astl-2022-12-31-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 shuttle tankers in 2018 and subsequent recycling activities;

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

•results of operations and revenues and expenses;

•shuttle tanker market fundamentals, including the balance of supply, demand 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;

•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, future taxable income 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 and interest rate 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;

•our ability to amend our floating-rate credit facilities and debt instruments from LIBOR to the Secured Overnight Financing Rate

(or SOFR);

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

•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; and

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

the invasion of Ukraine by Russia.

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 2022

Introduction

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

Partners L.P. (Altera Infrastructure or the Partnership). Altera Shuttle Tankers and its wholly-owned or controlled subsidiaries

(together with the Company, the Group) 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.

As at December 31, 2022, 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. Brookfield Asset Management Inc. (NYSE: BAM) (TSX: BAM.A), an entity incorporated in Ontario,

Canada, is the ultimate parent of the Company.

Altera Shuttle Tankers 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 together with expanding

its operations in the shuttle tanker business. The Group's 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 registered head office of the Company and place of effective management is 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 recent years there has also been an increased focus on CO2 emissions from the shipping industry and the

landscape of regulations aimed at reducing the carbon intensity of the industry is continuously evolving, with IMO's CII Regulations

and the contemplated inclusion of maritime transportation in the EU ETS being some of the most recent examples. 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 or otherwise are taxable, 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.

Challenging 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 future development and investments depend on multiple sources of capital including operational cash flow, capital

markets, and borrowings. Increased concerns over climate change and hydrocarbon linked investments could lead to an increased

cost of capital or lack of access to capital on acceptable terms. Recently, certain investors and lenders have limited or restricted

their activities and lending towards the oil and gas industry. To mitigate such risk, the Group works closely with various financial

institutions, with a strong focus on ESG principles, and continuously evaluate its capital structure to optimize a strong balance

sheet.

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; this 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 the continuing productivity of the field.

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 affected vessels at rates at least

equal to those under the prior contracts, 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 contract. 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, higher than anticipated operating expenses or require

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

The nature of the Group’s operations expose 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 include necessary adherence to tightening regulations related to carbon intensity of operations potentially requiring

technical investments and/or switching to alternative fuel types. The inclusion of maritime transport in the EU ETS will also increase

complexity in the Group's contract administration and may also subject the Group to increased risk of expenditures associated with

the trade of CO2 quotas. 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 in response to future pandemics or similar events, could impose or enforce restrictions on both

personnel and goods throughout Europe and other relevant jurisdictions globally. 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. In addition,

customers and suppliers 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 relevant employee experience, and individuals providing senior management functions and services.

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 key personnel providing

such services and the failure to successfully recruit replacements in a timely manner, if 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, adversely affect the Group’s ability to finance future operations or

capital needs, engage, expand or pursue business activities, and affect the ability of the Company’s subsidiaries to make

distributions to the Company, thus adversely affecting 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. The financial restrictions and

covenants do not provide any certainty that investors will 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 cases, 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

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 environmental damage or 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 in oil price are

examples which could lead to a decline in new developments and as a result may decrease demand.

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.

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.

The Group is currently working on replacing all LIBOR based agreements with SOFR as reference rate.

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 is typically 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 and/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 market rates for conventional oil tankers 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, 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, thus impacting the Group's ability to generate cash flow from operations and 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 obtain proceeds the Group could have realized

from them; moreover, 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 that the Group would become a debtor in the United States, or that a U.S.

bankruptcy court would be entitled to jurisdiction over such a bankruptcy case, or that courts in other countries which currently have

jurisdiction over the Group and the Group's operations would recognize a U.S. bankruptcy court’s authority.

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, its directors or management.

The Company is organized under the laws of the Marshall Islands, and a substantial part of the Group’s assets are located outside

Norway. The Company’s business is operated primarily from its offices in the United Kingdom with operations, assets and personnel

in many locations. As a result, it may be difficult or impossible to bring an action against the Company in Norway. Even if successful

in bringing an action of this kind, the laws of the Marshall Islands and of other applicable 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 has

historically been listed on the EU blacklist up to 2019, when it was taken off. In February 2023, it was again added to the list. There

is no immediate negative consequence to the Company from this change in status. The Company in continuously monitoring any

effects the relisting of Marshall Islands may have to the Company, and there can be no assurance that the relisting of The Marshall

Islands will not impact the transfer of funds through the Group in the future.

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 information technology systems and networks or steal data. A successful cyber-attack

could materially disrupt the Group's operations, jeopardize safety of Group operations, or lead to the unauthorized release of

information or alteration of data on the Group's systems. Any such attack or breach of our information technology systems could

have a material adverse effect on the Group's business and operational success.

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.

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

the economic conditions, 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; this, 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 operational success. If the governments of the Primary Jurisdictions 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 substantiated allegation 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, now a subsidiary of the Company, along with other shipping companies, 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 provide conclusive evidence that any improper

payments were made or that any of the Group’s current or former employees intended for the purported improper payments to be

made. However, there is no assurance that the outcome of the investigation is accurate, investigatory findings will not be challenged

in the future, or that other relevant information may come to light to alter the findings of this case as such findings are not binding on

regulatory or governmental authorities. It is uncertain how these allegations may ultimately affect the Group, if at all, acknowledging

the possibility of penalties that could be assigned 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 shuttle tankers 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 shuttle tanker export and, having not identified any breach of relevant export

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

directly involved in 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 overall financial performance. 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 that company which sits outside

the Group as well as cause 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, including as an extension of

the war in Ukraine. 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, asset freezes

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

banks from the U.S. and/or other financial systems, and barring select 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 sanctions announced to date may have on the Group's and its

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

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

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

Our businesses is stable, but subject to general economic conditions and risks relating to the economy.

Many industries, including the industries in which we operate, are impacted by adverse events in the broader economy and/or

financial markets. A slowdown in the financial markets and/or the global economy or the local economies of the regions in which we

operate, including, but not limited to, employment rates, business conditions, inflation, fuel and energy costs, commodity prices,

lack of available credit, the state of the financial markets, government policies in the jurisdictions in which our company operates,

interest rates and tax rates may adversely affect our growth and profitability. For example, a worldwide recession, reduction in

available skilled labor, a period of below-trend growth in developed countries, a slowdown in emerging markets or significant

declines in commodity factors could have a material adverse effect on our business, financial condition and results of operations, if

such increased levels of volatility and market turmoil were to persist for an extended duration. These and other unforeseen adverse

events in the global economy could negatively impact our operations.

The demand for our services is, in part, dependent upon and correlated to general economic conditions and economic growth of the

regions applicable to the relevant asset. Poor economic conditions or lower economic growth in a region or regions may, either

directly or indirectly, reduce demand for our services. In particular, the sectors in which we operate are highly cyclical, and we are

subject to cyclical fluctuations in global economic conditions and end-use markets. We are unable to predict the future course of

industry variables or the strength, pace or sustainability of the global economic recovery and the effects of government intervention.

Negative economic conditions, such as an economic downturn, a prolonged global inflationary period, a prolonged period of higher

interest rates or a prolonged recovery period or disruptions in the financial markets, could have a material adverse effect on our

businesses, financial condition or results or operations.

Our business is impacted by rising inflationary pressures. Inflation rates in jurisdictions that we operate or invest in have increased

significantly in 2022, rising above the target inflation rate ranges set by governing central banks. A significant portion of the upward

pressure on prices has been attributed to the rising costs of labor, energy, food, motor vehicles and housing, as well as overall

challenges involved in reopening and managing the economy throughout the COVID-19 pandemic and continuing global supply-

chain disruptions. Inflation increases may or may not be transitory and future inflation may be impacted by labor market constraints

reducing, supply-chain disruptions easing and commodity prices moderating. However, any sustained upward trajectory in the

inflation rate would have an impact on our business and our investors. We continue to monitor inflationary pressures in the

jurisdictions we operate in and assess any potential effects on our operations.

Environmental Risks

Altera Infrastructure operates according to a series of internal governance controls, including a formal enterprise risk management

process, to identify existing and emerging risks which may originate internally or externally. These risk inputs are used to assess

and prioritise mitigation responses.

Risk arising from Altera Infrastructure’s activities, including those that are climate-related, are identified and assessed through the

partnership's enterprise risk management (ERM) process. The ERM process is facilitated by the corporate Risk and Audit Services

function. Business unit management teams identify and assess enterprise risks on a quarterly basis, scoring each risk for

consequence and likelihood over the coming five years on a rating scale running from 1 to 5, where 5 is high. These two

independent scores are then multiplied to give a value of inherent risk with a score of 25 signifying imminent, and catastrophic risk.

The output of this assessment is a heatmap which indicates risk severity, and aids in risk prioritisation. Risks are then further

categorised as low risk, moderate risk and high risk as defined below:

• Low risk: inherent risk score ≤ 5

• Moderate risk: inherent risk score of 6–12

• High risk: inherent risk score >12

The ERM process runs on a business unit basis. Business unit ERM assessments are presented to group management quarterly

and are further consolidated to create a partnership-wide overview, and risks assigned an inherent risk score of 9 or above are

included in quarterly group management reports to the board.

Emissions & Emissions Intensity

Altera Infrastructure reports on Scope 1 and a portion of Scope 2 and Scope 3 emissions from its business activities, calculated

according to the GHG Protocol on an operational control basis. Absolute emissions are reported in tonnes of CO2 equivalent

(tCO2e). The group have also set emissions intensity targets, and report on the emissions intensity performance for the shuttle

tanker fleet. The International Maritime Organization (IMO) has set a target to reduce the carbon intensity of international shipping

by 40% by 2030, compared to a calculated 2008 baseline. Altera Infrastructure has set a more ambitious target – to reduce the

average carbon intensity of the shuttle tanker fleet by 50% by 2030. The group’s 2008 baseline, calculated according to recently

updated IMO methodology, is 5.90 g CO2/dwt-nm. The group have set a 50% reduction pathway from this point. Please refer to

‘Our actions and results’ under the Sustainability section (below) for an overview of the 2022 shuttle tanker fleet Scope 1 emissions

and emissions intensity.

The group measures the carbon intensity of FSOs by tracking carbon dioxide emissions from these vessels per barrel of oil stored

on the vessel for offloading (kg CO2/bbl). This is a new carbon intensity metric established in early 2023 based on modelling

conducted in 2022. Altera Infrastructure has set a target to reduce the fleet average carbon intensity of our operating FSOs 2%

annually from our baseline 2020 performance.

Marine life

Altera Infrastructure uses tailored technology specific to our shuttle tankers to ensure compliance with the IMO Ballast Water

Management Convention. 90% of the group’s shuttle tanker fleet employs a ballast water treatment system to help prevent the

spread of potentially harmful aquatic organisms, invasive species, and pathogens.

Altera Infrastructure monitors and evaluates environmental performance in all aspects of our operations, working continuously to

reduce and mitigate our environmental footprint. Altera Infrastructure focuses on preventing spills and maintains detailed spill

response and emergency preparedness procedures to minimise the potential consequences of any spills that may occur.

Additionally, Altera Infrastructure works to reduce chemical use and, when possible, replace the chemicals that are used with less-

harmful alternatives. In 2022, the group recorded one oil spill to sea, and no chemical spills to sea. The single oil spill amounted to

0.5 litres of crude oil; given the small volume of the spill, no remediation was undertaken.

Waste

Altera Infrastructure aims to minimize waste and ensures that disposal of all waste generated is done so in a responsible manner.

To minimise waste, the partnership buys in bulk, uses environmentally friendly packaging to avoid generating excess waste, and

has a rigorous system for waste recycling in place to allow for re-use. Plastic shoe coverings are replaced with reusable covers, and

plastic cups are removed and replaced with reusable cups both onboard our vessels and in our offices. In 2022, our shuttle tanker

fleet generated 2,378 m3 of waste, a 15% decrease compared to waste generated in 2021. The group’s shuttle tankers, FSOs, and

UMSs hold Inventory of Hazardous Materials (IHM) certificates, which they follow to avoid bringing anything onboard that could later

end up as hazardous waste; as such, the shuttle tanker fleet does not generate any hazardous waste.

Recycling

Altera Infrastructure has control over the recycling of our vessels and will only choose to recycle a vessel if we cannot identify a

viable alternative use. The partnership proactively ensures that all recycling activity is responsible and compliant with applicable law

and our internal Global Asset Recycling Policy. Altera Infrastructure has a strict audit and inspection regime for approval of chosen

ship recycling facilities (SRF) that goes beyond the standards set by the Hong Kong Convention. To actively promote responsible

ship recycling, Altera Infrastructure is a member of the steering committee of the Ship Recycling Transparency Initiative. In 2022,

Altera Infrastructure initiated the recycling of one shuttle tanker; this recycling project is expected to be completed within the first

half of 2023.

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 other purchases. Due to the

international presence of the Group’s operations, the Group may become subject to taxation in new jurisdictions 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 that are 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 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 as of December 31, 2022:

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,

ConocoPhillips, DNO,

Eni, Enquest,

Equinor, Ithaca, M

Vest Energy, Neptune

Energy, NEO Energy,

OKEA, OMV, ONE

Dyas, PGNiG, Repsol

Sinopec, Shell, Taqa

Bratani, Vår Energi,

Waldorf Production,

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

Ingrid Knutsen

111,600

2013

In-chartered

(until January

2023)

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

May 2023

Lambada Spirit

154,000

2013

100%

DP2

Brazil

Shell

July 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, Cenovus,

Chevron, Mosbacher,

Murphy, Nalcor,

Equinor, Suncor(3)

May 2030(5)

Norse Spirit

148,200

2017

100%

DP2

Canada

May 2030(5)

Dorset Spirit

148,200

2018

100%

DP2

Canada

May 2030(5)

Altera Thule

148,200

2022

100%

DP2

Canada

May 2030(5)/(6)

Nordic Brasilia

151,300

2004

100%

Far-East

Spot

Aurora Spirit

129,830

2020

100%

DP2

North Sea

Equinor(4)

March 2034

Rainbow Spirit

129,830

2020

100%

DP2

North Sea

Equinor(4)

March 2030

Current Spirit

129,830

2020

100%

DP2

North Sea

Equinor(4)

March 2024

Total capacity

2,730,320

(1)“CoA” refers to contracts of affreightment and "TC" refers to time charters.

(2)The Amundsen Spirit was temporarily contracted to assist the East Coast of Canada fleet during the winter months of 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)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.

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

(6)In November 2022, the Group entered into an agreement with Basin Wide Transportation and Transshipment System (or BWTTS) to in-charter the Altera

Thule for 6-8 months each year from the third quarter 2023, until the fourth quarter 2025. The vessel is owned by the Group and will be utilized in the

North Sea CoA pool, with a call option for winter operations in Canada.

In February 2023, the Group entered a new agreement with Knutsen to in-charter the Ingrid Knutsen for 10 months from March 1,

2023.

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


	Year Ended December 31,
	2022	2021
(in thousands of U.S Dollars)	$	$
Norway(1)	338,274	280,974
Canada	133,913	109,366
Brazil(1)	87,413	99,990
Other	44,809	23,165
Total	604,409	513,495

(1)Reference to Norway and Brazil are to income from activities occurring on the Norwegian 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, 2022, we owned 20

shuttle tankers 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 low-emission vessels combined

with economies of scale in the North Sea 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), credit risk and climate 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 as per year and 2022, the Group will need to refinance certain loan agreements and/or

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 2022, the Group's sole member, Altera Infrastructure Holdings L.L.C, injected $15 million of equity and

the Group completed the sale of certain vessels in order to enhance its liquidity and financial flexibility. The working capital deficit as

at December 31, 2022, includes $153 million in current borrowings related to certain tranches of the Group's East Coast of Canada

term loans classified as current. These term loans are secured by four vessels on contract until 2030. In March 2023, the Group

successfully completed an amendment and extension of this financing, which included a $30 million upsize to the commercial

senior tranche to take-out the junior financing related to the same vessels. Following the amendment, the outstanding amount of the

commercial senior tranche is $153 million and matures in March 2026. The total amended financing amounts to $333 million, which

reduces over time with semi annual repayments and has varying maturities through March 2034. Refer to the information contained

in this annual report under Note 18 - Borrowings in the Group's consolidated financial statements.

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, and working capital optimizations.

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 East Coast of Canada term loan refinancing, 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, 2023.

Review of 2022

Altera Infrastructure L.P. Chapter 11 Filing

On August 12, 2022, Altera Infrastructure L.P. (the Partnership) and certain of its affiliates and direct and indirect subsidiaries (the

Altera Chapter 11 Parties), which excludes all entities within the consolidated financial statements of Altera Shuttle Tankers LLC,

filed prearranged voluntary petitions to commence proceedings (the Chapter 11 Cases) under Chapter 11 of Title 11 of the United

States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Southern District of Texas (the Bankruptcy Court).

On January 6, 2023, the Altera Chapter 11 Parties emerged from Chapter 11 with a strengthened balance sheet and foundation for

long-term growth. In summary this restructuring:

•was successfully implemented through a pre-arranged Chapter 11 process in U.S. Bankruptcy Court;

•significantly deleveraged the Partnership’s balance sheet by equitizing $1.1 billion in junior debt obligations, cancelled $400

million of preferred equity, and facilitated a long term, sustainable positive liquidity outlook;

•reprofiled $550 million of secured asset-level bank debt to better align its debt service obligations with its cash flows; and

•raised $94 million in capital through an equity rights offering, which provided additional liquidity ($10 million) and repaid certain

credit facilities, including the Chapter 11 DIP financing, in full ($84 million).

Neither Altera Shuttle Tankers L.L.C. nor any of its subsidiaries (i.e. the Group) were included in these Altera Chapter 11

proceedings but nevertheless they all indirectly benefit from the emergence of a stronger and healthier parent company.

Financing

In March 2023, the Group successfully completed an amendment and extension of the financing for the shuttle tankers operating on

the East Coast of Canada, which included a $30 million upsize to the commercial senior tranche to take-out the junior financing

related to the same vessels. Following the amendment, the outstanding amount of the commercial senior tranche is $153 million

and matures in March 2026. The total amended financing amounts to $333 million, which reduces over time with semi annual

repayments and has varying maturities through March 2034.

In August 2022, on maturity, the Group redeemed the remaining $69 million of bonds on their outstanding 7.125% senior unsecured

bonds listed on the Oslo Stock Exchange. The bonds were repaid at 101% of par value.

In August 2022, the Group issued $15 million of class B common units to Altera Infrastructure Holdings LLC increasing the overall

equity of the Group.

Shuttle Tanker Newbuildings

The Group's final newbuilding in a series of seven, the Altera Thule, delivered to the Group from the yard in March 2022. In May

2022, Altera Thule, commenced operations off the East Coast of Canada. The Group has drawn down the final $63 million of the

previously secured $105 million of borrowings relating to this shuttle tanker newbuilding.

Sale of Vessels

In March 2023, the Group entered into an agreement to sell the 100% owned vessel, the Petroatlantic for conversion to an FSO for

approximately $19 million. The vessel operated in the North Sea CoA pool. The vessel is scheduled to be delivered to its buyer in

April 2023.

In October 2022, the Group entered into an agreement to sell the 50% owned vessel, the Nordic Rio for continued use for

approximately $27 million (100%). The vessel operated in the conventional tanker market. The vessel was delivered to its buyers in

December 2022.

In July 2022, the Group entered into an agreement to sell the 50% owned vessel, the Navion Gothenburg for continued use for

approximately $26 million (100%).The vessel operated in the conventional tanker market. The vessel was delivered to its buyers in

August 2022.

In July 2022, the Group entered into an agreement to sell the Petronordic for recycling for approximately $7 million. The vessel was

delivered to its buyer in September 2022.

Fleet

In February 2023, the Group entered an agreement with Knutsen to in-charter the Ingrid Knutsen for 10 months from March 1,

2023.

In November 2022, the Group entered into an agreement with Basin Wide Transportation and Transshipment System (or BWTTS)

to in-charter the Altera Thule for 6-8 months each year from the third quarter 2023, until the fourth quarter 2025. The vessel is

owned by the Group and will be utilized in the North Sea CoA pool, with a call option for winter operations in Canada.

Contracts

In February 2023, the Group entered into an agreement with Total Energies to utilize the Samba Spirit on a 22-month firm time-

charter contract with extension options for an additional two or four months.

Re-organization

During 2022, the Group re-organized the ownership structure of its shuttle tanker fleet transferring certain activities from Singapore

to Norway. The transfer resulted in these operations becoming taxable in Norway.

Board of Directors

In March 2023, William James Delday resigned from the Board of Directors and David Cannon was appointed to the Board of

Directors of the Group.

In February 2023, the sole member, Altera Infrastructure Holdings L.L.C., appointed the Audit Committee of the General Partner to

serve as the Group's Audit Committee and to undertake all related duties.

Financial Review

The consolidated financial statements and separate financial statements for the years ended December 31, 2022 and December 31,

2021 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, 2022 and 2021:


(in thousand of U.S. Dollars, except percentages)	Year Ended December 31,
(in thousand of U.S. Dollars, except percentages)	2022	2021	Change
IFRS:	$	$	%
Revenues	604,409	513,495	17.7
Direct operating costs	(305,529)	(245,753)	24.3
General and administrative expenses(1)	(27,562)	(30,180)	(8.7)
Depreciation and amortization	(158,703)	(172,716)	(8.1)
Interest expense	(106,749)	(81,644)	30.7
Interest income	1,585	15	10466.7
Impairment expense, net	(4,960)	—	100.0
Gain (loss) on dispositions, net	11,414	3,644	213.2
Realized and unrealized gain (loss) on derivative instruments	(1,822)	(151)	1106.6
Foreign currency exchange gain (loss)	231	(1,395)	(116.6)
Gain (loss) on modification of financial liabilities, net	—	(10,532)	(100.0)
Other income (expenses), net	915	(276)	(431.5)
Income before income tax (expense) benefit	13,229	(25,493)	(151.9)
Income tax (expense) benefit
Current	(126)	(3,252)	(96.1)
Deferred	7,839	3,667	113.8
Net income	20,942	(25,078)	(183.5)

Non-IFRS:
EBITDA(2)	277,096	228,852	21.1
Adjusted EBITDA(2)	270,185	237,724	13.7

(1)Includes direct general and administrative expenses and indirect general and administrative expenses (allocated from corporate departments to the Group,

based on estimated use of corporate resources).

(2)The Group is regularly reviewed by our chief operating decision maker (CODM) for the purpose of allocating resources and to assess their respective

performance. The key measure used by the CODM in assessing performance and in making resource allocation decisions is Adjusted EBITDA, Adjusted

EBITDA is also used by external users of our consolidated financial statements, such as investors and our controlling unitholder. 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 increased to $604 million, from $513 million, for the year ended December 31, 2022, compared to the same period last year,

primarily due to:

•an increase of $60 million due to reimbursable bunker purchases (offset in direct operating costs below);

•an increase of $36 million due to higher rates during 2022 in the conventional tanker spot market in which our vessels occasionally

operate and the Navion Gothenburg being in operation in 2022 (until sold August 2022), as compared to being in the yard for 11

months during 2021;

•an increase of $11 million due to the Altera Thule being on contract from May 2022;

•an increase of $4 million due to the Amundsen Spirit operating in the East Coast of Canada fleet during the first half of 2022;

•an increase of $3 million due to higher CoA revenue as the Altera Wind and Altera Wave entering the fleet in the second quarter of

2021;

•an increase of $3 million due to higher utilization in the North Sea CoA fleet;

•an increase of $2 million due to reduced off hire days during 2022; and

•an increase of $2 million due to rate escalations in the time-charter fleet;

partially offset by

•a decrease of $15 million due to the termination of the Petrojarl Foinaven CoA contract in May 2021;

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

redelivery of the Navion Gothenburg in the first quarter of 2021; and

•a decrease of $8 million due to the redelivery to us of the Navion Stavanger during October 2021.

Direct Operating Costs

Direct operating costs increased to $306 million, from $246 million, for the year ended December 31, 2022, compared to the same

period last year, primarily due to:

•an increase of $60 million due to reimbursable bunker purchases (offset in revenue above);

•an increase of $8 million due to the Navion Gothenburg being in operation in the conventional tanker market in 2022 (until sold in

August 2022), as compared to being in the yard for 11 months during 2021;

•an increase of $3 million due to certain yard claims expensed during the year ended 2022;

•an increase of $2 million due to the Altera Thule entering the fleet in May 2022; and

•an increase of $2 million due to more vessel in-chartered days during the year ended 2022;

partially offset by

•a decrease of $5 million due to the redelivery to us of the Navion Gothenburg in the first quarter of 2021;

•a decrease of $5 million due to various other operating expenditures including favorable foreign exchange fluctuations during the

year ended December 31, 2022;

•a decrease of $4 million due to the Stena Natalita, Navion Oslo, Navion Anglia and Navion Oceania leaving the fleet during the

year ended December 31, 2021; and

•a decrease of $1 million due to the sale of the Petronordic in September 2022.

General and Administrative Expenses

General and administrative expenses decreased to $28 million, for the year ended December 31, 2022, compared to $30 million for the

same period last year which is generally consistent.

Depreciation and Amortization

Depreciation and amortization expense increased to $159 million, for the year ended December 31, 2022, compared to $173 million for

the same period last year, primarily due to the sale of the Navion Stavanger in the fourth quarter of 2021 and the sale of the Petronordic

during the third quarter of 2022; partially offset by the delivery of the Altera Thule in the second quarter of 2022.

Interest Expense

Interest expense increased to $107 million for the year ended December 31, 2022, compared to $82 million the same period last year,

primarily due to increased interest rates on our outstanding borrowings.

Impairment Expense, Net

Impairment expense, net was $5 million for the year ended December 31, 2022, compared to $nil for the same period last year, due to

an impairment of the Petronordic in the second quarter of 2022 due to the expected sale of the vessel.

Gain (Loss) on Dispositions, Net

Gain (loss) on dispositions, net was $11 million for the year ended December 31, 2022, compared to $4 million for the same period last

year, primarily due to recognized gains on dispositions of $12 million relating to the sale of Nordic Rio, compared to $1 million relating

to the Navion Anglia and $3 million relating to the Navion Oceania, sold during the year ended December 31, 2021.

Realized and Unrealized Gain (Loss) on Derivative Instruments

Net realized and unrealized gain (loss) on derivative instruments was $(2) million for the year ended December 31, 2022, compared to

$nil for the same period last year, mainly due to realized losses on foreign exchange forward contracts used to hedge portions of our

forecasted expenditures in Norwegian Krone (or NOK).

Foreign Exchange Gain (Loss)

Foreign currency exchange gain (loss) was $nil million for the year ended December 31, 2022, compared to a loss of $(1) 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

Gain (loss) on modification of financial liabilities, net was $nil for the year ended December 31, 2022, compared to $(11) million for the

same period last year, primarily 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 Group's pre-existing 7.125% senior unsecured $250.0 million bonds

maturing in August 2022.

Income Tax (Expense) Benefit

Income tax (expense) benefit was $8 million for the year ended December 31, 2022, compared to $nil for the same period last year,

primarily due to a re-assessment of deferred tax assets during the fourth quarter of 2022 following the reorganization which resulted in

the movement of certain fleet activities to Norway.

Adjusted EBITDA

Adjusted EBITDA increased to $270 million, for the year ended December 31, 2022, compared to $238 million, for the same period last

year, primarily due to:

•an increase of $28 million due to a stronger conventional tanker spot market;

•an increase of $10 million due to certain vessels leaving the fleet;

•an increase of $9 million due to the Altera Thule commencing operations in May 2022;

•an increase of $5 million due to a decrease in direct operating costs due to various other operating expenditures including

favorable foreign exchange fluctuations;

•an increase of $4 million due to the Amundsen Spirit operating in the East Coast of Canada fleet in the first half of 2022;

•an increase of $3 million due to higher utilization in the CoA fleet; and

•an increase of $3 million due to a decrease in general and administrative expenses during 2022.

partially offset by

•a decrease of $15 million due to the termination of the Petrojarl Foinaven CoA contract in May 2021;

•a decrease of $8 million due to the absence of one-time compensation received from the client on the redelivery of the Navion

Gothenburg in 2021; and

•a decrease of $8 million due to the redelivery to us of the Navion Stavanger during October 2021.

Adjusted EBITDA is a non-IFRS financial measure. Please refer to "Non-IFRS Financial Measures" below for definitions of this

measure and for the reconciliations of this measure with the most directly comparable financial measure calculated and presented in

accordance with IFRS.

Non-IFRS Financial Measures

To supplement the consolidated financial statements, we use Adjusted EBITDA, which is a non-IFRS financial measure, as a measure

of our performance. Adjusted EBITDA represents net income (loss) before interest expense, interest income, income tax (expense)

benefit, and depreciation and amortization, and is 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 also excludes: realized gain or loss on interest rate swaps (as we, in assessing our

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; realized gain or loss on foreign currency forward contracts and other

income (expense), net. Adjusted EBITDA excludes the non-controlling interests' proportionate share of Adjusted EBITDA.

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

or as a substitute for net income (loss) or other measures of performance prepared in accordance with IFRS. In addition, this measure

does not have a standardized meaning and may not be comparable to similar measures presented by other companies. This non-IFRS

measure is used by our management, and we believe that this supplementary metric assists investors and other users of our financial

reports in comparing our 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, 2022 and 2021:


	Year Ended December 31,
	2022	2021
(in thousands of U.S. Dollars)	$	$
Net income (loss)	20,942	(25,078)
Less:
Depreciation and amortization	(158,703)	(172,716)
Interest expense	(106,749)	(81,644)
Interest income	1,585	15
Income tax (expense) benefit
Current	(126)	(3,252)
Deferred	7,839	3,667
EBITDA	277,096	228,852
Less:
Impairment expense, net	(4,960)	—
Gain (loss) on dispositions, net	11,414	3,644
Realized and unrealized gain (loss) on derivative instruments	(1,822)	(151)
Foreign currency exchange gain (loss)	231	(1,395)
Gain (loss) on modification of financial liabilities, net	—	(10,532)
Other income (expenses), net	915	(276)
Adjusted EBITDA attributable to non-controlling interests(1)	1,133	(162)
Adjusted EBITDA	270,185	237,724

(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 our 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,
	2022	2021
(in thousands of U.S. Dollars)	$	$
Net income (loss) attributable to non-controlling interests in subsidiaries	5,585	(6,840)
Less:
Depreciation and amortization	(1,596)	(6,163)
Interest expense, net of interest income	65	(368)
Other income / expense (1)	6,037	(150)
EBITDA	1,079	(159)
Less:
Foreign currency exchange gain (loss)	(54)	3
Adjusted EBITDA attributable to non-controlling interests	1,133	(162)

(1)Other income / expense for the three months and year ended December 31, 2022, is primarily due to the 50% share of the gain on sale of the

Nordic Rio attributed to non-controlling interests in subsidiaries.

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 following table presents the Group's liquidity measures as at December 31, 2022 and December 31, 2021:


	Year Ended December 31,
	2022	2021
(in thousands of U.S. Dollars)	$	$
Cash and cash equivalents	128,900	124,257
Total liquidity(1)	128,900	124,257
Working capital surplus (deficit)	(139,040)	(26,647)

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

The increase in the working capital deficit was primarily due to a $150 million increase in scheduled maturities and repayments of

outstanding borrowings during the 12 months ending December 31, 2023, which were classified as current liabilities as at December

31, 2022 and a $3 million net decrease in due from related parties, partially offset by a $17 million decrease in accounts payable, a $6

million increase in inventory, a $8 million increase in financial assets, and a $5 million increase in Cash and cash equivalents. The

working capital deficit includes $153 million in current borrowings related to certain tranches of our East Coast of Canada term loans

classified as current. In March 2023, we successfully completed an amendment and extension of this financing, which included a $30

million upsize to the commercial senior tranche to take-out the junior financing related to the same vessels. Following the amendment,

the outstanding amount of the commercial senior tranche is $153 million and matures in March 2026. The total amended financing

amounts to $333 million, which reduces over time with semi annual repayments and has varying maturities through March 2034. Refer

to Financial Statements: Note 18 - Borrowings for additional information.

Our primary short-term liquidity needs for the next twelve months, are to repay or refinance scheduled debt obligations, 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. Our long-term liquidity needs are to repay or refinance scheduled debt

obligations and pursue additional growth projects.

As at December 31, 2022, our interest-bearing obligations include bonds, commercial bank debt, an unsecured PIK note provided by

Brookfield and obligations related to leases. The contractual payments relating to these obligations for the next twelve months are

$326 million, and $1.4 billion thereafter. Refer to Financial Statements: Note 18 - Borrowings, Note 20 - Related Party Transactions and

Note 17 - Other Financial Liabilities for terms upon which future interest payments are determined.

As at December 31, 2022, our other financial liabilities include foreign currency forward contracts only as our interest rate swaps have

all been terminated. The contractual payments relating to these obligations for the next twelve months are $36 million, and $nil

thereafter. Refer to Financial Statements: Note 17 - Other Financial Liabilities for a summary of the terms of our derivative instruments.

Our estimated dry dock expenditures for the next twelve months are $39 million, primarily related to our Samba class 10-year dry-

dockings and final East Cost of Canada vessel's 5-year dry-docking, and $232 million thereafter.

As at December 31, 2022, the Group had total borrowings outstanding of $1.4 billion compared to $1.5 billion as at December 31,

2021. The borrowings consisted of the following:


	Year Ended December 31,
	2022	2021
(in thousands of U.S. Dollars)	$	$
U.S. Dollar Revolving Credit Facilities	244,201	301,387
U.S. Dollar Term Loans	696,473	671,832
U.S. Dollar Bonds	380,000	449,342
U.S. Dollar Non-Public Bonds	68,623	77,286
Total principal	1,389,297	1,499,847

The table below outlines the Group's consolidated net debt to capitalization as at December 31, 2022 and December 31, 2021:


	Year Ended December 31,
	2022	2021
(in thousands of U.S. Dollars)	$	$
Borrowings	1,374,613	1,477,772
Obligations relating to leases	188,086	199,107
Less:
Cash and cash equivalents	128,900	124,257
Net debt	1,433,799	1,552,622
Total equity	439,187	420,837
Total capitalization (1)	2,001,886	2,097,716
Net debt to capitalization ratio (2)	71.6%	74.0%

(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.

Cash Flows

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


	Year Ended December 31,
	2022	2021
(in thousands of U.S. Dollars)	$	$
Net operating cash flow	177,309	159,099
Net financing cash flow	(135,400)	(115,698)
Net investing cash flow	(35,166)	(89,569)

Operating Cash Flows

Net cash flow from operating activities increased to a cash inflow of $177 million for the year ended December 31, 2022, compared to

an inflow of $159 million for the same period last year, primarily due to an increase in revenue, partially offset by increases in direct

operating cost and interest expenses in the current period. Refer to "Consolidated Results of Operations" above.

Financing Cash Flows

Net financing cash flow during the year ended December 31, 2022, was $(135) million, compared to $(116) million last year, including

the following items:

Our proceeds from borrowings, net of financing costs, were $63 million for the year ended December 31, 2022 due to the drawdown of

the Altera Thule facility, and $201 million for the same period last year.

We actively manage the maturity profile of our outstanding financing arrangements. Our scheduled repayments of our borrowings were

$174 million for the year ended December 31, 2022, compared to $330 million for the same period last year. The decrease in

repayments and prepayments is mainly due to the $181 million repurchase of our $250 million unsecured bond due in August 2022, in

December 2021, as compared to the $69 million repayment of the same bond in 2022.

Our proceeds from borrowings, net of financing costs and scheduled repayments, related to the sale and leaseback of vessels, were

$(11) million and $59 million for the year ended December 31, 2022 and 2021, respectively. The gross proceeds received during the

year ended December 31, 2021 were used to fund yard installment payments on the Altera Wave and Altera Wind newbuildings.

Lease payments on our vessel in-charter leases and office leases were $11 million and $11 million for the year ended December 31,

2022 and 2021, respectively.

During the year ended December 31, 2021, we 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.

Increased equity through capital provided by sole member, Altera Infrastructure Holdings L.L.C., were $15 million and $11 million for the

year ended December 31, 2022 and 2021, respectively.

Capital contributions by non-controlling interests were $5 million and $18 million for the year ended December 31, 2022 and 2021,

respectively.

Distributions paid to the sole member, Altera Infrastructure Holdings L.L.C., were $nil and $125 million for the year ended December

31, 2022 and 2021, respectively.

Distributions paid to non-controlling interests were $22 million and $9 million for the year ended December 31, 2022 and 2021,

respectively.

Investing Cash Flows

During the year ended December 31, 2022, net cash flow used for investing activities was $35 million, primarily related to $88 million

for additions to vessels and equipment, including installment payments for the delivery of the Altera Thule newbuilding, partially offset

by $60 million, net proceeds from the sales of the Nordic Rio, Navion Gothenburg and Petronordic and a $8 million increase in

restricted cash.

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

for additions to vessels and equipment, including installment payments for the delivery of the Altera Wave and Altera Wind

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

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.

Distributions

During the year ended December 31, 2022, the Group paid distributions of $nil million to Altera Infrastructure L.L.C. (2021 - paid

distributions of $125 million). 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 the 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 performs a thorough risk management program that includes, but is not limited to, computer aided risk analysis,

maintenance and assessment review, seafarer competence training, seafarer workshops and maintains a membership in emergency

response organizations.

The Group benefits 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. 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 customers, DNV and applicable flag states.

Strategy and Outlook

The Group is expected to continue to generate solid cash flows during 2023. 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 2023, and

incorporating the Group's East Coast of Canada term loan refinancing, 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, 2023.

GOVERNANCE

Administrative, management and supervisory bodies

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

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 Vice President and Company 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 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, 2022:


Name	Age	Position
Giles Mark Mitchell	54	President & Director
William James Duthie	34	Secretary & Director
William James Delday	44	Director

In March 2023, William James Delday resigned from the Board of Directors and David Cannon was appointed to the Board of Directors

of the Group.

Audit Committee

In February 2023, the sole member, Altera Infrastructure Holdings L.L.C., appointed the Audit Committee of the General Partner to

serve as the Altera Shuttle Tankers L.L.C. Audit Committee and to undertake all related duties.

The Audit Committee of the General Partner is composed of three or more directors, each of whom must meet the independence

standards of the Oslo Børs and any other applicable laws and regulations governing independence from time to time. This committee is

currently comprised of General Partner Directors William L. Transier (Chair), Nelson Silva, Ian Craig and Benedicte Bakke Agerup, all

independent directors. Ralf Rank is an observer to the committee. All members of the committee are financially literate and the General

Partner Board of directors has determined that Mr. Transier satisfies the specific competence requirements in auditing and accounting.

The Audit Committee assists the board of directors in fulfilling its responsibilities for general oversight of:

•the integrity of our financial statements;

•our compliance with legal and regulatory requirements;

•the qualifications and independence of our independent auditor; and

•the performance of our internal audit function and our independent auditor.

The Audit Committee of the General Partner’s Board of Directors has the authority to pre-approve permissible audit-related and non-

audit services not prohibited by law to be performed by our independent auditors and associated fees. Engagements for proposed

services either may be separately pre-approved by the Audit Committee or entered into pursuant to detailed pre-approval policies and

procedures established by the Audit Committee, as long as the Audit Committee is informed on a timely basis of any engagement

entered into on that basis. The Audit Committee separately pre-approved all engagements and fees paid to our principal accountant in

2022.

Mr. Ralf Rank, who serves on the Audit Committee of the General Partner Board of Directors as an observer, is a Managing Partner in

Brookfield’s Private Equity Group. Affiliates of Brookfield are the largest common unitholder of Altera Infrastructure and the owner of a

100% interest in our General Partner. As an observer, Mr. Rank does not have voting rights on the Audit Committee. He is neither the

chair of the Audit Committee nor an executive officer of Altera Infrastructure. We do not believe that Mr. Rank’s affiliation with Brookfield

materially adversely affects the ability of the Audit Committee to act independently.

General principles for Corporate Governance

The Group 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 regulate the General Partner’s Board and Committees' operations as well as all operations of entities

controlled by the Partnership, including the Company and its subsidiaries, including employees, contractors and directors.

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 meticulous 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 to 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 it 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

For Altera Infrastructure Group, management is responsible for establishing and maintaining 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 deterioration related to the degree of compliance with

policies and procedures.

Board of Directors

Under the Company's Limited Liability Company Agreement, its member has full unilateral authority to appoint, by majority vote,

individuals to be Directors at their sole discretion, to remove and replace any Director they appoint to the Board of Directors, with or

with-out cause, at any time and for any reason, and to fill any positions created on the Board of Directors as a result of an increase in

the size of the Board of Directors. 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 Company’s Limited Liability Company 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 Company

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 Code of Conduct and 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.

Although not relevant for Altera Shuttle Tankers L.L.C., Altera Norway Marine AS, a subsidiary of the group, is required to report in

accordance with the Norwegian Equality and Anti-discrimination Act. As stipulated by the Norwegian Equality and Anti-discrimination

Act, there must be at least five of each gender in each group to publish salary results. In 2022, Altera Norway Marine AS only had 3

female employees, and so no salary information has been reported. Since wage differences cannot be included, there is no gender

difference related to wages; it is all tariff determined and seniority based. The levels outlined in the table below are defined as follows:

Level 1 – Employees: remaining crew, and Level 2 – Senior Management: Captain, Chief Officer, Chief Engineer and 1st Engineer.

These levels have been further broken down by gender, temporary employees, parental leave, actual and involuntary part-time

employees, and wage growth.


	Permanent Employees
	Gender Balance	Temporary Employees	Parental Leave	Actual Part- Time	Involuntary Part-Time	Wage Growth	Comment
Women	3	—	27	—	—	4.5%	*reference to 2022 DNMF agreement
Men	135	—	50	—	—	4.5%	*reference to 2022 DNMF agreement


	Gender Distribution at Different Position Levels/ Groups		Wage Differences
	Women	Men	Cash Benefits					Benefits in Kind
	Women	Men	Total Cash Benefits	Base Salary	Irregular Additions	Bonuses	Overtime Allowances	Total Taxable Benefits in Kind
Employee	3	53	N/A	N/A	N/A	N/A	N/A	N/A
Senior Management	—	82	N/A	N/A	N/A	N/A	N/A	N/A

In addition, disclosure under the Norwegian Equality and Anti-Discrimination Act will also be made separately in entity specific statutory

account filings, and a master statement will be available on our company website at alterainfra.com no later than 30 June 2023.

Similarly, the Group meets the criteria for disclosure under the Norwegian Transparency Act. Our statement will be published and made

available on our company website at alterainfra.com no later than 30 June 2023.

In 2022, absence due to sickness was 3.5 per cent of the total hours worked by employees.

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

initiatives for improvement.

Altera Infrastructure ensures that relevant Employees receive appropriate anti-Discrimination, anti-Harassment and fraternisation

guidance, and training as is necessary and at least once every two years. Employees must participate in such trainings as required.

Altera Infrastructure empowers and expects employees and staff to raise compliance and ethics concerns if they have them, including

about potential discrimination. The partnership’s Global Whistleblower Policy reflects our commitment to providing identifying and

addressing potential compliance and ethics issues promptly and professionally. Retaliation against those who raise concerns in good

faith is strictly prohibited.

Concerns about potential discrimination or harassment can be raised internally or via the Altera Infrastructure Reporting Hotline, a

confidential and secure reporting tool administered by an independent third party that allows for anonymous reporting, where permitted

by local law. The Reporting Hotline is accessible to the group's workforce as well as the general public at alterainfra.com.

Leaders have heightened responsibilities. Managers and direct team leaders who receive a complaint regarding alleged incidents of

discrimination or harassment, or who otherwise become aware of such incidents are required to report the matter.

Reported concerns are handled and investigated, as necessary, by the Altera Infrastructure corporate compliance function, which is

also generally available to offer guidance and answer questions about implementing and adhering to the Altera Infrastructure Code of

Conduct and supporting global policies. In 2022, the Partnership registered seven reports of compliance and ethics concerns under our

Global Whistleblower Policy, either directly through our Reporting Hotline or via internal channels. All were handled in accordance with

internal procedures.

Altera Infrastructure is aware of no confirmed instances of discrimination or harassment in violation of our policies in 2022.

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 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. 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 in line with the Paris Agreement

•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, and providing a work environment that is supportive,

inclusive and professionally rewarding.

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 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 International Maritime Organization (IMO) has set a target to reduce the carbon intensity of international shipping by 40% by 2030,

compared to a calculated 2008 baseline. We have set a more ambitious target – our goal is to reduce the average carbon intensity (CII)

of our shuttle tanker fleet by 50% by 2030.

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.

In 2022, our shuttle tanker fleet produced Scope 1 emissions of 582,654 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. Scope 1 emissions from our

shuttle tanker fleet increased 4.2% in 2022, as compared to 2021. Some of our shuttle tankers can run on either liquid natural gas

(LNG) or more carbon-intense marine gasoil (MGO). In 2022, some of these dual use vessels switched to MGO due to the historically

high gas prices for the given period.

Note that we identified and corrected a small number of minor errors in certain climate-related emissions calculations from past years,

and have corrected our methodology and restated affected historic emissions disclosures accordingly. Specifically, in 2022 we updated

historic emission factors from the IMO to include CO2 equivalent emissions from CH4 and N2O emissions (as opposed to only

considering CO2 emissions).

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


	2022	2021	2020
Scope 1 emissions (tCO2e)	582,654	559,106	575,759

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 our 2022 Sustainability Report, which will be published 31 March 2023 to Altera's company

website at alterainfra.com.

The primary indicator of the carbon intensity of our fleet is the IMO's CII (Carbon Intensity Indicator), which measures how efficiently a

vessel above 5,000 GT deadweight transports goods or passengers and is given in grams of CO2 emitted per cargo-carrying capacity

and nautical mile (g CO2 / dwt-nm). . A lower CII is indicative of a lower carbon intensity. Our 2022 CII value improved by 1%, compared

to 2021. Our dual fuel vessels operated more on MGO than LNG in 2022 due to the historically high gas prices. This would normally

have yielded increased CII figures, but this has largely been offset by improved vessel utilization which led to the 1% improvement for

2022.

Figure 2. Average carbon intensity of shuttle tanker fleet


	2022	2021	2020
CII (gCO2/dwt-nm)	3.08	3.13	3.34

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 that can use liquid natural gas (LNG), recovered volatile organic compound (VOC) emissions, and even potential

zero-emissions fuels, such as bio-LNG and synthetic methane, as fuel. A Green Bond was raised to part-finance the E-Shuttles, and all

proceeds from this bond have been used for this purpose.The bond received a light green rating from Cicero.

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

actual climate related performance of the E-shuttles, we compare the official CII 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 CII for the E-Shuttles was 13% lower than that for the Explorer

class in 2022, and 25% lower in 2021.

That said, the comparative CII dropped noticeably, from 25% in 2021 to 13% in 2022. While the Explorer class vessels achieved a

slight improvement in average CII in 2022, the average CII for the E-shuttles increased by about 11%. This largely stems from our

clients’ continued instructions to use marine gasoil (MGO) as a primary fuel instead of LNG in the latter part of 2022 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 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 CII methodology does not address the effects of methane slip. We do however expect to see a CII improvement

compared to the Explorer class in the range of 25–30%. Expected GHG savings, including the GHG effect of VOC emissions, will be

realized once all key on-board 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.

As of 31 December 2022, the crew for our shuttle tanker fleet numbered 973 permanent and temporary seafarers, of which 11 are

women. This means that 1% of our crew are women. Out of 78 onshore employees, 24 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 2022, neither the Altera Infrastructure Group nor the Group had any serious safety incidents. We had one lost time incidents (or

LTIs), resulting in an LTI rate of 0.23 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 had six total reportable cases (or TRCs) on our shuttle tankers, resulting in a TRC rate of 1.35 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. To minimize waste, we use environmentally friendly packing material to avoid generating

waste and we have a rigorous system for waste recycling to allow for re-use. Plastic shoe-covers are replaced with reusable covers,

and plastic cups are removed and replaced with reusable cups both onboard our vessels and in our offices.

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; 90%

of our shuttle tanker fleet employs tailored ballast water treatment systems.

In 2022, the Group experienced one small spill of oil to sea from our shuttle tanker fleet, with an aggregate volume of approximately 0.5

litres. The spill was 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 2022 Altera Infrastructure Group Code of Conduct training, in which the Group participated, covered anti-corruption, anti-fraud

awareness, and management of conflicts of interest. The training was completed by 100% of onshore employees and 83% percent of

assigned crew (as of the date of this statement), 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 2022. Nor did we receive any significant fines or non-monetary sanctions for non-compliance

with laws or regulations.

Human rights and decent working conditions

The Altera Infrastructure Group 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. We report annually on the steps we

take to identify and address negative human and labour rights impacts in our business activities and supply chain, in accordance with

the Norwegian Transparency Act and UK Modern Slavery Act. Our Modern Slavery Act statements for 2022 and prior reporting periods

are available on our website at alterainfra.com. Similarly, disclosure under the Norwegian Transparency Act will be published on our

company website at alterainfra.com, no later than 30 June 2023.

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 onshore

employees and crew via videos and material distributed regularly, and we include cybersecurity on the agenda for management and

operational meetings.

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 2022, we initiated recycling for one shuttle tanker, and expect this project to be complete within the first half of 2023.

Board of Director’s Responsibility Statement

We confirm, to the best of our knowledge, that the financial statements for the year ended December 31, 2022, 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: March 31, 2023		By: Altera Shuttle Tankers L.L.C. - the Group

By:
Giles Mark Mitchell President and Director	William James Duthie Secretary and Director	David Cannon Director

CONSOLIDATED FINANCIAL STATEMENTS

ALTERA SHUTTLE TANKERS L.L.C.

For the years ended December 31, 2022 and 2021


ALTERA SHUTTLE TANKERS L.L.C.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of U.S. dollars)

		As at December 31.
		2022	2021
	Notes	$	$
ASSETS
Current assets
Cash and cash equivalents	3	128,900	124,257
Financial assets	4	10,686	2,312
Accounts and other receivable, net	5	39,544	38,617
Inventory		19,084	12,902
Due from related parties	20	22,999	20,523
Other assets	8	23,138	21,718
Total current assets		244,351	220,329
Non-current assets
Vessels and equipment	10	1,706,616	1,764,026
Advances on newbuilding contracts	11	—	51,918
Deferred tax assets	19	15,624	8,660
Other assets	8	46,203	68,239
Goodwill	12	127,113	127,113
Total non-current assets		1,895,556	2,019,956
Total assets		2,139,907	2,240,285
LIABILITIES
Current liabilities
Accounts payable and other	13	48,235	65,052
Other financial liabilities	17	11,366	12,939
Borrowings	18	314,032	164,313
Due to related parties	20	9,758	4,672
Total current liabilities		383,391	246,976
Non-current liabilities
Accounts payable and other	13	113	507
Other financial liabilities	17	177,041	188,117
Borrowings	18	1,060,581	1,313,459
Due to related parties	20	79,594	70,389
Total non-current liabilities		1,317,329	1,572,472
Total liabilities		1,700,720	1,819,448
EQUITY
Paid-in capital		526,459	511,459
Retained earnings		(96,112)	(111,469)
Accumulated other comprehensive income (loss)		670	1,202
Member's equity		431,017	401,192
Non-controlling interests in subsidiaries	21	8,170	19,645
Total equity		439,187	420,837
Total liabilities and total equity		2,139,907	2,240,285

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,
		2022	2021
	Notes	$	$
Revenues	22	604,409	513,495
Direct operating costs	23	(305,529)	(245,753)
General and administrative expenses	20	(27,562)	(30,180)
Depreciation and amortization	10,9	(158,703)	(172,716)
Interest expense	18,20	(106,749)	(81,644)
Interest income		1,585	15
Impairment expense, net	10	(4,960)	—
Gain (loss) on dispositions, net	7	11,414	3,644
Realized and unrealized gain (loss) on derivative instruments	17	(1,822)	(151)
Foreign currency exchange gain (loss)		231	(1,395)
Gain (loss) on modification of financial liabilities, net	6	—	(10,532)
Other income (expenses), net		915	(276)
Income (loss) before income tax (expense) benefit		13,229	(25,493)
Income tax (expense) benefit
Current	19	(126)	(3,252)
Deferred	19	7,839	3,667
Net income (loss)		20,942	(25,078)
Attributable to:
Members		15,357	(18,238)
Non-controlling interests in subsidiaries	21	5,585	(6,840)
		20,942	(25,078)

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,
		2022	2021
	Notes	$	$
Net income (loss)		20,942	(25,078)
Other comprehensive income (loss)
Items that may be reclassified subsequently to profit or loss:
To interest expense:
Realized gain on qualifying cash flow hedging instruments	17	(532)	(750)
Total other comprehensive income (loss)		(532)	(750)
Comprehensive income (loss)		20,410	(25,828)
Attributable to:
Members		14,825	(18,988)
Non-controlling interests in subsidiaries	21	5,585	(6,840)
		20,410	(25,828)

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, 2022	511,459	(111,469)	1,202	19,645	420,837
Net income (loss)	—	15,357	—	5,585	20,942
Other comprehensive income (loss)	—	—	(532)	—	(532)
Distributions declared:
Distribution to non-controlling interests	—	—	—	(22,360)	(22,360)
Contributions received:
Contribution of capital from Altera Infrastructure Holdings L.L.C.	15,000	—	—	—	15,000
Contribution from non-controlling interests	—	—	—	5,300	5,300
Balance as at December 31, 2022	526,459	(96,112)	670	8,170	439,187


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)	(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	17,950
Balance as at December 31, 2021	511,459	(111,469)	1,202	19,645	420,837

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,
		2022	2021
	Notes	$	$
OPERATING ACTIVITIES
Net income (loss)		20,942	(25,078)
Adjusted for the following items:
Depreciation and amortization	10,9	158,703	172,716
Impairment expense, net	10	4,960	—
(Gain) loss on dispositions, net	7	(11,414)	(3,644)
Unrealized (gain) loss on derivative instruments	17	(2,228)	3,450
Deferred income tax expense (benefit)	19	(7,839)	(3,667)
Provisions and other items	15	—	(5,644)
Other non-cash items		5,056	7,051
Changes in non-cash working capital, net	24	9,129	13,915
Net operating cash flow		177,309	159,099
FINANCING ACTIVITIES
Proceeds from borrowings	18	63,195	201,119
Repayments of borrowings	17,18	(173,890)	(329,863)
Proceeds from borrowings related to sale and leaseback of vessels	11	—	71,400
Repayments of borrowings related to sale and leaseback of vessels	11	(11,272)	(11,335)
Financing costs related to borrowings from sale and leaseback of vessels	11	—	(584)
Lease liability repayments	9	(11,373)	(11,273)
Proceeds from borrowings from related parties	20	—	70,000
Capital provided by member		15,000	11,000
Capital provided by others who have interests in subsidiaries		5,300	17,950
Distributions to member		—	(125,000)
Distribution to others who have interests in subsidiaries	21	(22,360)	(9,112)
Net financing cash flow		(135,400)	(115,698)
INVESTING ACTIVITIES
Additions:
Vessels and equipment	10,11	(87,540)	(201,386)
Dispositions:
Vessels and equipment	7	59,939	38,035
Changes in restricted cash	3	(7,773)	73,782
Acquisition of company	20	208	—
Net investing cash flow		(35,166)	(89,569)
Cash and cash equivalents
Change during the period		6,743	(46,168)
Impact of foreign exchange on cash		(2,100)	978
Balance, beginning of the period		124,257	169,447
Balance, end of the period		128,900	124,257

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. and its wholly-owned or controlled subsidiaries (Altera Shuttle Tankers or the Company), a wholly-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 March 31, 2023.

b.Going concern

As at December 31, 2022, the Company had a working capital deficit of $139.0 million. The Company's working capital deficit increased

from $26.6 million as at December 31, 2021, primarily due to a $149.7 million increase in scheduled maturities and repayments of

outstanding borrowings during the 12 months ending December 31, 2023, which were classified as current as at December 31, 2022.

Based on these factors, the Company will need to refinance certain loan agreements and/or 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. The Company's minimum liquidity requirements under its financial covenants 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 2022, the Company's sole member, Altera Infrastructure Holdings L.L.C, injected $15 million of equity and the Company completed

the sale of certain vessels in order to enhance its liquidity and financial flexibility. The working capital deficit as at December 31, 2022,

includes $153.3 million in current borrowings related to certain tranches of the Company's East Coast of Canada term loans classified as

current. These term loans are secured by four vessels on contract until 2030. In March 2023, the Company successfully completed an

amendment and extension of this financing, which included a $30.0 million upsize to the commercial senior tranche to take-out the junior

financing related to the same vessels. Following the amendment, the outstanding amount of the commercial senior tranche is

$153.3 million and matures in March 2026. The total amended financing amounts to $332.6 million, which reduces over time with semi

annual repayments and has varying maturities through March 2034. Please see Note 18 for additional information.

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, and working capital optimizations.

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 East Coast of Canada term loan refinancing, 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, 2023.

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

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.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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, 2022:


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 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 AS	Norway	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%
Nordic Brasilia LLC	Marshall Islands	100%
Peary Spirit LLC	Marshall Islands	100%
Rainbow Spirit AS	Norway	100%
Samba Spirit LLC	Marshall Islands	100%
Scott Spirit LLC	Marshall Islands	100%
Sertanejo 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, 2022:


Name of Subsidiary	State of Formation	Proportion of Ownership Interest
Navion Gothenburg LLC	Marshall Islands	50%
Nordic Rio LLC	Marshall Islands	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

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

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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, 2022 and 2021:


	December 31, 2022	December 31, 2021
	$	$
Fuel oil	17,201	10,605
Materials and consumables	1,883	2,297
Total inventory	19,084	12,902

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.

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 five years and vessels older than 15 years are dry-docked every two and a

half years, depending on the nature of work and external requirements, the vessels are required to undergo planned dry docking for

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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

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

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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

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,

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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

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

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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

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

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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, 2022, the Company recorded an ECL of $0.6 million (December 31, 2021 - $0.6 million).

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

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

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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

associated with the modification, along with any existing unamortized deferred financing costs and premium or discount, are included in the

calculation of the gain or loss associated with the modification. The remeasurement of the financial instrument is recalculated by

discounting the revised estimated future cash flows at the instrument’s original effective interest rate.

v.Segment

For the year ended December 31, 2022, the Company's operations were organized into one segment (year ended December 31, 2021:

one segment).

w.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.

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.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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	Yes	Yes	Depends
Non-lease component	Yes	Yes	No	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

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

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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. See Note 19 for additional information.

(iv) COVID-19

The Company has not identified any new significant developments related to the COVID-19 pandemic which would impact 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, 2022. The Company will continue

to monitor the COVID-19 situation and review its critical estimates and judgements as circumstances evolve.

(v) Climate Change

The Company could be affected by 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

this transition. The effect of these risks on the Company's compliance costs, capital expenditures, cash flow from operations and other

assumptions are inherently uncertain and may differ from actual amounts. The Company did not experience any direct impact from an

accelerated energy transition driven by climate change on its financial results as at December 31, 2022. The risks will, however, remain

key considerations for impairment testing, estimation of remaining useful lives of assets in the Company's fleet and provisions for future

periods. See Note 25e) for additional information.

(vi) The Invasion of Ukraine by Russia

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, including 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.

The Company has no operations or contracts with counterparties in Ukraine, Belarus or Russia and did not experience any material impact

from the invasion on its financial results as at December 31, 2022. The Company intends to continue to monitor the situation and review its

critical estimates and judgments as circumstances evolve.

x.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.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

i.Amendments to IAS 1 – Presentation of financial statements

The amendments clarify how to classify debt and other liabilities as current or non-current. The amendments to IAS 1 apply to annual

reporting periods beginning on or after January 1, 2024. The Company is currently assessing the impact of these amendments on the

consolidated financial statements.

ii.Amendments to IAS 1 and IFRS Practice Statement 2

The amendments are intended to help preparers in deciding which accounting policies to disclose in their financial statements. The

amendments are effective for annual periods beginning on or after 1 January 2023. The Company is currently assessing the impact of

these amendments on the consolidated financial statements.

iii.Amendments to IAS 12 – Income taxes

The amendments clarify that the initial recognition exception does not apply to the initial recognition of transactions that give rise to equal

taxable and deductible temporary differences. The amendments to IAS 12 apply to annual reporting periods beginning on or after January

1, 2023. The Company is currently assessing the impact of these amendments on the consolidated financial statements.

iv.International Tax Reform – Pillar Two Model

In December 2021, OECD released Model Global Anti-Base Erosion (GloBE) rules under Pillar Two. These rules set forth a Global

Minimum Tax at 15% for Multinational Enterprises with a turnover of more than EUR750 million. The Company does not expect to be

materially impacted by the International Tax Reform – Pillar Two Model Rules due to exemptions provided under being defined as an

international shipping company with limited presence in low-tax regimes. Additionally, the company does not anticipate any impact to its

deferred tax assets, in line with the IASB Exposure Draft from Jan 9, 2023. The International Tax Reform – Pillar Two Model Rules apply to

annual reporting periods beginning on or after January 1, 2023. The Company is currently assessing the impact of these requirements on

the consolidated financial statements and tax filings.

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 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, 2022 and 2021:


	December 31, 2022			December 31, 2021
Measurement Basis	FVTPL $	Amortized cost $	Total $	FVTPL $	Amortized cost $	Total $
Financial assets
Cash and cash equivalents	—	128,900	128,900	—	124,257	124,257
Financial assets (current and non-current)	875	9,811	10,686	274	2,038	2,312
Accounts and other receivable, net (current and non-current) (1)	—	39,373	39,373	—	38,193	38,193
Due from related parties (current and non- current)	—	22,999	22,999	—	20,523	20,523
Other assets (current and non-current) (2)	—	43,996	43,996	—	53,158	53,158
Total	875	245,079	245,954	274	238,169	238,443
Financial liabilities
Accounts payable and other (3)	—	4,015	4,015	—	19,396	19,396
Other financial liabilities (current and non- current) (4)	321	188,086	188,407	1,949	199,107	201,056
Due to related parties (current and non-current)	—	89,352	89,352	—	75,061	75,061
Borrowings (current and non-current)	—	1,374,613	1,374,613	—	1,477,772	1,477,772
Total	321	1,656,066	1,656,387	1,949	1,771,336	1,773,285

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

(1)Excludes sales tax receivable of $0.2 million as at December 31, 2022 (December 31, 2021 - $0.4 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, 2022 is $128.9 million of cash (December 31, 2021 - $124.3 million) and $nil of

cash equivalents (December 31, 2021 - $nil).

The fair value of all financial assets and liabilities as at December 31, 2022 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 $1.3 billion (December 31,

2021 - $1.5 billion) versus a carrying value of $1.4 billion (December 31, 2021 - $1.5 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, 2022, nor during the year ended December 31, 2021.

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, 2022 and December 31, 2021:


	December 31, 2022			December 31, 2021
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
	$	$	$	$	$	$
Financial assets
Derivative instruments	—	875	—	—	274	—
Total	—	875	—	—	274	—
Financial liabilities
Derivative instruments	—	321	—	—	1,949	—
Total	—	321	—	—	1,949	—

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, 2022	December 31, 2021
	$	$
Derivative instruments	554	(1,675)	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,
	2022	2021
	$	$
Current
Restricted cash (1)	9,811	2,038
Derivative instruments(2)	875	274
Total current	10,686	2,312

(1)Restricted cash as at December 31, 2022 consists of a guarantee for certain operating expenses and withholding taxes (December 31, 2021 - includes funds for a

loan facility repayment and withholding taxes)

(2)See Note 17 for additional information.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

5.Accounts and Other Receivable, Net


	Year Ended December 31,
	2022	2021
	$	$
Current
Accounts receivable - trade	32,853	30,606
Other non-trade receivable	6,691	8,011
Total current	39,544	38,617

6. Gain (Loss) on Modification of Financial Liabilities, Net

The table below summarizes the Company's gain (loss) on modification of financial liabilities, net for the year ended December 31, 2022

and 2021:


	Year ended December 31,
	2022	2021
	$	$
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 a substantial

modification related to the $180.0 million unsecured bonds issued in December 2021 (see Note 18).

7.Gain (Loss) on Dispositions, Net


Period	Vessel	Net Proceeds	Gain (Loss) on Dispositions, Net
		$	$
Q4-22	Nordic Rio	27,309	11,680
Q4-22(1)	Navion Gothenburg	—	(154)
Q3-22	Navion Gothenburg	25,638	(120)
Q3-22	Petronordic	6,992	8
Gain (loss) on dispositions, net for the year ended December 31, 2022			11,414

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

(1)The Navion Gothenburg was sold during the third quarter of 2022 and a loss of $0.1 million was recorded as at September 30, 2022. An additional loss

of $0.2 million was recorded in December 2022 after a correction of the gain (loss) on sale calculation.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

8.Other Assets


	Year Ended December 31,
	2022	2021
	$	$
Current
Prepayments	6,407	3,917
Investment in finance leases (1)	9,234	9,162
Contract assets (2)	7,497	8,639
Total current	23,138	21,718
Non-current
Investment in finance leases (1)	34,762	43,996
Right-of-use assets (3)	138	11,126
Contract assets (2)	—	3,336
Other assets	11,303	9,781
Total non-current	46,203	68,239

(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, 2022 and

2021:


	Year Ended December 31,
	2022	2021
	$	$
Gross Carrying Amount
Opening balance at beginning of year	33,114	33,114
Additions (cash and non-cash)	—	—
Dispositions	(32,869)	—
Closing balance at end of period	245	33,114
Accumulated Depreciation
Opening balance at beginning of year	(21,988)	(10,944)
Depreciation expense	(9,866)	(11,044)
Dispositions	31,747	—
Closing balance at end of period	(107)	(21,988)
Net book value	138	11,126

As at December 31, 2022 and 2021, the Company's right-of-use assets were as follows:


			As at December 31, 2022
	December 31, 2022	December 31, 2021	Weighted-average remaining lease term	Weighted-average implicit interest rate
	$	$	(years)	(%)
Vessels and equipment	—	10,956	—	—%
Office leases	138	170	4.2	5.9%
Total	138	11,126

There were no indicators of impairment, nor were there any impairments recorded as at December 31, 2022 and 2021 on the Company's

right of use assets.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Lease related items for which the Company was a lessee for the years ended December 31, 2022 and 2021, were as follows:


	Year Ended December 31,
	2022	2021
	$	$
Amounts recognized in profit and loss
Depreciation expense on right-of-use vessels and equipment	11,293	11,015
Depreciation expense on right-of-use office leases	34	29
Interest expense on lease liabilities	195	598
Short-term lease expense	4,109	2,713
	15,631	14,355

As at December 31, 2022, the undiscounted contractual maturities of the Company's lease liabilities were $0.2 million.

10.Vessels and Equipment


	Year Ended December 31,
	2022	2021
	$	$
Gross carrying amount:
Opening balance at beginning of year	2,186,433	1,993,761
Additions (1)	17,626	24,787
Dispositions (2)	—	(48,916)
Transferred from advances on newbuilding contracts	123,669	253,301
Vessels and equipment reclassified as held for sale	(136,159)	(36,500)
Closing balance at end of period	2,191,569	2,186,433
Accumulated Depreciation and Impairment:
Opening balance at beginning of year	(422,407)	(321,028)
Depreciation and amortization (3)	(146,777)	(161,895)
Impairment expense, net (4)	(4,960)	—
Dispositions (2)	—	33,916
Transferred to deferred mobilization costs	(840)
Vessels and equipment reclassified as held for sale	90,031	26,600
Closing balance at end of period	(484,953)	(422,407)
Net book value	1,706,616	1,764,026

(1)Additions include dry docks, overhauls and capital modifications.

(2)Includes the sale of vessels and the disposal upon the replacement of certain components of vessels and equipment.

(3)Excludes depreciation and amortization on the Company's right-of-use assets, office equipment and software.

(4)See below for additional information.

Impairment expense, net

The following tables contains a summary of the Company’s impairment expense, net for the years ended December 31, 2022 and 2021,

by vessel:


Period	Vessel	Event	Fair Value Hierarchical Level	Valuation Techniques and Key Inputs	Impairment Expense $
Q2 2022 (1)	Petronordic	Sale of the vessel considered highly probable	Level 2	Fair value less cost to sell using an appraised valuation	4,960
Impairment expense, net for the year ended December 31, 2022					4,960

(1)Vessels and equipment were sold during the year ended December 31, 2022. See Note 7 for additional information.

(2)For the year ended December 31, 2021, impairment expense, net was $nil and $nil, respectively.

The fair value of vessels and equipment, classified as such, measured on a non-recurring basis was $nil and $nil as at December 31, 2022

and December 31, 2021, respectively.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

As at December 31, 2022, due to short remaining contract lengths, the Company identified impairment triggers for four of its shuttle

tankers. The tests of these assets did not result in a recoverable value lower than the carrying value and were therefore not impaired.

When estimating the recoverable amount, the Company makes assumptions for the uncontracted cash flows over the useful life for each

unit. These are estimated based on the Company's market knowledge, experience and return on invested capital. These assumptions are

used to create scenarios with different cash flows for each unit. Based on the attractiveness of the various assets, the assumptions can

include extensions on current contracts, new contracts, sale or a recycling option. The recoverable amount is a weighted average of all the

scenarios.

The Company's impairment tests are sensitive to changes in key assumptions such as discount rate, assumed contract rates and the

weight applied to the various scenarios. For the assets for-which the impairment tests as at December 31, 2022 did not result in an

impairment:

•An increase of 0.5% for the discount rate would not result in any impairment.

•An additional one-year before redeployment of the units in the weighted scenarios would result in an impairment of $52.2 million.

•A 10% reduction in rate/sales proceeds from the weighted scenarios on the same units would result in an impairment of $33.1 million.

As at December 31, 2022, the Company had no vessels in lay-up (December 31, 2021 - no vessels in lay-up).

Non-current Assets

The tables below summarize the Company's non-current assets by geography as at December 31, 2022 and December 31, 2021:


	Year Ended December 31,
	2022	2021
	$	$
Norway	1,149,276	1,171,584
Brazil	284,233	406,665
Canada	437,070	365,608
United Kingdom	9,353	38,402
Other	—	29,037
Total non-current assets(1)	1,879,932	2,011,296

(1)Excludes financial instruments and deferred tax assets.

11.Advances on Newbuilding Contracts


	Year Ended December 31,
	2022	2021
	$	$
Opening balance at beginning of year	51,918	127,335
Additions	71,001	176,964
Capitalized borrowing costs	750	920
Transferred to vessels and equipment	(123,669)	(253,301)
Closing balance at end of period	—	51,918

As at December 31, 2022, the Company has no commitments relating to newbuilding contracts, as the seventh and final shuttle tanker in

its newbuilding program, the Altera Thule, was delivered in March 2022 with total gross payments made towards this vessel for an

aggregate purchase price of $123.7 million. The Company secured $105.4 million of borrowings relating to this newbuilding, which was

fully drawn as of December 31, 2022 (see Note 18 for additional information).

As at December 31, 2022, the undiscounted 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	190.4	11.3	11.3	11.3	11.3	11.3	133.9

As at December 31, 2022, the Company had leases secured by two vessels (December 31, 2021 - two vessels) with a combined carrying

value of $227.8 million (December 31, 2021 - $240.6 million). The liability for the leases accrues interest at a variable rate of LIBOR plus a

margin of 2.85%. As at December 31, 2022, the Company was in compliance with all covenant requirements of its leases.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

12.Goodwill

The carrying amount of goodwill for the Company was $127.1 million as at December 31, 2022 and 2021. The Company conducted its

annual goodwill impairment evaluation during 2022 and 2021 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.


	2022	2021
Discount rate	8.76%	7.29%
Exit multiple	8.0	8.0

Discount rate

The discount rate is a post-tax measure, with a possible debt leveraging of 70% for 2022 (2021 - 70%) estimated based on the observed

leveraging within the industry and the long-term target leverage of the Company, at market interest rates of 5.9% for 2022 (2021 - 4.2%).

Exit Multiple

The cash flow projections include specific estimates for generally five years and a terminal value thereafter. The terminal value is estimated

using an EBITDA multiple generally applied to the year-five 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.


	2022	2021
Discount rate	4.97%	3.98%
Exit multiple	(2.1)	(1.6)

13.Accounts Payable and Other


	Year Ended December 31,
	2022	2021
	$	$
Current
Accounts payable	3,871	7,879
Accrued liabilities (1)	37,772	34,006
Deferred revenues (2)	6,561	11,803
Lease liabilities (3)	31	11,364
Total current	48,235	65,052
Non-current
Accounts payable and other	—	(1)
Deferred revenues (2)	—	354
Lease liabilities (3)	113	154
Total non-current	113	507

(1)See Note 14 for additional information.

(2)See Note 16 for additional information.

(3)See Note 9 for additional information.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

14.Accrued Liabilities


	Year Ended December 31,
	2022	2021
	$	$
Interest including interest rate swaps	16,018	11,836
Payroll and benefits	6,065	5,991
Audit, legal and other general expenses	875	3,450
Voyage and vessel expenses	14,814	12,729
	37,772	34,006

15. Provisions and Contingencies


	Year Ended December 31,
	2022	2021
	$	$
Opening balance at beginning of year	—	5,644
Reduction arising from payments / derecognition	—	(5,644)
Closing balance at end of period	—	—

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

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,
	2022	2021
	$	$
Contract assets
Current	7,497	8,639
Non-current	—	3,336
	7,497	11,975
Contract liabilities
Current	6,561	11,803
Non-current	—	354
	6,561	12,157

During the year ended December 31, 2022, the Company recognized revenue of $11.8 million, which was included in contract liabilities on

December 31, 2021.

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

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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, 2022 was $2.1 million (year ended December 31, 2021 $1.8 million).

At December 31, 2022 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 $11.3 million (December

31, 2021 - $9.8 million) and are categorized as vessel repositioning costs.

17.Other Financial Liabilities


	Year Ended December 31,
	2022	2021
	$	$
Current
Derivative instruments	321	1,949
Obligations relating to leases(1)	11,045	10,990
Total current	11,366	12,939
Non-current
Obligations relating to leases(1)	177,041	188,117
Total non-current	177,041	188,117

(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 2022, 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.

The aggregate amount of the Company's derivative financial instrument positions is as follows:


	December 31, 2022		December 31, 2021
	Financial Asset	Financial Liability	Financial Asset	Financial Liability
	$	$	$	$
Interest rate swaps	—	—	—	1,277
Foreign currency forward contracts	875	321	274	672
Total	875	321	274	1,949
Total current	875	321	274	1,949
Total non-current	—	—	—	—

Interest Rate Risk

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 may use interest rate swaps to reduce its exposure to market risk

from changes in interest rates. The principal objective of these contracts is to reduce the risks and costs associated with the Company's

floating-rate debt.

As at December 31, 2022, the Company is not part of any interest rate swaps, as the previously entered interest rate swaps have all been

terminated. The Company has not designated, for accounting purposes, any interest rate swaps as hedges of variable rate debt during the

year ended December 31, 2022 and December 31, 2021, respectively. Certain of the Company's interest rate swaps have historically been

secured by vessels.

In September 2022, the Company terminated, on maturity, one of its interest rate swaps, which as at June 30, 2022, had a notional amount

of $100.0 million and a total fair value asset of $nil.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

During the year ended December 31, 2022, 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 $0.5 million (December 31, 2021 - 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 consolidated statements of income (loss) for the year ended December 31, 2022 and 2021 as follows:


	Year Ended December 31,
	2022	2021
	$	$
Realized gain (loss) on derivative instruments
Interest rate swap	(706)	(1,942)
Foreign currency forward contracts	(3,344)	5,241
	(4,050)	3,299
Unrealized gain (loss) on derivative instruments
Interest rate swap	1,277	2,091
Foreign currency forward contracts	951	(5,541)
	2,228	(3,450)
Total realized and unrealized gain (loss) on derivative instruments	(1,822)	(151)

The Company is exposed to credit loss in the event of non-performance by the counterparties, all of which are financial institutions, to its

foreign currency forward contracts and its previously held interest rate swap agreements.

The following table presents the notional amounts underlying the Company's derivative financial instruments by term to maturity as at

December 31, 2022:


	Total	1 Year	2 Years	3 Years	4 Years	5 Years	Thereafter
	(in millions of U.S. Dollars)
Fair value through profit or loss
Foreign currency forward contracts	36.0	36.0	—	—	—	—	—
Total	36.0	36.0	—	—	—	—	—

18.Borrowings


			Weighted average term		Weighted average rate
	December 31, 2022	December 31, 2021	December 31, 2022	December 31, 2021	December 31, 2022	December 31, 2021
	$	$	(years)	(years)	(%)	(%)
Revolving Credit Facilities	244,201	301,387	1.39	2.39	7.24	2.68
Term Loans	696,473	671,832	5.39	5.96	5.94	2.85
Public Bonds	380,000	449,342	2.35	2.93	10.13	7.85
Non-Public Bonds	68,623	77,286	1.00	2.00	4.96	4.96
Total	1,389,297	1,499,847	3.64	4.13	7.27	4.42
Less: deferred financing costs and other	(14,684)	(22,075)
Total borrowings	1,374,613	1,477,772
Less current portion	(314,032)	(164,313)
Long-term portion	1,060,581	1,313,459

Revolving Credit Facilities

As at December 31, 2022, the Company had one revolving credit facility outstanding, secured by eight vessels (December 31, 2021 - one

credit facility outstanding secured by nine vessels), with a combined carrying value of $442.7 million (December 31, 2021 - $522.1 million)

which, as at such date, provided for total borrowings of up to $244.2 million (December 31, 2021 - $301.4 million), and was fully drawn

(December 31, 2021 - fully drawn).

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

Term Loans

As at December 31, 2022, the Company had term loans secured by eight vessels (December 31, 2021 - secured by eight vessels) with a

combined carrying value of $891.8 million (December 31, 2021 - $856.1 million), which, as at such date, provided for total borrowings of

$696.5 million (December 31, 2021 - $671.8 million). The term loans reduce over time with quarterly or semi-annual payments and have

varying maturities through 2034. As at December 31, 2022, all of these terms loans were guaranteed by the Company or a subsidiary of

the Company.

As at December 31, 2022, certain tranches of the financing for the shuttle tankers operating on the East Coast of Canada had an

outstanding balance of $153.3 million and matured in March 2023. In March 2023, the Company successfully completed an amendment

and extension of this financing, which included a $30.0 million upsize to the commercial senior tranche to take-out the junior financing

related to the same vessels. Following the amendment, the outstanding amount of the commercial senior tranche is $153.3 million and

matures in March 2026. The total amended financing amounts to $332.6 million, which reduces over time with semi annual repayments

and has varying maturities through March 2034. The interest payments on the amended facility are based on SOFR (and includes credit

adjustment spreads as a result of changing reference rate from LIBOR to SOFR) plus margins between 1.30% and 2.75% per annum.

Public and Non-Public Bonds

As at December 31, 2022, the Company had public bonds outstanding which totaled $380.0 million (December 31, 2021 - $449.3 million).

The public bonds have varying maturities through 2025.

As at December 31, 2022, the Company had non-public bonds outstanding secured by two vessels (December 31, 2021 - secured by two

vessels), with a combined carrying value of $144.3 million (December 31, 2021 - $156.9 million), which, as at such date provided for total

borrowings of $68.6 million (December 31, 2021 - $77.3 million). The non-public bonds reduce over time with semi-annual payments and

matures in December 2023.

In August 2022, on maturity, the Company redeemed the remaining $68.8 million of bonds on its outstanding 7.125% senior unsecured

bonds listed on the Oslo Stock Exchange. The bonds were repaid at 101% of par value as per the amended loan agreement.

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 issuer 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.

As at December 31, 2022, 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	430.4	102.9	67.9	42.9	36.0	33.8	146.9
Secured debt - repayments on maturity	578.9	211.9	169.4	—	197.6	—	—
Bond repayments	380.0	—	200.0	180.0	—	—	—
Total borrowings	1,389.3	314.8	437.3	222.9	233.6	33.8	146.9

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, 2022, the Company's pledged

accounts consisted of $58.3 million in Cash and cash equivalents ($49.4 million - December 31, 2021), $9.0 million in Financial assets

(current and non-current) ($1.1 million - December 31, 2021), and $29.0 million in Accounts and other receivable, net (current and non-

current) ($29.3 million - December 31, 2021). As at December 31, 2022, the Company has obtained guarantee arrangements with certain

financial institutions which in the event of default provide for $8.8 million of guarantee coverage ($8.6 million - December 31, 2021). As at

December 31, 2022, the Company was in compliance with all covenant requirements of its revolving credit facilities, term loans and bonds.

The Company's minimum liquidity requirements under its financial covenants 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%. The

Company's ability to make cash distributions are, for the time being, not permitted in accordance with the terms of its $180.0 million senior

unsecured bond. As at December 31, 2022, the Company was in compliance with all covenant requirements of its revolving credit facilities,

term loans and bonds.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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, 2022 and 2021 are as follows:


	Year Ended December 31,
	2022	2021
	$	$
Deferred tax assets:
Tax losses carried forward	97,184	54,186
Other tax assets	12,756	9,329
Deferred tax assets gross	109,940	63,515
Deferred tax liabilities:
Fixed assets and Goodwill, net	(67,957)	(52,463)
Other tax liabilities	(2,040)	(2,392)
Net deferred tax liabilities	(69,997)	(54,855)
Unrecognized tax assets	(24,319)	—
Net deferred tax assets (liabilities)	15,624	8,660

In December 2022, the commercial operation of the Company's North Sea shuttle business was transferred from a Singaporean to

Norwegian tax regime. Assessment of future taxable results in Norway resulted in the recognition of an additional deferred tax asset, as

shown in the table above. Expected realization of the recognized net $15.6 million deferred tax position is within 5 years. The tax assets

are expected to be utilized based on anticipated future taxable profit in Norway which is pending future development in the Norwegian

Krone exchange rate vs U.S. dollars. The Company also has tax loss carry forwards in Norway which are not recognized as it is not

possible with reasonable certainty to forecast sufficient taxable profit in the future for which tax loss carry forwards can be utilized. The

recognition of the deferred tax assets is based on the expectation that sufficient taxable income will be available through forecast

supported future taxable income.

The net deferred tax assets (liabilities) movements are as follows:


	Year Ended December 31,
	2022	2021
	$	$
Opening net deferred tax assets (liabilities) balance at beginning of year	8,660	5,153
Deferred income tax (expense) benefit	7,839	3,667
Other	(875)	(160)
Closing net deferred tax assets (liabilities) balance at end of year	15,624	8,660

The following table details the expiry date, if applicable, of the unrecognized deferred tax assets:


	Year Ended December 31,
	2022	2021
	$	$
One year from reporting date	—	—
Two years from reporting date	—	—
Three years from reporting date	—	—
After three years from reporting date	12,651	—
Do not expire	81,560	—
Total	94,211	—

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(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, 2022 and 2021 are as follows:


	Year Ended December 31,
	2022	2021
	$	$
Current income tax (expense) benefit	(126)	(3,252)
Deferred income tax (expense) benefit	7,839	3,667
Income tax (expense) benefit	7,713	415

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,
	2022	2021
	$	$
Income (loss) before income tax (expense) benefit	13,229	(25,493)
Net income (loss) not subject to taxes	31,997	(16,368)
Net income (loss) subject to taxes	(18,768)	(9,125)
Applicable statutory tax rate	12%	5%
Net income (loss) subject to taxes at applicable statutory tax rates	(2,276)	(437)
Permanent differences	2,402	773
Adjustments related to currency differences	875	160
Derecognition of deferred tax assets and other	(8,714)	(911)
Tax expense (benefit) related to current year	(7,713)	(415)

The unrecognized tax benefits movements are as follows:


	Year Ended December 31,
	2022	2021
	$	$
Opening unrecognized tax benefits balance at beginning of year	—	36,405
Increases (Decreases) for positions related to the current year	94,211	(36,405)
Closing unrecognized tax benefits balance at end of year	94,211	—

20.Related Party Transactions

The Company has no key employees and does not remunerate key management personnel.

The key management personnel of the Company 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, 2022 and 2021 the total compensation expenses of these three key management personnel of the

Company are as follows:


	Salary $	Bonus $	Pension Benefits $	Other Benefits $	Total Compensation $
2022	1,282	4,015	72	45	5,414
2021	1,585	1,788	93	70	3,536

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 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The Company is a party to the following transactions with related parties:

a)On December 14, 2021, the Company entered into an agreement with Brookfield to issue $70.0 million aggregate principal amount of

unsecured PIK notes (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, biannually, 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, 2022, the Company had recorded

$9.6 million of PIK interest which was added to the outstanding principal amount of the 12.50% PIK Notes. 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, 2022, 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)	79.6	—	—	—	79.6	—	—
Total borrowings due to related parties	79.6	—	—	—	79.6	—	—

(1)Includes PIK interest of $9.6 million. See Note 20a for additional information.

As at December 31, 2022, the Company was in compliance with the covenant requirements of this facility

b)During the year ended December 31, 2022, a common control transaction was undertaken, whereby the Company acquired Altera

Shuttle Loading AS (formerly Navion Offshore Loading AS) from Altera Infrastructure Holdings L.L.C. The transaction was accounted

for as a common control transaction by using the pooling of interest method.

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,
	2022	2021
	$	$
General and administrative (1)	(26,208)	(28,298)
Interest expense (2)(3)	(9,095)	(2,931)

(1)Includes ship management and crew training services provided by Altera Infrastructure and its subsidiaries.

(2)Includes interest expense of $9.1 million incurred on the 12.50% PIK Notes for the year ended December 31, 2022 (year ended December 31, 2021 -

$0.5 million) See Notes 20a for additional information.

(3)Includes interest expense of $nil for the year ended December 31, 2022 (year ended December 31, 2021 - $1.8 million), and an accretion expense of

$nil for year ended December 31, 2022 (year ended December 31, 2021 - $0.6 million) incurred on unsecured revolving credit facilities provided by

Brookfield.

At December 31, 2022, the carrying value of amounts due from related parties totaled $23.0 million (December 31, 2021 - $20.5 million)

and consist partially of an $11.0 million (December 31, 2021 - $11.0 million) 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 $89.4 million (December 31, 2021 - $75.1 million) and

consisted partially of $79.6 million (December 31, 2021 - $70.4 million) 12.50% 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.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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, 2022 and 2021, as well as of revenues, net income, other comprehensive income and distributions for the years ended December 31,

2022 and 2021:


	Year Ended December 31,
	2022	2021
	$	$
Current assets	15,038	3,628
Non-current assets	—	40,284
Current liabilities	2,018	6,567
Non-current liabilities	—	—


	Year Ended December 31,
	2022	2021
	$	$
Revenues	25,684	22,403
Net income (loss) and other comprehensive income (loss)	9,795	(13,681)
Distributions paid to non-controlling interests	(22,360)	(9,112)

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 2021, 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, 2022 and 2021, by contract type:


	Year Ended December 31,
	2022	2021
Revenues from contracts with customers	$	$
CoAs	126,309	85,190
Time-charters	110,379	96,196
Management fees and other	6,122	14,417
	242,810	195,803
Other revenues
CoAs	108,128	121,872
Time-charters	177,692	160,767
Bareboat charters	—	9,604
Voyage charters	75,779	25,449
	361,599	317,692
Total revenues	604,409	513,495

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(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, 2022 and 2021:


	Year Ended December 31,
	2022	2021
	$	$
Revenues from contracts with customers
Norway (1)	153,645	110,809
Brazil (1)	29,476	34,233
Canada	59,689	49,150
Other	—	1,611
Total revenues from contracts with customers	242,810	195,803
Other revenues
Norway (1)	184,629	170,165
Brazil (1)	57,937	65,757
Canada	74,224	60,216
Other	44,809	21,554
Total other revenues	361,599	317,692
Total revenues	604,409	513,495

(1) Reference to Norway and Brazil are to income from international shipping activities occurring on the Norwegian and Brazilian continental shelves respectively.

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,
	2022	2021
	$	$
Royal Dutch Shell Plc	$101.4 or 16.8%	$100.1 or 19.5%
BP Plc	$84.1 or 13.9%	$88.7 or 17.3%
Equinor ASA	$79.1 or 13.1%	$71.1 or 13.8%

c)Finance leases

Leasing of certain vessels and equipment and VOC equipment are accounted for as finance leases.

During the year ended December 31, 2022, the Company recorded finance income of $3.8 million on its investment in finance leases

(December 31, 2021 - $4.5 million).

As at December 31, 2022, the minimum lease payments receivable under the Company's finance leases approximated $50.6 million

(December 31, 2021 - $63.4 million), including unearned income of $7.9 million (December 31, 2021 - $11.8 million). As at December 31,

2022, 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	50.6	12.1	11.5	11.5	11.5	4.0	0.0

d)Operating Leases

As at December 31, 2022, the carrying amount of the Company's vessels and equipment subject to operating leases in which the

Company is a lessor was $1.4 billion (December 31, 2021 - $1.5 billion). As at December 31, 2022, the undiscounted contractual earnings

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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	1,239.9	225.0	142.0	143.0	145.5	138.3	446.1

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, 2022 and 2021 by nature:


	Year ended December 31,
	2022	2021
	$	$
Voyage expenses (1)	162,412	97,783
Operating expenses	71,955	75,829
Charter hire	12,342	10,141
Compensation	58,820	62,000
Total	305,529	245,753

(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,
	2022	2021
	$	$
Interest paid	91,879	77,222
Income taxes paid	614	2,202

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, 2022 and 2021 are as

follows:


Changes in non-cash working capital, net	Year ended December 31,
	2022	2021
	$	$
Accounts and other receivable, net	(926)	10,033
Other assets	(1,308)	1,046
Accounts payable and other	(495)	2,681
Due from (to) related parties	11,858	155
Changes in non-cash working capital, net	9,129	13,915

The following table presents the change in the balance of borrowings arising from financing activities as at December 31, 2022 and

December 31, 2021:


	Year ended December 31,
	2022	2021
	$	$
Opening balance at beginning of year	1,477,772	1,605,500
Cash flows	(110,695)	(128,744)
Non-cash changes:
Deferred financing costs amortization	6,541	(45)
Other	995	1,061
Closing balance at end of period	1,374,613	1,477,772

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

The following table presents the change in the balance of obligations related to leases arising from financing activities as at December 31,

2022 and December 31, 2021:


	Year ended December 31,
	2022	2021
	$	$
Opening balance of obligations relating to leases at beginning of year	199,108	139,239
Cash flows related to obligations relating to leases	(11,272)	59,481
Non-cash changes:
Other	250	388
Closing balance of obligations relating to leases at end of year (1)	188,086	199,108

(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, 2022 and

December 31, 2021:


	Year ended December 31,
	2022	2021
	$	$
Opening balance of lease liabilities at beginning of year	11,126	22,170
Cash flows related to lease liabilities	(11,272)	(11,273)
Non-cash changes:
Other	290	229
Closing balance of lease liabilities at end of year (1)	144	11,126

(1)See Note 9 for additional information.

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), credit risk and climate 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,
	2022	2021
	$	$
Borrowings	1,374,613	1,477,772
Obligations relating to leases	188,086	199,107
Less:
Cash and cash equivalents	128,900	124,257
Net debt	1,433,799	1,552,622
Total equity	439,187	420,837
Total capitalization (1)	2,001,886	2,097,716
Net debt to capitalization ratio (2)	72%	74%

(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,

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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 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, 2023.

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 or previously 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.

i.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 may use 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, 2022, the Company is not part of any interest rate swaps, as the previously entered interest rate

swaps have all been terminated.

As announced by the Financial Conduct Authority (FCA) in early 2022, the panel bank submissions for US dollar LIBOR will cease in

mid-2023. 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 SOFR at an agreed point in time. As at December 31, 2022, the Company has not finished the process of implementing

appropriate fallback provisions for all LIBOR indexed exposures. It is assumed that the result of the negotiations with external banks and

the implementation of SOFR will not have material impacts on the Company’s future financial results

As at December 31, 2022, the Company had $1.0 billion of outstanding LIBOR-referenced borrowings summarized as follows:


	Principal	Weighted-average term	Transition Progress
	$	(years)
Revolving Credit Facilities	244,201	1.39	Expected to amend fallback clauses prior to cessation of publication of LIBOR.
Term Loans	562,008	4.44
Public Bonds	200,000	1.80
Total	1,006,209	3.66

As at December 31, 2022, the Company had outstanding floating-rate debt balance of $1.0 billion (December 31, 2021 $1.0 billion) and an

outstanding notional balance of $nil (December 31, 2021 $0.1 billion) of interest rate swaps. A 100 basis point decrease in the Company's

interest rates is expected to increase future cash flows by $10.1 million (December 31, 2021 - $10.2 million).

The Company is exposed to credit loss in the event of non-performance by the counterparties, all of which are financial institutions, to its

foreign currency forward contracts and its previously held interest rate swap agreements. In order to minimize counterparty risk, to the

extent possible and practical, foreign currency forward contracts and 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.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

ii.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, 2022 and 2021:


(in thousands of U.S. Dollars)	December 31, 2022
(in thousands of U.S. Dollars)	USD	NOK	GBP	CAD	EUR	BRL	Other	Total
Financial assets
Current assets	159,775	3,963	1,223	14,170	22,325	9,201	535	211,192
Non-current assets	34,762	—	—	—	—	—	—	34,762
Total	194,537	3,963	1,223	14,170	22,325	9,201	535	245,954
Financial liabilities
Current liabilities	415,627	314	7	2,219	433	—	51	418,651
Non-current liabilities	1,237,736	—	—	—	—	—	—	1,237,736
Total	1,653,363	314	7	2,219	433	—	51	1,656,387


(in thousands of U.S. Dollars)	December 31, 2021
(in thousands of U.S. Dollars)	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

The Company’s exposures to foreign currencies of financial instruments and the sensitivity of net income and other comprehensive

income, on a pre-tax basis, to a 10% change in the exchange rates is summarized below:


(in thousands of U.S. Dollars)	December 31, 2022
(in thousands of U.S. Dollars)	10% decrease	10% increase
Euros	(2,189)	2,189
Brazilian Real	(920)	920
Canadian Dollars	(1,195)	1,195
Other	(535)	535


(in thousands of U.S. Dollars)	December 31, 2021
(in thousands of U.S. Dollars)	10% decrease	10% increase
Euros	(1,408)	1,408
Brazilian Real	(841)	841
Canadian Dollars	(6)	6
Other	(39)	39

iii.Commodity price risk management

The Company could be exposed to changes in forecasted bunker fuel costs when vessels are idle or off hire. The Company may use

bunker fuel swap contracts as economic hedges to protect against changes in bunker fuel costs, however, the Company has deemed the

exposure to be limited, and therefore, as at December 31, 2022, 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.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(all tabular amounts stated in thousands of U.S. dollars unless otherwise indicated)

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, 2022, the Company recorded an ECL of $0.3 million (December 31, 2021 - $0.3 million).

e.Climate risk

The Company climate-related risks stem mostly from the transition to a decarbonised energy system, in the form of changing market

conditions, shifting political and regulatory frameworks, and stigmatisation of the industry, which may increase the cost of financial capital,

and make it more difficult to attract and retain talent. Increased pricing of emissions will increase the Company and its clients' costs, and

the Company is monitoring proposed changes to emissions and carbon costs closely. The Company also faces some risks arising from the

physical and political impacts of climate change. Severe weather events and geopolitical instability resulting from climate change may

disrupt the Company's crewing schedules and supply chains and increase the costs of inputs to our business activities.

The Company’s primary revenue stream is owning, leasing and operating shuttle tankers to oil and gas operators. Reduced market

demand for long-term, fixed-rate CoA's, time-charter contracts, bareboat contracts and voyage contracts in the long-term could prompt

assets within the Company's fleet to become stranded. Climate change issues may cause a shift toward alternative sources of energy,

lowering demand for our services, resulting in potential impairments impacting the book value of the Company's assets. The Company

evaluates its assets with various considerations and sensitivities in this regard and has not identified any stranded assets as at December

31, 2022.

The Company supports the core objectives of the Paris Agreement on Climate Change and the global goal to achieve climate neutrality by

2050. Meeting this ambition within the infrastructure of offshore energy will require individual players to dramatically reduce their emissions

from current activities and industry-wide action to develop a new climate-neutral model. The International Maritime Organization (IMO) has

set a target to reduce the carbon intensity of international shipping by 40% by 2030, compared to a calculated 2008 baseline; the Company

has set a reduction pathway in line with such endeavors.

During 2022, the Company sold three shuttle tankers, thus making the operations and fleet more resilient towards stringent environmental

regulations and reduces residual value risk. The Company'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 that can use liquid natural gas (LNG), recovered volatile organic compound

(VOC) emissions, and even potential zero-emissions fuels, such as bio-LNG and synthetic methane, as fuel. A Green Bond was raised to

part-finance the E-Shuttles, and all proceeds from this bond have been used for this purpose. The bond received a light green rating from

Cicero.

The Company expects reasonably steady operational conditions in the near to medium-term with the potential for more transformative

changes to the energy sector in the long-term. The long-term impacts on the energy sector are still relatively unknown and hard to predict.

To respond to this market risk, the Company is investigating new commercial models aligned with the energy transition.

26. Subsequent Events

In February 2023, the Company entered into an agreement with TotalEnergies to utilize the Samba Spirit on a 22 month firm time-charter

contract with extension options for an additional two or four months.

In February 2023, the Company entered an agreement with Knutsen to in-charter the Ingrid Knutsen for 10 months from March 1, 2023.

In February 2023, sole member, Altera Infrastructure Holdings L.L.C., appointed the Audit Committee of the General Partner to serve as

the Company's Audit Committee and to undertake all related duties.

In March 2023, the Company entered into an agreement to sell the 100% owned vessel, the Petroatlantic for conversion to an FSO for

approximately $19 million. The vessel operated in the North Sea CoA pool. The vessel is scheduled to be delivered to its buyer in April

2023.

In March 2023, William James Delday resigned from the Board of Directors and David Cannon was appointed to the Board of Directors of

the Company.

As at December 31, 2022, certain tranches of the financing for the shuttle tankers operating on the East Coast of Canada had an

outstanding balance of $153.3 million and matured in March 2023. In March 2023, the Company successfully completed an amendment

and extension of this financing, which included a $30.0 million upsize to the commercial senior tranche to take-out the junior financing

related to the same vessels. Following the amendment, the outstanding amount of the commercial senior tranche is $153.3 million and

matures in March 2026. The total amended financing amounts to $332.6 million, which reduces over time with semi annual repayments

and has varying maturities through March 2034. The interest payments on the amended facility are based on SOFR (and includes credit

adjustment spreads as a result of changing reference rate from LIBOR to SOFR) plus margins between 1.30% and 2.75% per annum.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at December 31 2022 and December 31, 2021 and for the years ended December 31, 2022 and 2021

(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, 2022 and 2021

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,
		2022	2021
	Notes	$	$
ASSETS
Current assets
Cash and cash equivalents	3	39,801	62,452
Financial assets	4	875	274
Accounts and other receivable, net		—	3,889
Due from subsidiaries	5	579,044	700,494
Due from related parties	5	22,923	16,384
Total current assets		642,643	783,493
Non-current assets
Investments in subsidiaries	5	707,911	726,741
Total non-current assets		707,911	726,741
Total assets		1,350,554	1,510,234

LIABILITIES
Current liabilities
Accounts payable and other	6,7	14,015	14,407
Other financial liabilities	8	321	1,949
Borrowings	9	72,685	143,115
Due to subsidiaries	5	48,696	21,307
Due to related parties	5	4,269	259
Total current liabilities		139,986	181,037

Borrowings	9	903,132	978,078
Due to related parties	5	79,594	70,389
Total non-current liabilities		982,726	1,048,467
Total liabilities		1,122,712	1,229,504

EQUITY
Contributions		1,004,819	989,819
Accumulated deficit		(776,977)	(709,623)
Accumulated other comprehensive income		—	534
Total equity		227,842	280,730
Total liabilities and total equity		1,350,554	1,510,234

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,
		2022	2021
	Notes	$	$
Dividend income		10,500	16,800
General and administrative expenses	5	(1,216)	(4,573)
Interest expense	5	(77,486)	(63,088)
Interest income	5	22,385	18,791
Impairment expense, net	5	(12,461)	(107,441)
Realized and unrealized gain (loss) on derivative instruments	8	(1,822)	(151)
Foreign currency exchange gain (loss)		(7,250)	(2,520)
Gain (loss) on modification of financial liabilities, net	12	—	(10,705)
Other income (expenses), net		(4)	203
Net income (loss)		(67,354)	(152,684)
Attributable to:
Members		(67,354)	(152,684)

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,
		2022	2021
	Notes	$	$
Net income (loss)		(67,354)	(152,684)
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	8	(534)	(749)
Total other comprehensive income (loss)		(534)	(749)
Comprehensive income (loss)		(67,888)	(153,433)
Attributable to:
Members		(67,888)	(153,433)

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, 2020		(431,939)	1,283	978,240	547,584
Net income (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	11,000
Contribution of capital from Brookfield	5	—	—	579	579
Other comprehensive income (loss)	6	—	(749)	—	(749)
Balance as at December 31, 2021		(709,623)	534	989,819	280,730
Net income (loss)		(67,354)	—	—	(67,354)
Contribution of capital from Altera Infrastructure Holdings L.L.C.		—	—	15,000	15,000
Other comprehensive income (loss)	6	—	(534)	—	(534)
Balance as at December 31, 2022		(776,977)	—	1,004,819	227,842

The accompanying notes are an integral part of these separate financial statements.


ALTERA SHUTTLE TANKERS L.L.C.
SEPARATE STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)

		Year Ended December 31,
		2022	2021
	Notes	$	$
OPERATING ACTIVITIES
Net income (loss)		(67,354)	(152,684)
Adjusted for the following items:
Impairment expense, net	5	12,461	107,441
Unrealized (gain) loss on derivative instruments	8	(2,228)	3,449
Other non-cash items		2,166	(3,466)
Changes in non-cash working capital, net	10	159,012	160,626
Net operating cash flow		104,057	115,366
FINANCING ACTIVITIES
Proceeds from borrowings	9	—	180,000
Repayments of borrowings	9	(148,044)	(272,399)
Proceeds from borrowings from related parties	5	—	70,000
Distributions to member		—	(125,000)
Capital provided by member		15,000	11,000
Net financing cash flow		(133,044)	(136,399)
INVESTING ACTIVITIES
Net investment in cost-accounted subsidiaries	5	6,369	34,439
Net investing cash flow		6,369	34,439
Cash and cash equivalents
Change during the period		(22,618)	13,406
Impact of foreign exchange on cash		(33)	774
Balance, beginning of period		62,452	48,272
Balance, end of period		39,801	62,452

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 and place of effective

management 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 March 31,

2023.

b.Going concern

The working capital surplus of $502.7 million as at December 31, 2022 has decreased from a working capital surplus of

$602.5 million as at December 31, 2021. This decrease of $99.8 million is primarily related to a decrease of $121.5 million in to Due

from subsidiaries, an increase of $27.4 million in Due to subsidiaries, and a decrease in cash an cash equivalents of $22.7 million;

partially offset by a decrease in current borrowings of $70.4 million.

The Company's minimum liquidity requirements under its financial covenants 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 2022, the Company's sole member, Altera Infrastructure Holdings L.L.C, injected $15 million of equity in order to enhance its

liquidity and financial flexibility. 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, and working capital optimizations.

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, 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, 2023.

c.Foreign currency

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.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

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.

The following provides information about the Company's wholly-owned subsidiaries as at December 31, 2022:


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 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 AS	Norway	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%
Nordic Brasilia LLC	Marshall Islands	100%
Peary Spirit LLC	Marshall Islands	100%
Rainbow Spirit AS	Norway	100%
Samba Spirit LLC	Marshall Islands	100%
Scott Spirit LLC	Marshall Islands	100%
Sertanejo Spirit LLC	Marshall Islands	100%
Tide Spirit AS	Norway	100%

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 presents details of non-wholly owned subsidiaries of the Company as at December 31, 2022:


Name of Subsidiary	State of Formation	Proportion of Ownership Interest
Navion Gothenburg LLC	Marshall Islands	50%
Nordic Rio LLC	Marshall Islands	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:


	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

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

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

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 associated with the modification, along with any existing unamortized deferred financing costs and

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

premium or discount, are included in the calculation of the gain or loss associated with the modification. The remeasurement of the

financial instrument is recalculated by discounting the revised estimated future cash flows at the instrument’s original effective

interest rate.

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

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

The Company has not identified any new significant developments related to the COVID-19 pandemic which would impact 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, 2022. The

Company will continue to monitor the COVID-19 situation and review its critical estimates and judgements as circumstances evolve.

(v) Climate Change

The Company could be affected by 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 this transition. The effect of these risks on the Company's compliance costs, capital expenditures, cash flow from

operations and other assumptions are inherently uncertain and may differ from actual amounts. The Company did not experience

any direct impact from an accelerated energy transition driven by climate change on its financial results as at December 31, 2022.

The risks will, however, remain key considerations for impairment testing, estimation of remaining useful lives of assets in the

Company's fleet and provisions for future periods. See Note 11e) for additional information.

(vi) The Invasion of Ukraine by Russia

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, including 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. The Company has no operations or contracts with counterparties in Ukraine, Belarus or

Russia and did not experience any material impact from the invasion on its financial results as at December 31, 2022. The

Company intends to continue to monitor the situation and review its critical estimates and judgments as circumstances evolve.

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.Amendments to IAS 1 – Presentation of financial statements

The amendments clarify how to classify debt and other liabilities as current or non-current. The amendments to IAS 1 apply to

annual reporting periods beginning on or after January 1, 2024. The Company is currently assessing the impact of these

amendments on the separate financial statements.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

ii.Amendments to IAS 1 and IFRS Practice Statement 2

The amendments are intended to help preparers in deciding which accounting policies to disclose in their financial statements. The

amendments are effective for annual periods beginning on or after 1 January 2023. The Company is currently assessing the impact

of these amendments on the 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.

The following tables provide the details of financial instruments and their associated classifications as at December 31, 2022 and

2021:


	December 31, 2022			December 31, 2021
Measurement Basis	FVTPL $	Amortized cost $	Total $	FVTPL $	Amortized cost $		Total $
Financial assets
Cash and cash equivalents	—	39,801	39,801	—	62,452		62,452
Financial assets(1)	875	—	875	274	—		274
Accounts and other receivable, net	—	—	—	—	3,889		3,889
Due from subsidiaries	—	579,044	579,044	—	700,494		700,494
Due from related parties	—	22,923	22,923	—	16,384		16,384
Total	875	641,768	642,643	274	783,219	783,219	783,493
Financial liabilities
Accounts payable and other	—	14,015	14,015	—	14,407		14,407
Other financial liabilities (current and non-current) (1)	321	—	321	1,949	—		1,949
Due to subsidiaries	—	48,696	48,696	—	21,307		21,307
Due to related parties (current and non-currrent)	—	83,863	83,863	—	70,648		70,648
Borrowings (current and non-current)	—	975,817	975,817	—	1,121,193		1,121,193
Total	321	1,122,391	1,122,712	1,949	1,227,555		1,229,504

(1)Refer to Derivative financial instruments in Note 8 for additional information.

Included in cash and cash equivalents as at December 31, 2022 is $39.8 million of cash (December 31, 2020 - $62.5 million) and

$nil of cash equivalents (December 31, 2021 - $nil).

The fair value of all financial assets and liabilities as at December 31, 2022 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 $0.9 billion

(December 31, 2021: $1.1 billion) versus a carrying value of $1.0 billion (December 31, 2021: $1.1 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, 2022 and December 31, 2021. 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, 2022 and 2021:

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)


	December 31, 2022			December 31, 2021
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
	$	$	$	$	$	$
Financial assets
Derivative instruments	—	875	—	—	274	—
Total	—	875	—	—	274	—
Financial liabilities
Derivative instruments	—	321	—	—	1,949	—
Total	—	321	—	—	1,949	—

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, 2022	December 31, 2021
	$	$
Derivative instruments	553	(1,675)	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,
	2022	2021
	$	$
Current
Derivative instruments (1)	875	274
Total current	875	274

(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, 2022 and 2021:


	Year Ended December 31,
	2022	2021
	$	$
Gross carrying amount:
Opening balance at beginning of year	1,091,725	1,126,163
Additions	3,107	17,950
Dispositions	9,476	52,388
Closing balance at end of year	1,085,356	1,091,725
Accumulated Impairment:
Opening balance at beginning of year	364,984	257,543
Impairment expense, net	12,461	107,441
Closing balance at end of period	377,445	364,984
Net book value	707,911	726,741

Additions & Dispositions

Additions for the year ended December 31, 2022 was $3.1 million and mainly related to paid in capital to Navion Gothenburg LLC of

$3.0 million. Dispositions for the year ended December 31, 2022 was $9.5 million and mainly related to payment of capital from

Nordic Rio LLC.

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, 2022, a common control transaction was undertaken, whereby the Company acquired Altera

Shuttle Loading AS (formerly Navion Offshore Loading AS) from Altera Infrastructure Holdings L.L.C. The transaction was

accounted for as a common control transaction by using the pooling of interest method, increasing the Company's investment in

subsidiaries by $0.1 million.

During the year ended December 31, 2021, 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

During the year ended December 31, 2022, the carrying value of the Company's investment in Navion Gothenburg L.L.C. and

Stena Ugland Shuttle Tankers DA III was written down by $12.1 million and $0.3 million, respectively, to their estimated recoverable

amounts using an appraised value approach. The Company's separate statement of income (loss) for the year ended December

31, 2022 includes an impairment charge of $12.4 million relating to the decrease in fair value.

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.

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.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)


	Balances with subsidiaries as at December 31, 2022		Balances with subsidiaries as at December 31, 2021
	Short-term receivables	Short-term payables	Short-term receivables	Short-term payables
Company name	$	$	$	$
Altera (Atlantic) Management ULC	114	—	—	—
Altera Shuttle Tanker Finance L.L.C. (5)	—	15,599	—	11,421
Altera Grand Banks Shipping AS (3)(5)	19,273	1,112	24,522	909
Altera Infrastructure Holdings Pte Ltd	9	—	1,328	—
Altera Norway Holdings AS (4)	46,076	—	50,294	—
Altera Norway Marine AS	—	996	—	—
Altera Shuttle Loading AS	1,992	—	—	—
Altera Shuttle Loading Pte. Ltd (1)	13,598	—	3,388	—
Altera Wave AS (5)	15,719	1,297	19,059	1,297
Altera Wind AS (5)	19,147	912	22,710	912
Amundsen Spirit AS	—	1,614	11	—
Amundsen Spirit L.L.C.	—	—	10,617	212
Aurora Spirit AS (2)(5)	102,682	557	118,362	557
Bossa Nova Spirit L.L.C. (5)	—	1,899	—	3,317
Current Spirit AS (2)(5)	113,472	293	125,175	293
Lambada Spirit L.L.C. (5)	9,660	—	25,046	—
Nansen Spirit L.L.C. (5)	2,997	173	15,503	173
Navion Gothenburg L.L.C.	1,000	—	2,791	—
Nordic Brasilia L.L.C	940	212	—	—
Nordic Rio L.L.C.	1	—	2,000	—
Peary Spirit L.L.C. (5)	—	9,190	3,466	249
Rainbow Spirit (2)(5)	105,812	511	118,874	511
Samba Spirit L.L.C. (5)	11,776	—	27,905	—
Scott Spirit L.L.C. (5)	—	13,893	—	1,017
Sertanejo Spirit L.L.C. (5)	1,547	—	2,869	—
Tide Spirit AS (2)(5)	113,229	438	126,574	439
Balance with subsidiaries	579,044	48,696	700,494	21,307

(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, 2022, the balance under the revolving credit facility is $nil (December 31, 2021

- $nil). As at December 31, 2022, the Company incurred $0.1 million (December 31, 2021 - $2.3 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, 2022, the balance of such term loans due from subsidiaries

is $202.5 million (December 31, 2021 - $227.2 million), of which $16.9 million relates to accrued interest income (December 31, 2021 -

$13.3 million).

(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, 2022, the balance under the loan is $19.3 million (December 31, 2021 -

$26.8 million), of which $1.8 million relates to accrued interest income (December 31, 2021 - $2.1 million).

(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, 2022, the balance under the loan is $46.1 million (December 31, 2021 - $50.3 million), of which $3.1 million

relates to accrued interest income (December 31, 2021 - $3.4 million).

(5)As at December 31, 2022, $766.3 million of equity within the following investments in subsidiaries was pledged for various debt agreements

(December 31, 2021 - $694.8 million)

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.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)


	Balances with ultimate parent company and related parties as at December 31, 2022		Balances with ultimate parent company and related parties as at December 31, 2021
	Short-term due from related parties	Short-term due to related parties (2)	Short-term due from related parties	Short-term due to related parties
Company name	$	$	$	$
Altera Infrastructure L.P.	6,962	—	563	—
Altera Infrastructure Norway AS	—	832	—	259
Altera Infrastructure Holdings L.L.C. (1)	13,522	3,228	12,629	—
Altera Infrastructure Production (Singapore) Pte. Ltd.	177	—	—	—
Altera Infrastructure Services Pte. Ltd.	—	209	943	—
Altera Production UK Limited	13	—	—	—
ALP Maritime Services B.V.	2,249	—	2,249	—
Balance with related parties	22,923	4,269	16,384	259

(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, 2022, the balance under

promissory note is $11.0 million (December 31, 2021 - $11.0 million).

(2)Trade related in the course of ordinary business.

On December 14, 2021, the Company entered into an agreement with Brookfield to issue $70.0 million aggregate principal amount

of unsecured PIK notes (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, biannually, 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, 2022, the Company had recorded

$9.6 million of PIK interest which was added to the outstanding principal amount of the 12.50% PIK Notes. 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.

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:


	Year Ended December 31,
	2022	2021
	$	$
General and administrative (1)	(589)	(4,275)
Interest expense (2)(3)	(9,095)	(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 $9.1 million incurred on the 12.50% PIK Notes for the year ended December 31, 2022 (year ended December 31,

2021 - $0.5 million) See Notes 20a for additional information.

(3)Includes interest expense of $nil for the year ended December 31, 2022 (year ended December 31, 2021 - $1.8 million), and an accretion

expense of $nil for year ended December 31, 2022 (year ended December 31, 2021 - $0.6 million) incurred on unsecured revolving credit

facilities provided by Brookfield.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

6.Accounts Payable and Other


	Year Ended December 31,
	2022	2021
	$	$
Current
Accounts payable	—	147
Accrued liabilities	14,015	14,260
Total current	14,015	14,407

7.Accrued Liabilities


	Year Ended December 31,
	2022	2021
	$	$
Interest including interest rate swaps	14,005	10,972
Audit, legal and other general expenses	10	3,288
	14,015	14,260

8. Other Financial Liabilities


	Year Ended December 31,
	2022	2021
	$	$
Current
Interest rate swaps	—	1,277
Foreign currency forward contracts	321	672
Total current	321	1,949
Non-current
Total non-current	—	—

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:


	December 31, 2022		December 31, 2021
	Financial Asset	Financial Liability	Financial Asset	Financial Liability
	$	$	$	$
Interest rate swaps	—	—	—	1,277
Foreign currency forward contracts	875	321	274	672
Total	875	321	274	1,949
Total current	875	321	274	1,949
Total non-current	—	—	—	—

Interest Rate Risk

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 may use 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, 2022, the Company is not part of any interest rate swaps, as the previously entered interest rate swaps have

all been terminated. The Company has not designated, for accounting purposes, any interest rate swaps as hedges of variable rate

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

debt during the year ended December 31, 2022 and December 31, 2021, respectively. Certain of the Company's interest rate swaps

have historically been secured by vessels.

In September 2022, the Company terminated, on maturity, one of its interest rate swaps, which as at June 30, 2022, had a notional

amount of $100.0 million and a total fair value asset of $nil.

During the year ended December 31, 2022, 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 $0.5 million (December 31, 2021 - 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, 2022 and 2021 as follows:


	Year Ended December 31,
	2022	2021
	$	$
Realized gain (loss) on derivative instruments
Interest rate swap	(706)	(1,942)
Foreign currency forward contracts	(3,344)	5,241
	(4,050)	3,299
Unrealized gain (loss) on derivative instruments
Interest rate swap	1,277	2,091
Foreign currency forward contracts	951	(5,541)
	2,228	(3,450)
Total realized and unrealized gain (loss) on derivative instruments	(1,822)	(151)

The following table presents the notional amounts underlying the Company's derivative financial instruments by term to maturity as

at December 31, 2022:


	Total	1 Year	2 Years	3 Years	4 Years	5 Years	Thereafter
(in millions of U.S. Dollars)
Fair value through profit or loss
Foreign currency forward contracts	36.0	36.0	—	—	—	—	—
Total	36.0	36.0	—	—	—	—	—

9.Borrowings


			Weighted average term		Weighted average rate
	December 31, 2022	December 31, 2021	December 31, 2022	December 31, 2021	December 31, 2022	December 31, 2021
	$	$	(years)	(years)	(%)	(%)
Revolving Credit Facilities	244,201	301,387	1.39	2.39	7.24	2.68
Term Loans	362,026	385,012	5.59	6.68	5.26	3.23
Public Bonds	380,000	449,342	2.35	2.93	10.13	7.85
Total	986,227	1,135,741	3.30	4.06	7.62	4.91
Less: deferred financing costs and other	(10,410)	(14,548)
Total borrowings	975,817	1,121,193
Less current portion	(72,685)	(143,115)
Long-term portion	903,132	978,078

Revolving Credit Facilities

As at December 31, 2022, the Company had one revolving credit facility outstanding, secured by eight vessels (December 31,

2021- one credit facility outstanding secured by nine vessels), with a combined carrying value of $442.7 million (December 31, 2021

- $522.1 million), which, as at such date, provided for total borrowings of up to $244.2 million (December 31, 2021 - $301.4 million),

and was fully drawn (December 31, 2021 - fully drawn).

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

Term Loans

As at December 31, 2022, the Company had term loans outstanding secured by four vessels (December 31, 2021 - secured by four

vessels) with a combined carrying value of $471.7 million (December 31, 2021 - $499.0 million), which, as at such date, provided

for total borrowings of $362.0 million (December 31, 2021 - $385.0 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, 2022, the Company had public bonds outstanding which totaled $380.0 million (December 31, 2021-

$449.3 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, 2022, 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	239.2	72.9	47.9	23.0	16.1	13.8	65.5
Secured debt - repayments on maturity	367.0	—	169.3	—	197.7	—	—
Bond repayments	380.0	—	200.0	180.0	—	—	—
Total borrowings	986.2	72.9	417.2	203.0	213.8	13.8	65.5

The Company is currently in compliance with all covenant requirements of its revolving credit facilities, term loans and bonds.

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, 2022, the

Company's pledged accounts consisted of $34.5 million in Cash and cash equivalents ($19.2 million - December 31, 2021),

$9.0 million in Financial assets (current and non-current) ($1.1 million - December 31, 2021), and $nil in Accounts and other

receivable, net (current and non-current) ($3.9 million - December 31, 2021). As at December 31, 2022, the Company has obtained

guarantee arrangements with certain financial institutions which in the event of default provide for $8.8 million of guarantee

coverage ($8.6 million - December 31, 2021). As at December 31, 2022, the Company was in compliance with all covenant

requirements of its revolving credit facilities, term loans and bonds.

The Company's minimum liquidity requirements under its financial covenants 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%. The Company's ability to make cash distributions are, for the time being, not permitted in accordance with the terms of its

$180.0 million senior unsecured bond. As at December 31, 2022, 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.
	2022	2021
	$	$
Interest paid	65,505	59,047

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, 2022 and 2021 are

as follows:

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.
	2022	2021
	$	$
Accounts and other receivable, net	3,889	(3,889)
Accounts payable and other	(392)	28
Due from (to) related parties	6,676	75,106
Due from (to) subsidiaries	148,839	89,381
Changes in non-cash working capital, net	159,012	160,626

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), credit risk and climate 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, 2022, 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 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.

The following are the remaining contractual maturities of financial liabilities at the reporting date:


		Contractual cash flows
December 31, 2022	Carrying amount	Total	1 Year	2 Years	3 Years	4 Years	5 Years	Thereafter
Revolving credit facility(1)	244,201	274,129	65,749	208,380	—	—	—	—
Term loan(1)	362,026	436,657	41,447	40,298	39,149	223,366	24,223	68,174
Public bonds(2)	180,000	231,300	17,100	17,100	197,100		—	—
Green Bond(1)	200,000	242,775	21,387	221,388	—	—	—	—
Accrued Liabilities	14,015	14,015	14,015	—	—	—	—	—
Due to subsidiaries	48,696	48,696	48,696	—	—	—	—	—
Due to related parties	4,269	4,269	4,269	—	—	—	—	—
12.5% Unsecured PIK notes(3)	79,594	79,594	—	—	—	79,594	—	—
Foreign currency forward contracts(4)	36,000	36,000	36,000	—	—	—	—	—
Total	1,168,801	1,367,435	248,663	487,166	236,249	302,960	24,223	68,174

(1)Contractual cash flows are inclusive of projected interest payments based on the LIBOR curve at December 31, 2022. See Note 9 for additional

information.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

(2)In August 2022, on maturity, the Company redeemed the remaining $68.8 million of bonds on its outstanding 7.125% senior unsecured bonds

listed on the Oslo Stock Exchange. The bonds were repaid at 101% of par value as per the amended loan agreement.

(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 or previously 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.

i.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 may use 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, 2022, the Company is not part of any interest rate swaps, as

the previously entered interest rate swaps have all been terminated.

As announced by the Financial Conduct Authority (FCA) in early 2022, the panel bank submissions for US dollar LIBOR will cease

in mid-2023. 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 SOFR at an agreed point in time. As at December 31, 2022, the Company has not finished the

process of implementing appropriate fallback provisions for all LIBOR indexed exposures. It is assumed that the result of the

negotiations with external banks and the implementation of SOFR will not have material impacts on the Company’s future financial

results

As at December 31, 2022, the Company had $671.8 million of outstanding LIBOR-referenced borrowings summarized as follows:


	Principal	Weighted-average term	Transition Progress
	$	(years)
Revolving Credit Facilities	244,201	1.39	Expected to amend fallback clauses prior to cessation of publication of LIBOR.
Term Loans	227,560	3.36
Public Bonds	200,000	1.80
Total	671,761	6.56

As at December 31, 2022, the Company had outstanding floating-rate debt balance of $0.7 billion (December 31, 2021 -

$0.8 billion) and an outstanding notional balance of $nil of interest rate swaps (December 31, 2021 - $100 million). A 100 basis point

decrease in the Company's interest rates is expected to increase future cash flows by $6.7 million (December 31, 2021 -

$8.0 million).

The Company is exposed to credit loss in the event of non-performance by the counterparties, all of which are financial institutions,

to its foreign currency forward contracts and its previously held interest rate swap agreements. In order to minimize counterparty

risk, to the extent possible and practical, foreign currency forward contracts and 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.

ii.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

expenses and a portion of capital upgrade projects in foreign currencies. Therefore, there is a risk that currency fluctuations will

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)

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, 2022, 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.

e.Climate risk

The Company climate-related risks stem mostly from the transition to a decarbonised energy system, in the form of changing

market conditions, shifting political and regulatory frameworks, and stigmatisation of the industry, which may increase the cost of

financial capital, and make it more difficult to attract and retain talent. Increased pricing of emissions will increase the Company and

its clients' costs, and the Company is monitoring proposed changes to emissions and carbon costs closely. The Company also

faces some risks arising from the physical and political impacts of climate change. Severe weather events and geopolitical instability

resulting from climate change may disrupt the Company's crewing schedules and supply chains and increase the costs of inputs to

our business activities.

The Company supports the core objectives of the Paris Agreement on Climate Change and the global goal to achieve climate

neutrality by 2050. Meeting this ambition within the infrastructure of offshore energy will require individual players to dramatically

reduce their emissions from current activities and industry-wide action to develop a new climate-neutral model. The International

Maritime Organization (IMO) has set a target to reduce the carbon intensity of international shipping by 40% by 2030, compared to

a calculated 2008 baseline; the Company has set a reduction pathway in line with such endeavors.

The Company expects reasonably steady operational conditions in the near to medium-term with more transformative changes to

the energy sector in the long-term. To respond to this market risk, the Company is investigating new commercial models aligned

with the energy transition.

12.Gain (Loss) on Modification of Financial Liabilities, Net

The table below summarizes the Company's gain (loss) on modification of financial liabilities, net for the year ended December 31,

2022 and 2021:


	Year ended December 31,
	2022	2021
	$	$
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

In February 2023, the Company entered into an agreement with TotalEnergies to utilize the Samba Spirit on a 22 month firm time-

charter contract with extension options for an additional two or four months.

In February 2023, the Company entered an agreement with Knutsen to in-charter the Ingrid Knutsen for 10 months from March 1,

2023.

In February 2023, sole member, Altera Infrastructure Holdings L.L.C., appointed the Audit Committee of the General Partner to

serve as the Company's Audit Committee and to undertake all related duties.

ALTERA SHUTTLE TANKERS L.L.C.

NOTES TO THE SEPARATE FINANCIAL STATEMENTS

(all tabular amounts stated in thousands of U.S. dollars)