
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.
The Group held cash and cash equivalents amounting to NOK 560 million at the end of 2022. This is deemed to be sufficient funding for the Group\u2019s current activity levels and committed capital expenditures during 2023.
The liquidity risk is connected with the market risk and the re-contracting risk for the segments. The management continuously focuses on securing new profitable contracts to generate sufficient cash flow from operations, hence reducing the liquidity risk going forward.
Operating in more than 20 jurisdictions the Group do from time to time receive enquiries from authorities about compliance related matters. Refer to Note 30 regarding notice of decision received 1 October 2021 from HM Revenue and Customs. The Group has per 31 December 2022 not received any formal material assessment which is not disclosed in the financial statements.
Maturity of financial liabilities
The amounts disclosed in the table are the contractual non-discounted cash flows. The table include estimated interest payments for drawn facilities at the balance sheet date, based on the remaining period at the end of the reporting period to the contractual maturity date. The estimated interest payments include payments based on forward rates for the interest rate swaps.
Maturity of financial liabilities - 31.12.2022
| \n NOK million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Interest-bearing borrowings | \n\n 306.6 | \n\n 56.1 | \n\n 112.1 | \n\n 1,238.6 | \n\n - | \n\n 1,713.4 | \n\n 1,340.0 | \n
| \n Lease liabilities | \n\n 15.4 | \n\n 15.2 | \n\n 30.0 | \n\n 59.2 | \n\n 30.6 | \n\n 150.4 | \n\n 127.4 | \n
| \n Trade payables | \n\n 264.1 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 264.1 | \n\n 264.1 | \n
| \n Other current payables | \n\n 305.8 | \n\n 4.3 | \n\n - | \n\n - | \n\n - | \n\n 310.1 | \n\n 310.1 | \n
Maturity of financial liabilities - 31.12.2021
| \n NOK million | \n\n Less than 6 months | \n\n 6 - 12 months | \n\n Between 1 and 2 years | \n\n Between 2 and 5 years | \n\n Over 5 years | \n\n Total contractual cash flows | \n\n Carrying amount | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n 151.5 | \n\n - | \n\n - | \n\n - | \n\n - | \n\n 151.5 | \n\n 151.5 | \n
| \n Lease liabilities | \n\n 12.8 | \n\n 11.8 | \n\n 22.5 | \n\n 50.7 | \n\n 34.7 | \n\n 132.4 | \n\n 107.6 | \n
| \n Trade payables | \n\n 214.7 | \n\n 0.6 | \n\n - | \n\n - | \n\n - | \n\n 215.3 | \n\n 215.3 | \n
| \n Other current payables | \n\n 238.7 | \n\n 37.7 | \n\n - | \n\n - | \n\n - | \n\n 276.5 | \n\n 276.5 | \n
NOTE 25Market 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 oil service market has developed positively in recent years due to a strong focus on cost discipline and more efficient operations, combined with a healthier oil price development.
The focus on alternative energy sources and the overall future mix of energy remains strong. The transition into greener energy sources is expected to impact the energy market in the coming decades, however the need for continued exploration and production of oil and gas is viewed as vital, and it has become more apparent recently.
The general situation for the global oil service industry is expected to improve as a result of under investment in the oil and gas sector over the last 8 years. The supply of oil and gas is too low to meet the expected demand. Increase in investments and activity is vital to bridge the increasing energy demand as new energy sources take time to implement.
There is an increased appetite for field development and production spending across the segments.
Odfjell Technology has been successful in adding more backlog, due to our operational track record and strong client relationships, combined with a healthy balance sheet.
Well Services operates in a competitive market, but the increase in drilling activity and field investments is expected to increase demand for our services. The COVID-19 pandemic had an adverse effect in many of the regions Well Services operate in over the two last years, but the effects are now diminishing.
The market for our services in the Operations segment has been stable over the last decade. We have established a strong presence in the North Sea with efficient operations and strong client relationships, which we expect to capitalise on further. In addition, there are opportunities to expand Operations activities to other regions.
The Projects & Engineering market is improving both in existing deliverables and in green initiatives. We are well positioned to grow in existing services and further expand our portfolio of green services.
Climate Risk
During 2022, a project was undertaken with external advisors to raise awareness and assess the impacts of climate risks and opportunities. Cross-functional workshops were held to review the impact on the business from both physical and transitional risks in the short, medium and long term, prioritising risks for further deep dives.
The most significant transition risks identified, along with mitigating actions were:
\u25aa Increased resources, skills and tools required to measure, track and report on climate data, leading to increased costs. In house expertise being developed, gap analysis being conducted, and software tools will be researched.
\u25aa Impact on the ability to attract and retain talent, increasing costs. Training programmes to be reviewed and increase focus on communicating our sustainable activities.
\u25aa Changes in consumer behaviours will reduce the demand for oil and gas and therefore revenue. This will be addressed through diversification of our client portfolio and services to support the energy transition.
\u25aaCost of and access to capital may go up as banks move to low carbon portfolios, leading to increased interest costs. Consider green funding resources for investments and diversify to low carbon portfolio.
The most significant physical risks identified, along with mitigating actions were:
\u25aa Impact 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.
\u25aaHeat, floods and tropical storms may increase in certain geographies we operate in, damaging infrastructure and increasing costs. Business continuity plans, remote working and reviews of locations required to address risk.
\u25aa Heat stress will impact employees and equipment working outside in certain locations. Health tracking and storage of equipment to be monitored.
Foreign exchange risk
The consolidated material subsidiaries' reporting and functional currencies are NOK, USD, GBP and EUR.
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 as the customer contracts are denominated in multiple currencies with cost mainly in local currency, while capital expenditure is in USD.
The Group seeks to minimise these risks through natural hedging by balancing the currency in and out flow and will use financial hedging instruments if required.
The group\u2019s exposure to foreign currency risk at the end of the reporting period, expressed in NOK, was as follows:
Foreign exchange risk - Exposure - 31.12.2022
| \n NOK million | \n\n USD | \n\n NOK | \n
| \n Cash and cash equivalents | \n\n 132.3 | \n\n - | \n
| \n Trade receivables | \n\n 65.8 | \n\n 8.5 | \n
| \n Interest-bearing borrowings | \n\n (244.1) | \n\n - | \n
| \n Trade payables | \n\n (23.8) | \n\n (5.7) | \n
| \n Other current payables | \n\n (2.6) | \n\n (10.6) | \n
Foreign exchange risk - Exposure - 31.12.2021
| \n NOK million | \n\n USD | \n\n NOK | \n
| \n Cash and cash equivalents | \n\n 12.7 | \n\n 300.1 | \n
| \n Current interest-bearing receivables Odfjell Drilling Group | \n\n - | \n\n 90.2 | \n
| \n Trade receivables | \n\n 34.1 | \n\n 19.7 | \n
| \n Current interest-bearing payables Odfjell Drilling Group | \n\n (151.1) | \n\n (44.9) | \n
| \n Trade payables | \n\n (42.1) | \n\n (1.1) | \n
| \n Other current payables | \n\n (15.2) | \n\n (4.8) | \n
The Group's profit or loss is primarily exposed to changes in USD/NOK exchange rates.
The sensitivity shown in table below is calculated based on USD balances in companies with NOK as functional currency, and NOK balances in companies with USD as functional currency.
Sensitivity to changes in USD/NOK exchange rates
| \n Sensitivity to changes in USD/NOK exchange rates | \n\n USD is strengthened by 20 % against NOK | \n\n USD is strengthened by 10 % against NOK | \n\n USD is weakened by 10 % against NOK | \n\n USD is weakened by 20 % against NOK | \n||||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Cash and cash equivalents | \n\n 3.4 | \n\n (60.0) | \n\n 1.7 | \n\n (30.0) | \n\n (1.7) | \n\n 30.0 | \n\n (3.4) | \n\n 60.0 | \n
| \n Current receivables | \n\n 1.3 | \n\n (11.4) | \n\n 0.6 | \n\n (5.7) | \n\n (0.6) | \n\n 5.7 | \n\n (1.3) | \n\n 11.4 | \n
| \n Current liabilities | \n\n (48.8) | \n\n (20.7) | \n\n (24.4) | \n\n (10.4) | \n\n 24.4 | \n\n 10.4 | \n\n 48.8 | \n\n 20.7 | \n
| \n Net effect on profit before tax | \n\n (44.2) | \n\n (92.2) | \n\n (22.1) | \n\n (46.1) | \n\n 22.1 | \n\n 46.1 | \n\n 44.2 | \n\n 92.2 | \n
Interest rate risk
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's borrowing 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.
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.
The Group had 2 interest rate swap agreements at 31 December 2022. Quoted mark-to-market values from financial institutions have been used to determine the fair value of the swap agreements at the end of the year. The instruments were documented as cash flow hedges and changes in fair value were recognised in other comprehensive income (cash flow hedging).
Including interest rate swaps entered into, the fixed-rate portion of the group\u2019s interest bearing debt per 31 December 2022 is approximately 29%.
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 at 31 December 2022 was about 9.7% 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 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 NOK million | \n\n 31.12.2022 | \n\n % of total loans | \n
| \n Variable rate borrowings - NOK NIBOR | \n\n 715.0 | \n\n 53% | \n
| \n Variable rate borrowings - USD SOFR | \n\n 246.4 | \n\n 18% | \n
| \n Fixed rate borrowings - repricing or maturity dates: | \n\n \n | \n\n \n | \n
| \n Less than 1 year | \n\n - | \n\n 0% | \n
| \n 1-5 years | \n\n 385.0 | \n\n 29% | \n
| \n Later than 5 years | \n\n - | \n\n 0% | \n
| \n Total contractual amounts | \n\n 1,346.4 | \n\n 100% | \n
The result of the calculation on sensitivities returns the following expected values (incl. interest rate swaps entered into as at 31 December):
If interest rate is increased by 1.0 %, the effect would be an increase in financing costs of NOK 10 million for the next 12 months as at 31 December 2022
Interest rate benchmark reform
The Company will not be affected by the interest rate benchmark reform, as it does not have any USD LIBOR exposure, and the NOK NIBOR will remain.
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:
\u25aaThere is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u25aaThe effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u25aaThe 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:
\u25aaThe 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.
\u25aaAmounts 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.
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:
\u25aaThere is \u2018an economic relationship\u2019 between the hedged item and the hedging instrument.
\u25aaThe effect of credit risk does not \u2018dominate the value changes\u2019 that result from that economic relationship.
\u25aaThe 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:
\u25aaThe 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.
\u25aaAmounts 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.
NOTE 26Credit risk
Further description
The Group operates in three core business areas: Well Services (OWS), Operations and Projects & Engineering. The market for the Group\u2019s services is the offshore oil and gas industry, and the customers consist primarily of major integrated oil companies, independent oil and gas producers and government owned oil companies. The Group performs ongoing credit evaluations of the customers and generally does not request material collateral.
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents, marketable securities, other receivables and certain derivatives instruments receivable amount, the Group\u2019s exposure to credit risk arises from default of the counter-party, with a maximum exposure equal to the carrying amount of these instruments. However, the Group believes this risk is limited as the counter-parties mainly have a high credit quality.
During 2022, the Group has continued its focus on credit risk in general related to the uncertain conditions in some geographical markets. The maximum exposure regarding trade receivables is the carrying amount of NOK 943 million.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to non-billed work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The ageing of the trade receivables - 31.12.2022
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n NOK 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 781.9 | \n\n - | \n\n 781.9 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 105.4 | \n\n - | \n\n 105.4 | \n
| \n 3 to 6 months | \n\n 2.7% | \n\n 9.6 | \n\n (0.3) | \n\n 9.3 | \n
| \n Over 6 months | \n\n 23.6% | \n\n 60.2 | \n\n (14.2) | \n\n 46.0 | \n
| \n Total | \n\n \n | \n\n 957.0 | \n\n (14.5) | \n\n 942.6 | \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 NOK 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 0.9 | \n\n - | \n\n 0.9 | \n
The ageing of the trade receivables - 31.12.2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n NOK million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 689.8 | \n\n - | \n\n 689.8 | \n
| \n 0 to 3 months | \n\n 0.0% | \n\n 74.1 | \n\n - | \n\n 74.1 | \n
| \n 3 to 6 months | \n\n 0.0% | \n\n 7.0 | \n\n - | \n\n 7.0 | \n
| \n Over 6 months | \n\n 21.4% | \n\n 57.9 | \n\n (12.4) | \n\n 45.5 | \n
| \n Total | \n\n \n | \n\n 828.8 | \n\n (12.4) | \n\n 816.4 | \n
Contract assets - 2021
| \n \n | \n\n Expected loss rate | \n\n Gross amount | \n\n Loss allowance | \n\n Net amount | \n
| \n NOK million | \n\n \n | \n\n 31.12.2021 | \n\n 31.12.2021 | \n\n 31.12.2021 | \n
| \n Not due | \n\n 0.0% | \n\n 4.9 | \n\n - | \n\n 4.9 | \n
Movements in loss allowance / the provision for impairment of trade receivables and contract assets are as follows:
| \n \n | \n\n Trade receivables | \n\n Contract assets | \n||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Loss allowance as at 1 January | \n\n 12.4 | \n\n 9.7 | \n\n - | \n\n - | \n
| \n Utilised | \n\n (2.6) | \n\n (0.6) | \n\n - | \n\n - | \n
| \n Released provision | \n\n (0.0) | \n\n (2.3) | \n\n - | \n\n - | \n
| \n New provisions | \n\n 3.6 | \n\n 5.6 | \n\n - | \n\n - | \n
| \n Translation differences | \n\n 1.1 | \n\n 0.0 | \n\n - | \n\n - | \n
| \n Loss allowance as at 31 December | \n\n 14.5 | \n\n 12.4 | \n\n - | \n\n - | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Net gain (loss) related to trade receivables | \n\n (3.7) | \n\n (3.3) | \n
Movements in loss allowance / the provision for impairment of trade receivables and contract assets are as follows:
| \n \n | \n\n Trade receivables | \n\n Contract assets | \n||
| \n NOK million | \n\n 2022 | \n\n 2021 | \n\n 2022 | \n\n 2021 | \n
| \n Loss allowance as at 1 January | \n\n 12.4 | \n\n 9.7 | \n\n - | \n\n - | \n
| \n Utilised | \n\n (2.6) | \n\n (0.6) | \n\n - | \n\n - | \n
| \n Released provision | \n\n (0.0) | \n\n (2.3) | \n\n - | \n\n - | \n
| \n New provisions | \n\n 3.6 | \n\n 5.6 | \n\n - | \n\n - | \n
| \n Translation differences | \n\n 1.1 | \n\n 0.0 | \n\n - | \n\n - | \n
| \n Loss allowance as at 31 December | \n\n 14.5 | \n\n 12.4 | \n\n - | \n\n - | \n
NOTE 27Share capital and shareholder information
| \n \n | \n\n No.of shares | \n\n Nominal value | \n\n Share capital - USD thousands | \n
| \n Common shares issued as at 31 December 2022 | \n\n 39,463,867 | \n\n USD 0.01 | \n\n 394.6 | \n
| \n Largest common shareholders at 31 December 2022 | \n\n Account type | \n\n Holding | \n\n % of shares | \n
| \n Odfjell Technology Holding Ltd. | \n\n Ordinary | \n\n 23,825,396 | \n\n 60.37% | \n
| \n J.P. Morgan Securities Plc | \n\n Nominee | \n\n 2,087,476 | \n\n 5.29% | \n
| \n Goldman Sachs International | \n\n Nominee | \n\n 1,312,878 | \n\n 3.33% | \n
| \n BNP Paribas | \n\n Nominee | \n\n 983,781 | \n\n 2.49% | \n
| \n Space AS | \n\n Ordinary | \n\n 725,262 | \n\n 1.84% | \n
| \n UBS AG | \n\n Nominee | \n\n 556,413 | \n\n 1.41% | \n
| \n Kontrari AS | \n\n Ordinary | \n\n 500,000 | \n\n 1.27% | \n
| \n The Bank of New York Mellon SA/NV | \n\n Nominee | \n\n 496,391 | \n\n 1.26% | \n
| \n Skandinaviska Enskilda Banken AB | \n\n Nominee | \n\n 384,735 | \n\n 0.97% | \n
| \n Citibank, N.A. | \n\n Nominee | \n\n 350,214 | \n\n 0.89% | \n
| \n State Street Bank and Trust Comp | \n\n Nominee | \n\n 288,848 | \n\n 0.73% | \n
| \n Brown Brothers Harriman & Co. | \n\n Nominee | \n\n 266,069 | \n\n 0.67% | \n
| \n Nordnet Livsforsikring AS | \n\n Ordinary | \n\n 252,670 | \n\n 0.64% | \n
| \n Toluma Norden AS | \n\n Ordinary | \n\n 250,000 | \n\n 0.63% | \n
| \n AS Clipper | \n\n Ordinary | \n\n 249,758 | \n\n 0.63% | \n
| \n BNP Paribas | \n\n Nominee | \n\n 211,304 | \n\n 0.54% | \n
| \n Nordea Bank Abp | \n\n Nominee | \n\n 200,000 | \n\n 0.51% | \n
| \n Karsten Ellingsen AS | \n\n Ordinary | \n\n 194,500 | \n\n 0.49% | \n
| \n Verdipapirfondet Heimdal Tinde | \n\n Ordinary | \n\n 177,278 | \n\n 0.45% | \n
| \n Ulsmo Finans AS | \n\n Ordinary | \n\n 140,000 | \n\n 0.35% | \n
| \n Total 20 largest common shareholders | \n\n \n | \n\n 33,452,973 | \n\n 84.77% | \n
| \n Other common shareholders | \n\n \n | \n\n 6,010,894 | \n\n 15.23% | \n
| \n Total common shareholders | \n\n \n | \n\n 39,463,867 | \n\n 100.00% | \n
Common shares
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.
NOTE 28Other reserves
| \n NOK million | \n\n Note | \n\n Cash flow hedges | \n\n Translation differences | \n\n Share-Option plan | \n\n Total | \n
| \n At 1 January 2021 | \n\n \n | \n\n - | \n\n 563.4 | \n\n - | \n\n 563.4 | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n 82.1 | \n\n - | \n\n 82.1 | \n
| \n At 31 December 2021 | \n\n \n | \n\n - | \n\n 645.4 | \n\n - | \n\n 645.4 | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 11.3 | \n\n - | \n\n - | \n\n 11.3 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n (0.5) | \n\n - | \n\n - | \n\n (0.5) | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n 140.6 | \n\n - | \n\n 140.6 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n 2.8 | \n\n 2.8 | \n
| \n At 31 December 2022 | \n\n \n | \n\n 10.8 | \n\n 786.0 | \n\n 2.8 | \n\n 799.7 | \n
NOTE 27Share capital and shareholder information
| \n \n | \n\n No.of shares | \n\n Nominal value | \n\n Share capital - USD thousands | \n
| \n Common shares issued as at 31 December 2022 | \n\n 39,463,867 | \n\n USD 0.01 | \n\n 394.6 | \n
Accounting policy - Cash dividend
Accounting policy - Cash dividend
Cash dividend paid in 2022
As part of re-organisation prior to the split of Odfjell Drilling Ltd Group, a company now part of the Odfjell Technology Ltd Group paid a cash dividend of USD 20 million, approximately NOK 177 million to Odfjell Drilling Ltd Group.
NOTE 28Other reserves
| \n NOK million | \n\n Note | \n\n Cash flow hedges | \n\n Translation differences | \n\n Share-Option plan | \n\n Total | \n
| \n At 1 January 2021 | \n\n \n | \n\n - | \n\n 563.4 | \n\n - | \n\n 563.4 | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n 82.1 | \n\n - | \n\n 82.1 | \n
| \n At 31 December 2021 | \n\n \n | \n\n - | \n\n 645.4 | \n\n - | \n\n 645.4 | \n
| \n Change in fair value of hedging instruments recognised in OCI | \n\n\n | \n\n 11.3 | \n\n - | \n\n - | \n\n 11.3 | \n
| \n Reclassified from OCI to profit or loss | \n\n\n | \n\n (0.5) | \n\n - | \n\n - | \n\n (0.5) | \n
| \n Currency translation difference | \n\n \n | \n\n - | \n\n 140.6 | \n\n - | \n\n 140.6 | \n
| \n Cost of share-based option plan | \n\n\n | \n\n - | \n\n - | \n\n 2.8 | \n\n 2.8 | \n
| \n At 31 December 2022 | \n\n \n | \n\n 10.8 | \n\n 786.0 | \n\n 2.8 | \n\n 799.7 | \n
NOTE 29Securities and mortgages
Liabilities secured by mortgage
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Non current liabilities - contractual amounts | \n\n 1,100.0 | \n\n - | \n
| \n Current liabilities | \n\n 259.6 | \n\n - | \n
| \n Total | \n\n 1,359.6 | \n\n - | \n
Odfjell Technology Ltd \u2013 NOK 1.100 million bond loan and USD 25 million Senior Secured Rolling Credit Facility
As security for the loans, substantially all of the assets of Odfjell Technology Ltd., and its subsidiaries have been pledged in favour of the lenders.
Carrying amount of mortgaged assets:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Property, plant and equipment | \n\n 1,068.4 | \n\n - | \n
| \n Spare parts | \n\n 29.3 | \n\n \n | \n
| \n Receivables and contract assets | \n\n 1,059.0 | \n\n - | \n
| \n Bank deposits | \n\n 560.1 | \n\n - | \n
| \n Total | \n\n 2,716.9 | \n\n - | \n
NOTE 30Contingencies
Significant judgement and estimation uncertainty
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.
A Group subsidiary is subject to challenges by HM Revenue and Customs (\u201cHMRC\u201d) on the historical application of National Insurance Contributions (\u201cNICs\u201d) to workers in the UK Continental Shelf. 1 October 2021, a decision was issued by HMRC against Odfjell Technology (UK) Ltd \"OT UK\u201d (Previously Odfjell Drilling (UK) Ltd) in respect of the historic application of NICs. OT UK has appealed against the decision and no payment has been made to HMRC pending the outcome of the first level appeal. A final verdict is not expected in the short to medium term. Management, taking into consideration advice from independent legal and tax specialists, believes that the most probable outcome is that no outflow of resources embodying economic benefits will be required to settle the obligation, and accordingly, no provision has been recognised. The potential exposure to OT UK in relation to NICs and interest should it be unsuccessful in defending its position is approximately NOK 280\u00a0million.
Refer to Note 9 Income Taxes for information about the Odfjell Offshore Ltd tax case.
NOTE 30Contingencies
Significant judgement and estimation uncertainty
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.
A Group subsidiary is subject to challenges by HM Revenue and Customs (\u201cHMRC\u201d) on the historical application of National Insurance Contributions (\u201cNICs\u201d) to workers in the UK Continental Shelf. 1 October 2021, a decision was issued by HMRC against Odfjell Technology (UK) Ltd \"OT UK\u201d (Previously Odfjell Drilling (UK) Ltd) in respect of the historic application of NICs. OT UK has appealed against the decision and no payment has been made to HMRC pending the outcome of the first level appeal. A final verdict is not expected in the short to medium term. Management, taking into consideration advice from independent legal and tax specialists, believes that the most probable outcome is that no outflow of resources embodying economic benefits will be required to settle the obligation, and accordingly, no provision has been recognised. The potential exposure to OT UK in relation to NICs and interest should it be unsuccessful in defending its position is approximately NOK 280\u00a0million.
Refer to Note 9 Income Taxes for information about the Odfjell Offshore Ltd tax case.
NOTE 31Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Well Service equipment | \n\n 88.3 | \n\n 196.2 | \n
| \n Total | \n\n 88.3 | \n\n 196.2 | \n
Accounting policy - Provisions, contingent liabilities and contingent assets
A provision is recognised when an obligation exists (legal or constructive) as a result of a past event, it is probable that an economic settlement will be required as a consequence of the obligation, and a reliable estimate can be made of the amount of the obligation.
The best estimate of the expenditure required to settle the obligation is recognised as a provision. When the effect is material, the provision is discounted using a market based pre-tax discount rate.
Contingent liabilities and contingent assets are not recognised. Contingent liabilities are disclosed unless the possibility of an economic settlement as a consequence of the obligation is remote. Contingent assets are disclosed where an economic settlement as a consequence of the asset is probable.
Significant judgement and estimation uncertainty
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.
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.
NOTE 31Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
| \n NOK million | \n\n 31.12.2022 | \n\n 31.12.2021 | \n
| \n Well Service equipment | \n\n 88.3 | \n\n 196.2 | \n
| \n Total | \n\n 88.3 | \n\n 196.2 | \n
NOTE 32Subsidiaries
Material subsidiaries
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Ownership 2022 | \n\n Ownership 2021 * | \n\n Principal activities | \n
| \n Odfjell Technology Invest Ltd. (previous Odfjell Partners Invest) | \n\n Bermuda | \n\n United Arab Emirates | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company / Well services equipment owner | \n
| \n Odfjell Well Services II Ltd. | \n\n Bermuda | \n\n Kurdistan | \n\n USD | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Services (Thailand) FLC | \n\n Thailand | \n\n Thailand | \n\n THB | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Cooperatief U.A. | \n\n Netherlands | \n\n Europe | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services SRL | \n\n Romania | \n\n Europe | \n\n RON | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Arabia Drilling Services LLC | \n\n Saudi Arabia | \n\n Saudi Arabia | \n\n USD | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Service (UK) Ltd. | \n\n Scotland | \n\n UK | \n\n GBP | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Norway AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Ltd. | \n\n British Virgin Islands | \n\n United Arab Emirates | \n\n USD | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Platform Drilling AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Holding company / Drilling operations and Engineering | \n
| \n Odfjell Operations AS (previous Odfjell Drilling Management) | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Technology (UK) Ltd. (previous Odfjell Drilling (UK)) | \n\n Scotland | \n\n UK | \n\n GBP | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Offshore Ltd. | \n\n Bermuda | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Engineering AS (previous Drilling Technology) | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Engineering | \n
| \n Odfjell Energy Crewing AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Offshore crewing rig inspection and installation services | \n
| \n Odfjell Technology AS (previous Odfjell Global Business Services) | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Group Business Services | \n
| \n Odfjell Drilling Philippines Corporation | \n\n Philippines | \n\n Philippines | \n\n PHP | \n\n 100 | \n\n 100 | \n\n Group Business Services | \n
| \n\n | \n
The group's principal subsidiaries are set out in table above. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group.
Other subsidiaries included in the consolidated group financial statements:
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Ownership 2022 | \n\n Ownership 2021 * | \n\n Principal activities | \n
| \n Odfjell Well Services Ltda | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Drilling Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Gestao de Perfurancoes do Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Energy (Malaysia) SDN BHD | \n\n Malaysia | \n\n Malaysia | \n\n \n | \n\n 100 | \n\n n/a | \n\n No activity | \n
| \n Odfjell Well Services (Malaysia) SDN BHD | \n\n Malaysia | \n\n Malaysia | \n\n \n | \n\n 100 | \n\n n/a | \n\n No activity | \n
| \n\n | \n
NOTE 33Investments in joint ventures and associates
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.
Joint ventures
| \n Company | \n\n Acquisition/ formation date | \n\n Registered office | \n\n Principal place of business | \n\n Voting and owning interest 31.12.2022 | \n\n Voting and owning interest 31.12.2021 | \n
| \n Odfjell Oceanwind AS | \n\n 2020 | \n\n Oslo, Norway | \n\n Bergen, Norway | \n\n 21.1% | \n\n 15.2%* | \n
| \n\n | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Book value as at 1.1. | \n\n 4.3 | \n\n - | \n
| \n Investments * | \n\n - | \n\n 6.9 | \n
| \n Share of profit after tax | \n\n (19.9) | \n\n (4.6) | \n
| \n Disposals ** | \n\n - | \n\n 2.0 | \n
| \n Capital contributions | \n\n 30.0 | \n\n - | \n
| \n Mandatory convertible loan | \n\n 35.6 | \n\n - | \n
| \n Book value as at 31.12 | \n\n 50.0 | \n\n 4.3 | \n
| \n\n | \n||
| \n\n | \n
Odfjell Oceanwind AS does not have observable market values in form of market price or similar.
Mandatory convertible loan
15 November 2022 the Company signed a loan agreement with Odfjell Oceanwind AS and subsequently paid out NOK 35 million. The loan is subordinated and runs with 5% interest and without instalment until maturity 23 November 2023. At maturity the loan and interest shall mandatory be converted to shares. The subscription price is dependent on whether or not an equity capitalisation have been carried out prior to conversion.
In accordance with IAS 28, the mandatory convertible loan is accounted for as part of the investment in the joint venture.
Description of the business in Odfjell Oceanwind AS
Odfjell Oceanwind offers services through the full lifecycle of a floating offshore wind project from in house staff, based on standardised\u00a0solutions. Services include applications, front end engineering and design, project management, construction, assembly and installation follow-up, operations and maintenance planning and execution and other related services.
The table below shows the condensed financial information of Odfjell Oceanwind AS, based on 100%
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Total revenue | \n\n 16.7 | \n\n 4.5 | \n
| \n Total operating expenses | \n\n (124.7) | \n\n (38.1) | \n
| \n Net financial items | \n\n (0.3) | \n\n (0.1) | \n
| \n Net profit/(loss) | \n\n (108.3) | \n\n (33.7) | \n
| \n Current assets | \n\n 70.4 | \n\n 5.7 | \n
| \n -whereof cash and cash equivalents | \n\n 65.5 | \n\n 2.9 | \n
| \n Non-current assets | \n\n - | \n\n - | \n
| \n Current liabilities | \n\n 65.7 | \n\n 4.3 | \n
| \n Non-current liabilities | \n\n - | \n\n - | \n
| \n Equity | \n\n 4.7 | \n\n 1.3 | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n The company's share of equity | \n\n 1.0 | \n\n 0.2 | \n
| \n Goodwill | \n\n 13.4 | \n\n 4.1 | \n
| \n Mandatory convertible loan | \n\n 35.6 | \n\n - | \n
| \n Book value as at 31.12 | \n\n 50.0 | \n\n 4.3 | \n
NOTE 32Subsidiaries
Material subsidiaries
| \n Name of entity | \n\n Country of incorporation | \n\n Principal place of business | \n\n Functional currency | \n\n Ownership 2022 | \n\n Ownership 2021 * | \n\n Principal activities | \n
| \n Odfjell Technology Invest Ltd. (previous Odfjell Partners Invest) | \n\n Bermuda | \n\n United Arab Emirates | \n\n USD | \n\n 100 | \n\n 100 | \n\n Holding company / Well services equipment owner | \n
| \n Odfjell Well Services II Ltd. | \n\n Bermuda | \n\n Kurdistan | \n\n USD | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Services (Thailand) FLC | \n\n Thailand | \n\n Thailand | \n\n THB | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Cooperatief U.A. | \n\n Netherlands | \n\n Europe | \n\n EUR | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services SRL | \n\n Romania | \n\n Europe | \n\n RON | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Arabia Drilling Services LLC | \n\n Saudi Arabia | \n\n Saudi Arabia | \n\n USD | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Service (UK) Ltd. | \n\n Scotland | \n\n UK | \n\n GBP | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Norway AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Well Services Ltd. | \n\n British Virgin Islands | \n\n United Arab Emirates | \n\n USD | \n\n 100 | \n\n 100 | \n\n Well services | \n
| \n Odfjell Platform Drilling AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Holding company / Drilling operations and Engineering | \n
| \n Odfjell Operations AS (previous Odfjell Drilling Management) | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Technology (UK) Ltd. (previous Odfjell Drilling (UK)) | \n\n Scotland | \n\n UK | \n\n GBP | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Offshore Ltd. | \n\n Bermuda | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Drilling operations | \n
| \n Odfjell Engineering AS (previous Drilling Technology) | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Engineering | \n
| \n Odfjell Energy Crewing AS | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Offshore crewing rig inspection and installation services | \n
| \n Odfjell Technology AS (previous Odfjell Global Business Services) | \n\n Norway | \n\n Norway | \n\n NOK | \n\n 100 | \n\n 100 | \n\n Group Business Services | \n
| \n Odfjell Drilling Philippines Corporation | \n\n Philippines | \n\n Philippines | \n\n PHP | \n\n 100 | \n\n 100 | \n\n Group Business Services | \n
| \n\n | \n
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 Ownership 2022 | \n\n Ownership 2021 * | \n\n Principal activities | \n
| \n Odfjell Well Services Ltda | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Drilling Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Gestao de Perfurancoes do Brasil Ltda. | \n\n Brazil | \n\n Brazil | \n\n BRL | \n\n 100 | \n\n 100 | \n\n No activity | \n
| \n Odfjell Energy (Malaysia) SDN BHD | \n\n Malaysia | \n\n Malaysia | \n\n \n | \n\n 100 | \n\n n/a | \n\n No activity | \n
| \n Odfjell Well Services (Malaysia) SDN BHD | \n\n Malaysia | \n\n Malaysia | \n\n \n | \n\n 100 | \n\n n/a | \n\n No activity | \n
| \n\n | \n
NOTE 33Investments in joint ventures and associates
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.
Joint ventures
| \n Company | \n\n Acquisition/ formation date | \n\n Registered office | \n\n Principal place of business | \n\n Voting and owning interest 31.12.2022 | \n\n Voting and owning interest 31.12.2021 | \n
| \n Odfjell Oceanwind AS | \n\n 2020 | \n\n Oslo, Norway | \n\n Bergen, Norway | \n\n 21.1% | \n\n 15.2%* | \n
| \n\n | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Book value as at 1.1. | \n\n 4.3 | \n\n - | \n
| \n Investments * | \n\n - | \n\n 6.9 | \n
| \n Share of profit after tax | \n\n (19.9) | \n\n (4.6) | \n
| \n Disposals ** | \n\n - | \n\n 2.0 | \n
| \n Capital contributions | \n\n 30.0 | \n\n - | \n
| \n Mandatory convertible loan | \n\n 35.6 | \n\n - | \n
| \n Book value as at 31.12 | \n\n 50.0 | \n\n 4.3 | \n
| \n\n | \n||
| \n\n | \n
Odfjell Oceanwind AS does not have observable market values in form of market price or similar.
Mandatory convertible loan
15 November 2022 the Company signed a loan agreement with Odfjell Oceanwind AS and subsequently paid out NOK 35 million. The loan is subordinated and runs with 5% interest and without instalment until maturity 23 November 2023. At maturity the loan and interest shall mandatory be converted to shares. The subscription price is dependent on whether or not an equity capitalisation have been carried out prior to conversion.
In accordance with IAS 28, the mandatory convertible loan is accounted for as part of the investment in the joint venture.
Description of the business in Odfjell Oceanwind AS
Odfjell Oceanwind offers services through the full lifecycle of a floating offshore wind project from in house staff, based on standardised\u00a0solutions. Services include applications, front end engineering and design, project management, construction, assembly and installation follow-up, operations and maintenance planning and execution and other related services.
The table below shows the condensed financial information of Odfjell Oceanwind AS, based on 100%
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Total revenue | \n\n 16.7 | \n\n 4.5 | \n
| \n Total operating expenses | \n\n (124.7) | \n\n (38.1) | \n
| \n Net financial items | \n\n (0.3) | \n\n (0.1) | \n
| \n Net profit/(loss) | \n\n (108.3) | \n\n (33.7) | \n
| \n Current assets | \n\n 70.4 | \n\n 5.7 | \n
| \n -whereof cash and cash equivalents | \n\n 65.5 | \n\n 2.9 | \n
| \n Non-current assets | \n\n - | \n\n - | \n
| \n Current liabilities | \n\n 65.7 | \n\n 4.3 | \n
| \n Non-current liabilities | \n\n - | \n\n - | \n
| \n Equity | \n\n 4.7 | \n\n 1.3 | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n The company's share of equity | \n\n 1.0 | \n\n 0.2 | \n
| \n Goodwill | \n\n 13.4 | \n\n 4.1 | \n
| \n Mandatory convertible loan | \n\n 35.6 | \n\n - | \n
| \n Book value as at 31.12 | \n\n 50.0 | \n\n 4.3 | \n
NOTE 33Investments in joint ventures and associates
Joint ventures
| \n Company | \n\n Acquisition/ formation date | \n\n Registered office | \n\n Principal place of business | \n\n Voting and owning interest 31.12.2022 | \n\n Voting and owning interest 31.12.2021 | \n
| \n Odfjell Oceanwind AS | \n\n 2020 | \n\n Oslo, Norway | \n\n Bergen, Norway | \n\n 21.1% | \n\n 15.2%* | \n
| \n\n | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Book value as at 1.1. | \n\n 4.3 | \n\n - | \n
| \n Investments * | \n\n - | \n\n 6.9 | \n
| \n Share of profit after tax | \n\n (19.9) | \n\n (4.6) | \n
| \n Disposals ** | \n\n - | \n\n 2.0 | \n
| \n Capital contributions | \n\n 30.0 | \n\n - | \n
| \n Mandatory convertible loan | \n\n 35.6 | \n\n - | \n
| \n Book value as at 31.12 | \n\n 50.0 | \n\n 4.3 | \n
| \n\n | \n||
| \n\n | \n
Odfjell Oceanwind AS does not have observable market values in form of market price or similar.
Mandatory convertible loan
15 November 2022 the Company signed a loan agreement with Odfjell Oceanwind AS and subsequently paid out NOK 35 million. The loan is subordinated and runs with 5% interest and without instalment until maturity 23 November 2023. At maturity the loan and interest shall mandatory be converted to shares. The subscription price is dependent on whether or not an equity capitalisation have been carried out prior to conversion.
In accordance with IAS 28, the mandatory convertible loan is accounted for as part of the investment in the joint venture.
Description of the business in Odfjell Oceanwind AS
Odfjell Oceanwind offers services through the full lifecycle of a floating offshore wind project from in house staff, based on standardised\u00a0solutions. Services include applications, front end engineering and design, project management, construction, assembly and installation follow-up, operations and maintenance planning and execution and other related services.
The table below shows the condensed financial information of Odfjell Oceanwind AS, based on 100%
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Total revenue | \n\n 16.7 | \n\n 4.5 | \n
| \n Total operating expenses | \n\n (124.7) | \n\n (38.1) | \n
| \n Net financial items | \n\n (0.3) | \n\n (0.1) | \n
| \n Net profit/(loss) | \n\n (108.3) | \n\n (33.7) | \n
| \n Current assets | \n\n 70.4 | \n\n 5.7 | \n
| \n -whereof cash and cash equivalents | \n\n 65.5 | \n\n 2.9 | \n
| \n Non-current assets | \n\n - | \n\n - | \n
| \n Current liabilities | \n\n 65.7 | \n\n 4.3 | \n
| \n Non-current liabilities | \n\n - | \n\n - | \n
| \n Equity | \n\n 4.7 | \n\n 1.3 | \n
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n The company's share of equity | \n\n 1.0 | \n\n 0.2 | \n
| \n Goodwill | \n\n 13.4 | \n\n 4.1 | \n
| \n Mandatory convertible loan | \n\n 35.6 | \n\n - | \n
| \n Book value as at 31.12 | \n\n 50.0 | \n\n 4.3 | \n
Accounting policy
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
NOTE 35Remuneration to the Board of Directors, key executive management and auditor
Details of salary, variable pay and other benefits provided to Group management in 2022:
| \n NOK thousands | \n\n \n | \n\n Salary | \n\n Bonus | \n\n Pension premium | \n\n Other remuneration | \n\n Expense share-based payments | \n\n Total | \n
| \n Simen Lieungh | \n\n CEO from 29 March 2022 - Odfjell Technology AS | \n\n 4,018 | \n\n - | \n\n 99 | \n\n 175 | \n\n 1,367 | \n\n 5,659 | \n
| \n Jone Torstensen | \n\n CFO from 29 March 2022 - Odfjell Technology AS | \n\n 2,009 | \n\n - | \n\n 100 | \n\n 174 | \n\n 456 | \n\n 2,738 | \n
| \n Diane Stephen | \n\n General Manager - Odfjell Technology Ltd. | \n\n 689 | \n\n 119 | \n\n 36 | \n\n 40 | \n\n - | \n\n 883 | \n
| \n Total | \n\n \n | \n\n 6,715 | \n\n 119 | \n\n 235 | \n\n 389 | \n\n 1,822 | \n\n 9,280 | \n
The amounts listed as Salary, Bonus, and Other remuneration in the table above represent cash payments in 2022. Refer to the Executive Remuneration Report for bonuses earned in 2022.
Amounts listed as Pension premium and Expense share-based payments relates to the expense accounted for as personnel expenses in 2022.
For details regarding incentive share option programme, refer to the Executive Remuneration Report and Note 36 - Share-based payments
Fees to the Group's auditor
| \n NOK thousands | \n\n 2022 | \n\n 2021 | \n
| \n Audit | \n\n 1,794 | \n\n 686 | \n
| \n Other assurance services | \n\n - | \n\n 90 | \n
| \n Tax advisory fee | \n\n - | \n\n - | \n
| \n Fees for other services | \n\n 185 | \n\n - | \n
| \n Total remuneration to the Group's auditor | \n\n 1,978 | \n\n 776 | \n
In addition to fees to the Group's auditor listed in the table above, audit fees paid to other auditors for statutory audits of subsidiaries amount to NOK 505 thousands in 2022 (NOK 390 thousands in 2021).
NOTE 36Share-based payments
Accounting principle
The company have a 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:
27 June 2022, the Company implemented a long term incentive plan. A total of 1,995,000 options have been awarded to certain of its employees at strike prices ranging from NOK 22.31 to NOK 24.13 per share.
Overview of outstanding options:
| \n Overview of outstanding options: | \n\n 2022 | \n\n 2021 | \n
| \n Outstanding options 1.1 | \n\n - | \n\n - | \n
| \n Options granted | \n\n 1,995,000 | \n\n - | \n
| \n Options forfeited | \n\n - | \n\n - | \n
| \n Options exercised | \n\n - | \n\n - | \n
| \n Options expired | \n\n - | \n\n - | \n
| \n Outstanding options 31.12 | \n\n 1,995,000 | \n\n - | \n
| \n Of which exercisable | \n\n - | \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 9.07. The total cost of the share option plan is calculated based on the fair value 1,995,000 options granted. The total cost equals approximately NOK 18 million and is recognised over the period until August 2025.
The calculations are based on the following assumptions:
\u25aaThe share price on the grant dates were set to the stock exchange price on the grant dates (27 June 2022, 15 August 2022 and 1 September 2022).
\u25aaThe strike price per options were a weighted average of NOK 22.75.
\u25aaThe expected price volatility of the company's shares was set to 55% based on historical volatility adjusted for expected changes.
\u25aaThe expiry date was set to 4 July 2025, 22 August 2025 and 8 September 2025.
\u25aaThe expected dividend yield was set to 0%.
\u25aaThe risk-free interest rate was set to 3.67%
Accounting principle
The company have a 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 37Earnings 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 a share option plan for 1,995,000 common shares, see further description in Note 36 - Share-based payments.
The options do not affect the basic or diluted number of shares in 2021 or 2022.
| \n NOK million | \n\n 2022 | \n\n 2021 | \n
| \n Profit/(loss) due to owners of the parent | \n\n 253.0 | \n\n 116.5 | \n
| \n Diluted profit/(loss) for the period due to the holders of common shares | \n\n 253.0 | \n\n 116.5 | \n
| \n \n | \n\n 2022 * | \n\n 2021 * | \n
| \n Weighted average number of common shares in issue | \n\n 39,463,867 | \n\n 39,463,867 | \n
| \n Effects of dilutive potential common shares: | \n\n \n | \n\n \n | \n
| \n Share option plan | \n\n - | \n\n - | \n
| \n Diluted average number of shares outstanding | \n\n 39,463,867 | \n\n 39,463,867 | \n
| \n\n | \n
| \n \n | \n\n 2022 | \n\n 2021 | \n
| \n Basic earnings per share (NOK) | \n\n 6.410 | \n\n 2.951 | \n
| \n Diluted earnings per share (NOK) | \n\n 6.410 | \n\n 2.951 | \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 38Events after the reporting period