astl-2021-12-31-en

This Annual Report should be read in conjunction with the consolidated financial statements and accompanying notes included in

this report.

In addition to historical information, this Annual Report contains certain forward-looking statements that involve risks and

uncertainties. Such forward-looking statements relate to future events and our operations, objectives, expectations, performance,

financial condition and intentions. When used in this Annual Report, the words “expect,” “intend,” “plan,” “believe,” “anticipate,”

“estimate” and variations of such words and similar expressions are intended to identify forward-looking statements. Forward-

looking statements in this Annual Report include, in particular, statements regarding:

•our future growth prospects, business strategy and other plans and objectives for future operations;

•future capital expenditures and availability of capital resources to fund capital expenditures;

•our liquidity needs and meeting our going concern requirements, including our working capital deficit, anticipated funds and

sources of financing for liquidity needs and the sufficiency of cash flows, and our estimation that we will have sufficient liquidity

for at least the next one-year period;

•our ability to enter into new debt facilities, borrow additional amounts under existing facilities, refinance or extend existing debt

obligations, to fund capital expenditures, to sell certain assets, to pursue growth projects and to negotiate extensions or

redeployments of existing assets;

•measures taken to improve our debt maturity profile and enhance our liquidity and financial flexibility;

•our ability to maintain and expand long-term relationships with major oil companies, including our ability to service fields until

they no longer produce, and the potential negative impact of low oil prices on the likelihood of certain contract extensions;

•the derivation of a substantial majority of revenue from a limited number of customers;

•our ability to leverage to our advantage the expertise, relationships and reputation of Altera Infrastructure L.P. and Brookfield

Business Partners L.P. together with its institutional partners (Brookfield Business Partners L.P. and/or any one or more of its

affiliates referred to herein as Brookfield) to pursue growth opportunities;

•the outcome of an investigation by Norwegian authorities of potential violations of Norwegian pollution and export laws in

connection with the export of a shuttle tanker and subsequent recycling activities;

•our continued ability to enter into fixed-rate time charters;

•results of operations and revenues and expenses;

•offshore and tanker market fundamentals, including the balance of supply and demand in the offshore and tanker market and

spot tanker charter rates;

•our competitive advantage in the shuttle tanker market;

•the expected lifespan and estimated sales price or recycling value of vessels;

•our expectations as to any impairment of our vessels;

•acquisitions from third parties and obtaining offshore projects that we or Altera Infrastructure Partners L.P. bid on or may be

awarded;

•certainty of completion, estimated delivery and completion dates, commencement of charter, intended financing and estimated

costs for newbuildings and acquisitions, including our shuttle tanker newbuilding;

•the expected employment of the shuttle tanker newbuildings under our existing master agreement with Equinor ASA and the

expected required capacity in our contract of affreightment (or CoA) fleet in the North Sea;

•expected employment and trading of older shuttle tankers;

•expected redelivery dates of in-chartered vessels;

•the expectations as to the chartering of unchartered vessels;

•our expectations regarding competition in the markets we serve;

•our entering into joint ventures or partnerships with companies and any business or asset acquisitions or dispositions;

•our ability to maximize the use of our vessels, including the re-deployment or disposition of vessels no longer under long-term

time charter contracts;

•the duration of dry dockings;

•the valuation of goodwill and potential impairment;

•our compliance or ability to comply with covenants under our credit facilities and leases;

•the ability of the counterparties for our derivative contracts to fulfill their contractual obligations;

•our hedging activities relating to foreign exchange, interest rate and spot market risks;

•our exposure to foreign currency fluctuations, particularly in Norwegian Krone, Brazilian Real, Canadian Dollar and Euro;

•increasing the efficiency of our business and redeploying vessels as charters expire or terminate;

•the adequacy of our insurance coverage;

•the expected impact of heightened environmental and quality concerns of insurance underwriters, regulators and charterers;

•our ability to comply with governmental regulations and maritime self-regulatory organization standards applicable to our

business;

•the passage of climate control legislation or other regulatory initiatives that restrict emissions of greenhouse gases;

•unexpected changes in business conditions, governmental changes, health epidemics (including the COVID-19 pandemic) and

other factors beyond our control that could have a material and adverse effect on our business, financial condition and

operating results;

•anticipated taxation of us and our subsidiaries and the adequacy of our reserves to cover potential liability for additional taxes;

•consequences relating to the phasing-out of the London Inter-bank Offered Rate (or LIBOR);

•our ability to avoid labour disruptions and attract and retain highly skilled personnel; and

•the extent of the disruption to and/or adverse impact on our business, operating results and financial condition as a result of

the COVID-19 pandemic.

Forward-looking statements are necessary estimates reflecting the judgment of senior management, involve known and unknown

risks and are based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and

contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such

forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to, those

factors discussed below in Risk Factors.

We do not intend to revise any forward-looking statements in order to reflect any change in our expectations or events or

circumstances that may subsequently arise. You should carefully review and consider the various disclosures included in this

Annual Report and in our other filings that attempt to advise interested parties of the risks and factors that may affect our business,

prospects and results of operations.

BOARD OF DIRECTORS REPORT 2021

Introduction

Effective March 24, 2020, Teekay Shuttle Tankers L.L.C. was renamed as Altera Shuttle Tankers L.L.C. (Altera Shuttle Tankers or

the Company). Altera Shuttle Tankers is a wholly-owned subsidiary of Altera Infrastructure L.P. (Altera Infrastructure or the

Partnership).

Altera Shuttle Tankers and its subsidiaries (together with the Company, the Group) is an owner and operator of shuttle tankers and

was formed in 2017 by Altera Infrastructure Holdings L.L.C., formerly Teekay Offshore Holdings L.L.C, a 100% owned subsidiary of

Altera Infrastructure. As at December 31, 2021, Brookfield Business Partners L.P., together with its institutional investors (NYSE:

BBU) (TSX: BBU.UN) (collectively Brookfield), owned a 100% interest in Altera Infrastructure's general partner and 98.7% of Altera

Infrastructure's outstanding common units. Altera Infrastructure is an international midstream services provider to the offshore oil

industry, focused on the ownership and operation of critical infrastructure assets in offshore oil regions of the North Sea, Brazil and

the East Coast of Canada.

Altera Shuttle Tankers' customer base primarily consists of oil majors and producers and the Group's vessels operate under long-

term, fixed-rate contracts of affreightment (or CoA), time-charter contracts, bareboat contracts and voyage charter contracts. The

Group's business strategy is primarily focused on implementing existing growth projects, extending assets on long-term charters

and pursuing additional strategic growth projects.

The Company’s principal executive office is at Altera House, Unit 3, Prospect Park, Arnhall Business Park, Westhill, Aberdeenshire,

AB32 6FJ, United Kingdom.

Risk Factors

Risks Relating to the Group's business and industry

The Group operates in a market which is governed by regulatory regimes which may be subject to change.

The Group's operations are subject to a high degree of regulation, varying across the jurisdictions in which the Group operates. For

instance, different requirements and regulations apply to anti-pollution requirements, working environment and liability for

environmental events. In certain regulatory regimes where the Group operates, such requirements may also be subject to change

without notice or with limited advance notice. If regulations applicable to the Group or its businesses change, or if the Group or its

partners fail to abide by applicable regulations or meet applicable requirements in the jurisdictions in which the Group operates,

then the Group may lose rights, suffer fines or other penalties or otherwise incur costs. Such regulatory violations could adversely

affect the Group’s operations and business. Furthermore, any changes to tax legislation or practices in jurisdictions in which the

Group entities are resident for tax purposes may have a material adverse effect on the operating results or financial position of the

Group.

The Group depends on Altera Infrastructure and its subsidiaries to assist the Group in operating its businesses and

competing in its markets.

Direct and indirect subsidiaries of Altera Infrastructure provide to the Group certain administrative and other services which the

Group depends upon in order to operate its business. The Group’s business could be harmed if such direct and indirect subsidiaries

of the Partnership fail to perform those services satisfactorily or if they stop providing those services.

The Group derives a substantial majority of its revenues from a limited number of customers, and the loss of any such

customer or a contract dispute with any such customer could result in a significant loss of revenues and cash flow.

The loss of any of the Group’s significant customers or a reduction in revenues from them could have a material adverse effect on

the Group’s business and results of operations and financial condition. The Group’s future growth depends on the ability to expand

relationships with existing customers and obtain new customers.

Market conditions may limit the Group's access to capital.

Depressed market conditions in the energy sector may significantly reduce the Group's access to capital, particularly equity and

debt capital. Debt financing or refinancing may furthermore not be available on acceptable terms, if at all. Incurring additional debt

may increase the Group’s leverage, susceptibility to market downturns or adversely affect its ability to pursue future growth

opportunities. Lack of access to debt capital at reasonable rates could adversely affect the Group's ability to refinance debt and

finance operations as most vessels owned by the group are partly financed by debt.

The Group’s insurance coverage and indemnities may not adequately cover all risks, losses or expenses.

The Group is unable or deems it commercially unreasonable to insure against all risks and may be exposed under certain

circumstances to uninsurable hazards, losses and risks. None of the Group’s shuttle tankers are currently insured against loss of

revenues resulting from vessel off-hire time, based on the cost of insurance compared to the Group's off-hire experience.

Accordingly, the Group could incur substantial losses if an event which is not fully covered by insurance occurs, which could have a

material adverse effect on the Group’s business, results of operations and financial condition.

Continuing revenue under life-of-field contracts depends upon continuing field operations and other charter contracts will

depend upon renewals or contract extensions.

The duration of some of the shuttle tanker contracts of the Group is equal to the life of the relevant oil field or is subject to extension

by the field operator or vessel charterer. If the oil field no longer produces oil or is abandoned or the contract term is not extended,

or the applicable contract is not renewed, the relevant Group entity will no longer generate revenue under the related contract and

will need to seek to redeploy affected vessels. If the Group entity is unable to promptly redeploy any affected vessels at rates at

least equal to those under the prior contracts, if at all, the Group’s operating results could be harmed. Fluctuations in the utilization

of the Group’s vessels may adversely affect its results of operations and financial condition. Further, a portion of the Group’s

vessels operate under contracts of affreightment. Payments under these contracts of affreightment are based upon the volume of oil

transported, which in turn depends upon the level of oil production at the fields serviced under the contracts. Oil production levels

are affected by several factors, all of which are beyond the Group’s control, including but not limited to fluctuations in the price of oil

(which historically has experienced material declines), geological factors, including general declines in production that occur

naturally over time; mechanical failure or operator error; the rate of technical developments in extracting oil and related

infrastructure and implementation costs; the availability of necessary drilling and other governmental permits; the availability of

qualified personnel and equipment; strikes, employee lockouts or other labour unrest; and regulatory changes. In addition, the

volume of oil produced may be adversely affected by extended repairs to oil field installations or suspensions of field operations as

a result of oil spills or otherwise.

The Group may experience operational problems with vessels that could reduce revenue and increase costs.

Shuttle tankers are complex and their operations are technically challenging and require substantial capital expenditures.

Operational problems or an aging fleet may lead to loss of revenue or higher than anticipated operating expenses or require

additional capital expenditures. Any of these results could harm the Group’s business, financial condition and operating results.

The nature of the Group’s operations exposes it to a wide range of environmental regulations that could result in

significant environmental liabilities.

The Group’s operations are subject to local, national and international environmental regulations. The costs of compliance

associated with environmental regulations and changes thereto could require significant expenditures, and failure to comply with

such regulations could result in the imposition of material fines and penalties or temporary or permanent suspension of operations.

Examples of this includes necessary adherence to tightening regulations related to carbon intensity of operations potentially

requiring technical investments and/or switching to alternative fuel types. Another example would be fines and penalties related to

potential oil spills and other environmental contamination. An incident involving environmental contamination could also harm the

Group’s reputation and business.

COVID-19 and other pandemics may adversely impact the operations and profitability of the Group.

Although the Group has not experienced any material business interruptions or financial impact as a result of the COVID-19

pandemic, governmental orders throughout Europe and other relevant jurisdictions globally may continue to impose or impose new

restrictions on both personnel and goods. This may in turn force the Group to apply measures in accordance with the authorities’

instructions and advice to protect the public health and safety of personnel. Both the COVID-19 pandemic and any future pandemic

may impact the ability of the Group to operate its shuttle tankers and to take delivery of its newbuild vessels on time and on cost. In

addition, customers of the Group may invoke force majeure regulations in the existing contracts, which in turn may impact the

earnings and profitability of the Group. The Group is continuing to closely monitor counterparty risk associated with its vessels

under contract and will work to mitigate any potential impact on the business, there can however be no assurance that any such

mitigating efforts will be successful, in which case the earnings and profitability of the Group will be negatively affected.

The Group is dependent on experienced managers and employees.

The Group is dependent upon those individuals providing to it senior management functions and services and employees having

relevant experience. Pursuant to services agreements, subsidiaries of the Partnership and of Altera Infrastructure provide

substantially all of the Group’s managerial, operational and administrative services and other technical and advisory services. The

loss of the key personnel providing such services and the failure to successfully recruit replacements in a timely manner, or at all,

could have a material adverse effect on the Group’s business, financial condition and results of operations.

The Group is subject to financial restrictions and covenants.

The operating and financial restrictions and covenants in the Company's or the Group’s financing arrangements and any future

financing agreements may restrict the Group’s business activities, could adversely affect the Group’s ability to finance future

operations or capital needs or to engage, expand or pursue its business activities, and these restrictions and covenants could also

affect the ability of the Company’s subsidiaries to pay dividends and make distributions to the Company, thus adversely affecting its

cash flow. The Company may be able to take on additional debt from related parties and such debt may not be counted as part of

total debt in the financial covenants of the bond, regardless of the status of such liabilities. The financial restrictions and covenants

do not provide any certainty that investors may not lose their investments in whole or in part.

The Group may be unable to realize expected benefits from any acquisitions of vessels.

Any acquisition of a vessel may not be profitable at or after the time of acquisition and may not generate cash flow sufficient to

justify the investment. Unlike newbuild vessels, existing vessels typically do not carry warranties as to their condition. While the

Group will likely inspect any existing vessels prior to purchase, such inspection would normally not provide the Group with as much

knowledge of the vessel's condition as it would possess if the vessel had been built for the Group and operated by it during its life.

Repairs and maintenance costs for existing vessels are difficult to predict and may be substantially higher than for vessels operated

by the Group since they were built. These costs could decrease the Company's cash flow and reduce its liquidity.

The Group may be subject to legal, governmental, regulatory or arbitration proceedings that could have a material adverse

effect on its business, financial position, results of operations and cash flows.

The nature of the Group's operations implies a high degree of risk for material litigation, claims and disputes, inter alia from

customers, regulatory authorities and third parties. Such risk relates to (but is not limited to) claims for breach or non-compliance

with customer contracts, non-compliance with regulatory requirements (e.g. spillage, pollution etc.), and damage caused to third-

party property. Should any such incidents occur, this may in turn involve claims for significant monetary amounts. Such claims may

not be covered by insurance or may impose restrictions on the Group’s business operations. In such case, claims or outcomes

could have a material adverse effect on the Group’s reputation, business, financial position and results of operations.

Marine transportation is inherently risky, particularly in the extreme conditions in which many of the Group’s vessels will

operate.

An incident involving significant loss of product or environmental contamination by any of the vessels could harm the Group’s

reputation and business. Events such as marine disasters, adverse weather, mechanical failures, grounding, capsizing, fire,

explosions and collisions, piracy, cyber-attacks, human error, and war and terrorism may damage vessels and their cargoes and oil

production facilities. Accidents may cause death or injury to persons, loss of property, damage to the environment and natural

resources, delays in the delivery of cargo, loss of revenues from charters or contract of affreightment, liabilities or costs to recover

any spilled oil or other petroleum products, liabilities or costs to restore the eco-system affected by the spill, governmental fines,

penalties or restrictions on conducting business, higher insurance rates, and damage to reputation and customer relationships

generally, any of which could have a material adverse effect on the Group’s business, financial condition and operating results. In

addition, any damage to, or environmental contamination involving, oil production facilities serviced could suspend that service and

result in loss of revenues.

Competition and other factors may affect demand for the Group’s services.

The demand for the Group’s services may be volatile and will be subject to variations for a number of reasons, including factors

such as uncertainty in demand for the relevant products, declines in oil and natural gas markets, competition (including by other

companies that may have greater resources than the Group), slowdowns in economic activities, or regulatory changes.

Furthermore, the demand for shuttle tankers is invariably based on the developments of new oil fields in addition to the continuing

production of fields on stream. Environmental protection of certain geographical areas, tax increases, and a decline oil price are

examples which could lead to a decline in new developments and as a result may decrease demand. Subject to the terms of an

omnibus agreement between the Issuer, the Partnership, its general partner and other former affiliates of the Partnership, including

Teekay Corporation, and its affiliates may engage in competition with the Group.

Fluctuations in interest rates may materially affect the Group’s operating results.

The Group is exposed to the impact of interest rate changes, primarily through the Group's floating-rate borrowings that require the

Group to make interest payments based on LIBOR. If interest rates increase, the Group’s debt service obligations on the variable

rate indebtedness would increase even though the amount borrowed remained the same, and the Group's net income and cash

available for servicing our indebtedness would decrease. The Group may or may not hedge its floating interest rate exposure under

existing or future financing arrangements.

LIBOR is furthermore the subject of recent national, international and other regulatory guidance and proposals for reform. In March

2021, the UK Financial Conduct Authority, which regulates LIBOR, announced that it will cease the publication of LIBOR after

December 31, 2021, with the exception of certain tenors of U.S. dollar LIBOR which will cease publication after June 30, 2023. It is

unclear whether an extension will be granted or new methods of calculating LIBOR will be established such that it continues to exist

after the scheduled expiration dates, or if alternative rates will be adopted. Global regulators are working with the financial sector to

transition away from the use of LIBOR and towards the adoption of alternative reference rates. For example, the U.S. Federal

Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial

institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed

by Treasury securities (or SOFR). SOFR is observed and backward-looking, which stands in contrast with LIBOR under the current

methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel

members. Whether or not SOFR attains market acceptance as a LIBOR replacement tool remains in question and there can be no

assurance that the transition to a new benchmark rate or other financial metric will be an adequate alternative to LIBOR or produce

the economic equivalent of LIBOR. As a result, it is not possible at this time to know the ultimate impact that a phase-out of LIBOR

may have.

The results of the Group’s shuttle tanker operations in the North Sea are subject to seasonal fluctuations.

Due to harsh winter weather conditions, oil field operators in the North Sea typically schedule oil platform and other infrastructure

repairs and maintenance during the summer months. Because the North Sea is one of the Group’s primary existing offshore oil

markets, this seasonal repair and maintenance activity contributes to quarter-to-quarter volatility in the Group’s results of

operations, as oil production typically is lower in the second and third quarters in this region compared with production in the first

and fourth quarters. Such volatility may cause fluctuations in the quarterly results of the Group which may have a negative effect on

the ability of the Issuer to service its debt on a quarterly basis. Should the effect of such seasonal fluctuations exceed what is

common or expected, for instance if fields experience longer maintenance shutdown times than expected, this may have an

adverse effect on the Group's business, operating results or financial condition.

Because a portion of the Group’s North Sea shuttle tankers operate under contracts of affreightment (CoAs), under which revenue

is based on the volume of oil transported, the results of these shuttle tanker operations in the North Sea under these contracts

generally reflect this seasonal pattern of transport demand. Additionally, when the Group redeploys affected shuttle tankers as

conventional oil tankers while platform maintenance and repairs are conducted, the overall financial results for the North Sea shuttle

tanker operations may be negatively affected as the rates in the conventional oil tanker markets are usually lower than CoA rates. In

addition, the Group seeks to coordinate some of the general dry-docking schedule of its fleet with this seasonality, which may result

in lower revenues and increased dry-docking expenses during the summer months.

The Group may not be able to generate sufficient cash to service all of its indebtedness and may be forced to take other

actions to satisfy the obligations under its indebtedness, which may not be successful.

Given volatility associated with the Group's business and industry, and in particular a decline in oil prices which in turn will

negatively impact the demand for the Groups services, or a general deterioration of the global economic environment, particularly in

Brazil, Norway and Canada (the "Primary Jurisdictions"), the Group's future cash flow may be insufficient to meet the Group's debt

obligations and other commitments. Any insufficiency could negatively impact the Group's business. A range of economic,

competitive, business and industry factors, including those beyond the Group's control, will affect future financial performance, and,

as a result, the Group's ability to generate cash flow from operations and to pay the Group's debt obligations. If the Group's cash

flows and capital resources are insufficient to fund the Group's debt service obligations and other commitments, the Group may be

forced to reduce or delay planned investments and capital expenditures, or to sell assets, seek additional financing in the debt or

equity markets or restructure or refinance the Group's indebtedness. The Group's ability to restructure or refinance its indebtedness

will depend on the condition of the capital markets and the Group's financial condition at such time. Any refinancing of the Group's

indebtedness could be at higher interest rates and may require the Group to comply with more onerous covenants, which could

further restrict the Group's business operations. There can be no assurance that any such sources of financing will be available to

us on acceptable terms, if at all. In addition, any failure to make payments of interest and principal on the Group's outstanding

indebtedness on a timely basis would likely result in a reduction of the Group's credit rating, which could harm the Group's ability to

incur additional indebtedness. In the absence of sufficient cash flows and capital resources, the Group could face substantial

liquidity problems and may be required to dispose of material assets or operations to meet the Group's debt service and other

obligations. The Group may not be able to consummate those dispositions or to obtain the proceeds that the Group could have

realized from them and any proceeds may not be adequate to meet any debt service obligations then due. These alternative

measures may not be successful and may not permit the Group to meet our debt service obligations.

The international nature of the Group's operations may make the outcome of any bankruptcy proceedings difficult to

predict.

The Company was formed under the laws of the Republic of the Marshall Islands and the Subsidiaries were formed or incorporated

under the laws of the Marshall Islands, Norway, Singapore and certain other countries besides the United States, and the Group

conducts operations in countries around the world. Consequently, in the event of any bankruptcy, insolvency, liquidation, dissolution,

reorganization or similar proceeding involving the Group or any of our subsidiaries, bankruptcy laws other than those of the United

States could apply. We have limited operations in the United States. If we become a debtor under U.S. bankruptcy law, bankruptcy

courts in the United States may seek to assert jurisdiction over all of the Group's assets, wherever located, including property

situated in other countries. There can be no assurance, however, that the Group would become a debtor in the United States, or

that a U.S. bankruptcy court would be entitled to, or accept, jurisdiction over such a bankruptcy case, or that courts in other

countries that have jurisdiction over the Group and the Group's operations would recognize a U.S. bankruptcy court’s jurisdiction if

any other bankruptcy court would determine it had jurisdiction.

Because the Company is organized under the laws of the Marshall Islands, it may be difficult to serve the Company with

legal process or enforce judgments against it, or its directors or management.

The Company is organized under the laws of the Marshall Islands, and all of the Group’s assets are located outside of the United

States. The Group’s business is operated primarily from its offices in Norway, Canada, the United Kingdom and Singapore. As a

result, it may be difficult or impossible to bring an action against the Company or against these individuals in the United States.

Even if successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict

the enforcement of a judgment against the Company’s assets.

As a Marshall Islands limited liability company, the Issuer’s operations may be subject to the economic substance

requirements which could harm its business.

Finance ministers of the EU rate jurisdictions for tax transparency, governance, real economic activity and corporate tax rate.

Countries that do not adequately cooperate with the finance ministers are put on a “grey list” or a “blacklist”. EU member states

have agreed upon a set of measures, which they can choose to apply against the listed countries, including increased monitoring

and audits, withholding taxes, special documentation requirements and anti-abuse provisions. The European Commission has

stated it will continue to support member states' efforts to develop a more coordinated approach to sanctions for the listed countries

in 2019. EU legislation prohibits EU funds from being channeled or transited through entities in countries on the blacklist. The

Company is a Marshall Islands limited liability company which is strategically managed at board level from the UK, and therefore

also tax resident in the UK. A number of its subsidiaries are also organized in the Marshall Islands. The Marshall Islands is not

currently on any EU blacklist (having been removed from the blacklist in 2019). There can be no assurance however that The

Marshall Islands will not in the future again be placed on the blacklist, which may impact the transfer of funds through the Group.

A cyber-attack could materially disrupt the Group's business.

Rapid digitalization in the marine and offshore industry has led to increased reliance on information technology systems and

networks in our operations and the administration of the Group's business. Our threat analysis and security tools reports show that

cyber-attacks have increased in number and sophistication in recent years. The Group's operations could be targeted by individuals

or groups seeking to sabotage or disrupt the Group's information technology systems and networks or to steal data. A successful

cyber-attack could materially disrupt the Group's operations, including the safety of the Group's operations, or lead to the

unauthorized release of information or alteration of data on the Group's systems. Any such attack or other breaches of our

information technology systems could have a material adverse effect on the Group's business and results of operations.

Risks related to the countries in which the Group operates

Political and economic policies of the governments of the Primary Jurisdictions may affect the Group’s business and

results of operations.

Substantial portion of the Group’s principal assets and operations are located in the Primary Jurisdictions. Any adverse change in

the economic conditions or political environment or government policies in the Primary Jurisdictions could have a material adverse

effect on the overall economic growth and the level of investments and expenditures in the Primary Jurisdictions, which in turn could

lead to a reduction in demand for shuttle tanker services and, consequently, have a material adverse effect on the Group’s

business, financial condition and results of operations. If the governments of the Primary Jurisdictions should impose greater

restrictions on foreign companies and investors, the Group’s business, financial condition and results of operations could be

materially and adversely affected.

Allegations of improper payments may harm the Group’s reputation and business.

The Group may be subject to allegations of improper payments made to authorities at state-controlled enterprises in Brazil or other

jurisdictions. In spite of the Group’s policy of observance of the highest ethical standards, any such allegation, were it to be

substantiated, may give rise to penalties, fines or contract disputes, any of which could materially and adversely affect the Group’s

business, financial condition and results of operations. Any such allegation, whether or not substantiated, could harm the Group’s

reputation. In May 2016, a former executive of Transpetro, the transportation and logistics subsidiary of Petrobras, alleged in a plea

bargain that a subsidiary of Altera Infrastructure that is now a subsidiary of the Company, along with other shipping companies,

purportedly made improper payments to local Brazilian agents between 2004 and 2006 in an aggregate amount of approximately

1.5 million Brazilian Reals (less than $0.4 million at the December 31, 2018 exchange rate). An extensive internal investigation was

conducted, with the assistance of United States, Brazilian and Norwegian counsel and forensic accountants, to evaluate these

allegations. Based on the information reasonably available and reviewed as part of the investigation, the investigation did not

identify conclusive proof that any of the alleged improper payments were made or that any of the Group’s current or former

employees intended for the alleged improper payments to be made. However, there is no assurance the conclusions of the

investigation are accurate or will not be challenged, or that other information may exist or become available that would affect such

conclusions, and such conclusions are not binding on regulatory or governmental authorities. It is uncertain how these allegations

ultimately may affect the Group, if at all, including the possibility of penalties that could be assessed by relevant authorities. Any

claims against any member of the Group may adversely affect the Group’s reputation, business, financial condition and operating

results. As of the date of this Presentation, no legal or governmental proceedings are pending or, to the Company’s knowledge,

contemplated against any member of the Group relating to these allegations.

Uncertainties with respect to the legal systems of the Primary Jurisdictions could limit the protections available to the

Group.

The Group’s primary material agreements and operations are governed by laws which may be subject to uncertain interpretation. A

substantial portion of the Group’s assets and operations are located or conducted in the Primary Jurisdictions. If disputes arise in

connection with the Group’s assets or operations, the Group may be subject to the jurisdiction of the Primary Jurisdictions or other

foreign courts or arbitration tribunals and may not be successful in subjecting foreign persons, especially foreign oil ministries and

national oil companies, to the legal jurisdiction of the Primary Jurisdictions or other, desired legal jurisdictions. The uncertainties

under the laws of the Primary Jurisdictions, or the laws of other relevant countries, may impede the Group’s ability to enforce the

terms of any agreements entered into with the Group’s partners, service providers and suppliers that are governed by the laws of

the Primary Jurisdictions or other relevant countries.

The Issuer’s affiliate Altera Infrastructure Norway AS is subject to an ongoing investigation relating to suspected

violations of Norwegian pollution and export laws.

The investigations are currently ongoing and relate to the export of a shuttle tanker from the Norwegian Continental Shelf in 2018.

Whilst the Norwegian authorities continue their review of seized materials, the involved company has together with their advisors,

continued to review materials connected with such export and, having not identified that any such process breached any export

laws, continues to deny the allegations brought. Although the involved company is not in the Group, and the Group accordingly is

not directly involved or directly affected by the current investigations or allegations, there is a risk that the overall perception in the

market may cause reputational damage to the Group, which in turn may impact the overall financial performance of the Group. No

assurance can be made with respect to the results or timing of the ongoing review and investigations. Should the Norwegian

authorities conclude that Altera Infrastructure Norway AS has breached relevant export restrictions, this may result in fines against

the company as well as wider reputational damage to the Group.

Risk of war, other armed conflicts, piracy, increased hostilities and terrorist attacks.

War, military tension, revolutions, piracy and terrorist attacks, or increases in such events or activities, including current or future

tensions and the invasion of Ukraine by Russia, could create or increase instability in the world’s financial and commercial markets.

This may significantly increase political and economic instability in some of the geographic markets in which the Group operates or

may operate in the future, and may contribute to high levels of volatility in charter rates or oil prices. Hijacking as a result of an act

of piracy against any of the Group’s vessels, or an increase in cost or unavailability of insurance for such vessels, could have a

material adverse impact on the Group’s business, financial condition and results of operations.

In addition, oil facilities, shipyards, vessels, pipelines, oil fields or other infrastructure could be targets of future terrorist attacks or

warlike operations and the Group’s vessels could be targets of pirates, hijackers, terrorists or others. Armed conflicts, piracy,

increased hostilities, terrorism and their effects on the Group or its markets may materially and adversely affect the Group’s

business, financial position and operating results.

Following Russia’s invasion of Ukraine in February 2022, the U.S., several European Union nations, and other countries have

announced sanctions against Russia. The sanctions announced by the U.S. and other countries against Russia include, among

others, restrictions on selling or importing goods, services or technology in or from affected regions, travel bans and asset freezes

impacting connected individuals and political, military, business and financial organizations in Russia, severing large Russian banks

from U.S. and/or other financial systems, and barring some Russian enterprises from raising money in the U.S. market. The U.S.,

EU nations and other countries could impose wider sanctions and take other actions should the conflict further escalate. While it is

difficult to anticipate the potential for any indirect impact the sanctions announced to date may have on the Group's business and

the Group, any further sanctions imposed or actions taken by the U.S., EU nations or other countries, and any retaliatory measures

by Russia in response, such as restrictions on oil shipments from Russia, could lead to increased volatility in global oil demand

which, could have a material adverse impact on the Group's business, results of operations and financial condition.

Risks related to the taxation of the Group

The Issuer and its Subsidiaries may be subject to taxes in certain jurisdictions, which may reduce cash available for, inter

alia, debt service.

The Group is currently subject to taxation in certain jurisdictions in which its members are organized, own assets or have

operations, which could reduce the amount of cash available to service its debt obligations, and for other purposes. Due to the

international presence of the Group’s operations, the Group may become subject to taxation in new jurisdiction which, in the event

this should materialize, will further reduce the amount of cash available to service debt.

Future changes in tax legislation applicable to Group Companies may reduce net revenues.

The Group includes entities incorporated and resident for tax purposes in several different jurisdictions. Any changes to tax

legislation or practices in jurisdictions in which the Group entities are resident for tax purposes may have a material adverse effect

on the operating results or financial position of the Group.

Description of the Business

A shuttle tanker is a specialized ship designed to transport crude oil and condensates from offshore oil field installations to onshore

terminals and refineries. Shuttle tankers are equipped with sophisticated loading systems and dynamic positioning systems that

allow the vessels to load cargo safely and reliably even in harsh weather conditions. Shuttle tankers were developed in the North

Sea as an alternative to pipelines. The first cargo from an offshore field in the North Sea was shipped in 1977, and the first

dynamically-positioned shuttle tankers were introduced in the early 1980s. Shuttle tankers are often described as “floating pipelines”

because these vessels typically shuttle oil from offshore installations to onshore facilities in much the same way a pipeline would

transport oil along the ocean floor.

The Group's shuttle tankers are primarily subject to long-term, fixed-rate time-charter or contracts of affreightment for various fields.

The number of voyages performed under the contracts of affreightment depends mainly upon the oil production of each field.

Competition for charters is based primarily upon price, availability, the size, technical sophistication, age and condition of the vessel

and the reputation of the vessel’s manager. Shuttle tanker demand may be affected by the possible substitution of sub-sea pipelines

to transport oil from offshore production platforms. The shuttle tankers in our contract of affreightment fleet may operate in the

conventional spot market during downtime or maintenance periods for oil field installations, which provides increased utilization for

the fleet.

Operations and Fleet

The following table provides additional information about the Group's shuttle tankers, including newbuildings, as of December 31,

2021:

Vessel

Capacity

(dwt)

Built

Ownership

Positioning

System

Operating

Region

Contract

Type(1)

Charterer

Contract End

Date

Tide Spirit

129,830

2020

100%

DP2

North Sea

CoA

Aker BP, BP,

Capricorn,

ConocoPhillips,

DNO, Eni,

Enquest, Equinor,

Idemitsu,Ithaca,

Lundin, M Vest

Energy,

Molgrowest, NEO

Energy, OKEA,

OMV, ONE Dyas,

PGNiG, Premier

Oil, Repsol

Sinopec, Shell,

Taqa Bratani, Vår

Energi,

Wintershall Dea(3)

Scott Spirit

109,300

2011

100%

DP2

North Sea

CoA

Peary Spirit

109,300

2011

100%

DP2

North Sea

CoA

Nansen Spirit

109,300

2010

100%

DP2

North Sea

CoA

Amundsen Spirit

109,300

2010

100%

DP2

North Sea(2)

CoA

Petroatlantic

93,000

2003

100%

DP2

North Sea

CoA

Petronordic

93,000

2002

100%

DP2

North Sea

CoA

Ingrid Knutsen

111,600

2013

In-chartered

(until November

2022)

DP2

North Sea

CoA

Altera Wind

103,500

2021

100%

DP2

North Sea

CoA

Altera Wave

103,500

2021

100%

DP2

North Sea

CoA

Samba Spirit

154,100

2013

100%

DP2

Brazil

Shell

June 2023

Lambada Spirit

154,000

2013

100%

DP2

Brazil

Shell

August 2023

Bossa Nova Spirit

155,000

2013

100%

DP2

Brazil

Shell

Nov 2023

Sertanejo Spirit

155,000

2013

100%

DP2

Brazil

Shell

January 2024

Beothuk Spirit

148,200

2017

100%

DP2

Canada

ExxonMobil,

Canada Hibernia,

Chevron, Husky,

Mosbacher,

Murphy, Nalcor,

Equinor, Suncor(3)

May 2030(6)

Norse Spirit

148,200

2017

100%

DP2

Canada

May 2030(6)

Dorset Spirit

148,200

2018

100%

DP2

Canada

May 2030(6)

Altera Thule(7)

148,200

2022

100%

DP2

Canada

May 2030(6)

Navion Gothenburg

152,200

2006

50%(4)

DP2

Far-East

Spot

Nordic Brasilia

151,300

2004

100%

Far-East

Spot

Nordic Rio

151,300

2004

50%(4)

Far-East

Spot

Aurora Spirit

129,830

2020

100%

DP2

North Sea

Equinor(5)

March 2035

Rainbow Spirit

129,830

2020

100%

DP2

North Sea

Equinor(5)

March 2029

Current Spirit

129,830

2020

100%

DP2

North Sea

Equinor(5)

March 2023

Total capacity

3,126,820

(1)“CoA” refers to contracts of affreightment, "TC" refers to time charters, "NB" refers to newbuilding vessel.

(2)The Amundsen Spirit shuttle tanker was temporarily contracted to assist the East Coast of Canada fleet during the winter months of late-2021 and

early-2022.

(3)The charter agreements specify which shuttle tankers may be employed under the contract and the actual usage depends on the transport demand

(4)Owned through a partnership in which we have a 50% ownership interest.

(5)Under the terms of a master agreement with Equinor, the vessels are chartered under individual fixed-rate annually renewable time-charter contracts. The

number of vessels Equinor is committed to in-charter may be adjusted annually based on the requirements of the fields serviced and the charter end date

is based on the latest production forecast.

(6)The charterer may adjust the number of vessels servicing the East Coast of Canada contract by providing at least 24 months' notice.

(7)The newbuilding will operate in the East Coast of Canada.

Historically, the utilization of shuttle tankers in the North Sea is higher in the winter months due to rougher weather conditions and

oil production is at the highest as offshore installations perform turnarounds (a planned break in production) during the summer

months. Turnarounds affect oil production as the installations may be partly or fully closed down for maintenance for shorter periods

of time. This provides opportunities for repairs and maintenance on our vessels to be performed at the same time.

The table below provides a breakdown of revenues for our shuttle tanker segment by region:

Year Ended December 31,

2021

2020

(in thousands of U.S Dollars)

Norway(1)

280,974

288,279

Brazil(1)

99,990

101,694

Canada

109,366

110,366

United Kingdom(1)

—

4,507

Other

23,165

37,845

Total

513,495

542,691

(1)Reference to Norway, the United Kingdom and Brazil are to income from activities occurring on the Norwegian, the United Kingdom and Brazilian

continental shelves respectively.

Market

Shuttle tankers primarily operate in the North Sea, off the East Coast of Canada and Brazil. As of December 31, 2021, we owned 22

shuttle tankers, of which two are 50% owned, had one shuttle tanker under construction and chartered-in an additional shuttle

tanker. Other shuttle tanker owners include Knutsen, MOL and AET Tankers. The Group believes that it has competitive advantages

in the shuttle tanker market as a result of the quality, type and dimensions of its vessels combined with its market share in the North

Sea, Brazil and the East Coast of Canada.

Historically, the utilization of shuttle tankers in the North Sea is higher in the winter months, as favorable weather conditions in the

summer months provide opportunities for repairs and maintenance to vessels and to the offshore oil platforms. Downtime for repairs

and maintenance generally reduces oil production and, thus, transportation requirements.

Risk Management

The Group is exposed to the following risks: capital risk, liquidity risk, market risk (i.e. interest rate risk, foreign currency risk and

commodity risk) and credit risk. Refer to the information contained in this annual report under Note 25 - Financial Risk Management

in the Group's consolidated financial statements.

Based on the Group's working capital deficit, the Group will need to obtain additional sources of financing, in addition to amounts

generated from operations, to meet its obligations and commitments and the minimum liquidity requirements under its financial

covenants. These requirements include but are not limited to maintaining a minimum liquidity in an amount equal to the greater of

$35 million and 5% of total debt and a net debt to total capitalization ratio of no greater than 75%. During the year ended December

31, 2021, the Group completed various measures to improve its debt maturity profile and enhance its liquidity and financial

flexibility, including but not limited to exchanging $70 million of Brookfield debt with a 2022 maturity into debt with interest paid in

kind and with a 2026 maturity and issuing $180 million of new 2025 bonds. Refer to the information contained in this annual report

under Note 18 - Borrowings and Note 20 - Related Party Transactions in the Group's consolidated financial statements.

Other potential sources of financing that the Group is actively pursuing, or may consider pursuing, during the one-year period to

December 31, 2022, include entering into new debt facilities, borrowing additional amounts under existing facilities, the refinancing

or extension of certain borrowings, selling certain assets, seeking joint venture partners for the Group's business interests, entering

into sale-leaseback agreements and/or capital raises. Additional potential sources of amounts generated from operations include

the extensions and new opportunities for existing assets, higher utilization of the operating fleet, increased rates for vessels

operating in the spot market, and working capital optimizations.

The Group is actively pursuing or may pursue the financing initiatives described above, which it considers probable of completion

based on the Group’s history of being able to raise and refinance borrowings for similar types of vessels and based on the Group's

assessment of current conditions and estimated future conditions. The Group is in various stages of progression on these matters.

Based on the Group’s liquidity at the date of these consolidated financial statements, the liquidity it expects to generate from

operations over the following year, and by incorporating the Group's plans to raise additional liquidity that it considers probable of

completion, the Group expects that it will have sufficient liquidity to enable the Group to continue as a going concern for at least the

one-year period to December 31, 2022.

Review of 2021

Financing

In December 2021, the Group issued new $180 million 9.5% senior unsecured bonds (the 2025 Bonds) in the Norwegian bond

market that mature in December 2025. The Group used the net proceeds of this issuance plus cash on hand to repurchase $181

million principal amount of outstanding 7.125% senior unsecured $250 million bonds maturing in August 2022.

In December 2021, the Group's $70 million unsecured revolving credit facility provided by Brookfield, which was due in February

2022, and was fully drawn, was cancelled and replaced by the issuance to Brookfield of $70 million principal amount of 12.50%

senior unsecured PIK notes due 2026 (or the 12.50% PIK Notes). Interest on the 12.50% PIK Notes is payable biannually through

the issuance of additional 12.50% PIK Notes.

In February 2021, the Group entered into an unsecured revolving credit facility with Brookfield. The borrowings available under the

unsecured revolving credit facilities were $70 million and matured in February 2022. As described above, as part of the Brookfield

Exchanges, the $70 million credit facility was replaced by $70 million principal amount of 12.50% PIK Notes.

Shuttle Tanker Newbuildings

The Group's final newbuilding in a series of seven, the shuttle tanker, Altera Thule, delivered to the Group from the yard in March

2022. The Group plans to operate this vessel off the East Coast of Canada.

During the second quarter of 2021, the Group's fifth and sixth LNG-fueled E-shuttle tankers, the Altera Wave and Altera Wind,

commenced operations.

Sale of Vessels

In November 2021, the Group delivered the 2003-built Navion Stavanger shuttle tanker to its buyer for responsible recycling and

received total proceeds of $10 million, which was the approximate carrying value of the vessel.

In August 2021, the Group delivered the 1999-built Navion Anglia shuttle tanker to its buyer for responsible recycling and received

total proceeds of $6 million and recorded a gain on sale of the vessel of $1 million during the third quarter of 2021.

In June 2021, the Group delivered the 2001-built Stena Natalita shuttle tanker to its buyer for continued operations and received

total proceeds of $8 million, which was the approximate carrying value of the vessel.

In June 2021, the Group delivered the 1999-built Navion Oceania shuttle tanker to its buyer for continued operations and received

total proceeds of $11 million and recorded a gain on sale of the vessel of $3 million during the second quarter of 2021.

In May 2021, the Group delivered the 2001-built Navion Oslo shuttle tanker to its buyer for responsible recycling and received total

proceeds of $3 million, which was the approximate carrying value of the vessel.

COVID-19

During 2021 the Group did not experience any material business interruptions or direct material financial impact as a result of the

COVID-19 pandemic. The Group continues to focus on the safety of its operations and have introduced a number of proactive

measures to protect the health and safety of the Group's crews on its vessels as well as at onshore locations. A majority of the

Group's revenues are secured under medium-to-long-term contracts that should not be materially affected by any short-term

volatility in oil prices. The Group continues to closely monitor counterparty risk associated with its vessels under contract and will

work to mitigate any potential impact on the business.

The extent to which COVID-19 may impact the Group's results of operations and financial condition, including any possible

impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including new information

which may emerge concerning the severity of the virus or its variants, vaccination rates and the effectiveness of vaccines,

pandemic-related restrictions and other actions to contain or treat its impact, among others. Accordingly, an estimate of the future

impact cannot be made at this time.

Financial Review

The consolidated financial statements and separate financial statements for the years ended December 31, 2021 and December

31, 2020 have been prepared in accordance with the International Financial Reporting Standards. Except where specifically

identified, the financial information presented below has been prepared on a consolidated basis.

Operating Results

The following table presents certain of the Group's consolidated operating results for the years ended December 31, 2021 and

2020:

(in thousand of U.S. Dollars, except percentages)

Year Ended December 31,

2021

2020

Change

IFRS:

Revenues

513,495

542,692

(5.4)

Direct operating costs

(245,753)

(237,165)

3.6

General and administrative expenses

(30,180)

(17,942)

68.2

Depreciation and amortization

(172,716)

(162,966)

6.0

Interest expense

(81,644)

(74,878)

9.0

Interest income

739

(98.0)

Impairment expense, net

—

(35,259)

(100.0)

Gain (loss) on dispositions, net

3,644

(487)

(848.3)

Realized and unrealized gain (loss) on derivative instruments

(151)

(1,026)

(85.3)

Foreign currency exchange gain (loss)

(1,395)

1,734

(180.4)

Gain (loss) on modification of financial liabilities, net

(10,532)

—

100.0

Other income (expenses), net

(276)

(1,514)

(81.8)

Income before income tax (expense) benefit

(25,493)

13,928

(283.0)

Income tax (expense) benefit

Current

(3,252)

(4,166)

(21.9)

Deferred

3,667

(1,830)

(300.4)

Net income

(25,078)

7,932

(416.2)

Non-IFRS:

EBITDA(1)

228,852

250,995

(8.8)

Adjusted EBITDA(1)

237,724

274,191

(13.3)

(1)EBITDA and Adjusted EBITDA are non-IFRS financial measures. Please refer to "Non-IFRS Financial Measures" below for definitions of these measures

and for reconciliations of them with the most directly comparable financial measures calculated and presented in accordance with IFRS.

Revenues

Revenues decreased to $513 million, for the year ended December 31, 2021, compared to $543 million the same period last year,

primarily due to:

•a decrease of $24 million due to the redelivery to us of the Navion Anglia, Navion Bergen and Navion Gothenburg during 2020;

•a decrease of $19 million due to termination of the Foinaven CoA contract in May 2021;

•a decrease of $17 million due to lower rates in the conventional tanker market in which our vessels occasionally operate; and

•a decrease of $5 million due to lower average CoA rates;

partially offset by

•an increase of $14 million due to an increase in operating days under a master agreement with Equinor ASA;

•an increase of $8 million due to compensation for contractual dry-docking obligations not performed by the charterer upon

redelivery of the Navion Gothenburg;

•an increase of $9 million due to the timing of reimbursable bunker purchases (offset in direct operating costs below); and

•an increase of $5 million due to reduced off hire days.

Direct Operating Costs

Direct operating costs increased to $246 million, for the year ended December 31, 2021, compared to $237 million the same period

last year, primarily due to:

•an increase of $12 million due to transit costs from Korea to the North Sea and mobilization and testing in the North Sea of the

Current Spirit, Tide Spirit, Altera Wave, and Altera Wind;

•an increase of $9 million due to the timing of reimbursable bunker purchases (offset in revenue above);

•an increase of $6 million due to repair and maintenance costs from the re-delivery to us of the Navion Gothenburg in

early-2021; and

•an increase of $5 million due to certain vessels migrating from time charter contracts to CoA contracts during the current year;

partially offset by

•a decrease of $17 million due to the Stena Sirita, Navion Hispania, Navion Bergen, Stena Natalita, Navion Oslo, Navion

Oceania and Navion Anglia leaving the fleet; and

•a decrease of $8 million due to less time-charter hire in 2021 compared to 2020.

General and Administrative Expenses

General and administrative expenses increased to $30 million, for the year ended December 31, 2021, compared to $18 million for

the same period last year.

Depreciation and Amortization

Depreciation and amortization expense increased to $173 million, for the year ended December 31, 2021, compared to $163 million

for the same period last year, primarily due to four shuttle tanker newbuildings entering the fleet in late-2020 and early-2021,

partially offset by the sale and impairment of certain vessels.

Interest Expense

Interest expense increased to $82 million for the year ended December 31, 2021, compared to $75 million the same period last

year, primarily due to higher outstanding related party borrowings and an increase in the total amount drawn under our secured

borrowings related to the newbuilding program.

Impairment Expense, Net

Impairment expense, net was $nil for 2021, as there were no impairments recorded for within the Group in 2021. Impairment

expense, net of $35 million for 2020 was related to a $17 million impairment recorded on the Navion Gothenburg, $8 million on the

Navion Oslo, $4 million on the Navion Bergen, $4 million on the Navion Stavanger, and $3 million on the Navion Anglia.

The average size of our owned shuttle tanker fleet decreased for 2021, compared to 2020, primarily due to the sales of the Navion

Oslo in May 2021, the Navion Oceania and Stena Natalita in June 2021, the Navion Anglia in August 2021 and the Navion

Stavanger in November 2021, partially offset by the deliveries of the Altera Wave in January 2021 and Altera Wind in March 2021.

The average size of our chartered-in fleet decreased from two vessels to one for 2021, compared to 2020, primarily due to the

redelivery of one vessel in September 2020.

Gain (Loss) on Dispositions, Net

Gain (loss) on dispositions, net was $4 million for the year ended December 31, 2021, compared to $nil for the same period last

year. During 2021 the Company sold five vessels and recognized a gain of $3 million relating to Navion Oceania and $1 million

relating to Navion Anglia. The remaining three vessels were sold at their approximate carrying values.

Foreign Exchange Gain (Loss)

Foreign currency exchange loss was $1 million for the year ended December 31, 2021, compared to a gain of $2 million for the

same period last year. Our foreign currency exchange gain (loss) is primarily related to period-end revaluations of NOK-

denominated monetary assets and liabilities for financial reporting purposes. Gains on NOK-denominated net monetary liabilities

reflect a stronger U.S. Dollar against the NOK on the date of revaluation or settlement compared to the rate in effect at the

beginning of the period. Losses on NOK-denominated net monetary liabilities reflect a weaker U.S. Dollar against the NOK on the

date of revaluation or settlement compared to the rate in effect at the beginning of the period.

Gain (loss) on modification of financial liabilities, net

Loss on modification of financial liabilities, net was $11 million for the year ended December 31, 2021, compared to $nil for 2020.

This was due to the refinancing activities related to the $180 million unsecured bonds issued in December 2021 including the above

par repurchase of $181.2 million of the Company's pre-existing 7.125% senior unsecured $250.0 million bonds maturing in August

2022.

Income Tax (Expense) Benefit

Income tax expense was $nil for the year ended December 31, 2021, as compared with $6 million for the same period last year.

Adjusted EBITDA

Adjusted EBITDA decreased to $238 million for the year ended December 31, 2021, compared to $274 million for the same period

last year. This decrease was primarily due to a decrease in revenue of $30 million, as described above, an increase in direct

operating costs of $9 million, as described above, and an increase in general and administrative costs of $12 million, as described

above, partially offset by an absence of EBITDA impacts attributable to non-controlling interests of $11 million.

Non-IFRS Financial Measures

To supplement the consolidated financial statements, the Group uses EBITDA and Adjusted EBITDA, which are non-IFRS financial

measures, as measures of performance. EBITDA is calculated as net income (loss) before interest expense, interest income,

income tax (expense) benefit, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude certain items

whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating

performance. Such adjustments include impairment expenses, gain (loss) on dispositions, net, unrealized gain (loss) on derivative

instruments, foreign currency exchange gain (loss) and certain other income or expenses. Adjusted EBITDA excludes realized gain

or loss on interest rate swaps, as the Group, in assessing its performance, view these gains or losses as an element of interest

expense, realized gain or loss on derivative instruments resulting from amendments or terminations of the underlying instruments,

and realized gain or loss on foreign currency forward contracts. Adjusted EBITDA also excludes the non-controlling interests'

proportionate share of Adjusted EBITDA.

EBITDA and Adjusted EBITDA is intended to provide additional information and should not be considered as the sole measures of

the Group's performance or as a substitute for net income (loss) or other measures of performance prepared in accordance with

IFRS. In addition, these measures do not have a standardized meaning and may not be comparable to similar measures presented

by other companies. These non-IFRS measures are used by the Group's management, and the Group believes that these

supplementary metrics assist investors and other users of the Group's financial reports in comparing its financial and operating

performance across reporting periods and with other companies.

The following table reconciles EBITDA and Adjusted EBITDA to net income (loss) for the years ended December 31, 2021 and

2020:

Year Ended December 31,

2021

2020

Net income (loss)

(25,078)

7,932

Less:

Depreciation and amortization

(172,716)

(162,928)

Interest expense

(81,644)

(74,878)

Interest income

739

Income tax (expense) benefit

Current

(3,252)

(4,166)

Deferred

3,667

(1,830)

EBITDA

228,852

250,995

Less:

Impairment expense, net

—

(35,259)

Gain (loss) on dispositions, net

3,644

(487)

Realized and unrealized gain (loss) on derivative instruments

(151)

(1,026)

Foreign currency exchange gain (loss)

(1,395)

1,734

Gain (loss) on modification of financial liabilities, net

(10,532)

—

Other income (expenses), net

(276)

(1,514)

Adjusted EBITDA attributable to non-controlling interests(1)

(162)

10,988

Add:

Realized gain (loss) on foreign currency forward contracts

—

(2,369)

Other

—

Adjusted EBITDA

237,724

274,191

(1)Adjusted EBITDA attributable to non-controlling interests, which is a non-IFRS financial measure and should not be considered as an alternative to

net income (loss) attributable to non-controlling interests in subsidiaries or any other measure of financial performance presented in accordance

with IFRS, represents the non-controlling interests' proportionate share of Adjusted EBITDA (as defined above) from the Group's consolidated joint

ventures. This measure does not have a standardized meaning, and may not be comparable to similar measures presented by other companies.

Adjusted EBITDA attributable to non-controlling interests is summarized in the table below:

Year Ended December 31,

2021

2020

Net income (loss) attributable to non-controlling interests in subsidiaries

(6,840)

(7,374)

Less:

Depreciation and amortization

(6,163)

(6,087)

Interest expense, net of interest income

(368)

(887)

Other income (expenses), net

(150)

—

EBITDA

(159)

(400)

Less:

Impairment expense, net

—

(11,218)

Gain (loss) on dispositions, net

—

(43)

Foreign currency exchange gain (loss)

(127)

Adjusted EBITDA attributable to non-controlling interests

(162)

10,988

Liquidity and Capital Resources

Liquidity and Cash Needs

Liquidity and capital requirements are managed through cash flows from operations, use of credit facilities and refinancing existing

debt. The Group aims to maintain sufficient financial liquidity to meet its ongoing operating requirements.

The Group's primary liquidity needs for the next twelve months are to pay existing committed capital expenditures related to the shuttle

tanker newbuilding program, to make scheduled repayments of borrowings and related interest rate swaps, to pay debt service costs,

to pay operating expenses and dry-docking expenditures, to fund general working capital requirements, to settle potential claims

against us and to manage our working capital deficit.

The following table presents the Group's liquidity measures as at December 31, 2021 and December 31, 2020:

Year Ended December 31,

2021

2020

Cash and cash equivalents

124,257

169,447

Total liquidity(1)

124,257

169,447

Working capital surplus (deficit)

(26,647)

141,171

(1)Defined as cash, cash equivalents and undrawn revolving credit facilities

The working capital deficit of $27 million as at December 31, 2021 has decreased from a working capital surplus of $141 million as at

December 31, 2020. The decrease is primarily related to a decrease in financial assets of $79 million, mainly relating to amounts held

in escrow for a shuttle tanker newbuilding yard installment payment as at December 31, 2020, a decrease in cash and cash equivalents

of $45 million and an increase in current borrowings of $30 million.

Primarily as a result of the working capital deficit and committed capital expenditures, during the one-year period from December 31,

2021, the Group will need to obtain additional sources of financing, in addition to amounts generated from operations, to meet the

Group's obligations and commitments and minimum liquidity requirements under the Group's financial covenants in its credit facilities.

During the year ended December 31, 2021, the Group completed various measures to improve its debt maturity profile and enhance its

liquidity and financial flexibility. Refer to the information contained in this annual report under Note 2b - Going Concern in the Group's

consolidated financial statements.

As at December 31, 2021, the Group had total borrowings outstanding of $1500 million compared to $1629 million as at December 31,

2020. The borrowings consisted of the following:

Year Ended December 31,

2021

2020

U.S. Dollar Revolving Credit Facilities

301,387

369,600

U.S. Dollar Term Loans

671,832

714,001

U.S. Dollar Bonds

449,342

451,097

U.S. Dollar Non-Public Bonds

77,286

94,448

Total principal

1,499,847

1,629,146

The table below outlines the Group's consolidated net debt to capitalization as at December 31, 2021 and December 31, 2020:

Year Ended December 31,

2021

2020

Borrowings

1,477,772

1,605,500

Obligations relating to leases

199,107

139,238

Less:

Cash and cash equivalents

124,257

169,447

Net debt

1,552,622

1,575,291

Total equity

420,837

551,248

Total capitalization (1)

2,097,716

2,295,986

Net debt to capitalization ratio (2)

74%

69%

(1)Total capitalization is calculated as the sum of borrowings, obligations relating to finance leases and total equity.

(2)Defined as net debt divided by total capitalization. The metric is relevant to certain covenants for the Group.

The increase in the net debt to capitalization ratio to 74% for the year ended December 31, 2021 was primarily due to a distribution of

$125 million to Altera Infrastructure Holdings L.L.C. during the year, a $60 million increase in Obligations relating to leases, and a $45

million decrease in Cash and cash equivalents, partially offset by a $128 million decrease in Borrowings.

Cash Flows

The following table summarizes our sources and uses of cash for the periods presented:

Year Ended December 31,

2021

2020

Net operating cash flow

159,099

206,838

Net financing cash flow

(115,698)

259,452

Net investing cash flow

(89,569)

(433,297)

Operating Cash Flows

Net cash flow from operating activities decreased to $159 million for 2021, compared to an $207 million for 2020, primarily due to a

decrease in revenues, an increase in direct operating costs, an increase in general and administrative expenses and an increase in

depreciation in the current period. Refer to "Consolidated Results of Operations" above.

Financing Cash Flows

The Group's proceeds from borrowings, net of financing costs, were $201 million for year ended December 31, 2021, and $304 million

for the same period last year.

The Group actively manages the maturity profile of its outstanding financing arrangements. The Group's repayments of its borrowings

were $330 million for the year ended December 31, 2021, compared to $100 million for the same period last year. The increase in

repayments and prepayments is mainly due to a $181 million repurchase of the Group's $250 million unsecured shuttle bond during

2021, E-Shuttle newbuilding deliveries, bond refinancing and repayment of a loan facility.

The Group's proceeds from borrowings, net of financing costs and scheduled repayments, related to the sale and leaseback of vessels,

were $59 million and $118 million for the year ended December 31, 2021 and 2020, respectively. The gross proceeds were used to

fund installment payments on certain of the shuttle tanker newbuildings.

Lease payments on the Group's vessel in-charter leases and office leases were $11 million and $18 million for the year ended

December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, the Group entered into an unsecured credit facility with Brookfield. As of December 31,

2021, the revolving credit facility provided for total borrowings of up to $70 million. During the year ended December 31, 2021, the

Group drew down $70 million related to this credit facility. As at December 31, 2021, the Group's unsecured revolving credit facilities

with Brookfield had been replaced by the 12.50% PIK Notes. Refer to the information contained in this annual report under Note 20a -

Related Party Transactions in the Group's consolidated financial statements.

Cash contributions received from the sole member Altera Infrastructure Holdings L.L.C. were $11 million and $nil for the year ended

December 31, 2021 and 2020, respectively.

Cash distributions paid to the sole member Altera Infrastructure Holdings L.L.C. were $125 million and $40 million for the year ended

December 31, 2021 and 2020, respectively.

Capital contribution by non-controlling interests were $18 million and $nil for the year ended December 31, 2021 and 2020,

respectively, while distributions to non-controlling interests were $9 million and $5 million for the year ended December 31, 2021 and

2020, respectively.

Investing Cash Flows

During the year ended December 31, 2021, net cash flow used for investing activities was $90 million, primarily related to $201 million

of additions to vessels and equipment, including installment payments for the delivery of two shuttle tanker newbuildings, partially offset

by a $74 million decrease in restricted cash and $38 million proceeds related to the sale of certain vessels.

Contractual Obligations

In the ordinary course of business, the Group enters into contractual arrangements that may require future cash payments. The table

below outlines our contractual obligations as at December 31, 2021:

Payments as at December 31, 2021

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Secured debt - scheduled repayments (1)

467.3

95.7

98.9

63.2

37.7

30.8

141.0

Secured debt - repayments on maturity (1)

583.2

—

211.9

173.6

—

197.7

—

Bond repayments (1)

449.3

69.3

—

200.0

180.0

—

Obligations related to leases (1)

201.7

11.3

145.2

12.5% Unsecured PIK notes (2)

70.4

—

70.4

—

Derivative instruments (3)

1.3

—

Foreign currency forward contracts (3)

33.0

—

Lease liabilities (4)

11.6

11.4

0.2

—

Newbuilding contracts (5)

74.0

—

Total

1,891.8

296.0

322.3

448.1

229.0

310.2

286.2

(1)Our interest-bearing obligations include bonds, commercial bank debt, and obligations related to finance leases. Refer to the information contained

in this annual report under Note 18 – Borrowings and Note 11 – Advances on Newbuilding Contracts in the Group's consolidated financial

statements for terms upon which future interest payments are determined,

(2)Consists of 12.5% Unsecured PIK notes. Refer to the information contained in this annual report under Note 20a – Related Party Transactions in

the Group's consolidated financial statements.

(3)Refer to the information contained in this annual report under Note 17 – Other Financial Liabilities in the Group's consolidated financial statements

for a summary of the terms of our derivative instruments which economically hedge certain of our floating rate interest-bearing obligations .

(4)Consists of the undiscounted contractual maturities of our lease liabilities. Refer to the information contained in this annual report under Note 9 –

Right-of-use Assets and Lease Liabilities in the Group's consolidated financial statements.

(5)Consists of the estimated remaining payments for the acquisition of three shuttle tanker newbuildings. Refer to the information contained in this

annual report under Note 11 – Advances on Newbuilding Contracts in the Group's consolidated financial statements.

Off-Balance Sheet Arrangements

The Group has no off-balance sheet arrangements that have or are reasonably likely to have, a current or future material effect on its

financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital

resources.

Related Party Transactions

The Group entered into a number of related party transactions as described in Note 20 of the Group's consolidated financial

statements.

Dividends

The Group paid dividend cash distributions $125 million to Altera Infrastructure L.L.C. (2020 - paid dividend cash distributions of $40

million and distributed $100 million in kind to Altera Infrastructure Holdings L.L.C in the form of a receivable owing from Gina Krog

Offshore Pte. Ltd. during 2020). In December 2021, the Group issued $180 million in senior unsecured bonds in the Norwegian bond

market that mature in December 2025. The bonds are non-callable for three years and all distributions by the Group have been

suspended for the life of the bonds.

Health, Safety and Environment

Safety and environmental compliance are the Group’s top operational priorities. Operations of the Shuttle Tankers are managed by

indirect subsidiaries of Altera Infrastructure (collectively, the Fleet Manager) in a manner intended to protect the safety and health of

employees, the general public and the environment. The Group and Fleet Manager actively manage the risks inherent in the Group’s

business and are committed to eliminating incidents that would threaten safety and integrity of the vessels and equipment. The Group

is subjected to rigorous internal audits of its processes and seafarers are provided with training to improve the safety culture in the fleet.

The Group is also committed to reducing emissions and waste generation.

The Fleet Manager is responsible for providing technical management services for all of the Group’s vessels. The Fleet Manager

provides expertise in various functions critical to the Group’s operations, resulting in a safe, efficient and cost-effective operation. The

Fleet Manager uses in the Group’s operations to perform a thorough risk management program that includes, among other things,

computer aided risk analysis tools, maintenance and assessment programs, a seafarer competence training program, seafarer

workshops and member in emergency response organizations.

The Group expects to benefit from Altera Infrastructure’s commitment to safety and environmental protection. Altera Infrastructure

complies with the standards reflected in the International Management Code for the Safe Operation of Ships and for Pollution

Prevention (or ISM Code), the International Standards Organization’s (or ISO) 9001 for Quality Assurance, ISO 14001 for

Environmental Management Systems, ISO 45001 for Occupational Health and Safety and the Maritime Labour Convention 2006 (or

MLC 2006) and is certified by DNV-GL. Compliance with these standards is confirmed on a yearly basis by auditing procedures that

includes both internal audits as well as external verification audits by DNV-GL and applicable flag states.

Strategy and Outlook

The Group is expected to continue to generate solid cash flows during 2022. The Group's near-to-medium term business strategy is

primarily to focus on extending contracts and redeploying existing assets on long-term charters, repaying or refinancing scheduled debt

obligations and pursuing additional growth projects. Over the long-term, the Group intends to continue its practice of primarily acquiring

vessels as needed for approved projects only after the medium-to-long-term charters for the projects have been awarded, rather than

ordering vessels on a speculative basis.

Based on the Group's liquidity at the date of this Annual Report, the liquidity it expects to generate from operations during 2022, and

incorporating the Group's plans to raise additional liquidity that it considers probable of completion, the Group expects that it will have

sufficient liquidity to enable the Group to continue as a going concern for at least the one-year period to December 31, 2022.

GOVERNANCE

Administrative, management and supervisory bodies

The General Partner manages Altera Infrastructure, which indirectly owns the Group. Accordingly, the General Partner controls

appointments to the board of the group (Altera Shuttle Tankers L.L.C). The General Partner does not have any officers other than its

secretary. The Board of Directors for the General Partner is the ultimate supervising board. Pursuant to services agreements,

employees of certain subsidiaries of Altera Infrastructure provide various services to the Group, including substantially all of their

managerial, operational and administrative services and other technical and advisory services.

Board of Directors

The following table presents certain information concerning our Board of Directors. Ages of the Directors and Officers are as of

December 31, 2021:

Name

Age

Position

Giles Mark Mitchell

President & Director

William James Duthie

Secretary & Director

William James Delday

Director

General principles for Corporate Governance

The Company is a wholly-owned subsidiary of Altera Infrastructure L.P. (the Partnership and together with its subsidiaries, the Altera

Infrastructure Group). The Altera Infrastructure Group has group-wide Corporate Governance Guidelines including our Code of

Conduct. These guidelines, together with the charters of the General Partner Board Committees and applicable provisions of the

Partnership's partnership agreement, provide the framework for the Partnership's and the Altera Infrastructure Group’s corporate

governance. The Guidelines regulates the General Partner’s Board and Committees' operations.

The Board of the Company interacts with the board of the Partnership in matters relating to the governance practices of the Company.

Our core values of trust and accountability reflect our belief in conducting business ethically and in compliance with all applicable

requirements regarding anti-corruption, international trade controls, competition, privacy, and human and labour rights.

We communicate our Code of Conduct and supporting requirements extensively internally and require our board members and

employees to confirm their commitment to the Code of Conduct in writing annually in connection with annual Code of Conduct training.

As our vessels operate all over the world, we rely on a vast global network of suppliers to support our operations. Therefore, our Code

of Conduct is made available to our stakeholders on our website and is incorporated by reference in our general terms and conditions.

We rely on a rigorous set of tools to integrate business ethics and compliance into our decision-making, including:

(i)Focused compliance risk assessments of ongoing operations and new undertakings to appraise the strength of our

compliance program and inform our consideration of new business opportunities;

(ii)A rigorous risk-based due diligence process for potential suppliers, customers, and counterparties fully integrated with our

master financial system;

(iii)Regular sanctions and restricted-party screenings of suppliers and customers;

(iv)Compliance review of proposed business transactions;

(v)Mandatory annual compliance training for governance board members, employees, and contract staff and additional targeted

training for those with the higher exposure to compliance risks; and

(vi)Hospitality and conflict of interest disclosure and approval requirements.

Additionally, we have several group-wide policies:

Global Whistleblower Policy

Policy statement: "Altera Infrastructure Group shall maintain procedures to allow for its Employees to anonymously report

whistleblowing concerns and to ensure that such reports are properly received, retained, and handled."

Global Anti-Corruption policy

Policy statement: "Altera will comply with all applicable law prohibiting bribery and corruption and we strictly prohibit corruption of any

kind. We do not engage in Bribery or Facilitation Payments (as defined herein) and you must never do so on our behalf."

Global Competition Policy

Policy statement: "Altera strictly prohibits activities that infringe applicable competition law. We do not engage in anti-competitive

agreements such as price fixing, bid rigging, market allocation, improper sharing of competition-sensitive information, or collective

boycotts, and you must never do so on our behalf. In situations where we are or may become dominant in a particular market, we do

not engage in abusive market conduct such as predatory, discriminatory, or excessive pricing, loyalty rebates, or refusing to supply,

and you must never do so on our behalf. We undertake all merger and acquisition (“M&A”) and joint venture activity according to

specific protocols and only on approval of the Altera Legal and Compliance functions to ensure compliance with the requirements of

applicable competition law."

Global Conflict of Interest Policy

Policy statement: "All Altera Employees must avoid potential, actual, and apparent conflicts of interest, and must disclose any activity,

interest, or situation that may give rise of a conflict of interest according to the disclosure requirements established in this Policy. You

must refrain from any activity, interest, or situation that may give rise to a conflict of interest unless you receive approval in accordance

with this Policy and comply with any mitigation steps that may be required to resolve any identified conflict of interest, as determined by

the Chief Compliance Officer."

Global Privacy Policy

Policy statement: "Altera will Process (the Personal Data of its Employees and other relevant Data Subjects (as defined herein) only for

legitimate purposes in compliance with the principles that Personal Data shall be:

•Processed lawfully, fairly, and transparently;

•Processed for specified, explicit, and legitimate purposes;

•Adequate, relevant, and limited to what is necessary in relation to the purposes for which it is Processed;

•Accurate and kept up to date;

•Stored only so long as necessary to fulfil the specific purpose for which is was collected; and

•Protected by adequate safeguards.

Our compliance with these principles will be demonstrable and documented. We will maintain clear and transparent mechanisms to

allow our Employees and other Data Subjects to access and request rectification or erasure of their Personal Data Processed by

Altera, and to object to Altera’s Processing of their Personal Data."

Global Trade Controls Policy

Policy statement: "Altera will comply with all applicable laws and regulations regarding international trade, including economic sanctions

and export control laws."

Risk management and internal control

The Fleet Manager is responsible for establishing and maintaining, for the Altera Infrastructure Group, adequate internal control over

financial reporting. The internal controls were designed to provide a reasonable level of assurance as to the reliability of the Altera

Infrastructure Group's financial reporting and the preparation and presentation of the financial statements for external purposes in

accordance with IFRS. Our internal controls over financial reporting include those policies and procedures that: 1) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; 2) provide

reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with

IFRS, and that our receipts and expenditures are being made in accordance with authorizations of management and our directors; and

3) provide a reasonable level of assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of

our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over

financial reporting may not prevent or detect misstatements even when determined to be effective and can only provide reasonable

assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future

periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of

compliance with the policies and procedures may deteriorate.

Board of Directors

Under the Altera Infrastructure Group’s limited liability agreement, its members have full authority unilaterally to appoint, by majority

vote, such individuals to be Directors as they shall choose in their sole discretion, and to remove and replace, by majority vote, any

Director they appoint to the Board of Directors, with or with-out cause, at any time and for any reason, and to fill by majority vote, any

positions created on the Board of Directors as a result of an increase in the size of the Board of Directors; provided. Each Director shall

be appointed to serve until his or her successor shall be appointed and shall qualify until his or her earlier resignation of removal.

The exact number of Directors may be fixed from time to time by resolution of the Board of Directors or the Member and such number

may be increased or decreased from time to time by vote of a majority of the Directors then in office or by the Member.

The Board of Directors are covered by a Director and Officer (or D&O) insurance policy which is procured by Brookfield for all

Brookfield affiliated entities. The D&O policy contains industry-standard terms for such policies. The Directors are also protected by

standard indemnities from the Company when acting as Directors

Repurchase or issue of the Company's units

Under the Altera Infrastructure Group’s limited liability agreement, except for decisions or actions requiring the approval of the Member

as provided in the Agreement or by non-waivable provisions of the Act or applicable law, the powers of the Company shall be exercised

by or under the authority of, and the business and affairs of the Company shall be managed under the direction of the Board of

Directors comprised of no less than one (1) Director. This includes the following authorizations as set forth in the limited liability

agreement:

The Company is authorized to issue an unlimited number of Series A or Series B Units.

The Company shall have the right at any time, and from time to time, to redeem any of the Units or series of Units, in whole or in part,

from any source of funds legally available for such purpose. Any such redemption shall occur on a date set by the Board of Directors

(the “Redemption Date”). Any Units that are redeemed or otherwise acquired by the Company shall be cancelled.

Working environment, equality and equal treatment

We encourage and promote diversity and equal opportunities across our global organization and are firmly committed to providing a

working environment that is respectful, productive, supportive, and safe, in which everyone is treated, and treats others, with respect

and fairness. Our Global Anti-Discrimination, Anti-Harassment, and Fraternisation Policy establishes our expectations and requirements

regarding equal and respectful treatment – including our strict prohibition of discrimination and harassment – and applies to all Group

entities and personnel, whether employees, directors, or contractors. We encourage and expect anyone with concerns about potential

misconduct under this or other group policies to report them and we strictly prohibit retaliation against those who report concerns in

good faith. We are aware of no substantiated concerns about discrimination or harassment in violation of our policies in 2021.

The Altera Infrastructure Group further believes that everyone is entitled to dignity and fundamental human and labour rights. We are

guided in our business dealings by the United Nations’ Guiding Principles on Business and Human Rights and we publish a Modern

Slavery Act Statement annually, which addresses the steps we take to prevent modern slavery in connection with our business

activities, including slavery, servitude, forced or compulsory labour, child labour, and human trafficking. Our Modern Slavery Act

statements for 2021 and prior reporting periods are available on our website at alterainfra.com.

The working environment and culture in the Altera Infrastructure Group are considered strong, and there is continuous focus on

initiatives for improvement. In 2021, absence due to sickness was 1.4 per cent of the total hours worked by employees In 2021, as in

2020, we concentrated on preventing the spread of COVID-19 onboard our vessels and in our offices with protective measures,

protocols, and guidelines. Our main focus was and continues to be protecting our employees against infection and we established new

ways of working to do so.

SUSTAINABILITY

Introductory note

The Altera Infrastructure Group annually produces a consolidated sustainability report in which Altera Infrastructure Group's

consolidated sustainability performance is described, analysed, and evaluated. Published Altera Infrastructure Group sustainability

reports are available on the Altera Infrastructure website at alterainfra.com. The Group contributes to and is covered by these

consolidated efforts and reporting, so some of the information in this document refers to such group efforts and information. Information

and data that is specific to Altera Shuttle Tankers instead of the group is specified herein as such.

Policies and principles

The Altera Infrastructure Group has a group-wide Global Sustainability Policy, available at alterainfra.com, which is directly applicable to

the Group. The Policy confirms that sustainability is directly linked to the long-term success of the Altera Infrastructure Group. It is our

vision to lead the offshore energy industry to a sustainable future and we have a responsibility to drive the necessary change. In

support of this global Policy, the Group commits to continually seek out and create more sustainable solutions. The Group endorses the

seventeen UN Sustainable Development Goals, and uses them to benchmark the strength of our performance in support of our vision.

Our policy is to anchor our strategy and daily decisions on the following principles:

Environment

•Through innovation, operational excellence and continuous improvement we manage our environmental footprint towards the

goal of a net-zero emissions industry;

•We seek to be at the forefront of the innovation of environmentally friendly technology;

•We minimize our emissions, discharges and waste, and make sure that we dispose of all waste that we generate in a

responsible manner;

Society

•We support and respect human rights, the elimination of child and compulsory labour, freedom of association and the right to

collective bargaining;

•Our people play a vital role in our business and are our most important asset. We trust in them, treat them with respect and

dignity, and make sure they have a safe working environment free from harassment and discrimination;

•We invest in our employees and in the communities in which we operate, ensuring that our employees have the best possible

opportunities to perform their work in a safe manner;

Governance

•We work against corruption in all its forms, including extortion and bribery; and

•Our business decisions and actions are ethical and in full compliance with legal requirements.

The Altera Infrastructure Group also maintains a Code of Conduct which sets forth expectations of business conduct and ethics, to

which the Group is directly subject and adheres. We communicate our Code of Conduct and supporting requirements extensively

internally and require our board members and employees to confirm their commitment to the Code of Conduct in writing annually in

connection with annual Code of Conduct training. As our vessels operate all over the world, we rely on a vast global network of

suppliers to support our operations. Therefore, our Code of Conduct is further available to our stakeholders on our website and is

incorporated by reference in our general terms and conditions.

In addition to the Global Sustainability Policy, the Altera Infrastructure Group has adopted several specific policies to support the Code,

including the Global Anti-Discrimination, Anti-Harassment, and Fraternisation Policy, the Global HSEQ Policy, and the Global Anti-

Corruption Policy.

Our framework

The Altera Infrastructure Group has developed a sustainability framework to structure and prioritise our activities in support of our

vision, to set goals, and to track and measure our progress. This framework aligns with the Altera Infrastructure Group business

strategy and reflects the material topics that are most important to our key stakeholders and the areas where we have the greatest

opportunity to make a significant impact. The Group subscribes to this sustainability framework. Altera Infrastructure Group’s

sustainability priorities are:

•Decarbonisation – reducing the direct climate impact from our operations

•Commitment to the energy transition – developing the new business models that will enable the energy transition and

secure Altera’s roles in that transition

•The power of our TEAM – investing in our people for the long term

The Altera Infrastructure Group, including the Group, pursues priorities while continuing to deliver excellence in the fundamental areas

that serve as our license to operate. This includes performing safe and clean operations and acting responsibly and with integrity.

The Group contributes to the Altera Infrastructure Group’s progress towards these targets in several ways, by including driving

efficiency improvements and emissions reductions in the operation of its fleet, maintaining a constant focus on the health and safety of

our workforce, minimising the environmental impact of our activities, and taking active steps to maintain an empowering, positive, and

fair work environment.

Our actions and results

Climate performance

The Group has set an ambitious goal to reduce the average annual efficiency ratio (or AER) for our shuttle tanker fleet by 50% by 2030,

compared to 2008 levels.

To drive emission reductions, we continually focus on improving operating efficiency, implementing technical enhancements where

appropriate, and renewing our fleet with less carbon-intensive vessels as we approach 2030.

The Group's E-shuttle tankers are some of the most advanced and energy efficient shuttle tankers on the market. They boast a unique

future-proof design. A Green Bond was raised to part-finance the E-Shuttles, and all proceeds from this bond have been used for this

purpose. The E-Shuttles were also designed to achieve GHG emissions savings compared to our Explorer class shuttle tankers.

In 2021, our shuttle tanker fleet produced Scope 1 emissions of 523,827 tCO2e. Scope 1 emissions, as defined by the GHG Protocol,

are direct GHG emissions from operations, and the Group reports on the basis of operational control. This is an improvement for the

fleet from 2020, but still reflects an overall increase from 2019 Scope 1 emissions.

Figure 1. Scope 1 GHG emissions from operation of shuttle tankers

2021

2020

2019

Scope 1 emissions (tCO2e)

523,827

556,474

507,087

The Altera Infrastructure Group tracks and reports Scope 2 and Scope 3 emissions on a consolidated group-wide basis and therefore it

is not possible for the Group to report on its share of these emissions here. Consolidated emissions disclosures for the Altera

Infrastructure Group are available in Altera Infrastructure Group's consolidated reports, at published on alterainfra.com.

The primary indicator of the carbon intensity of our fleet is the AER and Energy Efficiency Operational Index (or EEOI). In both cases, a

lower number is indicative of a lower carbon intensity. The improvements in our 2021 AER and EEOI results were 7,4% and 13%

respectively. AER improved mainly due to increased use of LNG instead of MGO due to the E-shuttles which can use LNG were

phased in. EEOI improved due to improved cargo carrying utilization.

Figure 2. Average carbon intensity of shuttle tanker fleet

2021

2020

2019

AER (gCO2/dwt-nm)

6.61

7.14

7.5

EEOI (gCO2/ton mile)

18.3

20.7

23.3

To assess the actual climate related performance of the E-shuttles, we compare the official AER figures reported to the IMO for our

Explorer class vessels to those reported for the E-Shuttles. The data confirm that the E-shuttles are more efficient than the last series of

vessels built for trade in the North Sea (or the Explorer class vessels) – the average AER for the E-Shuttles was 21% lower than that

for the Explorer class in 2021, and 28% lower in 2020.

That said, the comparative AER dropped by 7% from 2020 to 2021. In addition, while the Explorer class vessels achieved a slight

improvement in their AER in 2021, the average AER for the E-shuttles increased by about 6%. This largely stems from our clients’

instructions to use marine gas oil (or MGO) as a primary fuel instead of LNG in the latter part of 2021 due to unprecedented gas prices.

Further, while the E-Shuttles were delivered in 2020, commissioning of many onboard systems was delayed due to the disruptive

effects of the COVID-19 pandemic and technical equipment challenges. We expect the vessels to realise their full emissions reduction

potential in 2022 once the onboard VOC reduction plants are fully operational. The first full year during which all four E-Shuttles will

operate with fully commissioned onboard systems is projected to be 2023.

As a final note, the AER methodology does not address the effects of VOC emissions of methane slip. We do however expect to see an

AER improvement compared to the Explorer class in the range of 25-30%. The remaining improvement towards the GHG reduction

target of 40%, including VOC emissions, will be realized once all the key onboard systems are fully operational.

Power of our TEAM

The Group attracts and retains competent and committed people by offering an empowering and positive working environment. A key

part of this is a clear framework for professional development. In line with our core value of Accountability, each person in Altera is

accountable for their own deliveries and for living our TEAM values – trust, excellent, accountability, and momentum. We expect our

people to work together to reach our vision and deliver on our promises. We attract, and invest in, people who share our TEAM values,

are committed to our sustainable success, and are committed to learn and adapt to our changing environment. We encourage and

promote diversity and equal opportunities across our global organisation. We drive sustainable results through clear expectations and

responsibilities set within our accountability framework, strong TEAM-work and effective global systems and processes that facilitate

collaboration between business units, project teams, and corporate functions.

In 2021, the crew for our shuttle tanker fleet numbered 982 permanent and temporary seafarers, of which 15 are women. This means

that 2% of our crew are women. Out of 11 onshore employees 2 are women. The small share of women amongst our crew reflects that

our industry, particularly offshore and aboard vessels, is heavily male-dominated.

Health and safety

The health and safety of our people is our license to operate and the goal of the Altera Infrastructure Group is always zero incidents.

The Altera Infrastructure Group, including the Group, incorporates a strong risk and opportunity-based approach to safety in our

strategic and daily decisions and meet or exceed all applicable legislation and regulatory requirements. Our shuttle tanker fleet

maintains a management system certified for ISO 9001 (quality management), ISO 14001 (environmental management), and ISO

45001 (occupational health and safety).

To protect our people and prevent incidents we:

•Systematically identify, assess, and control health and safety risks;

•Manage hazards to prevent major accidents;

•Extensively train onshore staff and crew;

•Anchor safety as a line responsibility and personal accountability;

•Empower everyone to stop work when safety is at risk;

•Actively engage with our employees and their representatives;

•Continuously improve our processes and performance; and

•Expect our business partners and suppliers to share our approach to health and safety.

In 2021, neither the Altera Infrastructure Group nor the Group had any serious safety incidents. We had no lost time incidents (or LTIs),

and therefore an LTI rate of 0.0 LTIs per million man hours (using a 24-hour day). An LTI is a work-related injury or illness to an

employee for which a physician or licensed health care professional recommends days away from work due to the incident. We also

marked significant LTI-free milestones aboard many of our vessels in 2021.

We had 2 total reportable cases (or TRCs) on our shuttle tankers, resulting in a TRC rate of 0.48 per million man hours (using a 24-

hour day). TRC includes medical treatment injuries and lost time injuries, but does not include first aid cases.

Environmental impact

The Group, monitors and evaluates environmental performance in all aspects of our operations, working continuously to reduce and

mitigate our environmental footprint. The Group focuses on preventing spills and maintains up-to-date spill response and emergency

preparedness procedures to minimise the potential consequences of any spills that may occur. We work to reduce chemical use and

when possible replace the chemicals we do use with less-harmful alternatives. We take active steps to minimise waste, to properly

segregate and recycle our waste where possible, and to otherwise dispose of the waste we generate in a responsible manner.

We are acutely aware of the rapid increase of plastics in the world’s oceans and are working to reduce our plastic use. Single-use

cutlery, cups, and shoe covers are now either banned or considerably reduced. The most significant type of single use plastic onboard

many of our vessels is packaging for the goods that are delivered, and we are working to reduce this as well, for example by engaging

directly with key vendors.

The transfer of invasive marine species through ships’ ballast water is of major ecological concern, which is why the IMO has

implemented the strict Ballast Water Management Convention. We use tailored technology to ensure compliance with this treaty. 92%

of our shuttle tanker fleet implements ballast water treatment systems.

In 2021, the Group experienced only two small spills of oil to sea from our shuttle tanker fleet, with an aggregate volume of

approximately 5 to 10 litres. Both spills were responded to and handled in accordance with our procedures and applicable law. We

experienced no spills of chemicals to sea.

Responsible business

The Altera Infrastructure Group’s core values of trust and accountability reflect our belief in conducting business ethically and in

compliance with all applicable requirements regarding anti-corruption, international trade controls, competition, privacy, and human and

labour rights.

The Altera Infrastructure Group communicates the Code of Conduct and supporting requirements extensively internally, including to the

Group, and requires our board members and employees to confirm their commitment to the Code of Conduct in writing annually in

connection with annual Code of Conduct training. As our vessels operate all over the world, we rely on a vast global network of

suppliers to support our operations. Therefore, our Code of Conduct is further available to our stakeholders on our website and is

incorporated by reference in our general terms and conditions.

The 2021 Altera Infrastructure Group Code of Conduct training, in which the Group participated, covered anti-corruption, the

appropriate exchange of gifts and hospitality, and management of conflicts of interest. The training was completed by 100% of onshore

employees and 98% percent of assigned crew, for the entire Altera Infrastructure Group.

Neither the Altera Infrastructure Group nor the Group have been the target of any legal or enforcement actions regarding anti-

competitive or monopolistic practices in 2021. Nor did we receive any significant fines or non-monetary sanctions for non-compliance

with laws or regulations.

Managing cyber security

The marine and offshore industries have become increasingly exposed to cyber-attacks in recent years. Rapid digitalisation and

increased systems integration improves operating efficiency but also provides a broader attack surface for bad actors. We view

cybersecurity not only as a technology issue, but as a management and operational challenge.

The Altera Infrastructure Group's approach to cybersecurity, to which the Group also subscribes, is a combination of people, process,

and technology. We actively work to manage these risks through continuous improvements in our competence, routines, and systems

to safeguard our people, our assets, and our information. We maintain a full suite of IT infrastructure security measures, including multi-

factor authentication (or MFA) and industry-leading anti-virus and anti-malware protection tools. Our information security processes are

practiced and iterated, to prepare us for possible attacks and incidents.

As nearly all cybersecurity breaches are caused by human error, we focus on training and awareness campaigns for our employees

about the risks and implications of cybersecurity threats. The Group, as part of the Altera Infrastructure Group, trains our onshore

employees and crew via videos and material distributed regularly, and we include cybersecurity on the agenda for management and

operational meetings.

In 2021, the Altera Infrastructure Group regularly provided Cybersecurity training to all onshore and offshore employees, including

those working with the Group. Phishing campaigns have been sent out to employees group-wide, and the result has been

communicated and followed up by management.

Responsible recycling

Our preferred option when one of our vessels reaches the end of its commercial life for the Group is to find alternate employment,

primarily through a sale for further trade, or conversions. We will only choose to recycle a vessel if we cannot identify a viable

alternative use, and we proactively ensure that all recycling activity is responsible and compliant with applicable law.

In 2021, we initiated recycling projects for three shuttle tankers.

Board of Director’s Responsibility Statement

We confirm, to the best of our knowledge, that the financial statements for the year ended December 31, 2021, have been prepared in

accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and give a

true and fair view of the assets, liabilities, financial position and results of the Company and the Group. We also confirm that the Board

of Directors' Report includes a true and fair review of the development and performance of the business and the position of the Group,

together with a description of the principal risks and uncertainties that the Group faces under Norwegian Securities Trading Act sections

5-6 fourth paragraph and contain relevant information on major related party transactions.

ALTERA SHUTTLE TANKERS L.L.C.

Date: April 29, 2022

By: Altera Shuttle Tankers L.L.C. - the Group

By:

Giles Mark Mitchell

President and Director

William James Duthie

Secretary and Director

William James Delday

Director

CONSOLIDATED FINANCIAL STATEMENTS

ALTERA SHUTTLE TANKERS L.L.C.

For the years ended December 31, 2021 and 2020

ALTERA SHUTTLE TANKERS L.L.C.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands of U.S. dollars)

As at December 31.

2021

2020

Notes

ASSETS

Current assets

Cash and cash equivalents

124,257

169,447

Financial assets

2,312

80,964

Accounts and other receivable, net

38,617

48,638

Vessels and equipment classified as held for sale

—

7,500

Inventory

12,902

8,264

Due from related parties

20,523

24,619

Other assets

21,718

20,262

Total current assets

220,329

359,694

Non-current assets

Vessels and equipment

1,764,026

1,672,733

Advances on newbuilding contracts

51,918

127,335

Deferred tax assets

8,660

5,153

Other assets

68,239

92,926

Goodwill

127,113

Total non-current assets

2,019,956

2,025,260

Total assets

2,240,285

2,384,954

LIABILITIES

Current liabilities

Accounts payable and other

65,052

64,242

Other financial liabilities

12,939

10,761

Borrowings

164,313

134,530

Due to related parties

4,672

8,990

Total current liabilities

246,976

218,523

Non-current liabilities

Accounts payable and other

507

12,375

Other financial liabilities

188,117

131,838

Borrowings

1,313,459

1,470,970

Due to related parties

70,389

—

Total non-current liabilities

1,572,472

1,615,183

Total liabilities

1,819,448

1,833,706

EQUITY

Paid-in capital

511,459

499,880

Retained earnings

(111,469)

31,769

Accumulated other comprehensive income (loss)

1,202

1,952

Member's equity

401,192

533,601

Non-controlling interests in subsidiaries

19,645

17,647

Total equity

420,837

551,248

Total liabilities and total equity

2,240,285

2,384,954

The accompanying notes are an integral part of the consolidated financial statements.

ALTERA SHUTTLE TANKERS L.L.C.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands of U.S. dollars)

Year Ended December 31,

2021

2020

Notes

Revenues

513,495

542,692

Direct operating costs

(245,753)

(237,165)

General and administrative expenses

(30,180)

(17,942)

Depreciation and amortization

(172,716)

(162,966)

Interest expense

18,20

(81,644)

(74,878)

Interest income

739

Impairment expense, net

—

(35,259)

Gain (loss) on dispositions, net

3,644

(487)

Realized and unrealized gain (loss) on derivative instruments

(151)

(1,026)

Foreign currency exchange gain (loss)

(1,395)

1,734

Gain (loss) on modification of financial liabilities, net

(10,532)

—

Other income (expenses), net

(276)

(1,514)

Income (loss) before income tax (expense) benefit

(25,493)

13,928

Income tax (expense) benefit

Current

(3,252)

(4,166)

Deferred

3,667

(1,830)

Net income (loss)

(25,078)

7,932

Attributable to:

Members

(18,238)

15,306

Non-controlling interests in subsidiaries

(6,840)

(7,374)

(25,078)

7,932

The accompanying notes are an integral part of the consolidated financial statements.

ALTERA SHUTTLE TANKERS L.L.C.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands of U.S. dollars)

Year Ended December 31,

2021

2020

Notes

Net income (loss)

(25,078)

7,932

Other comprehensive income (loss)

Items that will not be reclassified subsequently to net income (loss):

Pension adjustments, net of taxes

—

670

Items that may be reclassified subsequently to net income (loss):

To interest expense:

Realized gain on qualifying cash flow hedging instruments

(750)

(811)

Total other comprehensive income (loss)

(750)

(141)

Comprehensive income (loss)

(25,828)

7,791

Attributable to:

Members

(18,988)

15,165

Non-controlling interests in subsidiaries

(6,840)

(7,374)

(25,828)

7,791

The accompanying notes are an integral part of the consolidated financial statements.

ALTERA SHUTTLE TANKERS L.L.C.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands of U.S. dollars)

Paid-in Capital

Retained

Earnings

(Accumulated

Deficit)

Accumulated

Other

Comprehensive

Income

Non-

Controlling

Interest

Total

Balance as at January 1, 2021

499,880

31,769

1,952

17,647

551,248

Net income (loss)

—

(18,238)

—

(6,840)

(25,078)

Other comprehensive income (loss)

—

(750)

—

(750)

Distributions declared:

Distribution to Altera Infrastructure Holdings L.L.C.

—

(125,000)

—

(125,000)

Distribution to non-controlling interests

—

(9,112)

Contributions received:

Contribution of capital from Altera Infrastructure

Holdings L.L.C.

11,000

—

11,000

Contribution of capital from Brookfield

579

—

579

Contribution from non-controlling interests

—

17,950

Balance as at December 31, 2021

511,459

(111,469)

1,202

19,645

420,837

Balance as at January 1, 2020

499,880

156,463

2,093

29,771

688,207

Net income (loss)

—

15,306

—

(7,374)

7,932

Other comprehensive income (loss)

—

(141)

—

(141)

Distributions declared:

Distributions to Altera Infrastructure Holdings

L.L.C.

—

(140,000)

—

(140,000)

Distribution to non-controlling interests

—

(4,750)

Balance as at December 31, 2020

499,880

31,769

1,952

17,647

551,248

The accompanying notes are an integral part of the consolidated financial statements.

ALTERA SHUTTLE TANKERS L.L.C.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)

Year Ended December 31,

2021

2020

Notes

OPERATING ACTIVITIES

Net income (loss)

(25,078)

7,932

Adjusted for the following items:

Depreciation and amortization

172,716

162,966

Impairment expense, net

—

35,259

(Gain) loss on dispositions, net

(3,644)

487

Unrealized (gain) loss on derivative instruments

3,450

(2,483)

Deferred income tax expense (benefit)

(3,667)

1,830

Provisions and other items

(5,644)

505

Other non-cash items

7,051

15,348

Changes in non-cash working capital, net

13,915

(15,006)

Net operating cash flow

159,099

206,838

FINANCING ACTIVITIES

Proceeds from borrowings

201,119

312,149

Repayments of borrowings

17,18

(329,863)

(99,850)

Financing costs related to borrowings

—

(7,868)

Proceeds from borrowings related to sale and leaseback of vessels

71,400

119,073

Repayments of borrowings related to sale and leaseback of vessels

(11,335)

(1,190)

Financing costs related to borrowings from sale and leaseback of vessels

(584)

(187)

Lease liability repayments

(11,273)

(17,925)

Proceeds from borrowings from related parties

70,000

—

Capital provided by member

11,000

—

Capital provided by others who have interests in subsidiaries

17,950

—

Distributions to member

(125,000)

(40,000)

Distribution to others who have interests in subsidiaries

(9,112)

(4,750)

Net financing cash flow

(115,698)

259,452

INVESTING ACTIVITIES

Additions:

Vessels and equipment

10,11

(201,386)

(464,402)

Dispositions:

Vessels and equipment

38,035

16,155

Changes in restricted cash

73,782

14,935

Acquisition of company

—

Net investing cash flow

(89,569)

(433,297)

Cash and cash equivalents

Change during the period

(46,168)

32,993

Impact of foreign exchange on cash

978

(2,183)

Balance, beginning of the period

169,447

138,637

Balance, end of the period

124,257

169,447

Supplemental cash flow disclosure (note 24)

The accompanying notes are an integral part of the consolidated financial statements.

1. Nature and Description of the Company

Altera Shuttle Tankers L.L.C. (Altera Shuttle Tankers or the Company), a wholly-owned owned subsidiary of Altera Infrastructure L.P.

(Altera Infrastructure or the Partnership) is an international midstream services provider of marine transportation to the offshore oil industry,

focused on the ownership and operation of shuttle tankers in the North Sea, Brazil and the East Coast of Canada and expanding its

operations in the shuttle tanker business.

The Company was formed in July 2017, under the laws of the Republic of the Marshall Islands, by Altera Infrastructure Holdings L.L.C., a

100% owned subsidiary of Altera Infrastructure. The registered head office of the Company is Altera House, Unit 3, Prospect Park, Arnhall

Business Park, Westhill, Aberdeenshire, AB32 6FJ, United Kingdom.

Altera Infrastructure is a subsidiary of Brookfield Business Partners L.P. (NYSE: BBU) (TSX: BBU.UN) (or with its affiliates, Brookfield),

while Brookfield Asset Management Inc. (NYSE: BAM) (TSX: BAM.A), an entity incorporated in Ontario, Canada, is the ultimate parent of

the Company.

2. Significant Accounting Policies

a.Basis of presentation

These consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting

Standards as issued by the International Accounting Standards Board (or IFRS) and using the accounting policies described below. The

consolidated financial statements have been prepared under the assumption that the Company operates on a going concern basis and

have been presented in U.S. dollars rounded to the nearest thousand unless otherwise indicated.

These consolidated financial statements were approved by the Company's Board of Directors and authorized for issue on April 29, 2022.

b.Going concern

The working capital deficit of $26.6 million as at December 31, 2021 has decreased from a working capital surplus of $141.2 million as at

December 31, 2020. The decrease is primarily related to a decrease in financial assets of $78.7 million, mainly relating to amounts held in

escrow for a shuttle tanker newbuilding yard installment payment as at December 31, 2020, a decrease in cash and cash equivalents of

$45.2 million and an increase in current borrowings of $29.8 million.

Based on these factors, the Company will need to obtain additional sources of financing, in addition to amounts generated from operations,

to meet its obligations and commitments and the minimum liquidity requirements under its financial covenants. These requirements include

but are not limited to maintaining a minimum liquidity in an amount equal to the greater of $35 million and 5% of total debt and a net debt to

total capitalization ratio of no greater than 75%. During the year ended December 31, 2021, the Company completed various measures to

improve its debt maturity profile and enhance its liquidity and financial flexibility, including but not limited to exchanging $70.0 million of

Brookfield debt with a 2022 maturity into debt with interest paid in kind and with a 2026 maturity and issuing $180.0 million of new 2025

bonds. See Notes 18 and 20 for additional information.

Other potential sources of financing that the Company is actively pursuing, or may consider pursuing, during the one-year period to

December 31, 2022, include entering into new debt facilities, borrowing additional amounts under existing facilities, the refinancing or

extension of certain borrowings, selling certain assets, seeking joint venture partners for the Company's business interests, entering into

sale-leaseback agreements and/or capital raises. Additional potential sources of amounts generated from operations include the

extensions and new opportunities for existing assets, higher utilization of the operating fleet, increased rates for vessels operating in the

spot market, and working capital optimizations.

The Company is actively pursuing or may pursue the financing initiatives described above, which it considers probable of completion based

on the Company’s history of being able to raise and refinance borrowings for similar types of vessels and based on the Company's

assessment of current conditions and estimated future conditions. The Company is in various stages of progression on these matters.

Based on the Company’s liquidity at the date of these consolidated financial statements, the liquidity it expects to generate from operations

over the following year, and by incorporating the Company's plans to raise additional liquidity that it considers probable of completion, the

Company expects that it will have sufficient liquidity to enable the Company to continue as a going concern for at least the one-year period

to December 31, 2022.

c.Basis of consolidation

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries, which are the entities over

which the Company has control. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement

with the investee and has the ability to affect those returns through its power over the investee. Non-controlling interests in the equity of the

Company’s subsidiaries held by others and are shown separately in equity in the consolidated statements of financial position. All

intercompany balances, transactions, revenues and expenses are eliminated in full in these consolidated financial statements.

d.Interests in other entities

(i) Subsidiaries

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Subsidiaries are consolidated from the date of acquisition, being the date on which the Company obtained control, and continue to be

consolidated until the date when control is lost.

Non-controlling interests may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair

value of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition by acquisition basis.

Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the

non-controlling interests’ share of subsequent changes in the Company's capital in addition to changes in ownership interests. Total

comprehensive income (loss) is attributed to non-controlling interests, even if this results in the non-controlling interests having a deficit

balance.

The following provides information about the Company's wholly-owned subsidiaries as at December 31, 2021:

Name of Subsidiary

State of Formation

Proportion of

Ownership Interest

Altera (Atlantic) Chartering ULC

Canada

100%

Altera (Atlantic) Management ULC

Canada

100%

Altera Grand Banks AS

Norway

100%

Altera Grand Banks Shipping AS

Norway

100%

Altera Infrastructure Holdings Pte. Ltd.

Singapore

100%

Altera Norway Holdings AS

Norway

100%

Altera Norway Marine AS

Norway

100%

Altera Shuttle Loading Pte. Ltd.

Singapore

100%

Altera Shuttle Tanker Finance LLC

Marshall Islands

100%

Altera Wave AS

Norway

100%

Altera Wind AS

Norway

100%

Amundsen Spirit LLC

Marshall Islands

100%

Aurora Spirit AS

Norway

100%

Bossa Nova Spirit LLC

Marshall Islands

100%

Current Spirit AS

Norway

100%

Lambada Spirit LLC

Marshall Islands

100%

Nansen Spirit LLC

Marshall Islands

100%

Navion Bergen AS

Norway

100%

Navion Bergen LLC

Marshall Islands

100%

Sertanejo Spirit LLC

Marshall Islands

100%

Navion Gothenburg AS

Norway

100%

Peary Spirit LLC

Marshall Islands

100%

Rainbow Spirit AS

Norway

100%

Samba Spirit LLC

Marshall Islands

100%

Scott Spirit LLC

Marshall Islands

100%

Tide Spirit AS

Norway

100%

The following table presents details of non-wholly owned subsidiaries of the Company as at December 31, 2021:

Name of Subsidiary

State of Formation

Proportion of

Ownership Interest

Navion Gothenburg LLC

Marshall Islands

50%

Nordic Rio LLC

Marshall Islands

50%

Partrederiet Stena Ugland Shuttle Tankers I DA

Norway

50%

Partrederiet Stena Ugland Shuttle Tankers II DA

Norway

50%

Partrederiet Stena Ugland Shuttle Tankers III DA

Norway

50%

For the 50% owned entities above the Company has determined that the entities are non-wholly owned subsidiaries of the Company based

on its assessment of control. For non-wholly owned subsidiaries, the Company is exposed to variable returns from its involvement with the

investee and has substantive decision making authority to affect the returns of its investment, as well as the power to direct the activities of

the entities that can significantly impact the economic performance of the entity.

e.Foreign currency translation

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The U.S. dollar is the functional and presentation currency of the Company. The Company’s vessels operate in international shipping

markets in which substantially all income and expenses are settled in U.S. dollars. In addition, the Company's most significant assets, its

vessels and equipment, are bought and sold in in U.S. dollars and the Company's most significant liabilities, its commercial bank

borrowings, are denominated in U.S. dollars. Foreign currency denominated monetary assets and liabilities are translated using the rate of

exchange prevailing at the reporting date and non-monetary assets and liabilities are measured at historic cost and are translated at the

rate of exchange at the transaction date. Foreign currency denominated revenues and expenses are measured at average rates during the

period. Gains or losses on translation of these items are included in foreign currency exchange gain (loss) in the consolidated statements

of income (loss).

f.Cash and cash equivalents

Cash and cash equivalents include cash on hand, non-restricted deposits and short-term investments with original maturities of three

months or less.

g.Accounts and other receivable, net

Accounts and other receivable, net includes trade receivables and other unbilled receivables. Accounts and other receivable, net, except

for trade receivables, are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method,

less any allowance for expected credit losses. Trade receivables are recognized initially at their transaction price.

h.Inventory

Inventories are the materials or supplies consumed in the rendering of services. Inventory is valued at the lower of cost and net realizable

value. Cost is determined using specific identification where possible and practicable or using the first-in, first-out method. Costs include

direct and indirect expenditures incurred in bringing the inventory to its existing condition and location. Net realizable value represents the

estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to

make the sale.

The following table presents the details of the Company's inventory as at December 31, 2021 and 2020:

December 31, 2021

December 31, 2020

Fuel oil

10,605

7,044

Materials and consumables

2,297

1,220

Total inventory

12,902

8,264

i.Related party transactions

In the normal course of operations, the Company enters into various transactions with related parties, which have been measured at their

fair value, which generally is the agreed upon exchange value and are recognized in the consolidated financial statements. Related party

transactions are further described in Note 20.

j.Vessels and equipment

Vessels and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes

expenditures that are directly attributable to the acquisition of the asset including the cost of materials and direct labour, any other costs

directly attributable to bringing the assets to a working condition for their intended use. All pre-delivery costs incurred during the

construction of vessels and equipment, including interest, supervision and technical costs, are capitalized. The acquisition cost and all

costs incurred to restore used vessels and equipment purchased by the Company to the standard required to service the Company’s

customers are capitalized.

Depreciation of an asset commences when it is available for use. Vessels and equipment are depreciated for each component of the asset

classes as follows:

Component

Estimated Useful Life

Dry docks

2.5 - 5 years

Capital Modifications (1)

3 - 20 years

Vessels and Equipment (2)

20 years

(1)Includes capital upgrades for the Company's shuttle tankers.

(2)For a newbuilding vessel, the Company uses an estimated useful life of 20 years.

Depreciation on vessels and equipment is calculated on a straight-line basis so as to write-off the net cost of each asset over its expected

useful life to its estimated residual value. Residual value of the vessel hull is estimated as the lightweight tonnage of each vessel multiplied

by scrap value per ton. The estimated useful lives, residual values and depreciation methods are reviewed annually, with the effect of any

changes recognized on a prospective basis.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Vessel capital modifications include the addition of new equipment or can encompass various modifications to the vessel which are aimed

at improving or increasing the operational efficiency and functionality of the asset. This type of expenditure is amortized over the estimated

useful life of the modification. Expenditures covering recurring routine repairs or maintenance are expensed as incurred.

Generally, the Company dry docks each shuttle tanker every two and a half to five years, depending on the nature of work and external

requirements, the vessels are required to undergo planned dry docking for replacement of certain components, major repairs and major

maintenance of other components, which cannot be carried out while the vessels are operating. The Company capitalizes a portion of the

costs incurred during dry docking and amortizes those costs on a straight-line basis from the completion of a dry docking over the

estimated useful life of the dry dock, which is generally until the commencement of the subsequent dry dock. Included in capitalized dry

docking are costs incurred as part of the dry docking to meet regulatory requirements, or expenditures that either add economic life to the

vessel, increase the vessel’s earning capacity or improve the vessel’s operating efficiency. A portion of the cost of acquiring a new vessel is

allocated to the components expected to be replaced or refurbished at the next dry-docking. The Company expenses costs related to

routine repairs and maintenance performed during dry docking that do not improve operating efficiency or extend the useful lives of the

assets.

Advances on newbuilding contracts consists of prepayments related to newbuilding contracts for vessels and equipment not yet delivered

to the Company and include the share of borrowing costs that are directly attributable to the acquisition of the underlying vessel. When a

vessel is delivered, the prepaid amount is reallocated to Vessels and equipment.

k.Right-of-use assets and lease obligations

The Company assesses whether a contract is, or contains, a lease component at inception of the contract. A right-of-use asset and

corresponding lease liability is recognized at the lease commencement date for contracts that are, or contain, a lease component, except

for short-term leases and leases of low value.

Agreements to charter in vessels and to lease land and buildings for which the Company substantially has the right to control for a period

of time in exchange for consideration are recognized in the consolidated statements of financial position as right-of-use assets within other

assets and initially measured at cost, which comprises the initial amount of the lease liabilities adjusted for any lease payments made at or

before the commencement date. Subsequently, the right-of-use assets are measured at cost less accumulated depreciation and

impairment losses, if any. The right-of-use assets are depreciated on a straight-line basis over the lease term or remaining life of the

underlying asset, depending on the lease terms.

The Company charters in vessels from other vessel owners on time-charter contracts, whereby the vessel owner will provide use of the

vessel to the Company, as well as operate the vessel for the Company. A time-charter contract is typically for a fixed period of time,

although in certain cases the Company may have the option to extend the charter. The Company will typically pay the owner a daily hire

rate that is fixed over the duration of the charter. The Company is generally not required to pay the daily hire rate during periods the vessel

is not able to operate.

The company has determined that all of its time-charter-in contracts contain both a lease component (lease of the vessel) and a non-lease

component (operation of the vessel). The Company has allocated the contract consideration between the lease component and non-lease

component on a relative standalone selling price basis. Given that there are no observable standalone selling prices for either of these two

components, judgment is required in determining the standalone selling price of each component. The standalone selling price of the non-

lease component has been determined using a cost-plus approach, whereby the Company estimates the cost to operate the vessel using

cost benchmarking studies prepared by a third party, when available, or internal estimates when not available, plus a profit margin. The

standalone selling price of the lease component has been determined using an adjusted market approach, whereby the Company

calculates a rate excluding the operating component based on a market time-charter rate from published broker estimates, when available,

or internal estimates when not available. The discount rate of the lease is determined using the Company’s incremental borrowing rate,

which is based on the fixed interest rate the Company could obtain when entering into a secured loan facility of similar term.

The Company has elected to recognize the lease payments of short-term leases in profit or loss on a straight-line basis over the lease term

and variable lease payments not dependent on a rate or index in the period in which the obligation for those payments is incurred, which is

consistent with the recognition of payment for the non-lease component. Short-term leases are leases with an original term of one year or

less, excluding those leases with an option to extend the lease for greater than one year or an option to purchase the underlying asset, that

the lessee is reasonably certain to exercise.

The corresponding lease obligation is recognized as a liability in the consolidated statements of financial position under Accounts payable

and other and initially measured at the present value of the outstanding lease payments at the commencement date.

The Company recognizes the lease payments for leases of low value as an operating expense on a straight-line basis over the term of the

lease.

l.Asset impairment

At each reporting date the Company assesses whether there is any indication that assets or cash generating units, relating specifically to

its vessels and equipment and right-of use-assets, are impaired. This assessment includes a review of internal and external factors which

includes, but is not limited to, changes in the technological, political, economic or legal environment in which the entity operates, structural

changes in the industry, changes in the level of demand, physical damage and obsolescence due to technological changes. The Company

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

has determined that, for impairment purposes, each individual vessel, except for the Company's contract of affreightment (or CoA) vessels,

is a cash generating unit. This is due to the fact that the cash inflows from an individual vessel operating in the CoA fleet are not largely

independent of the cash inflows from other vessels operating in the CoA fleet, i.e., the individual vessels are not the smallest identifiable

group and therefore it is concluded that the CoA fleet is a single cash generating unit.

An impairment is recognized if the recoverable amount, determined as the higher of the estimated fair value less costs of disposal or the

value in use, is less than the carrying value of the asset or cash generating unit. In cases where an active second-hand sale and purchase

market does not exist, the Company uses a discounted cash flow approach to estimate the fair value of its vessel and equipment. In cases

where an active second-hand sale and purchase market exists, an appraised value is used to estimate the fair value of the vessel and

equipment. An appraised value is generally the amount the Company would expect to receive if it were to sell the vessel. Such appraisal is

normally completed by the Company. The value in use is the present value of the future cash flows that the Company expects to derive

from the asset or cash generating unit. The projections of future cash flows take into account the relevant operating plans and

management’s best estimate of the most probable set of conditions anticipated to prevail.

At each reporting date the Company assesses whether there is any indication that an impairment loss may have decreased. Where an

impairment loss subsequently reverses, the carrying amount of the asset or cash generating unit is increased to the revised estimate.

m.Goodwill

Goodwill represents the excess of the price paid for the acquisition of a business over the fair value of the net tangible and intangible

assets and liabilities acquired. Goodwill is allocated to the cash generating unit or units to which it relates. The Company identifies cash

generating units as identifiable groups of assets whose cash inflows largely independent of the cash inflows from other assets or groups of

assets. The Company has identified the Company itself as the group of cash generating units to which the Company's goodwill relates.

Goodwill is evaluated for impairment on an annual basis or more frequently if an event occurs or circumstances change that would indicate

that the recoverable amount of a reporting unit was below its carrying value. Impairment is determined for goodwill by assessing if the

carrying value of a cash generating unit, including the allocated goodwill, exceeds its recoverable amount determined as the greater of the

estimated fair value less costs of disposal or the value in use. Impairment losses recognized in respect of a cash generating unit are first

allocated to the carrying value of goodwill and any excess is allocated to the carrying amount of assets in the cash generating unit. Any

goodwill impairment is charged to Impairment expense, net on the consolidated statement of income (loss) in the period in which the

impairment is identified. Impairment losses on goodwill are not subsequently reversed.

n.Revenues

Each vessel charter may, depending on its terms, contain a lease component, a non-lease component or both. Revenues that are fixed on

or prior to the commencement of the contract are recognized by the Company on a straight-line basis daily over the term of the contract.

The Company’s primary source of revenues is chartering its vessels to its customers. The Company utilizes four primary forms of

contracts, consisting of contracts of affreightment (or CoAs), time-charter contracts, bareboat charter contracts and voyage charter

contracts.

A highly probable criterion is required to be met with regards to recognizing revenue arising from variable consideration resulting from

contract modifications and claims. For variable consideration, revenue is only recognized to the extent that it is highly probable that a

significant reversal in the amount of revenue recognized will not occur when the uncertainty associated with the variable consideration is

subsequently resolved.

(i) CoAs

Voyages performed pursuant to a CoA for the Company’s shuttle tankers are priced based on the pre-agreed terms in the CoA. The

obligations within a voyage performed pursuant to a CoA, which will typically include the lease of the vessel to the charterer as well as the

operation of the vessel, are satisfied as services are rendered over the duration of the voyage, as measured using the time that has

elapsed from commencement of the contract. In addition, any expenses that are unique to a particular voyage, including any bunker fuel

expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions, are the responsibility of the vessel

owner. Consideration for such voyages consists of a fixed daily hire rate for the duration of the voyage, the reimbursement of costs

incurred from fuel consumed during the voyage, as well as a fixed lump sum intended to compensate for time necessary for the vessel to

return to the field following completion of the voyage. While such consideration is generally fixed, certain sources of variability exist,

including variability in the duration of the voyage and the actual quantity of fuel consumed during the voyage. Payment for the voyage is

not due until the voyage is completed. The duration of a single voyage will typically be less than two weeks, and, as a result, the Company

has applied the practical expedient in IFRS 15.121(a), which permits an entity, with a contract that has an original expected duration of one

year or less, to not disclose the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied as

of the end of the period. The Company does not engage in any specific activities to minimize residual value risk due to the short-term

nature of the contracts.

The Company has allocated the contract consideration between the lease component and non-lease component on a relative standalone

selling price basis. Given that there are no observable standalone selling prices for either of these two components, judgment is required in

determining the standalone selling price of each component. The standalone selling price of the non-lease component has been

determined using a cost-plus approach, whereby the Company estimates the cost to operate the vessel using internal estimates, plus a

profit margin. The standalone selling price of the lease component has been determined using an adjusted market approach, whereby the

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Company calculates a rate excluding the operating component based on a market rate from published broker estimates, when available, or

internal estimates when not available.

(ii) Time-Charter Contracts

Pursuant to a time-charter contract, the Company charters a vessel to a customer for a fixed period of time, generally one year or more.

The obligations under a time-charter contract, which includes the lease of the vessel to the charterer as well as the operation of the vessel,

are satisfied as services are rendered over the duration of such contract, as measured using the time that has elapsed from

commencement. In addition, any expenses that are unique to a particular voyage, including any bunker fuel expenses, port fees, cargo

loading and unloading expenses, canal tolls, agency fees and commissions, are the responsibility of the customer, as long as the vessel is

not off-hire. Hire is typically invoiced monthly in advance for time-charter contracts, based on a fixed daily hire amount. In certain long-term

time-charters, the fixed daily hire amount will increase on an annual basis by a fixed amount to offset expected increases in operating

costs. Therefore, the Company has applied the practical expedient in IFRS 15.B16, which permits an entity to recognize revenue based on

the amount it has a right to invoice.

As a result of the Company accounting for compensation from such charters on a straight-line basis over the duration of the charter, such

fixed increases in rate will result in revenues being accrued in the first half of the charter and such amount drawn down in the last half of

the charter. Some time-charters include variable consideration components in the form of expense adjustments or reimbursements,

incentive compensation and penalties. For example, certain time-charters contain provisions that allow the Company to be compensated

for increases in the Company's costs during the term of the charter. Such provisions may be in the form of annual hire rate adjustments for

changes in inflation indices or in the form of cost reimbursements for vessel operating expenditures or dry-docking expenditures. During

periods in which the vessels are off-hire or minimum speed and performance metrics are not met, penalties may be imposed. Variable

consideration under the Company’s contracts is typically recognized as incurred as either such revenues are allocated and accounted for

under lease accounting requirements or alternatively such consideration is allocated to the distinct period in which such variable

consideration was earned. The Company does not engage in any specific activities to minimize residual value risk.

The Company has allocated the contract consideration between the lease component and non-lease component on a relative standalone

selling price basis. Given that there are no observable standalone selling prices for either of these two components, judgment is required in

determining the standalone selling price of each component. The standalone selling price of the non-lease component has been

determined using a cost-plus approach, whereby the Company estimates the cost to operate the vessel using internal estimates, plus a

profit margin. The standalone selling price of the lease component has been determined using an adjusted market approach, whereby the

Company calculates a rate excluding the operating component based on a market rate from published broker estimates, when available, or

internal estimates when not available.

(iii) Bareboat Charter Contracts

Pursuant to a bareboat charter contract, the Company charters a vessel to a customer for a fixed period of time, generally one year or

more, at rates that are generally fixed. The customer is responsible for operation and maintenance of the vessel with their own crew as well

as any expenses that are unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading

expenses, canal tolls, agency fees and commissions. If the vessel goes off-hire due to a mechanical issue or any other reason, the monthly

hire received by the vessel owner is normally not impacted by such events. A bareboat charter contract contains only a lease component

and revenue is recognized over the duration of such contract, as measured using the time that has elapsed from commencement of the

lease. Hire is typically invoiced monthly in advance for bareboat charters, based on a fixed daily hire amount. Revenue is recognized in line

with invoicing using the practical expedient in IFRS 15.B16.

(iv) Voyage Charters

Voyage charters are charters for a specific voyage. Voyage charters for the Company’s vessels are priced on a current or “spot” market

rate. The performance obligations within a voyage charter contract, which will typically include the lease of the vessel to the charterer as

well as the operation of the vessel, are satisfied as services are rendered over the duration of the voyage, as measured using the time that

has elapsed from commencement of the contract. In addition, expenses that are unique to a particular voyage, including any bunker fuel

expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions, are the responsibility of the vessel

owner. The Company’s voyage charters normally contain a lease. Consideration for such contracts is generally fixed; however, certain

sources of variability exist. Delays caused by the charterer result in additional consideration. Payment for the voyage is not due until the

voyage is completed. The duration of a single voyage will typically be less than two weeks, as a result, the Company has applied the

practical expedient in IFRS 15.121(a). The Company does not engage in any specific activities to minimize residual value risk due to the

short-term nature of the contracts.

The consolidated statements of financial position reflect, in Other assets, the accrued portion of revenues for those voyages that

commence prior to the consolidated statement of financial position date and complete after the consolidated statement of financial position

date and reflect, in Accounts payable and other, the deferred portion of revenues which will be earned in subsequent periods.

(v) Management Fees and Other

The Company also generates revenues from the operation of volatile organic compounds (or VOC) systems on certain of the Company’s

vessels. The obligations are satisfied concurrently and consecutively rendered over the duration of the management contract, as measured

using the time that has elapsed from commencement of the contract. Consideration for such contracts will generally consist of a fixed

monthly management fee, plus the reimbursement of crewing costs for vessels being managed and all operational costs for the VOC

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

systems. Management fees are typically invoiced monthly. Revenue is recognized in line with invoicing using the practical expedient in

IFRS 15.B16.

o.Direct operating costs

Direct operating cost include the following expenses: voyage expenses; operating expenses; charter hire and compensation. Voyage

expenses are all expenses unique to a particular voyage, including bunker fuel expenses, port fees, cargo loading and unloading

expenses, canal tolls, agency fees and commissions. Operating expenses include ship management services, repairs and maintenance,

insurance, stores, lube oils and communication expenses. Charter hire expenses represent the cost to charter-in a vessel for a fixed period

of time. Compensation includes the compensation costs for crewing and shore-based employees.

Voyage expenses and operating expenses are recognized when incurred except when the Company incurs pre-operational costs related to

the repositioning of a vessel that relates directly to a specific customer contract, that generates or enhances resources of the Company

that will be used in satisfying performance obligations in the future, and where such costs are expected to be recovered via the customer

contract. In this case, such costs are capitalized as contract costs and amortized over the duration of the customer contract.

The Company recognizes operating leases from vessels chartered from other owners in charter hire expenses.

p.Financial instruments

Classification and measurement

The table below summarizes the Company’s classification and measurement of financial assets and liabilities:

Measurement Category

Consolidated Statement of Financial Position

Account

Financial assets

Cash and cash equivalents

Amortized cost

Cash and cash equivalents

Restricted cash

Amortized cost

Financial assets

Derivative instruments

FVTPL

Financial assets

Other financial assets

Amortized cost

Financial assets

Accounts receivable

Amortized cost

Accounts and other receivable, net

Due from related parties

Amortized cost

Due from related parties

Investment in finance leases

Amortized cost

Other assets

Financial liabilities

Accounts payable and other

Amortized cost

Accounts payable and other

Derivative instruments

FVTPL

Other financial liabilities

Obligations relating to leases

Amortized cost

Other financial liabilities

Due to related parties

Amortized cost

Due to related parties

Borrowings

Amortized cost

Borrowings

The classification of financial assets depends on the specific business model for managing the financial assets and the contractual cash

flow characteristics of the financial asset.

At initial recognition, the Company measures a financial asset or liability at its fair value plus, in the case of a financial asset not at fair

value through profit or loss (or FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction

costs of financial assets and liabilities carried at FVTPL are expensed in Other income (expenses), net in the consolidated statements of

income (loss).

Financial assets are measured at amortized cost dependent on their contractual cash flow characteristics and the business model for

which they are held. Financial assets classified as amortized cost are recorded initially at fair value, then subsequently measured at

amortized cost using the effective interest rate method, less any impairment.

Financial liabilities measured at amortized cost are initially recorded at fair value and in the case of borrowings, net of directly attributable

transaction costs. Financial liabilities are then subsequently measured at amortized cost using the effective interest rate method. Gains or

losses are recognized in the consolidated statements of income (loss) when a financial asset or liability is remeasured due to a

modification of terms that does not result in derecognition or when derecognition occurs and the modified financial instrument is recorded

at fair value.

Impairment

The Company recognizes a loss allowance for expected credit losses (or ECL) on financial assets measured subsequently at amortized

cost, including trade receivables, amounts due from related parties, investments in finance leases and contract assets. The ECL is

recognized upon inception of the financial asset and revised at each reporting date thereafter until maturity or disposal of the financial

asset. The Company measures the loss allowance for a financial asset at an amount equal to the lifetime ECL if the credit risk on a

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

financial asset has increased significantly since initial recognition. If the credit risk on a financial asset has not increased significantly, the

Company measures the loss allowance for that financial instrument at an amount equal to 12-months ECL. In making this assessment, the

Company considers information that is reasonable and supportable, including historical experience and forward looking information that is

available without undue cost or effort.

The Company utilizes a simplified approach for measuring the loss allowance at an amount equal to the lifetime ECL for trade receivables,

contract assets and investment in finance leases. The ECL on trade receivables are estimated using reference to past default experience

of the debtor and an analysis of the debtor’s current financial position, which also forms a basis for the Company's future expectations for

potential defaults of the debtor.

The ECL is presented as a direct reduction to the carrying value of the financial asset it relates to. The initial recognition of an ECL and all

changes to an ECL at each reporting date thereafter are reflected in Other income (expenses), net in the consolidated statements of

income (loss). As at December 31, 2021, the Company recorded an ECL of $0.3 million (December 31, 2020 - $nil).

Derivative instruments

The Company selectively utilizes derivative financial instruments primarily to manage financial risks, including foreign exchange risks and

interest rate risks. All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying

consolidated statements of financial position and subsequently remeasured to fair value, regardless of the purpose or intent for holding the

derivative instruments.

Hedge accounting is applied when the derivative is designated as a hedge of a specific exposure and there is assurance that it will

continue to be highly effective as a hedge based on an expectation of offsetting cash flows or fair value. Hedge accounting is not applied if

the hedge is not effective or will no longer be effective, the derivative was sold or exercised, or the hedged item was sold, repaid or is no

longer probable of occurring. Hedge accounting is discontinued prospectively when the derivative no longer qualifies as a hedge or the

hedging relationship is terminated. Once discontinued, the cumulative change in fair value of a derivative that was previously recorded in

Other comprehensive income by the application of hedge accounting will be recognized in the Company's profit or loss over the remaining

term of the original hedging relationship as amounts related to the hedged item are recognized in profit or loss. The Company has not

designated, for accounting purposes, any derivatives as hedges of a specific exposure for all periods presented in these consolidated

financial statements.

For derivative financial instruments that are not designated as accounting hedges, the changes in the fair value of the derivative financial

instruments are recognized in the profit or loss. Gains and losses from the Company’s non-designated foreign currency forward contracts

and interest rate swaps are recorded in realized and unrealized gain (loss) on derivative instruments in the consolidated statements of

income (loss). The assets or liabilities relating to unrealized mark-to-market gains and losses on derivative financial instruments are

recorded in financial assets and other financial liabilities, respectively.

q.Fair value measurement

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, regardless of whether that price is directly observable or estimated using another valuation

technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if

market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

Fair value measurement is disaggregated into three hierarchical levels: Level 1, 2 or 3. Fair value hierarchical levels are based on the

degree to which the inputs to the fair value measurement are observable. The levels are as follows:

Level 1 -

Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 -

Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability

through correlation with market data at the measurement date and for the duration of the asset’s or liability’s

anticipated life.

Level 3 -

Inputs are unobservable and reflect management’s best estimate of what market participants would use in pricing the

asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the

risk inherent in the inputs in determining the estimate.

Further information on fair value measurements is described in Note 3.

r.Income taxes

The Company is subject to income taxes relating to its subsidiaries in Norway, Singapore, Canada, and the United Kingdom.

(i) Current income tax

Current income tax assets and liabilities are measured at the amount expected to be paid to tax authorities, net of recoveries based on the

tax rates and laws enacted or substantively enacted at the reporting date.

(ii) Deferred income tax

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Deferred income tax liabilities are provided for using the liability method on temporary differences between the tax bases used in the

computation of taxable income and carrying amounts of assets and liabilities in the consolidated financial statements.

Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax

losses, to the extent that it is probable that deductions, tax credits and tax losses can be utilized. Such deferred income tax assets and

liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a

transaction that affects neither the taxable income nor the accounting income, other than in a business combination. The carrying amount

of deferred income tax assets are reviewed at each reporting date and reduced to the extent it is no longer probable that the income tax

asset will be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is

settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting

period. The measurement of deferred income tax liabilities and assets reflect the tax consequences that would follow from the manner in

which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax

liabilities and when they relate to income taxes levied by the same taxation authority within a single taxable entity or the Company intends

to settle its current tax assets and liabilities on a net basis in the case where there exist different taxable entities in the same taxation

authority and when there is a legally enforceable right to set off current tax assets against current tax liabilities.

s.Provisions

Provisions are recognized when the Company has a present obligation either legal or constructive as a result of a past event, it is probable

that the Company will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions

are recorded within Accounts payable and other in the consolidated statements of financial position.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the

reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash

flows estimated to settle the obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is

recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured

reliably.

t.Assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale

transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current

asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should

be expected to qualify for recognition as a completed sale within one year from the date of classification subject to limited exceptions.

Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less

costs to sell and are classified as current. Once classified as held for sale, vessels and equipment are no longer depreciated.

u.Deferred financing costs

Deferred financing costs related to a borrowing, including bank fees, commissions and legal expenses, are capitalized and amortized over

the term of the relevant loan facility to interest expense using an effective interest rate method. Deferred financing costs are presented as a

reduction from the carrying amount of the related financial liability, unless no amounts have been drawn under the debt liability or the debt

issuance costs exceed the carrying value of the related debt liability, in which case the debt issuance costs are presented as Other non-

current assets.

If a debt modification is considered substantial, fees paid to amend an arrangement pursuant to which a credit facility is extinguished are

associated with the extinguishment of the old debt instrument and included in determining the debt extinguishment gain or loss to be

recognized. Any unamortized deferred financing costs are written off. If a debt modification is not considered substantial, then the fees are

associated with the modification, along with any existing unamortized deferred financing costs and premium or discount, are including in

calculation of the gain (loss) associated with the modification and remeasurement of the financial instrument resulting recognition of

interest expense using the effective interest rate.

v.Critical accounting judgments and key sources of estimation uncertainty

The preparation of financial statements requires management to make critical judgments, estimates and assumptions that affect the

reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial

statements and the reported amounts of revenues and expenses that are not readily apparent from other sources, during the reporting

period. These estimates and associated assumptions are based on historical experience and other factors that are considered to be

relevant. Actual results may differ from these estimates.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the

period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the

revision affects both current and future periods.

Critical judgments and estimates made by management and utilized in the normal course of preparing the Company’s consolidated

financial statements are outlined below.

Critical accounting judgments

(i) Determination of control

The Company consolidates an investee when it controls the investee, with control existing if, and only if, the Company has (a) power over

the investee, (b) exposure, or rights, to variable returns from involvement with the investee and (c) the ability to use that power over the

investee to affect the amount of the Company’s returns.

In determining if the Company has power over an investee, judgments are made when identifying which activities of the investee are

relevant in significantly affecting returns of the investee and the extent of existing rights that give the Company the current ability to direct

the relevant activities of the investee. Judgments are required to assess the Company's control over its non-wholly owned subsidiaries.

Judgments are made as to the amount of potential voting rights which provides voting powers, the existence of contractual relationships

that provide voting power and the ability for the Company to appoint directors. The Company enters into voting agreements which provides

it the ability to contractually direct the relevant activities of the investee. In assessing if the Company has exposure, or rights, to variable

returns from involvement with the investee judgments are made concerning whether returns from an investee are variable and how

variable those returns are on the basis of the substance of the arrangement, the size of those returns and the size of those returns relative

to others, particularly in circumstances where the Company’s voting interest differs from the ownership interest in an investee. In

determining if the Company has the ability to use its power over the investee to affect the amount of its returns, judgments are made when

the Company is an investor as to whether it is a principal or agent and whether another entity with decision making rights is acting as the

Company’s agent. If it is determined that the Company is acting as an agent, as opposed to a principal, the Company does not control the

investee. See Note 2d(i) for additional information.

(ii) Lease classification and term

At the inception of the charter, the classification of the lease as an operating lease or a finance lease may involve the use of judgment as to

the determination of the lease term. Such judgment is required as the duration of certain of the Company's charters is unknown at

commencement of the charter. The charterer may have the option to extend the charter or terminate the charter early. In addition, certain

charters impose penalties on the charterer if it terminates the charter early and such penalties can vary in size depending on when, during

the term of the charter, the termination right is exercised. Such penalties could impact the determination of the lease term and requires the

use of judgment.

(iii) Determination if a contract contains a lease

Each vessel charter may, depending on its terms, contain a lease component, a non-lease component or both. Judgment is required in

determining the composition of the lease and non-lease components of the Company's charters. The Company has determined the

following for its charters:

CoA(2)

Time Charter

Bareboat Charter

Voyage Charter (1)

Lease component

Yes

Depends

Non-lease component

Yes

Depends

(1)The Company believes that the conclusion as to whether or not a voyage charter contains a lease component rests principally on whether the customer has the

substantive right to select and change the load and discharge ports. If the customer does not have this substantive right then the charter would not contain a lease

component. The Company has categorized the charters for its shuttle tankers that are priced on spot market rates, as voyage charters. Based on the conclusion

above, the Company has determined that the contracts for its shuttle tankers classified as voyage charters normally contain a lease.

(2)The Company has determined that as the relevant decisions about how and for what purpose the vessel is used are not predetermined under a CoA, but the

customer has the right to make those relevant decisions, then the customer directs the use of the vessel. Based on this conclusion, the customer has the

substantive right to select and change the load and discharge ports under a CoA charter and therefore the Company believes that a CoA charter contains a lease

component, in addition to a non-lease component.

The Company also generates revenues from the operation of VOC systems on certain of the Company’s shuttle tankers. The Company

has determined that as the leasing of its VOC equipment is classified as a finance lease, the finance income associated with these leases

are recognized as lease income.

For charters which contain both, the Company has allocated the contract consideration between the lease component and non-lease

component on a relative standalone selling price basis. Given that there are no observable standalone selling prices for either of these two

components, judgment is required in determining the standalone selling price of each component. The standalone selling price of the non-

lease component has been determined using a cost-plus approach, whereby the Company estimates the cost to operate the unit using

internal estimates, plus a profit margin. The standalone selling price of the lease component has been determined using an adjusted

market approach, whereby the Company calculates a rate excluding the operating component based on a market rate from published

broker estimates, when available, or internal estimates when not available.

(iv) Impairment

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Judgment is applied when determining whether indicators of impairment exist when assessing the carrying values of the Company’s

assets, the likelihood the Company will sell the vessel or equipment prior to the end of its useful life, the estimation of a cash generating

unit’s future revenues and direct costs, and the determination of discount rates. The Company has determined that, as the cash inflows of

the individual vessels in its CoA fleet are not largely independent from each other, the CoA fleet is treated as a single cash generating unit

for impairment purposes.

Estimation uncertainty

(i) Vessels and equipment - useful lives and residual value

The cost of the Company's vessels and equipment are depreciated on a straight-line basis over each asset's estimated useful life to an

estimated residual value. The estimated useful life of the Company's vessels, including individual components, takes into account design

life, commercial considerations and regulatory restrictions. The determination of the components, if any, of an asset and the estimated

useful life of such asset or components involves judgment. See Note 2j for additional information.

(ii) Impairment

The recoverable amounts of each vessel, being defined as a cash-generating unit, is the higher of its fair value less cost of disposal and its

value in use. The fair value less cost of disposal calculation is based on the discounted cash flow model and is the same as the value in

use. Value in use calculations are based on contracted cash flows and estimates of uncontracted cash flows for the useful lives of each

vessel, including residual values discounted by an estimated discount rate. Assumptions on uncontracted cash flows are based on several

variables, such as comparing the specifications on a particular vessel with planned new projects around the world, assessment of

investment levels to redeploy the vessel on a new field and assumptions on rates to be achieved from redeployment. The key assumptions

used for the impairment testing of our fleet are described in Note 10.

All impairment assessment calculations demand a high degree of estimation. The Company must make complex assessment of the

expected cash flows arising from such assets and the selection of discount rates. Changes to these estimates could have significant

impact on the impairments recognized and future changes may lead to reversals of recognized impairments. See Note 10 and 12 for

additional information

(iii) Taxes

The future realization of deferred tax assets depends on the existence of sufficient taxable income to utilize tax losses. This analysis

requires, among other things, the use of estimates and projections in determining future reversals of temporary differences, forecasts of

future profitability and evaluating potential tax-planning strategies.

(iv) COVID-19

In March 2020, the World Health Organization declared a global pandemic related to COVID-19. To date, there has been significant

volatility in capital markets, commodity prices and foreign currencies, restrictions on the conduct of business in many jurisdictions, and the

global movement of people and some goods has become restricted. The Company considered the impacts of these circumstances on the

key critical judgments, estimates and assumptions that affect the reported and contingent amount of assets, liabilities, revenues and

expenses, including whether any additional indicators of impairment were present for the year ended December 31, 2021. Based on the

Company’s assessments, no additional impairment indicators were identified as at December 31, 2021 and the Company has not

experienced any material business interruptions or financial impact as a result of the COVID-19 pandemic. The extent to which the

COVID-19 pandemic may impact the Company's results of operations and financial condition, including any future possible impairments,

will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge

concerning the severity of the virus or its variants, the effectiveness of vaccines and other actions to contain or treat its impact, among

others. The Company will continue to monitor the situation and review its critical estimates and judgments as circumstances evolve.

(v) Climate Change

The Company could face the impact of an accelerated energy transition driven by climate change. The Company's strategy, capital

allocation and selection of projects are guided by the vision to lead the industry to a sustainable future and climate related risks are key

drivers for it. The effect on the Company's compliance costs, capital expenditures, cash flow from operation and other assumptions are

inherently uncertain and may differ from actual amounts. The Company did not experience any impact from an accelerated energy

transition driven by climate change on the financial results as at December 31, 2021. The risks will however remain as key considerations

for impairment testing, estimation of remaining useful life and provisions for future periods.

w.New standards, interpretations, amendments and policies adopted by the Company

The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

i.Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

In August 2020, the International Accounting Standards Board published Interest Rate Benchmark Reform — Phase 2 (Amendments to

IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) (or Phase 2 Amendments), effective January 1, 2021, with early adoption permitted. The

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Phase 2 amendments provide additional guidance to address the issues that will arise during the transition of benchmark interest rates and

primarily relate to the modification of financial assets, financial liabilities and lease liabilities where the basis for determining the contractual

cash flow changes as a result of the replacement of an existing interest rate benchmark, allowing for prospective application of the new

applicable benchmark interest rate, and to the application of hedge accounting, providing an exception such that changes in the

designation of hedge accounting relationships that are needed to reflect the changes required by the benchmark interest rate reform do not

result in the discontinuation of hedge accounting. The Company is adopting the Phase 2 Amendments on January 1, 2021. The adoption of

the amendments did not have a significant impact on the Company’s consolidated financial statements as at and for the year ended

December 31, 2021. The Company's risk management strategy has not changed as a result of these matters.

Progress towards implementation of alternative benchmark interest rates

The Company is exposed to the impact of interest rate changes, primarily through its floating-rate borrowings that require it to make

interest payments based on LIBOR. The Company uses interest rate swaps to reduce its exposure to market risk from changes in interest

rates.

The Company plans to transition the majority of its LIBOR-linked contracts to risk-free rates through amendments to fallback clauses in its

floating-rate credit facilities and debt instruments which would change the basis for determining the interest rate cash flows from LIBOR to

a risk-free rate at an agreed point in time. During March 2021, ICE Benchmark Administration, an administrator of regulated benchmarks,

announced that it has delayed the cessation of the publication of the overnight, one, three, six and 12 month USD LIBOR until June 30,

2023.

Interest rate benchmark transition for non-derivative financial liabilities

As at December 31, 2021, the Company had $1.0 billion of outstanding LIBOR-referenced borrowings summarized as follows:

Principal

Weighted-average

term

Transition Progress

(years)

Revolving Credit Facilities

301,387

2.39

Expected to amend fallback clauses prior to cessation of

publication of LIBOR.

Term Loans

523,574

4.71

Public Bonds

200,000

2.80

Total

1,024,961

3.66

Interest rate benchmark transition for derivatives

As at December 31, 2021, the Company had an outstanding notional balance of $100.0 million of LIBOR-referenced interest rate swap

agreements.

For all of the Company’s LIBOR-referenced derivatives, the International Swaps and Derivative Association’s fallback clauses were made

available in late-2020 and the Company and its counterparties expect to adhere to this protocol. Such adherence would result in all legacy

trade under the derivatives following, on the cessation of LIBOR, the fallback clause provided in the protocol.

ii.Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

In January 2020, the International Accounting Standards Board finalized amendments to IAS 1 to clarify the classification of liabilities. The

amendments affect only the presentation of liabilities in the statement of financial position and not the amount or timing of recognition of

any asset, liability income or expenses, or the information that entities disclose about those items. They:

•clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the

reporting period and align the wording in all affected paragraphs to refer to the "right" to defer settlement by at least twelve months

and make explicit that only rights in place "at the end of the reporting period" should affect the classification of a liability;

•clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability;

and

•make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and are to be applied retrospectively.

Earlier application is permitted. The Company is currently assessing the impact as a result of the amendment however, the adoption is not

expected to have a significant impact on the Company's consolidated financial statements.

3. Fair Value of Financial Instruments

The fair value of a financial instrument 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. In the absence of an active market, fair values are determined based on

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

prevailing market rates for instruments with similar characteristics and risk profiles, or internal or external valuation models, such as

discounted cash flow analysis, maximizing observable market inputs.

Fair values determined using valuation models require the use of assumptions concerning the amount and timing of estimated future cash

flows and discount rates. In determining those assumptions, the Company looks primarily to external readily observable market inputs such

as interest rate yield curves and price and rate volatilities as applicable. Financial instruments classified as fair value through profit or loss

(or FVTPL) are carried at fair value in the consolidated statements of financial position and changes in fair values are recognized in profit

or loss.

The following tables provide the details of financial instruments and their associated classifications as at December 31, 2021 and 2020:

December 31, 2021

December 31, 2020

Measurement Basis

FVTPL

Amortized

cost

Total

FVTPL

Amortized

cost

Total

Financial assets

Cash and cash equivalents

—

124,257

—

169,447

Financial assets (current and non-current)

274

2,038

2,312

5,144

75,821

80,964

Accounts and other receivable, net (current and

non-current) (1)

—

38,193

—

50,654

Due from related parties (current and non-

current)

—

20,523

—

24,619

Other assets (current and non-current) (2)

—

53,158

—

59,905

Total

274

238,169

238,443

5,144

380,446

385,590

Financial liabilities

Accounts payable and other (3)

—

19,396

—

30,617

Other financial liabilities (current and non-

current) (4)

1,949

199,107

201,056

3,368

139,232

142,600

Due to related parties (current and non-current)

—

75,061

—

8,990

Borrowings (current and non-current)

—

1,477,772

—

1,605,500

Total

1,949

1,771,336

1,773,285

3,368

1,784,339

1,787,707

(1)Excludes sales tax receivable of $0.4 million as at December 31, 2021 (December 31, 2020 - $1.0 million).

(2)Includes investments in finance leases. See Note 8 for additional information.

(3)Includes accounts payable and lease liabilities. See Note 13 for additional information.

(4)Includes derivative instruments, obligations relating to leases and other financial liabilities. See Note 17 for additional information.

Included in cash and cash equivalents as at December 31, 2021 is $124.3 million of cash (December 31, 2020 - $169.4 million) and $nil of

cash equivalents (December 31, 2020 - $nil).

The fair value of all financial assets and liabilities as at December 31, 2021 approximated their carrying values, with the exception of the

borrowings, where fair value which was determined using Level 1 and Level 2 inputs resulted in a fair value of $1.5 billion (December 31,

2020 - $1.6 billion) versus a carrying value of $1.5 billion (December 31, 2020 - $1.6 billion). The fair value of the Company’s fixed-rate and

variable-rate long-term debt is either based on quoted market prices or estimated using discounted cash flow analysis based on rates

currently available for debt with similar terms and remaining maturities and the current credit worthiness of the Company.

Fair value hierarchical levels - financial instruments

There were no transfers between levels during the year ended December 31, 2021, nor during the year ended December 31, 2020. The

following table categorizes financial assets and liabilities, which are carried at fair value through profit or loss on a recurring basis, based

upon the level of input as at December 31, 2021 and December 31, 2020:

December 31, 2021

December 31, 2020

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

Financial assets

Derivative instruments

—

274

—

5,144

—

Total

—

274

—

5,144

—

Financial liabilities

Derivative instruments

—

1,949

—

3,368

—

Total

—

1,949

—

3,368

—

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The following table summarizes the valuation techniques and key inputs used in the fair value measurement of Level 2 financial

instruments:

Type of Asset /

Liability

Carrying value

Valuation Techniques and Key Inputs

December

31, 2021

December

31, 2020

Derivative instruments

(1,675)

1,776

The fair value of derivative instruments incorporates observable forward

exchange rates and forward interest rates from observable yield curves,

respectively, at the end of the reporting period, and the current credit worthiness

of both the Company and the derivative counterparties. The estimated amount is

the present value of future cash flows.

4.Financial Assets

Year Ended December 31,

2021

2020

Current

Restricted cash (1)

2,038

75,820

Derivative instruments(2)

274

5,144

Total current

2,312

80,964

(1)Restricted cash as at December 31, 2021 includes funds for loan facility repayments and withholding taxes. (December 31, 2020 - includes amounts held in

escrow for a shuttle tanker newbuilding yard installment payment and withholding taxes).

(2)See Note 17 for additional information.

5.Accounts and Other Receivable, Net

Year Ended December 31,

2021

2020

Current

Accounts receivable - trade

30,606

45,934

Other non-trade receivable

8,011

2,704

Total current

38,617

48,638

6.Vessels and Equipment Classified as Held for Sale

Year Ended December 31,

2021

2020

Vessel

Navion Anglia (1)

—

4,400

Navion Oslo (1)

—

3,100

Total

—

7,500

(1)Classification as a result of the highly probable sale of the vessels, which were completed during the second and third quarter of 2021 (see Note 7 for additional

information).

The fair value of vessels and equipment classified as held for sale measured on a non-recurring basis was $nil and $7.5 million as at

December 31, 2021 and December 31, 2020, respectively (see Note 10 for additional information).

7.Gain (Loss) on Dispositions, Net

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Period

Vessel

Net Proceeds

Gain (Loss) on

Dispositions, Net

Q4-21

Navion Stavanger

9,915

(1)

Q3-21

Navion Anglia

6,144

1,397

Q2-21

Navion Oceania

10,618

2,576

Q2-21

Navion Oslo

3,160

(29)

Q2-21

Stena Natalita

8,198

(299)

Gain (loss) on dispositions, net for the year ended December 31, 2021

3,644

Q4-20

Navion Bergen

—

Q3-20

Navion Bergen

3,385

(18)

Q1-20

Navion Hispania

6,715

(385)

Q1-20

Stena Sirita

6,055

(85)

Gain (loss) on dispositions, net for the year ended December 31, 2020

(487)

8.Other Assets

Year Ended December 31,

2021

2020

Current

Prepayments

3,917

2,875

Investment in finance leases (1)

9,162

8,268

Contract assets (2)

8,639

9,119

Total current

21,718

20,262

Non-current

Investment in finance leases (1)

43,996

51,638

Right-of-use assets (3)

11,126

22,170

Contract assets (2)

3,336

7,527

Other assets

9,781

11,591

Total non-current

68,239

92,926

(1)Includes the VOC systems on certain of the Company's shuttle tankers. See Note 22 for additional information.

(2)See Note 16 for additional information

(3)See Note 9 for additional information

9.Right-of-use Assets and Lease Liabilities

The following table presents the change in the balance of the Company's right-of-use assets for the years ended December 31, 2021 and

2020:

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Year Ended December 31,

2021

2020

Gross Carrying Amount

Opening balance at beginning of year

33,114

57,668

Additions (cash and non-cash)

—

Dispositions

—

(24,554)

Closing balance at end of period

33,114

Accumulated Depreciation

Opening balance at beginning of year

(10,944)

(4,592)

Depreciation expense

(11,044)

(15,925)

Dispositions

—

9,573

Closing balance at end of period

(21,988)

(10,944)

Net book value

11,126

22,170

As at December 31, 2021 and 2020, the Company's right-of-use assets were as follows:

As at December 31, 2021

December 31,

2021

December 31,

2020

Weighted-average

remaining lease

term

Weighted-average

implicit interest rate

(years)

(%)

Vessels and equipment

10,956

21,971

1.0

3.3%

Office leases

170

199

5.2

5.9%

Total

11,126

22,170

Lease related items for which the Company was a lessee for the years ended December 31, 2021 and 2020, were as follows:

Year Ended December 31,

2021

2020

Amounts recognized in profit and loss

Depreciation expense on right-of-use vessels and equipment

11,015

15,899

Depreciation expense on right-of-use office leases

Interest expense on lease liabilities

598

1,944

Short-term lease expense

2,713

4,312

14,355

22,181

As at December 31, 2021, the undiscounted contractual maturities of the Company's lease liabilities were as follows:

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Lease liabilities

11.6

11.4

0.2

—

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

10.Vessels and Equipment

Year Ended December 31,

2021

2020

Gross carrying amount:

Opening balance at beginning of year

1,993,761

1,466,204

Additions

24,787

24,093

Dispositions (1)

(48,916)

(19,400)

Transferred from advances on newbuilding contracts

253,301

543,564

Vessels and equipment reclassified as held for sale (2)

(36,500)

(20,700)

Closing balance at end of year

2,186,433

1,993,761

Accumulated Depreciation and Impairment:

Opening balance at beginning of year

(321,028)

(167,380)

Depreciation and amortization (3)

(161,895)

(143,417)

Impairment expense, net (4)

—

(35,259)

Dispositions (1)

33,916

11,827

Vessels and equipment reclassified as held for sale (2)

26,600

13,201

Closing balance at end of year

(422,407)

(321,028)

Net book value

1,764,026

1,672,733

(1)Includes the sale of vessels and the replacement of certain components of vessels and equipment.

(2)See Note 6 for additional information.

(3)Excludes depreciation and amortization on the Company's right-of-use assets, office equipment and software. See Note 9 for additional details.

(4)See below for additional information. Excludes impairment expense on vessels and equipment classified as held for sale during the years ended December 31,

2021 and 2020.

Impairment expense, net

The following tables contains a summary of the Company’s impairment expense, net for the years ended December 31, 2021 and 2020,

by vessel:

Period

Vessel

Event

Fair Value

Hierarchical

Level

Valuation Techniques and Key

Inputs

Impairment

Expense

Q4 2020(1)

Navion Oslo

Sale of the vessel considered

highly probable

Level 2

Fair value less cost to sell using

an appraised valuation

7,665

Q3 2020(1)

Navion Anglia

Sale of the vessel considered

highly probable

Level 2

Fair value less cost to sell using

an appraised valuation

3,100

Q2 2020(2)

Navion Bergen

Sale of the vessel considered

highly probable

Level 2

Fair value less cost to sell using

an appraised valuation

1,715

Q1 2020

Navion Stavanger

Change in expected earnings

of the vessel

Level 3

Value in use using a discounted

cash flow valuation

3,607

Q1 2020

Navion

Gothenburg

Change in future redeployment

assumptions

Level 3

Value in use using a discounted

cash flow valuation

16,772

Q1 2020(2)

Navion Bergen

Sale of the vessel considered

highly probable

Level 2

Fair value less cost to sell using

an appraised valuation

2,400

Impairment expense, net for the year ended December 31, 2020

35,259

(1)Vessels and equipment were classified as held for sale as at December 31, 2020.

(2)Vessels and equipment were sold during the year ended December 31, 2020.

The fair value of vessels and equipment measured on a non-recurring basis using the valuation techniques as described above was $nil

and $nil as at December 31, 2021 and December 31, 2020, respectively.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The following table summarizes the significant unobservable inputs used in the Level 3 fair value measurements for the discounted cash

flow valuations used for the Company's vessels and equipment:

Period

Vessel

Period of

Projected Cash

Flows

(years)

Growth Rate(1)

(%)

Discount Rate

(%)

Sensitivity Analysis - Increase in

impairment expense due to 0.5%

increase in discount rate

(in million USD)

Q1 2020

Navion Stavanger

3.3

2.60 - 3.50

8.25

0.2

Q1 2020

Navion Gothenburg

5.9

2.50

8.25

0.4

(1)The growth rates indicated in the table above are the implicit rates used in the discounted cash flow valuations, however, cash flows have been adjusted for

contractual revenues and expected offhire due to repairs and maintenance or drydocking.

As at December 31, 2021, the Company had no vessels in lay-up (December 31, 2020 - one vessel, with a carrying value of $4.4 million

which was classified as held for sale). See Note 6 for additional information.

Non-current Assets

The tables below summarize the Company's non-current assets by geography as at December 31, 2021 and December 31, 2020:

Year Ended December 31,

2021

2020

Norway

1,171,584

1,145,344

Brazil

406,665

385,621

Canada

365,608

357,237

United Kingdom

38,402

60,542

Other

29,037

32,353

Total non-current assets(1)

2,011,296

1,981,097

(1)Excludes financial instruments and deferred tax assets.

11.Advances on Newbuilding Contracts

Year Ended December 31,

2021

2020

Opening balance at beginning of year

127,335

297,100

Additions

176,964

369,021

Capitalized borrowing costs

920

4,778

Transferred to vessels and equipment

(253,301)

(543,564)

Closing balance at end of period

51,918

127,335

Since 2017, the Company had entered into shipbuilding contracts for the construction of seven shuttle tanker newbuildings for an

estimated fully built up cost of $965.6 million. As at December 31, 2021, six of these vessels had been delivered to the Company. The

remaining vessel, the Altera Thule shuttle tanker, was delivered in March 2022. As at December 31, 2021, gross payments made towards

these commitments were $891.7 million. The Company has secured $733.5 million of borrowings or long-term financing under sale and

leaseback transactions relating to these shuttle tanker newbuildings (see Notes 17 and 18 for additional information).

As at December 31, 2021, the contractual maturities of the Company's obligations under its newbuildings contracts were as follows:

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Newbuilding contracts(1)

74.0

—

(1)The Company secured $105.6 million of borrowings relating to this shuttle tanker newbuilding, which as at December 31, 2021 had an undrawn balance

of $63.4 million (see Note 18 for additional information).

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

As at December 31, 2021, the contractual maturities of the Company's obligations relating to the leases under the sale and leaseback

transactions were as follows:

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Obligations related to leases

201.7

11.3

145.2

As at December 31, 2021, the Company had leases secured by two vessels (December 31, 2020 - two vessels) with a combined carrying

value of $240.6 million (December 31, 2020 - $101.9 million).

12.Goodwill

The carrying amount of goodwill for the Company was $127.1 million as at December 31, 2021 and 2020. The Company conducted its

annual goodwill impairment evaluation during 2021 and 2020 and concluded that no impairment had occurred as the recoverable amount,

based on the fair value less cost of disposal using a discounted cash flow model incorporating significant unobservable inputs, exceeded

the carrying amount of goodwill. The estimates regarding the expected future cash flows and discount rates are Level 3 fair value inputs

based on various assumptions including existing contracts, future vessel redeployment rates, financial forecasts and industry trends. The

Company has not previously recorded any impairment expense related to the carrying amount of goodwill.

The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions

represent the Company's assessment of future trends in the relevant industries and have been based on historical data from both external

and internal sources.

2021

2020

Discount rate

7.29%

6.73%

Exit multiple

8.0

Discount rate

The discount rate is a post-tax measure, with a possible debt leveraging of 70% for 2021 (2020 - 70%) estimated based on the observed

leveraging within the industry and the long-term target leverage of the Company, at market interest rates of 4.2% for 2021 (2020 - 3.9%).

Exit Multiple

The cash flow projections include specific estimates for generally six years and a terminal value thereafter. The terminal value is estimated

using an EBITDA multiple generally applied to the year-six EBITDA and discounted using the discount rates described above. The EBITDA

multiple was determined based on an average of the EBITDA multiples used by the Company's industry peers and is therefore determined

to be consistent with the assumptions that a market participant would make.

The Company has identified that a reasonably possible change in these key assumptions could cause the carrying amount to exceed the

recoverable amount. The following table shows the amount by which these two assumptions would need to change individually for the

estimated recoverable amount to be equal to the carrying amount.

2021

2020

Discount rate

3.98%

3.23%

Exit multiple

(1.6)

(1.7)

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

13.Accounts Payable and Other

Year Ended December 31,

2021

2020

Current

Accounts payable

7,879

7,823

Accrued liabilities (1)

34,006

31,380

Provisions (2)

—

5,644

Deferred revenues (3)

11,803

8,124

Lease liabilities (4)

11,364

11,271

Total current

65,052

64,242

Non-current

Accounts payable and other

(1)

—

Deferred revenues (3)

354

854

Lease liabilities (4)

154

11,521

Total non-current

507

12,375

(1)See Note 14 for additional information.

(2)See Note 15 for additional information.

(3)See Note 16 for additional information.

(4)See Note 9 for additional information.

14.Accrued Liabilities

Year Ended December 31,

2021

2020

Interest including interest rate swaps

11,836

15,204

Payroll and benefits

5,991

6,027

Audit, legal and other general expenses

3,450

235

Voyage and vessel expenses

12,729

9,914

34,006

31,380

15. Provisions and Contingencies

Year Ended December 31,

2021

2020

Opening balance at beginning of year

5,644

4,724

Additional provisions recognized

—

920

Reduction arising from payments / derecognition

(5,644)

—

Closing balance at end of period

—

5,644

Occasionally the Company has been, and expects to continue to be, subject to legal proceedings and claims in the ordinary course of its

business, principally personal injury and property casualty claims. Certain of these claims have been assessed by the Company as having

a remote possibility of any outflow from settlement and are therefore not included in the balances above.

16.Contracts in Progress

Contract Assets and Liabilities

Certain customer contracts that the Company enters into will result in situations where the customer will pay consideration for performance

to be provided in the following month or months. These receipts are a contract liability and are presented within accounts payable and

other as deferred revenue until performance is provided. In other cases, the Company will provide performance in the month or months

prior to it being entitled to invoice for such performance. This results in such receipts being reflected as a contract asset that is presented

within other assets. In addition to these short-term timing differences between the timing of revenue recognition and when the entity’s right

to consideration in exchange for goods or services is unconditional, the Company has long-term charter arrangements whereby it has

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

received payments that are larger in the earlier periods of the arrangements and long-term charter arrangements whereby it will receive

payments that are larger in the latter periods of the arrangements. The following table presents the contract assets and contract liabilities

on the Company's consolidated statements of financial position associated with these long-term charter arrangements from contracts with

customers.

Year Ended December 31,

2021

2020

Contract assets

Current

8,639

9,119

Non-current

3,336

7,527

11,975

16,646

Contract liabilities

Current

11,803

8,124

Non-current

354

854

12,157

8,978

During the year ended December 31, 2021, the Company recognized revenue of $4.2 million, which was included in contract liabilities on

December 31, 2020.

Contract Costs

In certain cases, the Company incurs pre-operational costs that relate directly to a specific customer contract, that generate or enhance

resources of the Company that will be used in satisfying performance obligations in the future, whereby such costs are expected to be

recovered via the customer contract. These costs include costs incurred to reposition a vessel to a location where a charterer will take

delivery of the vessel. In certain cases, the Company will need to make judgments about whether costs relate directly to a specific

customer contract and whether costs were factored into the pricing of a customer contract and thus expected to be recovered. Such

deferred costs are amortized into direct operating costs over the duration of the customer contract. Amortization of such costs for the

Company for the year ended December 31, 2021 was $1.8 million (year ended December 31, 2020 - $1.8 million).

At December 31, 2021 the balance of assets recognized from the costs to fulfill a contract with a customer, classified as other assets, split

between current and non-current portions, on the Company's consolidated statements of financial position, totaled $9.8 million (December

31, 2020 - $11.6 million) and are categorized as vessel repositioning costs.

17.Other Financial Liabilities

December 31, 2021

December 31, 2020

Current

Derivative instruments

1,949

1,929

Obligations relating to leases(1)

10,990

8,839

Other

—

(7)

Total current

12,939

10,761

Non-current

Derivative instruments

—

1,439

Obligations relating to leases(1)

188,117

130,399

Total non-current

188,117

131,838

(1)See Note 11 for additional information. The financing liability accrued interest at a fixed rate of 5.5% until the related newbuilding vessels were delivered to the

Company during the first quarter of 2021, after which they accrue interest at a variable rate of LIBOR plus 2.85%.

Derivative Financial Instruments

The Company’s activities expose it to a variety of financial risks, including liquidity risk, interest rate risk, foreign currency risk and credit

risk. The Company selectively uses derivative financial instruments principally to manage certain of these risks.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The aggregate amount of the Company's derivative financial instrument positions is as follows:

December 31, 2021

December 31, 2020

Financial

Asset

Financial

Liability

Financial

Asset

Financial

Liability

Interest rate swaps

—

1,277

—

3,368

Foreign currency forward contracts

274

672

5,144

—

Total

274

1,949

5,144

3,368

Total current

274

1,949

5,144

1,929

Total non-current

—

1,439

Interest Rate Risk

The company enters into interest rate swaps, which exchange a receipt of floating interest for a payment of fixed interest, to reduce the

Company’s exposure to interest rate variability on its outstanding floating-rate debt. The Company has not designated, for accounting

purposes, any of the interest rate swaps held during the years ended December 31, 2021 and 2020 as hedges of variable rate debt. The

Company's interest rate swap is secured by certain vessels.

As at December 31, 2021, the Company was committed to the following interest rate swap agreements:

Interest

Rate

Index

Notional

Amount

Fair Value /

Carrying

Amount of

Assets

(Liabilities)

Weighted-

Average

Remaining

Term

(years)

Fixed

Interest

Rate (%) (1)

U.S. Dollar-denominated interest rate swap (2)

LIBOR

100,000

(1,277)

0.75

2.1%

(1) Excludes the margin the Company pays on its variable-rate debt, which at December 31, 2021, ranged from 1.30% to 6.50%.

(2)Notional amount remains constant over the term of the swap, unless the swap is partially terminated.

(3)Includes one interest rate swap, which as at December 31, 2021, had a total current notional amount of $100.0 million and a total fair value liability of $1.3 million.

This interest rate swap is due to terminate in the third quarter of 2022.

During the year ended December 31, 2021, the effective portion of previously designated and qualifying cash flow hedges recorded in

accumulated other comprehensive income during the term of the hedging relationship and reclassified to earnings and reported in interest

expense was a gain of $0.8 million (year ended December 31, 2020 - $0.8 million).

Total realized and unrealized gain (loss) on the Company's derivative financial instruments that are not designated, for accounting

purposes, as cash flow hedges are recognized in earnings and reported in realized and unrealized gain (loss) on derivative instruments in

the consolidated statements of income (loss) for the years ended December 31, 2021 and 2020 as follows:

Year Ended December 31,

2021

2020

Realized gain (loss) on derivative instruments

Interest rate swap

(1,942)

(1,140)

Foreign currency forward contracts

5,241

(2,369)

3,299

(3,509)

Unrealized gain (loss) on derivative instruments

Interest rate swap

2,091

(2,178)

Foreign currency forward contracts

(5,541)

4,661

(3,450)

2,483

Total realized and unrealized gain (loss) on derivative instruments

(151)

(1,026)

The Company is exposed to credit loss in the event of non-performance by the counterparties, all of which are financial institutions, to the

foreign currency forward contracts and the interest rate swap agreements. In order to minimize counterparty risk, to the extent possible and

practical, interest rate swaps are entered into with different counterparties to reduce concentration risk.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The following table presents the notional amounts underlying the Company's derivative financial instruments by term to maturity as at

December 31, 2021:

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Fair value through profit or loss

Interest rate swaps

100.0

—

Foreign currency forward contracts

33.0

—

Total

133.0

—

18.Borrowings

Weighted average

term

Weighted average

rate

December 31,

2021

December 31,

2020

December

31, 2021

December

31, 2020

December

31, 2021

December

31, 2020

(years)

(%)

Revolving Credit Facilities

301,387

369,600

2.39

3.39

2.68

2.73

Term Loans

671,832

714,001

5.96

6.62

2.85

2.96

Public Bonds

449,342

451,097

2.93

2.59

7.85

6.94

Non-Public Bonds

77,286

94,448

2.00

3.00

4.96

Total

1,499,847

1,629,146

4.13

4.56

4.42

4.13

Less: deferred financing costs and other

(22,075)

(23,646)

Total borrowings

1,477,772

1,605,500

Less current portion

(164,313)

(134,530)

Long-term portion

1,313,459

1,470,970

Revolving Credit Facilities

As at December 31, 2021, the Company had one revolving credit facility outstanding, secured by nine vessels (December 31, 2020 - one

credit facility outstanding secured by 13 vessels), with a combined carrying value of $522.1 million (December 31, 2020 - $621.7 million),

which, as at such date, provided for total borrowings of up to $301.4 million (December 31, 2020 - $369.6 million), and was fully drawn

(December 31, 2020 - fully drawn).

Term Loans

As at December 31, 2021, the Company had term loans outstanding secured by eight vessels (December 31, 2020 - secured by ten

vessels) with a combined carrying value of $856.1 million (December 31, 2020 - $885.2 million), which, as at such date, provided for total

borrowings of $671.8 million (December 31, 2020 - $714.0 million). The term loans reduce over time with quarterly or semi-annual

payments and have varying maturities through 2034.

Public and Non-Public Bonds

As at December 31, 2021, the Company had public bonds outstanding which totaled $449.3 million (December 31, 2020 - $451.1 million).

The public bonds have varying maturities through 2025.

As at December 31, 2021, the Company had non-public bonds outstanding outstanding secured by two vessels (December 31, 2020 -

secured by two vessels), with a combined carrying value of $156.9 million (December 31, 2020 - $168.7 million), which, as at such date

provided for total borrowings of $77.3 million (December 31, 2020 - $94.4 million). The non-public bonds reduce over time with semi-

annual payments and varying maturities through 2023.

In December 2021, the Company issued $180.0 million in senior unsecured bonds in the Norwegian bond market that mature in December

2025. These bonds are listed on the Oslo Stock Exchange. The interest payments on the bonds are fixed at a rate of 9.50%. The bonds

are non-callable for three years and all distributions by the Company have been suspended for the life of the bonds. These bonds were

issued at a discount to par value of 3% and the proceeds plus cash on hand were used to repurchase $181.2 million of the Company's pre-

existing 7.125% senior unsecured $250.0 million bond maturing in August 2022.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

As at December 31, 2021, the contractual maturities of the Company's borrowings were as follows:

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Borrowings:

Secured debt - scheduled repayments

467.3

95.7

98.9

63.2

37.7

30.8

141.0

Secured debt - repayments on maturity

583.2

—

211.9

173.6

—

197.7

—

Bond repayments

449.3

69.3

—

200.0

180.0

—

Total borrowings

1,499.8

165.0

310.8

436.8

217.7

228.5

141.0

See Note 20 for information regarding the Company's borrowings due to related parties.

In addition to the secured vessels discussed above, the Company's loan agreements typically includes customary security provisions

including assignment of insurance and earnings, pledged in favor of our lenders. As at December 31, 2021, the Company's pledged

accounts consisted of $49.4 million in Cash and cash equivalents ($83.7 million - December 31, 2020), $1.1 million in Financial assets

(current and non-current) ($nil - December 31, 2020), and $29.3 million in Accounts and other receivable, net (current and non-current)

($45.3 million - December 31, 2020). As at December 31, 2021, the Company has obtained guarantee arrangements with certain financial

institutions which in the event of default provide for $8.6 million of guarantee coverage ($14.3 million - December 31, 2020). As at

December 31, 2021, the Company was in compliance with all covenant requirements of its revolving credit facilities, term loans and bonds.

19.Income Taxes

Income taxes are recognized for the amount of taxes payable by the Company’s subsidiaries and for the impact of deferred income tax

assets and liabilities related to such subsidiaries.

The significant components of the Company’s deferred tax assets and liabilities as at December 31, 2021 and 2020 are as follows:

Year Ended December 31,

2021

2020

Tax losses carried forward

8,860

5,153

Total net deferred tax assets (liabilities)

8,860

5,153

Reflected in the statement of financial position as follows:

Deferred tax assets

8,860

5,153

Net deferred tax assets (liabilities)

8,860

5,153

The recognition of the deferred tax assets is based on the expectation that sufficient taxable income will be available through future taxable

income supported by forecast.

The net deferred tax assets (liabilities) movements are as follows:

Year Ended December 31,

2021

2020

Opening net deferred tax assets (liabilities) balance at beginning of year

5,153

7,000

Deferred income tax (expense) benefit

3,667

(1,830)

Other

(160)

(17)

Closing net deferred tax assets (liabilities) balance at end of year

8,660

5,153

The following table details the expiry date, if applicable, of the unrecognized deferred tax assets:

Year Ended December 31,

2021

2020

One year from reporting date

—

Two years from reporting date

—

Three years from reporting date

—

After three years from reporting date

—

Do not expire

—

36,405

Total

—

36,405

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The major components of income tax expense for the years ended December 31, 2021 and 2020 are as follows:

Year Ended December 31,

2021

2020

Current income tax (expense) benefit

(3,252)

(4,166)

Deferred income tax (expense) benefit

3,667

(1,830)

Income tax (expense) benefit

415

(5,996)

The company operates in countries that have differing tax laws and rates. Consequently, a consolidated weighted average tax rate will vary

from year to year according to the source of earnings or losses by country and the change in applicable tax rates. The below reconciliation

has been prepared using a composite statutory-rate for jurisdictions where the Company’s subsidiaries operate:

Year Ended December 31,

2021

2020

Income (loss) before income tax (expense) benefit

(25,493)

13,928

Net income (loss) not subject to taxes

(16,368)

32,196

Net income (loss) subject to taxes

(9,125)

(18,268)

Applicable statutory tax rate

15%

Net income (loss) subject to taxes at applicable statutory tax rates

(437)

(2,732)

Permanent differences

773

1,826

Adjustments related to currency differences

160

(17)

Derecognition of deferred tax assets and other

(911)

6,919

Tax expense (benefit) related to current year

(415)

5,996

The unrecognized tax benefits movements are as follows:

Year Ended December 31,

2021

2020

Opening unrecognized tax benefits balance at beginning of year

36,405

136,906

Increases (Decreases) for positions related to the current year

(36,405)

(100,501)

Closing unrecognized tax benefits balance at end of year

—

36,405

20.Related Party Transactions

The Company has no key employees and does not remunerate key management personnel.

The key management personal of the Partnership are as follows:

Name

Position

Ingvild Sæther

President and Chief Executive Officer, Altera Infrastructure Group Ltd.

Jan Rune Steinsland

Chief Financial Officer, Altera Infrastructure Group Ltd.

Duncan Donaldson

General Counsel, Altera Infrastructure Group Ltd.

For the years ended December 31, 2021 and 2020 the total compensation expenses of these three key management personnel of the

Partnership are as follows:

Salary

Bonus

Pension Benefits

Other Benefits

Total Compensation

2021

1,585

1,788

3,536

2020

1,317

1,570

3,063

Altera Infrastructure and its wholly-owned subsidiaries provide a significant portion of the Company’s commercial, technical, crew training,

strategic, business development and/or administrative service needs.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

a.On December 14, 2021, the Company entered into an agreement with Brookfield to issue $70.0 million aggregate principal amount

unsecured PIK notes (or the 12.50% PIK Notes), which contemporaneously discharged the then-existing $70.0 million unsecured

revolving credit facility bearing accrued interest at a rate equal to LIBOR plus a margin of 5.00%, which was fully drawn and was due

to mature in February 2022. Interest under the 12.50% Notes is payable in kind at a fixed rate of 12.50% and the facility matures in

June 2026. The 12.50% PIK Notes are to be listed on The International Stock Exchange. Additional 12.50% PIK Notes may only be

issued to satisfy the interest payable under the notes. As at December 31, 2021, the Company has accrued a total of $0.4 million of

interest, which upon payment date in June 2022 will increase the outstanding principal amount of the 12.50% PIK Notes in an

amount equal to the interest. Any outstanding principal balances are due on the maturity date.

During the year ended December 31, 2021, the Company determined that the interest rate under the $70.0 million revolving credit

facility described above was deemed to be at below market terms and therefore, Brookfield was acting in its capacity as an equity

owner. The Company recorded a $0.6 million decrease in the carrying value of the facility, which was classified as an equity

contribution in the Company's consolidated statements of changes in equity during the year ended December 31, 2021.

As at December 31, 2021, the contractual maturities of the Company's borrowings due to related parties were as follows:

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Borrowings due to related parties:

12.50% Unsecured PIK notes (1)

70.4

—

70.4

—

Total borrowings due to related parties

—

(1)Includes accrued interest $0.4 million which will be PIK'd in June 2022. See Note 20a for additional information.

As at December 31, 2021, the Company was in compliance with the covenant requirements of this facility.

The Company also reimburses its related parties for expenses incurred by the companies that are necessary or appropriate for the conduct

of the Company’s business. The Company's related party transactions recognized in the consolidated statements of income (loss) were as

follows for the periods indicated:

Year Ended December 31,

2021

2020

General and administrative (1)

(28,298)

(15,379)

Interest expense (2)(3)

(2,931)

—

(1)Includes commercial, technical, strategic, business development and administrative management fees charged by Altera Infrastructure and its wholly-

owned subsidiaries.

(2)Includes interest expense of $1.8 million for the year ended December 31, 2021 (year ended December 31, 2020 - $nil), and an accretion expense of

$0.6 million for the year ended December 31, 2021 (year ended December 31, 2020 - accretion expense of $nil) incurred on the unsecured revolving

credit facility provided by Brookfield. See Note 20a for additional information.

(3)Includes interest expense of $0.4 million incurred on the 12.50% PIK Notes for the year ended December 31, 2021 (December 31, 2020 - $nil). See

Note 20a for additional information.

At December 31, 2021, the carrying value of amounts due from related parties totaled $20.5 million (December 31, 2020 - $24.6 million).

and consist partially of an $11.0 million (December 31, 2020 - $nil) demand promissory note provided to Altera Infrastructure Holdings

L.L.C. which incurs interest at LIBOR plus a margin of 0.80% and is due on demand within 30 business days or matures on September 30,

2026. The carrying value of amounts due to related parties totaled $75.1 million (December 31, 2020 - $9.0 million) and consist partially of

$70.4 million (December 31, 2020 - $nil) 12.5% PIK Notes issued to Brookfield. The remaining amounts due to and from related parties are

non-interest bearing and unsecured and relate to amounts due to and from Altera Infrastructure and certain of its subsidiaries.

21.Non-Wholly Owned Subsidiaries

The following tables present the assets and liabilities from the Company’s investments in non-wholly owned subsidiaries as at December

31, 2021 and 2020, as well as of revenues, net income, other comprehensive income and distributions for the years ended December 31,

2021 and 2020:

Year Ended December 31,

2021

2020

Current assets

3,628

22,549

Non-current assets

40,284

48,960

Current liabilities

6,567

38,390

Non-current liabilities

—

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Year Ended December 31,

2021

2020

Revenues

22,403

43,206

Net income (loss) and other comprehensive income (loss)

(13,681)

(14,748)

Distributions paid to non-controlling interests

(9,112)

(4,750)

22.Revenues

a)Revenues by type

The Company’s primary source of revenues is chartering its shuttle tankers to its customers. The Company utilizes four primary forms of

contracts, consisting of CoAs, time-charter contracts, bareboat charter contracts and voyage charter contracts. During the years ended

December 31, 2021 and 2020, the Company also generated revenues from the operation of VOC systems on certain of the Company’s

shuttle tankers.

The following table contains the Company’s revenues for the years ended December 31, 2021 and 2020, by contract type:

Year Ended December 31,

2021

2020 (1)

Revenues from contracts with customers

CoAs

85,190

83,676

Time charters

96,196

92,066

Voyage charters

—

1,637

Management fees and other

14,417

7,119

195,803

184,498

Other revenues

CoAs

121,872

145,804

Time charters

160,767

152,866

Bareboat charters

9,604

21,679

Voyage charters

25,449

37,845

317,692

358,194

Total revenues

513,495

542,692

(1)The classification between the types of revenue has been updated for 2020 to align with the Partnership.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

b)Revenues from External Customers

The table below summarize the Company's revenues by geography based on the operating location of the Company's assets for revenues

from contracts with customers for the years ended December 31, 2021 and 2020:

Year Ended December 31,

2021

2020 (2)

Revenues from contracts with customers

Norway (1)

110,809

109,413

Brazil (1)

34,233

25,578

Canada

49,150

48,097

United Kingdom (1)

—

1,409

Other

1,611

—

Total revenues from contracts with customers

195,803

184,497

Other revenues

Norway (1)

170,165

178,866

Brazil (1)

65,757

76,116

Canada

60,216

62,269

United Kingdom (1)

—

3,098

Other

21,554

37,846

Total other revenues

317,692

358,195

Total revenues

513,495

542,692

(1) Reference to Norway, the UK and Brazil are to income from international shipping activities occurring on the Norwegian, UK and Brazilian continental shelves

respectively.

(2)The classification between the operating locations of revenue has been updated for 2020 to align with the Partnership.

The following table presents revenues and percentage of consolidated revenues for customers that accounted for more than 10% of the

Company’s consolidated revenues during the periods presented:

Year Ended December 31,

2021

2020

Royal Dutch Shell Plc

$100.1 or 19.5%

$93.9 or 17.3%

BP Plc

$88.7 or 17.3%

$76.3 or 14.1%

Equinor ASA

$71.1 or 13.8%

—(1)

(1)Percentage of consolidated revenue was less than 10%.

Finance leases

Leasing of certain vessels and equipment and VOC equipment are accounted for as finance leases.

During the year ended December 31, 2021, the Company recorded finance income of $4.5 million on its investment in finance leases

(December 31, 2020 - $3.4 million).

As at December 31, 2021, the minimum lease payments receivable under the Company's finance leases approximated $63.4 million

(December 31, 2020 - $76.2 million), including unearned income of $11.8 million (December 31, 2020 - $16.3 million). As at December 31,

2021, future scheduled payments under the finance leases to be received by the Company were as follows:

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Finance leases

63.4

12.8

12.1

11.5

4.0

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

c)Operating Leases

As at December 31, 2021, the carrying amount of the Company's vessels and equipment subject to operating leases in which the

Company is a lessor was $1.5 billion (December 31, 2020 - $1.6 billion). As at December 31, 2021, the undiscounted contractual earnings

receivable of the Company’s operating leases by expected period of receipt were as follows:

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Operating leases

1,469.8

234.9

212.7

165.2

149.9

146.6

560.5

23.Direct Operating Costs

Direct operating costs include all attributable expenses except interest, depreciation and amortization, impairment expense, other

expenses and taxes, and primarily relate to cost of revenues. The following table lists direct operating costs for the years ended December

31, 2021 and 2020 by nature:

Year ended December 31,

2021

2020

Voyage expenses (1)

97,783

91,620

Operating expenses

75,829

65,720

Charter hire

10,141

18,326

Compensation

62,000

61,499

Total

245,753

237,165

(1)Expenses unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and

commissions.

24.Supplemental Cash Flow Information

Year ended December 31,

2021

2020

Interest paid

77,222

69,829

Income taxes paid

2,202

5,397

Amounts paid and received for interest were reflected as operating cash flows in the consolidated statements of cash flow.

The changes in non-cash working capital items related to operating activities for the years ended December 31, 2021 and 2020 are as

follows:

Changes in non-cash working capital, net

Year ended December 31,

2021

2020

Accounts and other receivable, net

10,033

(537)

Other assets

1,046

6,488

Accounts payable and other

2,681

(8,781)

Due from (to) related parties

155

(12,176)

Changes in non-cash working capital, net

13,915

(15,006)

The following table presents the change in the balance of borrowings arising from financing activities as at December 31, 2021 and

December 31, 2020:

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Year ended December 31,

2021

2020

Opening balance at beginning of year

1,605,500

1,394,792

Cash flows

(128,744)

205,298

Non-cash changes:

Deferred financing costs amortization

(45)

6,797

Other

1,061

(1,387)

Closing balance at end of period

1,477,772

1,605,500

The following table presents the change in the balance of obligations related to leases arising from financing activities as at December 31,

2021 and December 31, 2020:

Year ended December 31,

2021

2020

Opening balance of obligations relating to leases at beginning of year

139,239

21,544

Cash flows related to obligations relating to leases

59,481

117,696

Non-cash changes:

Other

388

(1)

Closing balance of obligations relating to leases at end of year (1)

199,108

139,239

(1)See Note 17 for additional information.

The following table presents the change in the balance of lease liabilities arising from financing activities as at December 31, 2021 and

December 31, 2020:

Year ended December 31,

2021

2020

Opening balance of lease liabilities at beginning of year

22,170

53,076

Cash flows related to lease liabilities

(11,273)

(17,925)

Non-cash changes:

Additions

—

Dispositions

—

(14,981)

Other

229

2,000

Closing balance of lease liabilities at end of year (1)

11,126

22,170

(1)See Note 9 for additional information.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

25.Financial Risk Management

The Company recognizes that risk management is an integral part of a strong management practice.

The Company is exposed to the following risks: capital risk, liquidity risk, market risk (i.e. interest rate risk, foreign currency risk and

commodity risk) and credit risk. The following is a description of these risks and how they are managed:

a.Capital risk management

The capital structure of the Company consists of borrowings, offset by cash and equity.

Year ended December 31,

2021

2020

Borrowings

1,477,772

1,605,500

Obligations relating to leases

199,107

139,238

Less:

Cash and cash equivalents

124,257

169,447

Net debt

1,552,622

1,575,291

Total equity

420,837

551,248

Total capitalization (1)

2,097,716

2,295,986

Net debt to capitalization ratio (2)

74%

69%

(1)Total capitalization is calculated as the sum of borrowings, obligations relating to leases and total equity.

(2)Defined as net debt divided by total capitalization. The metric is is relevant to certain covenants for the Company.

The Company manages its debt exposure by financing its operations with non-recourse borrowings in subsidiaries of the Company,

ensuring a diversity of funding sources as well as managing its maturity profile. The Company also borrows in U.S. Dollars in order to

mitigate its currency risk.

As disclosed in Note 18, the Company has various credit facilities in place. In certain cases, the facilities have financial covenants which

are generally in the form of debt service coverage ratios, vessel values to drawn principal balance ratios and minimum liquidity

requirements.

b.Liquidity risk management

The Company maintains sufficient financial liquidity to be able to meet its ongoing operating requirements. The Company's primary liquidity

needs for the next twelve months are to pay existing committed capital expenditures, to pay scheduled debt repayments, to pay debt

service costs, to pay direct operating costs and dry-docking expenditures, to fund general working capital requirements, to settle potential

claims against the Company and to manage its working capital deficit.

For further information on the Company's contractual obligations, including a maturity analysis, please refer to Notes 9, 11, 17 and 18. See

Note 2b for the Company’s assessment of its ability to meet these obligations for at least the one-year period to December 31, 2022.

c.Market risk

Market risk is defined for these purposes as the risk that the fair value or future cash flows of a financial instrument held by the Company

will fluctuate because of changes in market prices. Market risk includes the risk of changes in interest rates, foreign currency exchange

rates and changes in market prices due to factors other than interest rates or foreign currency exchange rates, such as changes in

commodity prices or credit spreads.

Financial instruments held by the Company that are subject to market risk include borrowings and derivative instruments, such as interest

rate swaps and foreign currency forward contracts.

Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market

interest rates. The Company is exposed to the impact of interest rate changes, primarily through its floating-rate borrowings that require it

to make interest payments based on LIBOR. Significant increases in interest rates could adversely affect operating margins, results of

operations and the Company's ability to service its debt. The Company uses interest rate swaps to reduce its exposure to market risk from

changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with the Company's

floating-rate debt.

As at December 31, 2021, the Company had outstanding floating-rate debt balance of $1.0 billion (December 31, 2020 - $1.1 billion) and

an outstanding notional balance of $0.1 billion (December 31, 2020 $0.1 billion) of interest rate swaps. A 10 basis point decrease in the

Company's interest rates is expected to increase future cash flows by $1.0 million (December 31, 2020 - $1.0 million).

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2021 and December 31, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The Company is exposed to credit loss in the event of non-performance by the counterparties to the interest rate swap agreements. In

order to minimize counterparty risk, to the extent possible and practical, interest rate swaps are entered into with different counterparties to

reduce concentration risk.

For further information on the financial instruments held by the Company that are subject to interest rate risk, include borrowings and

derivative instruments, please refer to Note 3, which includes the fair values of the interest rate risk sensitive financial instruments, and

Notes 17 and 18, which includes the expected cash flows from the interest rate risk sensitive financial instruments.

Foreign exchange risk management

Foreign exchange risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign

exchange rates. The net income impact to the Company of foreign currency risk associated with financial instruments is limited as its

financial assets and liabilities are generally denominated in the Company's functional currency. However, the Company is exposed to

foreign currency risk on the net assets of its foreign currency denominated operations. The following tables set out the Company's currency

exposure of financial instruments as at December 31, 2021 and 2020:

(in thousands of U.S. Dollars)

December 31, 2021

USD

NOK

GBP

CAD

EUR

BRL

Other

Total

Financial assets

Current assets

161,787

576

989

4,475

16,246

9,281

1,093

194,447

Non-current assets

43,996

—

43,996

Total

205,783

576

989

4,475

16,246

9,281

1,093

238,443

Financial liabilities

Current liabilities

263,515

—

4,305

2,165

871

699

271,555

Non-current liabilities

1,501,616

—

114

—

1,501,730

Total

1,765,131

—

4,419

2,165

871

699

1,773,285

(in thousands of U.S. Dollars)

December 31, 2020

USD

NOK

GBP

CAD

EUR

BRL

Other

Total

Financial assets

Current assets

314,982

5,725

740

8,946

1,788

—

1,771

333,952

Non-current assets

51,638

—

51,638

Total

366,620

5,725

740

8,946

1,788

—

1,771

385,590

Financial liabilities

Current liabilities

171,302

1,195

—

533

—

370

173,400

Non-current liabilities

1,614,115

—

192

—

1,614,307

Total

1,785,417

1,195

—

192

533

—

370

1,787,707

The Company’s exposures to foreign currencies and the sensitivity of net income and other comprehensive income, on a pre-tax basis, to

a 10% change in the exchange rates relative to the United States dollar is summarized below:

(in thousands of U.S. Dollars)

December 31, 2021

10% decrease

10% increase

Euros

(1,408)

1,408

Brazilian Real

(841)

841

Canadian Dollars

(6)

Other

(39)

(in thousands of U.S. Dollars)

December 31, 2020

10% decrease

10% increase

Canadian Dollars

(875)

875

Norwegian Krone

(453)

453

Euros

(125)

125

Other

(214)

214

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31, 2021, December 31, 2020 and January 1, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Commodity price risk management

The Company is exposed to changes in forecasted bunker fuel costs for certain vessels being time-chartered-out and for vessels servicing

certain CoAs. The Company may use bunker fuel swap contracts as economic hedges to protect against changes in bunker fuel costs. As

at December 31, 2021, the Company was not committed to any bunker fuel swap contracts.

d.Credit risk

Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfill its contractual obligations.

The Company assesses the credit worthiness of each counterparty before entering into contracts and ensures that counterparties meet

minimum credit quality requirements. The Company also evaluates and monitors counterparty credit risk for derivative financial instruments

and endeavors to minimize counterparty credit risk through diversification.

All of the Company’s derivative financial instruments involve either counterparties that are banks or other financial institutions. The

Company does not have any significant credit risk exposure to any single counterparty.

Based on no experience of past default of the Company's debtors and no expectations of future losses as a result of default, the Company

has determined its credit risk to be low. For the purposes of credit risk, the Company has applied a definition to the term default as an

assessment that a counterparty is unlikely to pay, as well as an amount outstanding from a counterparty which is 90 days past due. As at

December 31, 2021, the Company recorded an ECL of $0.3 million (December 31, 2020 - $nil).

26. Gain (Loss) on Modification of Financial Liabilities, Net

The table below summarize the Company's gain (loss) on modification of financial liabilities, net for the year ended December 31, 2021

and 2020:

Year ended December 31,

2021

2020

Gain (loss) on modification of financial liabilities, net

(10,532)

—

Total other income (expenses), net

(10,532)

—

(1)During the year ended December 31, 2021, the Company recognized a loss on modification of financial liabilities of $10.5 million due to refinancing activities

related to the $180.0 million unsecured bonds issued in December 2021. See Note 18 for additional information.

27. Subsequent Events

a.Following Russia’s invasion of Ukraine in February 2022, the U.S., several European Union nations, and other countries have

announced sanctions against Russia. While it is difficult to anticipate the potential for any indirect impact the sanctions

announced to date may have on the Company's business and the Company, any further sanctions imposed or actions taken by

the U.S., EU nations or other countries, and any retaliatory measures by Russia in response, such as restrictions on oil

shipments from Russia, could lead to increased volatility in global oil demand which, could have a material adverse impact on the

Company's business, results of operations and financial condition.

b.The Company's final newbuilding in a series of seven, the shuttle tanker, Altera Thule, delivered to the Company from the yard in

March 2022. The Company plans to operate this vessel off the East Coast of Canada. The Company has drawn down the final

$63.4 million of the previously secured $105.6 million of borrowings relating to this shuttle tanker newbuilding.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31, 2021, December 31, 2020 and January 1, 2020 and for the years ended December 31, 2021 and 2020

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

SEPARATE FINANCIAL STATEMENTS

ALTERA SHUTTLE TANKERS L.L.C.

For the years ended December 31, 2021 and 2020

The following supplemental separate financial statements of Altera Shuttle Tankers L.L.C. (the "Parent Company") have been

prepared on a non-consolidated basis in order to comply with the Securities Trading Act and reporting obligations of the Oslo Stock

Exchange.

ALTERA SHUTTLE TANKERS L.L.C.

SEPARATE STATEMENTS OF FINANCIAL POSITION

(in thousands of U.S. dollars)

Year Ended December 31,

2021

2020

Notes

ASSETS

Current assets

Cash and cash equivalents

62,452

48,272

Financial assets

274

5,144

Accounts and other receivable, net

3,889

—

Due from subsidiaries

700,494

784,776

Due from related parties

16,384

247,822

Total current assets

783,493

1,086,014

Non-current assets

Investments in subsidiaries

726,741

868,620

Total non-current assets

726,741

868,620

Total assets

1,510,234

1,954,635

LIABILITIES

Current liabilities

Accounts payable and other

6,7

14,407

14,379

Other financial liabilities

1,949

1,929

Borrowings

143,115

76,402

Due to subsidiaries

21,307

16,208

Due to related parties

259

156,980

Total current liabilities

181,037

265,898

Other financial liabilities

—

1,439

Borrowings

978,078

1,139,714

Due to related parties

70,389

—

Total non-current liabilities

1,048,467

1,141,153

Total liabilities

1,229,504

1,407,051

EQUITY

Contributions

989,819

978,240

Accumulated deficit

(709,623)

(431,939)

Accumulated other comprehensive income

534

1,283

Total equity

280,730

547,584

Total liabilities and total equity

1,510,234

1,954,635

The accompanying notes are an integral part of the separate financial statements.

ALTERA SHUTTLE TANKERS L.L.C.

SEPARATE STATEMENTS OF INCOME (LOSS)

(in thousands of U.S. dollars)

Year Ended December 31,

2021

2020

Notes

Dividend income

16,800

92,325

General and administrative expenses

(4,573)

(415)

Interest expense

(63,088)

(59,354)

Interest income

18,791

11,908

Impairment expense, net

(107,441)

(230,124)

Realized and unrealized gain (loss) on derivative instruments

(151)

(928)

Foreign currency exchange gain (loss)

(2,520)

7,382

Gain (loss) on modification of financial liabilities, net

(10,705)

—

Other income (expenses), net

203

(1,063)

Net income (loss)

(152,684)

(180,269)

Attributable to:

Members

(152,684)

(180,269)

The accompanying notes are an integral part of the separate financial statements.

ALTERA SHUTTLE TANKERS L.L.C.

SEPARATE STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands of U.S. dollars)

Year Ended December 31,

2021

2020

Notes

Net income (loss)

(152,684)

(180,269)

Other comprehensive income (loss):

Items that may be reclassified subsequently to net income (loss):

To interest expense:

Realized gain on qualifying cash flow hedging instruments

(749)

(810)

Total other comprehensive income (loss)

(749)

(810)

Comprehensive income (loss)

(153,433)

(181,079)

Attributable to:

Members

(153,433)

(181,079)

The accompanying notes are an integral part of the separate financial statements.

ALTERA SHUTTLE TANKERS L.L.C.

SEPARATE STATEMENTS OF CHANGES IN TOTAL EQUITY

(in thousands of U.S. dollars)

Accumulated

deficit

Accumulated

Other

Comprehensive

Income

Contributions

Total

Notes

Balance as at December 31, 2019

(111,670)

2,093

521,178

411,601

Net income (loss)

(180,269)

—

(180,269)

Distribution to Altera Infrastructure L.L.C.

(140,000)

—

(140,000)

Return of capital from subsidiaries

—

457,062

Other comprehensive income

—

(810)

—

(810)

Balance as at December 31, 2020

(431,939)

1,283

978,240

547,584

Net loss

(152,684)

—

(152,684)

Distribution to Altera Infrastructure L.L.C.

(125,000)

—

(125,000)

Contribution of capital from Altera Infrastructure

Holdings L.L.C.

—

11,000

Contribution of capital from Brookfield

—

579

Other comprehensive income (loss)

—

(749)

—

(749)

Balance as at December 31, 2021

(709,623)

534

989,819

280,730

The accompanying notes are an integral part of these unaudited separate financial statements.

ALTERA SHUTTLE TANKERS L.L.C.

SEPARATE STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)

Year Ended December 31,

2021

2020

Notes

OPERATING ACTIVITIES

Net income (loss)

(152,684)

(180,269)

Adjusted for the following items:

Impairment expense, net

107,441

230,125

Unrealized (gain) loss on derivative instruments

3,449

(2,237)

Other non-cash items

(3,466)

966

Changes in non-cash working capital, net

160,626

(339,892)

Net operating cash flow

115,366

(291,307)

FINANCING ACTIVITIES

Proceeds from borrowings

180,000

290,630

Repayments of borrowings

(272,399)

(59,352)

Proceeds from borrowings from related parties

70,000

—

Distributions to member

(125,000)

(40,000)

Capital provided by member

11,000

—

Net financing cash flow

(136,399)

191,278

INVESTING ACTIVITIES

Net investment in cost-accounted subsidiaries

34,439

—

Cash acquired through mergers

—

Net investing cash flow

34,439

Cash and cash equivalents

Change during the period

13,406

(100,014)

Impact of foreign exchange on cash

774

(1,775)

Balance, beginning of period

48,272

150,061

Balance, end of period

62,452

48,272

Supplemental cash flow information (note 10)

The accompanying notes are an integral part of these separate financial statements.

1. Nature and Description of the Company

Altera Shuttle Tankers L.L.C. (Altera Shuttle Tankers or the Company), a wholly-owned subsidiary of Altera Infrastructure Partners

L.P. (Altera Infrastructure or the Partnership) is an international midstream services provider of marine transportation to the offshore

oil industry, focused on the ownership and operation of shuttle tankers in the North Sea, Brazil and the East Coast of Canada and

expanding its operations in the shuttle tanker business.

The main activity of the Company is a holding company of ship-owning subsidiaries.

The Company was formed in July 2017, under the laws of the Republic of the Marshall Islands, by Altera Infrastructure Holdings

L.L.C., a 100% owned subsidiary of Altera Infrastructure. The registered head office of the Company is Altera House, Unit 3,

Prospect Park, Arnhall Business Park, Westhill, Aberdeenshire, AB32 6FJ, United Kingdom.

Altera Infrastructure is a subsidiary of Brookfield Business Partners L.P. (NYSE: BBU) (TSX: BBU.UN) (or with its affiliates,

Brookfield), while Brookfield Asset Management Inc., (NYSE: BAM) (TSX: BAM.A) an entity incorporated in Ontario, Canada, is the

ultimate parent of the Company.

2. Significant Accounting Policies

a.Basis of presentation

These separate financial statements of the Company have been prepared in accordance with International Financial Reporting

Standards as issued by the International Accounting Standards Board (or IFRS) and using the accounting policies described below.

The separate financial statements have been prepared under the assumption that the Company operates on a going concern basis

and have been presented in U.S. dollars rounded to the nearest thousand unless otherwise indicated.

These financial statements are prepared on a non-consolidated basis in order to comply with the Securities Trading Act of the Oslo

Stock Exchange.

These separate financial statements were approved by the Company's Board of Directors and authorized for issue on April 29,

2022.

b.Going concern

The working capital surplus of $602.5 million as at December 31, 2021 has decreased from a working capital surplus of

$820.1 million as at December 31, 2020. This decrease is primarily related to a decrease of $84.3 million in to Due from

Subsidiaries, a decrease of $231.4 million in to Due from related parties and an increase in current borrowings of $66.7 million,

partially offset by a decrease of $156.7 million in Due to related parties.

Based on these factors, the Company will need to obtain additional sources of financing, in addition to amounts generated from

operations, to meet its obligations and commitments and the minimum liquidity requirements under its financial covenants. These

requirements include but are not limited to maintaining a minimum liquidity in an amount equal to the greater of $35 million and 5%

of total debt and a net debt to total capitalization ratio of no greater than 75%. During the year ended December 31, 2021, the

Company completed various measures to improve its debt maturity profile and enhance its liquidity and financial flexibility, including

but not limited to exchanging $70.0 million of Brookfield debt with a 2022 maturity into debt with interest paid in kind and with a 2026

maturity and issuing $180.0 million of new 2025 bonds. See Notes 5 and 9 for additional information.

Other potential sources of financing that the Company is actively pursuing, or may consider pursuing, during the one-year period to

December 31, 2022, include entering into new debt facilities, borrowing additional amounts under existing facilities, the refinancing

or extension of certain borrowings, selling certain assets, seeking joint venture partners for the Company's business interests,

entering into sale-leaseback agreements and/or capital raises. Additional potential sources of amounts generated from operations

include the extensions and new opportunities for existing assets, higher utilization of the operating fleet, increased rates for vessels

operating in the spot market, and working capital optimizations.

The Company is actively pursuing or may pursue the financing initiatives described above, which it considers probable of

completion based on the Company’s history of being able to raise and refinance borrowings for similar types of vessels and based

on the Company's assessment of current conditions and estimated future conditions. The Company is in various stages of

progression on these matters.

Based on the Company’s liquidity at the date of these separate financial statements, the liquidity it expects to generate from

operations over the following year, and by incorporating the Company's plans to raise additional liquidity that it considers probable

of completion, the Company expects that it will have sufficient liquidity to enable the Company to continue as a going concern for at

least the one-year period to December 31, 2022.

c.Foreign currency

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

The U.S. dollar is the functional and presentation currency of the Company. The Company’s vessels operate in international

shipping markets, in which substantially all income and expenses are settled in U.S. dollars. In addition, the Company's most

significant assets, its vessels and equipment, are bought and sold in in U.S. dollars and the Company's most significant liabilities, its

commercial bank borrowings, are denominated in U.S. dollars. Foreign currency denominated monetary assets and liabilities are

translated using the rate of exchange prevailing at the reporting date and non-monetary assets and liabilities are measured at

historic cost and are translated at the rate of exchange at the transaction date. Foreign currency denominated revenues and

expenses are measured at average rates during the period. Gains or losses on translation of these items are included in foreign

currency exchange gain (loss) in the separate statements of income (loss).

d.Cash and cash equivalents

Cash and cash equivalents include cash on hand, non-restricted deposits and short-term investments with original maturities of

three months or less.

e. Accounts and other receivable, net

Accounts and other receivable, net includes trade receivables and other unbilled receivables. Accounts and other receivable, net,

except for trade receivables, are recognized initially at fair value and subsequently measured at amortized cost using the effective

interest method, less any allowance for expected credit losses. Trade receivables are recognized initially at their transaction price.

f.Related party transactions

In the normal course of operations, the Company enters into various transactions with related parties, which have been measured

at their fair value, which generally is the agreed upon exchange value and are recognized in the separate financial statements.

Related party transactions are further described in Note 5.

g.Dividend income

Dividend income is recognized when the right to receive payment is established, which is when the dividend is approved by the

general meeting of the subsidiary. Dividend income is recognized based on the accumulated earnings of the subsidiary and any

excess distributions is recognized in the statement of income (loss).

h.Investment in subsidiaries

The Company accounts for investments in subsidiaries using the cost method of accounting. No income is recorded related to the

investments in subsidiaries except for dividends received. At each reporting date the Company assesses if an event has occurred

or circumstances have changed that would indicate that the recoverable amount of the investment in a subsidiary was below its

carrying value. This assessment includes a review of internal and external factors which includes, but is not limited to, changes in

the technological, political, economic or legal environment in which the subsidiary operates, structural changes in the industry,

changes in the level of demand, physical damage and obsolescence due to technological changes. An impairment is recognized if

the recoverable amount, determined as the higher of the estimated fair value less costs of disposal or the value in use, is less than

the carrying value of the asset.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

The following provides information about the Company's wholly-owned subsidiaries as at December 31, 2021:

Name of Subsidiary

State of Formation

Proportion of

Ownership Interest

Altera (Atlantic) Chartering ULC

Canada

100%

Altera (Atlantic) Management ULC

Canada

100%

Altera Grand Banks AS

Norway

100%

Altera Grand Banks Shipping AS

Norway

100%

Altera Infrastructure Holdings Pte. Ltd.

Singapore

100%

Altera Norway Holdings AS

Norway

100%

Altera Norway Marine AS

Norway

100%

Altera Shuttle Loading Pte. Ltd.

Singapore

100%

Altera Shuttle Tanker Finance LLC

Marshall Islands

100%

Altera Wave AS

Norway

100%

Altera Wind AS

Norway

100%

Amundsen Spirit LLC

Marshall Islands

100%

Aurora Spirit AS

Norway

100%

Bossa Nova Spirit LLC

Marshall Islands

100%

Current Spirit AS

Norway

100%

Lambada Spirit LLC

Marshall Islands

100%

Nansen Spirit LLC

Marshall Islands

100%

Navion Bergen AS

Norway

100%

Navion Bergen LLC

Marshall Islands

100%

Sertanejo Spirit LLC

Marshall Islands

100%

Navion Gothenburg AS

Norway

100%

Peary Spirit LLC

Marshall Islands

100%

Rainbow Spirit AS

Norway

100%

Samba Spirit LLC

Marshall Islands

100%

Scott Spirit LLC

Marshall Islands

100%

Tide Spirit AS

Norway

100%

The following table presents details of non-wholly owned subsidiaries of the Company:

Name of Subsidiary

State of Formation

Proportion of

Ownership Interest

Navion Gothenburg LLC

Marshall Islands

50%

Nordic Rio LLC

Marshall Islands

50%

Partrederiet Stena Ugland Shuttle Tankers I DA

Norway

50%

Partrederiet Stena Ugland Shuttle Tankers II DA

Norway

50%

Partrederiet Stena Ugland Shuttle Tankers III DA

Norway

50%

For the 50% owned entities above the Company has determined that the entities are non-wholly owned subsidiaries of the

Company based on its assessment of control. For non-wholly owned subsidiaries, the Company is exposed to variable returns from

its involvement with the investee and has substantive decision making authority to affect the returns of its investment, as well as the

power to direct the activities of the entities that can significantly impact the economic performance of the entity.

i.Financial instruments

Classification and measurement

The table below summarizes the Company’s classification and measurement of financial assets and liabilities:

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

Measurement Category

Separate Statement of Financial Position Account

Financial assets

Cash and cash equivalents

Amortized cost

Cash and cash equivalents

Restricted cash

Amortized cost

Financial assets

Derivative instruments

FVTPL

Financial assets

Other financial assets

Amortized cost

Financial assets

Accounts receivable

Amortized cost

Accounts and other receivable, net

Due from related parties

Amortized cost

Due from related parties

Investment in finance leases

Amortized cost

Other assets

Financial liabilities

Accounts payable and other

Amortized cost

Accounts payable and other

Derivative instruments

FVTPL

Other financial liabilities

Obligations relating to finance

leases

Amortized cost

Other financial liabilities

Due to related parties

Amortized cost

Due to related parties

Borrowings

Amortized cost

Borrowings

The classification of financial assets depends on the specific business model for managing the financial assets and the contractual

cash flow characteristics of the financial asset.

At initial recognition, the Company measures a financial asset or liability at its fair value plus, in the case of a financial asset not at

fair value through profit or loss (or FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset.

Transaction costs of financial assets and liabilities carried at FVTPL are expensed in Other income (expenses), net in the separate

statements of income (loss).

Financial assets measured at amortized cost are based on their contractual cash flow characteristics and the business model for

which they are held. Financial assets classified as amortized cost are recorded initially at fair value, then subsequently measured at

amortized cost using the effective interest rate method, less any impairment.

Financial liabilities measured at amortized cost are initially recorded at fair value and in the case of borrowings, net of directly

attributable transaction costs. Financial liabilities are then subsequently measured at amortized cost using the effective interest rate

method with gains or losses recognized in the separate statements of income (loss).

Impairment

The Company recognizes a loss allowance for expected credit losses (or ECL) on financial assets measured subsequently at

amortized cost, including amounts due from subsidiaries and related parties. The ECL is recognized upon inception of the financial

asset and revised at each reporting date thereafter until maturity or disposal of the financial asset. The Company measures the loss

allowance for a financial asset at an amount equal to the lifetime ECL if the credit risk on a financial asset has increased

significantly since initial recognition. If the credit risk on a financial asset has not increased significantly, the Company measures the

loss allowance for that financial instrument at an amount equal to 12-months ECL. In making this assessment, the Company

considers information that is reasonable and supportable, including historical experience and forward looking information that is

available without undue cost or effort.

The Company utilizes a simplified approach for measuring the loss allowance at an amount equal to the lifetime ECL for trade

receivables, contract assets and investment in finance leases. The ECL on trade receivables are estimated using reference to past

default experience of the debtor and an analysis of the debtor’s current financial position, which also forms a basis for the

Company's future expectations for potential defaults of the debtor.

The ECL is presented as a direct reduction to the carrying value of the financial asset it relates to. The initial recognition of an ECL

and all changes to an ECL at each reporting date thereafter are reflected in Other income (expenses), net in the separate

statements of income (loss). The Company has not recorded an ECL for all periods presented in these separate financial

statements.

Derivative instruments

The Company selectively utilizes derivative financial instruments primarily to manage financial risks, including foreign exchange

risks and interest rate risks. All derivative instruments are initially recorded at fair value as either assets or liabilities in the

accompanying separate statements of financial position and subsequently remeasured to fair value, regardless of the purpose or

intent for holding the derivative instruments.

Hedge accounting is applied when the derivative is designated as a hedge of a specific exposure and there is assurance that it will

continue to be highly effective as a hedge based on an expectation of offsetting cash flows or fair value. Hedge accounting is not

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

applied if the hedge is not effective or will no longer be effective, the derivative was sold or exercised, or the hedged item was sold,

repaid or is no longer probable of occurring. Hedge accounting is discontinued prospectively when the derivative no longer qualifies

as a hedge or the hedging relationship is terminated. Once discontinued, the cumulative change in fair value of a derivative that

was previously recorded in other comprehensive income by the application of hedge accounting will be recognized in the

Company's profit or loss over the remaining term of the original hedging relationship as amounts related to the hedged item are

recognized in profit or loss. The Company has not designated, for accounting purposes, any derivatives as hedges of a specific

exposure for all periods presented in these separate financial statements.

For derivative financial instruments that are not designated as accounting hedges, the changes in the fair value of the derivative

financial instruments are recognized in the profit or loss. Gains and losses from the Company’s non-designated foreign currency

forward contracts and interest rate swaps are recorded in realized and unrealized gain (loss) on derivative instruments in the

separate statements of income (loss). The assets or liabilities relating to unrealized mark-to-market gains and losses on derivative

financial instruments are recorded in financial assets and other financial liabilities, respectively.

j.Fair value measurement

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, regardless of whether that price is directly observable or estimated using another valuation

technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or

liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement

date.

Fair value measurement is disaggregated into three hierarchical levels: Level 1, 2 or 3. Fair value hierarchical levels are based on

the degree to which the inputs to the fair value measurement are observable. The levels are as follows:

Level 1 -

Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 -

Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability

through correlation with market data at the measurement date and for the duration of the asset’s or liability’s

anticipated life.

Level 3 -

Inputs are unobservable and reflect management’s best estimate of what market participants would use in pricing the

asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the

risk inherent in the inputs in determining the estimate.

Further information on fair value measurements is described in Note 3.

k.Deferred financing costs

Deferred financing costs related to a borrowing, including bank fees, commissions and legal expenses, are capitalized and

amortized over the term of the relevant loan facility to interest expense using an effective interest rate method. Deferred financing

costs are presented as a reduction from the carrying amount of the related financial liability, unless no amounts have been drawn

under the debt liability or the debt issuance costs exceed the carrying value of the related debt liability, in which case the debt

issuance costs are presented as Other non-current assets.

If a debt modification is considered substantial, fees paid to amend an arrangement pursuant to which a credit facility is

extinguished are associated with the extinguishment of the old debt instrument and included in determining the debt extinguishment

gain or loss to be recognized. Any unamortized deferred financing costs are written off. If a debt modification is not considered

substantial, then the fees are associated with the modification, along with any existing unamortized deferred financing costs and

premium or discount, are amortized as an adjustment of interest expense over the remaining term of the modified debt instrument

using the effective interest method.

l.Critical accounting judgments and key sources of estimation uncertainty

The preparation of financial statements requires management to make critical judgments, estimates and assumptions that affect the

reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the separate financial

statements and the reported amounts of revenues and expenses that are not readily apparent from other sources, during the

reporting period. These estimates and associated assumptions are based on historical experience and other factors that are

considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in

the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if

the revision affects both current and future periods.

Critical judgments and estimates made by management and utilized in the normal course of preparing the Company’s separate

financial statements are outlined below.

(i) Impairment

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

Judgement is required to determine whether any indication of impairment exists at the end of each reporting period, which includes

assessing observable indications that the asset’s value has declined during the period. Management assesses whether there are

indicators of impairment, such as significant changes in commodity prices or declining conditions of future operations.

(ii) COVID-19

In March 2020, the World Health Organization declared a global pandemic related to COVID-19. To date, there has been significant

volatility in capital markets, commodity prices and foreign currencies, restrictions on the conduct of business in many jurisdictions,

and the global movement of people and some goods has become restricted. The Company considered the impacts of these

circumstances on the key critical judgments, estimates and assumptions that affect the reported and contingent amount of assets,

liabilities, revenues and expenses, including whether any additional indicators of impairment were present for the year ended

December 31, 2021. Based on the Company’s assessments, no additional impairment indicators were identified as at December

31, 2021 and the Company has not experienced any material business interruptions or financial impact as a result of the COVID-19

pandemic. The extent to which the COVID-19 pandemic may impact the Company's results of operations and financial condition,

including any future possible impairments, will depend on future developments, which are highly uncertain and cannot be predicted,

including new information that may emerge concerning the severity of the virus or its variants, the effectiveness of vaccines and

other actions to contain or treat its impact, among others. The Company will continue to monitor the situation and review its critical

estimates and judgments as circumstances evolve.

(v) Climate Change

The Company could face the impact of an accelerated energy transition driven by climate change. The Company's strategy, capital

allocation and selection of projects are guided by the vision to lead the industry to a sustainable future and climate related risks are

key drivers for it. The effect on the Company's compliance costs, capital expenditures, cash flow from operation and other

assumptions are inherently uncertain and may differ from actual amounts. The Company did not experience any impact from an

accelerated energy transition driven by climate change on the financial results as at December 31, 2021. The risks will however

remain as key considerations for impairment testing, estimation of remaining useful life and provisions for future periods.

m.New standards, interpretations, amendments and policies adopted by the Company

The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

i.Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

In August 2020, the International Accounting Standards Board published Interest Rate Benchmark Reform — Phase 2

(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) (or Phase 2 Amendments), effective January 1, 2021, with early

adoption permitted. The Phase 2 amendments provide additional guidance to address the issues that will arise during the transition

of benchmark interest rates and primarily relate to the modification of financial assets, financial liabilities and lease liabilities where

the basis for determining the contractual cash flow changes as a result of the replacement of an existing interest rate benchmark,

allowing for prospective application of the new applicable benchmark interest rate, and to the application of hedge accounting,

providing an exception such that changes in the designation of hedge accounting relationships that are needed to reflect the

changes required by the benchmark interest rate reform do not result in the discontinuation of hedge accounting. The Company is

adopting the Phase 2 Amendments on January 1, 2021. The adoption of the amendments did not have a significant impact on the

Company’s separate financial statements as at and for the year ended December 31, 2021. The Company's risk management

strategy has not changed as a result of these matters.

Progress towards implementation of alternative benchmark interest rates

The Company is exposed to the impact of interest rate changes, primarily through its floating-rate borrowings that require it to make

interest payments based on LIBOR. The Company uses interest rate swaps to reduce its exposure to market risk from changes in

interest rates.

The Company plans to transition the majority of its LIBOR-linked contracts to risk-free rates through amendments to fallback

clauses in its floating-rate credit facilities and debt instruments which would change the basis for determining the interest rate cash

flows from LIBOR to a risk-free rate at an agreed point in time. During March 2021, ICE Benchmark Administration, an administrator

of regulated benchmarks, announced that it has delayed the cessation of the publication of the overnight, one, three, six and 12

month USD LIBOR until June 30, 2023.

Interest rate benchmark transition for non-derivative financial liabilities

As at December 31, 2021, the Company had $738.1 million of outstanding LIBOR-referenced borrowings summarized as follows:

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

Principal

Weighted-average

term

Transition Progress

(years)

Revolving Credit

Facilities

301,387

2.39

Expected to amend fallback clauses prior to cessation

of publication of LIBOR.

Term Loans

236,754

4.36

Public Bonds

200,000

2.80

Total

738,141

3.14

Interest rate benchmark transition for derivatives

As at December 31, 2021, the Company had an outstanding notional balance of $100.0 million of LIBOR-referenced interest rate

swap agreements.

For all of the Company’s LIBOR-referenced derivatives, the International Swaps and Derivative Association’s fallback clauses were

made available in late-2020 and the Company and its counterparties expect to adhere to this protocol. This ensures that all legacy

trade will, on the cessation of LIBOR, follow the fallback clause provided in the protocol.

ii.Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

In January 2020, the International Accounting Standards Board finalized amendments to IAS 1 to clarify the classification of

liabilities. The amendments affect only the presentation of liabilities in the statement of financial position and not the amount or

timing of recognition of any asset, liability income or expenses, or the information that entities disclose about those items. They:

•clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of

the reporting period and align the wording in all affected paragraphs to refer to the "right" to defer settlement by at least twelve

months and make explicit that only rights in place "at the end of the reporting period" should affect the classification of a

liability;

•clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a

liability; and

•make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and are to be applied

retrospectively. Earlier application is permitted. The Company is currently assessing the impact as a result of the amendment

however, the adoption is not expected to have a significant impact on the Company's separate financial statements.

3. Fair Value of Financial Instruments

The fair value of a financial instrument 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. In the absence of an active market, fair values are determined

based on prevailing market rates for instruments with similar characteristics and risk profiles, or internal or external valuation

models, such as discounted cash flow analysis, maximizing observable market inputs.

Fair values determined using valuation models require the use of assumptions concerning the amount and timing of estimated

future cash flows and discount rates. In determining those assumptions, the Company looks primarily to external readily observable

market inputs such as interest rate yield curves and price and rate volatilizes as applicable. Financial instruments classified as fair

value through profit or loss (or FVTPL) are carried at fair value in the separate statements of financial position and changes in fair

values are recognized in profit or loss.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

The following tables provide the details of financial instruments and their associated classifications as at December 31, 2021 and

2020:

December 31, 2021

December 31, 2020

Measurement Basis

FVTPL

Amortized

cost

Total

FVTPL

Amortized

cost

Total

Financial assets

Cash and cash equivalents

—

62,452

—

48,272

Financial assets(1)

274

—

274

5,144

—

5,144

Accounts and other receivable, net

—

3,889

—

Due from subsidiaries

—

700,494

—

784,776

Due from related parties

—

16,384

—

247,822

Total

274

783,219

783,493

5,144

1,080,870

1,086,014

Financial liabilities

Accounts payable and other

—

14,407

—

14,379

Other financial liabilities (current and

non-current) (1)

1,949

—

1,949

3,368

—

3,368

Due to subsidiaries

—

21,307

—

16,208

Due to related parties (current and

non-currrent)

—

70,648

—

156,980

Borrowings (current and non-current)

—

1,121,193

—

1,216,116

Total

1,949

1,227,555

1,229,504

3,368

1,403,683

1,407,051

(1)Refer to Derivative financial instruments in Note 8 for additional information.

Included in cash and cash equivalents as at December 31, 2021 is $62.5 million of cash (December 31, 2020 - $48.3 million) and

$nil of cash equivalents (December 31, 2020 - $nil).

The fair value of all financial assets and liabilities as at December 31, 2021 approximated their carrying values, with the exception of

the borrowings, where fair value which was determined using Level 1 and Level 2 inputs resulted in a fair value of $1.1 billion

(December 31, 2020: $1.2 billion) versus a carrying value of $1.1 billion (December 31, 2020: $1.2 billion). The fair value of the

Company’s fixed-rate and variable-rate long-term debt is either based on quoted market prices or estimated using discounted cash

flow analysis based on rates currently available for debt with similar terms and remaining maturities and the current credit

worthiness of the Company.

Fair value hierarchical levels - financial instruments

There were no transfers between levels during the years ended December 31, 2021 and December 31, 2020. The following table

categorizes financial assets and liabilities, which are carried at fair value on a recurring basis, based upon the level of input as at

December 31, 2021 and 2020:

December 31, 2021

December 31, 2020

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

Financial assets

Derivative instruments

—

274

—

5,144

—

Total

—

274

—

5,144

—

Financial liabilities

Derivative instruments

—

1,949

—

3,368

—

Total

—

1,949

—

3,368

—

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

The following table summarizes the valuation techniques and key inputs used in the fair value measurement of Level 2 financial

instruments:

Type of Asset /

Liability

Carrying value

Valuation Techniques and Key Inputs

December

31, 2021

December

31, 2020

Derivative instruments

(1,675)

1,776

The fair value of derivative instruments incorporates observable forward

exchange rates and forward interest rates from observable yield curves,

respectively, at the end of the reporting period, and the current credit

worthiness of both the Company and the derivative counterparties. The

estimated amount is the present value of future cash flows.

4.Financial Assets

Year Ended December 31,

2021

2020

Current

Derivative instruments (1)

274

5,144

Total current

274

5,144

(1)Refer to derivative financial instruments in Note 8 for additional information.

5.Investment in Subsidiaries and Related Parties Transactions

The following table presents the change in Investment in subsidiaries as at December 31, 2021 and 2020:

Year Ended December 31,

2021

2020

Gross carrying amount:

Opening balance at beginning of year

1,126,163

765,932

Additions

17,950

956,776

Dispositions

52,388

596,545

Closing balance at end of year

1,091,725

1,126,163

Accumulated Impairment:

Opening balance at beginning of year

257,543

27,418

Impairment expense, net

107,441

230,125

Closing balance at end of period

364,984

257,543

Net book value

726,741

868,620

Additions & Dispositions

Additions for the year ended December 31, 2021 was $18.0 million and relates to paid in capital to Navion Gothenburg LLC of

$6.8 million and paid in capital to Nordic Rio LLC of $11.2 million. Dispositions for the year ended December 31, 2021 was

$52.4 million and relates a repayment of capital from Altera Shuttle Loading Pte. Ltd and its parent company relating to earlier

advances from Altera Shuttle Loading Pte. Ltd to the Company.

The Company went through a restructuring process in December 2020. The purpose of the restructuring was to exit Bermuda,

relocate effective management of the Company and certain group entities to the UK and Norway and more generally simplify the

Company structure. As part of the restructuring certain common control transactions were undertaken.

Companies Altera Infrastructure Operating GP LLC, Altera Infrastructure Operating LP, Altera Nordic Holdings Inc and Altera

Norway Holdings Ltd were merged into Altera Shuttle Tankers LLC. The merger of the subsidiaries was accounted by recognizing

the historical cost of the investment acquired. As part of the merger investments in indirect subsidiaries with historical cost of

$799.9 million changed to direct ownership. As part of the restructuring Altera Norway Holdings AS was acquired from a subsidiary

for $155.7 million and Altera Norway Marine AS was acquired for a consideration of $1.2 million. The dispositions mainly relate to

the derecognition of ownership in entities where ownership changed from direct to indirect.

Impairment expense, net

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

During the year ended December 31, 2021, the carrying value of the Company's investment in Navion Bergen L.L.C and Stena

Ugland Shuttle Tankers DA III was written down by $6.3 million and $2.9 million, respectively, to their estimated recoverable

amounts using an appraised value approach. During the year ended December 31, 2021, the carrying value of the Company's

investment Altera Infrastructure Holdings Pte. Ltd. was written down by $98.2 million, to its estimated recoverable amount using a

discounted cash flow valuation. The Company's separate statement of income (loss) for the year ended December 31, 2021

includes an impairment charge of $107.4 million relating to the decrease in fair value.

During the year ended December 31, 2020, the carrying value of the Company's investments in Navion Gothenburg L.L.C. and

Navion Bergen L.L.C was written down to their estimated recoverable amount. The Company's separate statement of income (loss)

for the year ended December 31, 2020 includes an impairment charge of $12.6 million relating to the decrease in fair value. A fair

value assessment was performed for the entities merged in where ownership went from indirect to direct. This led to impairments of

$217.5 million for the investments in Altera Infrastructure Holdings Pte Ltd, Amundsen Spirit L.L.C, Scott Spirit, L.L.C, Nansen Spirit,

L.L.C, Peary Spirit, L.L.C and Partrederiet Stena Ugland Shuttle Tankers DA III.

Balances with subsidiaries

The Company provides and receives financing to and from certain of its subsidiaries through short-term loans. Except for the

balances described below, the amounts are non-interest bearing and have no fixed repayment terms. The fair values of the

Company's balances due to / from subsidiaries approximate their carrying amounts reported in the accompanying separate

statements of financial position.

Balances with subsidiaries as at

December 31, 2021

Balances with subsidiaries as at

December 31, 2020

Short-term

receivables

Short-term

payables

Short-term

receivables

Short-term

payables

Company name

Altera Shuttle Tanker Finance L.L.C. (5)

—

11,421

—

8,275

Altera Grand Banks Shipping AS (3)(5)

24,522

909

—

3,354

Altera Infrastructure Holdings Pte Ltd

1,328

—

1,327

—

Altera Infrastructure Operating L.P.

—

Altera Norway AS

—

Altera Norway Holdings AS (4)

50,294

—

Altera Shuttle Loading Pte. Ltd (1)

3,388

—

3,023

—

Altera Wave AS (5)

19,059

1,297

23,387

1,297

Altera Wind AS (5)

22,710

912

16,453

789

Amundsen Spirit AS

—

Amundsen Spirit L.L.C.

10,617

212

22,149

212

Aurora Spirit AS (2)(5)

118,362

557

140,407

557

Bosa Nova Spirit L.L.C. (5)

—

3,317

5,471

—

Current Spirit AS (2)(5)

125,175

293

141,056

293

Lambada Spirit L.L.C. (5)

25,046

—

45,756

—

Nansen Spirit L.L.C. (5)

15,503

173

25,315

173

Navion Gothenburg AS (5)

—

Navion Gothenburg L.L.C.

2,791

—

Nordic Rio L.L.C.

2,000

—

1,000

—

Peary Spirit L.L.C. (5)

3,466

249

13,201

249

Rainbow Spirit (2)(5)

118,874

511

140,685

511

Samba Spirit L.L.C. (5)

27,905

—

46,863

—

Scott Spirit L.L.C. (5)

—

1,017

10,017

Sertanejo Spirit L.L.C. (5)

2,869

—

5,045

—

Tide Spirit AS (2)(5)

126,574

439

143,585

438

Balance with subsidiaries

700,494

21,307

784,776

16,208

(1)The Company has a revolving credit facility provided by Altera Shuttle Loading Pte Ltd. which incurs interest at LIBOR plus a margin of 6% and

is due on demand within 30 business days. As at December 31, 2021, the balance under the revolving credit facility is $nil (December 31, 2020

- $nil). As at December 31, 2021, the Company incurred $2.3 million (December 31, 2020 - $3.9 million) of interest expense related to this

facility.

(2)The Company has term loans provided to Aurora Spirit AS, Rainbow Spirit AS, Tide Spirit AS and Current Spirit AS which incur interest at

LIBOR plus a margin of 6.50% and matures on July 15, 2023. As at December 31, 2021, the balance of such term loans due from subsidiaries

is $227.2 million (December 31, 2020 - $213.9 million), of which $13.3 million relates to accrued interest income (December 31, 2020 -

$11.2 million).

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

(3)The Company has a demand loan provided to Altera Grand Banks Shipping AS which incurs interest at EURIBOR plus margin of 8.0% and is

due on demand within 30 business days. As at December 31, 2021, the balance under the loan is $26.8 million (December 31, 2020 - $nil), of

which $2.1 million relates to accrued interest income (December 31, 2020 - $nil).

(4)The Company has a demand loan provided to Altera Norway Holdings AS which incurs interest at 7.70% and is due on demand within 30

business days. As at December 31, 2021, the balance under the loan is $50.3 million (December 31, 2020 - $nil), of which $3.4 million relates to

accrued interest income (December 31, 2020 - $nil).

(5)As at December 31, 2021, $694.8 million of equity within the following investments in subsidiaries was pledged for various debt agreements

(December 31, 2020 - $616.3 million - including Navion Gothenburg L.L.C., Nordic Rio L.L.C. and Amundsen Spirit L.L.C., excluding Navion

Gothenburg AS).

Balances with related parties

The Company provides and receives advances to and from its related parties through short-term loans. The amounts are non-

interest bearing and have no fixed repayment terms. The fair values of the Company’s balances due to / from related parties

approximate their carrying amounts reported in the accompanying separate statements of financial position.

Balances with ultimate parent

company and related parties as at

December 31, 2021

Balances with ultimate parent

company and related parties as at

December 31, 2020

Short-term due

from related

parties

Short-term due to

related parties

Short-term due

from related

parties

Short-term due to

related parties

Company name

Altera Norway Marine AS

—

Altera Infrastructure Chartering L.L.C.

—

5,521

—

Altera Luxembourg S.a.r.l.

—

240,518

—

Altera Netherlands B.V.

—

155,735

Altera Infrastructure L.P.

563

—

351

—

Altera Infrastructure Norway AS

—

259

1,432

—

Altera Infrastructure Holdings L.L.C.

12,629

—

Altera Infrastructure Services Pte. Ltd.

943

—

ALP Maritime Services B.V.

2,249

—

Navion Offshore Loading AS

—

1,154

Balance with related parties

16,384

259

247,822

156,980

(1)The Company has a demand promissory note provided to Altera Infrastructure Holdings L.L.C. which incurs interest at LIBOR plus a margin of

0.80% and is due on demand within 30 business days or matures on September 30, 2026. As at December 31, 2021, the balance under

promissory note is $11.0 million (December 31, 2020 - $nil).

On December 14, 2021, the Company entered into an agreement with Brookfield to issue $70.0 million aggregate principal amount

unsecured PIK notes (or the 12.50% PIK Notes), which contemporaneously discharged the then-existing $70.0 million unsecured

revolving credit facility which was fully drawn, accrued interest at a rate equal to LIBOR plus a margin of 5.00% and was due to

mature in February 2022. Interest under the 12.50% Notes is payable in kind at a fixed rate of 12.50% and the facility matures in

June 2026. The 12.50% PIK Notes are to be listed on The International Stock Exchange. Additional 12.50% PIK Notes may only be

issued to satisfy the interest payable under the notes. As at December 31, 2021, the Company has accrued a total of $0.4 million of

interest, which upon payment date in June 2022 will increase the outstanding principal amount of the 12.50% PIK Notes in an

amount equal to the interest. Any outstanding principal balances are due on the maturity date.

During the year ended December 31, 2021, the Company determined that the interest rate under the $70.0 million revolving credit

facility described above was deemed to be at below market terms and therefore, Brookfield was acting in its capacity as an equity

owner. The Company recorded a $0.6 million decrease in the carrying value of the facility, which was classified as an equity

contribution in the Company's separate statements of changes in equity during the year ended December 31, 2021.

Transactions with related parties

The Company has no key employees and does not remunerate key management personnel.

The Company's related party transactions recognized in the separate statements of income (loss) were as follows for the periods

indicated:

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

Year Ended December 31,

2021

2020

General and administrative (1)

(4,275)

(187)

Interest expense (2)(3)

(2,931)

—

(1)Includes commercial, technical, strategic, business development and administrative management fees charged by Altera Infrastructure and its

wholly-owned subsidiaries.

(2)Includes interest expense of $1.8 million for the year ended December 31, 2021 (year ended December 31, 20200 - $nil), and an accretion

expense of $0.6 million for the year ended December 31, 2021 (year ended December 31, 2020 - accretion expense of $nil) incurred on the

unsecured revolving credit facility provided by Brookfield.

(3)Includes interest expense of $0.4 million incurred on the 12.50% PIK Notes for the year ended December 31, 2021 (December 31, 2020 - $nil).

6.Accounts Payable and Other

Year Ended December 31,

2021

2020

Current

Accounts payable

147

Accrued liabilities

14,260

14,285

Total current

14,407

14,379

7.Accrued Liabilities

Year Ended December 31,

2021

2020

Interest including interest rate swaps

10,972

14,208

Audit, legal and other general expenses

3,288

14,260

14,285

8. Other Financial Liabilities

Year Ended December 31,

2021

2020

Current

Interest rate swaps

1,277

1,929

Foreign currency forward contracts

672

—

Total current

1,949

1,929

Non-current

Derivative instruments

—

1,439

Total non-current

—

1,439

Derivative Financial Instruments

The Company’s activities expose it to a variety of financial risks, including liquidity risk, interest rate risk, foreign currency risk and

credit risk. The Company selectively uses derivative financial instruments principally to manage certain of these risks.

The aggregate amount of the Company's derivative financial instrument positions is as follows:

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

December 31, 2021

December 31, 2020

Financial

Asset

Financial

Liability

Financial

Asset

Financial

Liability

Interest rate swaps

—

1,277

—

3,368

Foreign currency forward contracts

274

672

5,144

—

Total

274

1,949

5,144

3,368

Total current

274

1,949

5,144

1,929

Total non-current

—

1,439

Interest Rate Risk

The Company enters into interest rate swaps, which exchange a receipt of floating interest for a payment of fixed interest, to reduce

the Company’s exposure to interest rate variability on its outstanding floating-rate debt. The Company has not designated, for

accounting purposes, any of the interest rate swaps held during the years ended December 31, 2021 and 2020 as hedges of

variable rate debt. The Company's interest rate swap is secured by certain vessels.

As at December 31, 2021, the Company was committed to the following interest rate swap agreements:

Interest

Rate

Index

Notional

Amount

Fair Value /

Carrying

Amount of

Assets

(Liabilities)

Weighted -

Average

Remaining

Term

(years)

Fixed

Interest

Rate

(%) (1)

U.S. Dollar-denominated interest rate swap(2)

LIBOR

100,000

(1,277)

0.75

2.1%

(1) Excludes the margin the Company pays on its variable-rate debt, which at December 31, 2021, ranged from 1.30% to 6.50%.

(2)Notional amount remains constant over the term of the swap, unless the swap is partially terminated.

(3)Includes one interest rate swap, which as at December 31, 2021, had a total current notional amount of $100.0 million and a total fair value

liability of $1.3 million. This interest rate swap is due to terminate in the third quarter of 2022.

During the year ended December 31, 2021, the effective portion of previously designated and qualifying cash flow hedges recorded

in accumulated other comprehensive income during the term of the hedging relationship and reclassified to earnings and reported

in interest expense was a gain of $0.7 million (year ended December 31, 2020 - gain of $0.8 million).

Total realized and unrealized gain (loss) on the Company's derivative financial instruments that are not designated, for accounting

purposes, as cash flow hedges are recognized in earnings and reported in realized and unrealized gain (loss) on derivative

instruments in the separate statements of income (loss) for the years ended December 31, 2021 and 2020 as follows:

Year Ended December 31,

2021

2020

Realized gain (loss) on derivative instruments

Interest rate swap

(1,942)

(1,140)

Foreign currency forward contracts

5,241

(2,025)

3,299

(3,165)

Unrealized gain (loss) on derivative instruments

Interest rate swap

2,091

(2,179)

Foreign currency forward contracts

(5,541)

4,416

(3,450)

2,237

Total realized and unrealized gain (loss) on derivative instruments

(151)

(928)

The following table presents the notional amounts underlying the Company's derivative financial instruments by term to maturity as

at December 31, 2021:

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Fair value through profit or loss

Interest rate swaps

100.0

—

Foreign currency forward contracts

33.0

—

Total

133.0

—

9.Borrowings

Weighted average term

Weighted average rate

December

31, 2021

December

31, 2020

December

31, 2021

December

31, 2020

December

31, 2021

December

31, 2020

(years)

(%)

Revolving Credit Facilities

301,387

369,600

2.39

3.39

2.68

2.73

Term Loans

385,012

407,998

6.68

7.75

3.23

3.31

Public Bonds

449,342

451,097

2.93

2.59

7.85

6.94

Total

1,135,741

1,228,695

4.06

4.54

4.91

4.47

Less: deferred financing costs and other

(14,548)

(12,579)

Total borrowings

1,121,193

1,216,116

Less current portion

(143,115)

(76,402)

Long-term portion

978,078

1,139,714

Revolving Credit Facilities

As at December 31, 2021, the Company had one revolving credit facility outstanding, secured by nine vessels (December 31, 2020-

one credit facility outstanding secured by 13 vessels), with a combined carrying value of $522.1 million (December 31, 2020 -

$621.7 million), which, as at such date, provided for total borrowings of up to $301.4 million (December 31, 2020 - $369.6 million),

and was fully drawn (December 31, 2020 - fully drawn).

Term Loans

As at December 31, 2021, the Company had term loans outstanding secured by four vessels (December 31, 2020 - secured by four

vessels) with a combined carrying value of $499.0 million (December 31, 2020 - $528.5 million), which, as at such date, provided

for total borrowings of $385.0 million (December 31, 2020 - $408.0 million). The term loans reduce over time with quarterly or semi-

annual payments and have varying maturities through 2032.

Public Bonds

As at December 31, 2021, the Company had public bonds outstanding which totaled $449.3 million (December 31, 2020-

$451.1 million). The public bonds have varying maturities through 2025.

In December 2021, the Company issued $180.0 million in senior unsecured bonds in the Norwegian bond market that mature in

December 2025. These bonds are listed on the Oslo Stock Exchange. The interest payments on the bonds are fixed at a rate of

9.50%. The bonds are non-callable for three years and all distributions by the Company have been suspended for the life of the

bonds. These bonds were issued at a discount to par value of 3% and the proceeds plus cash on hand were used to repurchase

$181.2 million of the Company's preexisting 7.125% senior unsecured $250.0 million bond maturing in August 2022.

As at December 31, 2021, the contractual maturities of the Company's borrowings were as follows:

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

(in millions of U.S. Dollars)

Borrowings:

Secured debt - scheduled repayments

315.1

74.1

48.5

23.0

16.1

79.3

Secured debt - repayments on maturity

371.3

—

173.6

—

197.7

—

Bond repayments

449.3

69.3

—

200.0

180.0

—

Total borrowings

1,135.7

143.4

74.1

422.1

203.0

213.8

79.3

The Company is currently in compliance with all covenant requirements of its revolving credit facilities, term loans and bonds.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

In addition to the secured vessels discussed above, the Company's loan agreements typically includes customary security

provisions including assignment of insurance and earnings, pledged in favor of our lenders. As at December 31, 2021, the

Company's pledged accounts consisted of $19.2 million in Cash and cash equivalents ($65.5 million - December 31, 2020),

$1.1 million in Financial assets (current and non-current) ($nil - December 31, 2020), and $3.9 million in Accounts and other

receivable, net (current and non-current) ($nil - December 31, 2020). As at December 31, 2021, the Company has obtained

guarantee arrangements with certain financial institutions which in the event of default provide for $8.6 million of guarantee

coverage ($14.3 million - December 31, 2020). As at December 31, 2021, the Company was in compliance with all covenant

requirements of its revolving credit facilities, term loans and bonds.

10.Supplemental Cash Flow Information

Year Ended December 31.

2021

2020

Interest paid

59,047

52,238

Amounts paid and received for interest were reflected as operating cash flows in the separate statements of cash flow.

The changes in non-cash working capital items related to operating activities for the years ended December 31, 2021 and 2020 are

as follows:

Year Ended December 31.

2021

2020

Accounts and other receivable, net

(3,889)

—

Accounts payable and other

3,698

Due from (to) related parties

75,106

(611)

Due from (to) subsidiaries

89,381

(342,979)

Changes in non-cash working capital, net

160,626

(339,892)

11.Financial Risk Management

The Company recognizes that risk management is an integral part of a strong management practice.

The Company is exposed to the following risks: capital risk, liquidity risk, market risk (i.e. interest rate risk, foreign currency risk and

commodity risk) and credit risk. The following is a description of these risks and how they are managed:

a.Capital risk management

The Company’s capital is composed of member’s equity, long-term borrowings and cash and cash equivalents. The Company

maintains a capital level that enables it to acquire, operate and sell shuttle tankers and meet financial covenants under the secured

credit facility.

In order to maintain or adjust its capital structure, the Company may issue new debt, borrow additional amounts under existing

facilities, refinance existing debt, acquire of dispose of assets or adjust the amount of cash and cash equivalent balances.

The Company’s credit facility, 12.5% PIK notes and U.S. Dollar bonds have financial covenants with which the Company must

comply. Non-compliance with such covenants could result in accelerated payment of the related credit facility and reclassification of

the amounts to current liabilities. The Company monitors its covenants on an ongoing basis and reports on its compliance to its

lender on a quarterly basis. As at December 31, 2021, the Company was in compliance with all its covenants in respect of both the

credit facility and the U.S. Dollar bonds. The Company is not subject to any externally imposed capital restrictions.

b.Liquidity Risk Management

The Company maintains sufficient financial liquidity to be able to meet its ongoing operating requirements. The Company's primary

liquidity needs for the next twelve months are to pay existing committed capital expenditures, to pay scheduled debt repayments, to

pay debt service costs, to pay direct operating costs and dry-docking expenditures, to fund general working capital requirements

and to settle potential claims against the Company.

For further information on the Company's contractual obligations, including a maturity analysis, please refer to Notes 8 and 9. See

Note 2b for the Company’s assessment of its ability to meet these obligations for at least the one-year period to December 31,

2022.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

The following are the remaining contractual maturities of financial liabilities at the reporting date:

Contractual cash flows

December 31, 2021

Carrying

amount

Total

1 Year

2 Years

3 Years

4 Years

5 Years

Thereafter

Revolving credit facility(1)

301,387

316,937

58,514

57,144

201,279

—

Term loan(1)

385,012

443,211

35,001

34,153

33,304

32,455

218,695

89,603

Public bonds(2)

249,342

311,874

97,674

17,100

180,000

—

Green Bond(1)

200,000

237,232

13,245

13,244

210,743

—

Accrued Liabilities

14,260

—

12.5% Unsecured PIK

notes(3)

70,389

—

70,389

—

Interest rate swaps(4)

1,277

—

Foreign currency forward

contracts(4)

33,000

—

Total

1,254,667

1,428,180

252,971

121,641

462,426

212,455

289,084

89,603

(1)Contractual cash flows are inclusive of projected interest payments based on the LIBOR curve at December 31, 2021. See Note 9 for additional

information.

(2)Includes $69.3 million of unsecured bonds bearing interest at 7.125% which will be repaid at 101% of par value, rather than 100%, when

maturing in August 2022. See Note 9 for additional information.

(3)See Note 5 for additional information.

(4)See Note 8 for a summary of the terms of our derivative instruments which economically hedge certain of our floating rate interest-bearing

obligations.

c.Market risk

Market risk is defined for these purposes as the risk that the fair value or future cash flows of a financial instrument held by the

Company will fluctuate because of changes in market prices. Market risk includes the risk of changes in interest rates, foreign

currency exchange rates and changes in market prices due to factors other than interest rates or foreign currency exchange rates,

such as changes in commodity prices or credit spreads.

Financial instruments held by the Company that are subject to market risk include borrowings and derivative instruments, such as

interest rate swaps and foreign currency forward contracts.

Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in

market interest rates. The Company is exposed to the impact of interest rate changes, primarily through its floating-rate borrowings

that require it to make interest payments based on LIBOR. Significant increases in interest rates could adversely affect operating

margins, results of operations and the Company's ability to service its debt. The Company uses interest rate swaps to reduce its

exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs

associated with the Company's floating-rate debt.

As at December 31, 2021, the Company had outstanding floating-rate debt balance of $0.8 billion (December 31, 2020 -

$0.8 million) and an outstanding notional balance of $100.0 million of interest rate swaps (December 31, 2020 - $100 million). A 10

basis point decrease in the Company's interest rates is expected to increase future cash flows by $0.8 million (December 31, 2020 -

$0.7 million).

The Company is exposed to credit loss in the event of non-performance by the counterparties to the interest rate swap agreements.

In order to minimize counterparty risk, to the extent possible and practical, interest rate swaps are entered into with different

counterparties to reduce concentration risk.

For further information on the financial instruments held by the Company that are subject to interest rate risk, include borrowings

and derivative instruments, please refer to Note 3, which includes the fair values of the interest rate risk sensitive financial

instruments, and Notes 8 and 9, which includes the expected cash flows from the interest rate risk sensitive financial instruments.

Foreign currency risk management

The Company’s functional currency is U.S. Dollars. The Company’s primary economic environment is the international shipping

market. Transactions in this market generally utilize U.S. Dollars. Consequently, virtually all of the Company’s revenues and the

expenses are in U.S. Dollars. However, the Company incurs certain vessel operating expenses, general and administrative

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

expenses and a portion of capital upgrade projects in foreign currencies. Therefore, there is a risk that currency fluctuations will

have a negative effect on the value of the Company's cash flows. The Company periodically enters into foreign currency forward

contracts to economically hedge portions of these forecasted expenditures. As at December 31, 2021, the Company was committed

to foreign currency forward contracts to hedge portions of our forecasted expenditures in NOK.

d.Credit risk

Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfill its contractual obligations.

The Company assesses the credit worthiness of each counterparty before entering into contracts and ensures that counterparties

meet minimum credit quality requirements. The Company also evaluates and monitors counterparty credit risk for derivative

financial instruments and endeavors to minimize counterparty credit risk through diversification.

All of the Company’s derivative financial instruments involve either counterparties that are banks or other financial institutions. The

Company does not have any significant credit risk exposure to any single counterparty.

Based on no experience of past default of the Company's debtors and no expectations of future losses as a result of default, the

Company has determined its credit risk to be low. For the purposes of credit risk, the Company has applied a definition to the term

default as an assessment that a counterparty is unlikely to pay, as well as an amount outstanding from a counterparty which is 90

days past due.

12.Gain (Loss) on Modification of Financial Liabilities, Net

The table below summarize the Company's gain (loss) on modification of financial liabilities, net for the year ended December 31,

2021 and 2020:

Year ended December 31,

2021

2020

Gain (loss) on modification of financial liabilities, net

(10,705)

—

Total other income (expenses), net

(10,705)

—

(1)During the year ended December 31, 2021, the Company recognized a loss on modification of financial liabilities of $10.7 million due to refinancing

activities related to the $180.0 million unsecured bonds issued in December 2021. See Note 9 for additional information.

13.Subsequent Events

a.Following Russia’s invasion of Ukraine in February 2022, the U.S., several European Union nations, and other countries

have announced sanctions against Russia. While it is difficult to anticipate the potential for any indirect impact the

sanctions announced to date may have on the Company's business and the Company, any further sanctions imposed or

actions taken by the U.S., EU nations or other countries, and any retaliatory measures by Russia in response, such as

restrictions on oil shipments from Russia, could lead to increased volatility in global oil demand which, could have a

material adverse impact on the Company's business, results of operations and financial condition.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)