EMGS
ANNUAL
REPORT
2023
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3
EMGS technology
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Board of Directors
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Board of Directors’ Report
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Responsibility Statement
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Report on Corporate Governance
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Report on Sustainability and CSR
32
2023 Transparency Act Statement
34
Determination of Salary Statement
37
Financial Statements EMGS Group
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Financial Statements EMGS ASA
102
Auditor’s Report for 2023
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EMGS technology
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We deploy two methods of electromagnetic (EM) technology when conducting
offshore
surveys:
controlled-source
electromagnetic
(CSEM)
surveying
and
magnetotelluric (MT) surveying. Both methods use electromagnetic signals to map
the subsurface. EMGS then receives the signals with acquisition hardware, and
further processes and interprets this information with proprietary software. We seek
to continually improve our signalling, acquisition, processing and interpretation
hardware and software in order to further enhance the value of our technology to
our clients.
Our clients see significant benefits in using electromagnetic surveys in addition to
seismic surveys, which are based on acoustic wave technology. By combining these
datasets, the accuracy and efficiency of oil and gas exploration can be significantly
improved.
CSEM (Controlled-Source Electromagnetic)
When performing a CSEM survey, a powerful horizontal electric dipole source is towed above the seafloor while a series
of receivers are placed on the seabed.
The dipole source transmits a low-frequency electromagnetic signal into the subsurface underneath the seafloor. The
resistivity of the formations under the seafloor define the way in which the electromagnetic energy transmitted by the
dipole propagates through the subsurface. High resistivity is an indicator of a possible hydrocarbon-filled reservoir.
Multi-component receivers that have been placed on the seabed for the survey measure the electromagnetic energy
that has propagated through the subsurface and the sea. The information from these receivers is processed and
inverted to produce a 3D resistivity image of the survey area. EMGS typically deploys grids of receivers in order to
acquire full-azimuth surveys. This type of survey provides optimal imaging of the subsurface.
CSEM data is a valuable supplement to information on structure and deposition of sediments provided by seismic
(acoustic wave) surveys.
In addition, CSEM data can provide information on shallow subsurface resistivity which is important in marine mineral
exploration and could also prove to be valuable in offshore wind turbine and cable placement and a range of other
geotechnical applications.
EMGS has developed a workflow that allows companies to easily integrate CSEM information with seismic data and
embed the integrated interpretation into their prospect evaluation work. This workflow, the EMGS’ Exploration
Solution, includes a wide range of analyses including; resistivity attribute analysis (similar to working with seismic
attributes), anomaly identification and delineation, anomaly significance tests, sensitivity assessment for depth
intervals of interest, correlation of anomalies to seismic observations such as conformance to structure, seismic DHI
and seismic indicators of lithological resistors. The resulting integrated interpretation is used to establish the likelihood
of a prospect being hydrocarbon charged and the size/area of a possible hydrocarbon accumulation.
Extensions to the workflow are available that address subsurface questions specific to field appraisal, such as estimating
pay distribution and interpreting the hydrocarbon-water contact, both of which can further refine a company’s
assessment of the prospect(s) and therefore improve the understanding of the survey area prior to taking further steps
in the exploration process.
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The EMGS’ Exploration Solution workflow transforms
CSEM data into information for improved exploration
decision-making
MT (Magnetotelluric)
Similar to CSEM surveying, the MT technique generates insight into the subsurface by imaging subsurface resistivity.
Marine MT surveys map subsurface resistivity variations by measuring naturally occurring electromagnetic signals on
the seabed. These signals are generated by the interactions of solar wind with the Earth’s magnetic field, which, when
strong, are known as geomagnetic storms. The MT signals are of very low frequency, which offers excellent depth
penetration. The unique design and sensitivity of the EMGS seabed receivers enable EMGS to efficiently acquire high-
quality MT data as part of a CSEM survey when the controlled-source is inactive.
The low-frequency, deep-sensing nature of MT surveying makes the technique valuable for imaging and interpreting
regional geology. MT surveys have been found most useful in salt and basalt settings where the flanks and/or the base
are poorly defined. MT measurements, therefore, form a useful complement to seismic techniques, particularly in
settings where high-impedance volcanic rocks or salt make the imaging and interpretation of seismic challenging.
Application of EM technology
The services offered by EMGS are used in all stages of the offshore exploration and development cycle. Applications
of EMGS’ technology include evaluating regional prospectivity, ranking identified prospects and appraisal of
discoveries.
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Figure 1: CSEM acquisition equipment
Regional Prospectivity
At the early stages of the exploration and production process, oil and gas companies use EM services to evaluate
whether an offshore acreage is viable for commercial production of hydrocarbons. EM surveys may be conducted
before licensing decisions are made in order to better understand the acreage value, as well as prioritization of potential
leads and prospects that may have been mapped with seismic. EM may also be used to de-risk new and unproven plays
and generate new leads and prospects. Adopting EM early in the exploration cycle can help oil and gas companies focus
their investments on the most valuable acreage.
Prospect Ranking and Portfolio Polarisation
When a prospect is identified from seismic information, EM surveys can help operators reduce uncertainties in the
probability of success and expected hydrocarbon volume, resulting in a more reliable economic evaluation of the
prospect. Using EM to rank prospects reduces the risk of drilling dry wells, thereby increasing the economic success of
exploration projects. Used on a portfolio of existing prospects EM can polarise the prospect portfolio and highlight the
prospects with the largest volume potential and the highest chance of success. Through better targeting of exploration
drilling activity, the use of EM surveys can also help to diminish the overall environmental impact of an exploration
project.
Field Appraisal
Once a discovery is made, EM surveys can be used to ascertain a field’s commercial viability and aid in development
planning by improving reservoir delineation (i.e. the size and shape of the reservoir). EM can also assist in the optimal
placement of subsequent development wells and reduce the number of appraisal wells that would typically be required
for field delineation and reservoir characterisation, can result in a positive impact on a project’s financial outcome and
reducing its environmental footprint.
EM source
towed
above seabed
Integrated interpretation
of seismic and EM
improves exploration
performance by reducing
uncertainties
EM receivers
dropped on the
seabed in a grid
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Potential New Application Areas
EMGS’ core technology, originally developed for the oil and gas industry, can be adapted to new application areas such
as marine mineral exploration, gas hydrate mapping, geotechnical and shallow hazard investigations, and the location
of subsea cables. It is the company’s goal to develop these new business fields building on its world-renowned expertise
in marine EM technology.
Marine minerals
The electrification of society is an important part of the energy transition. In its “net zero 2050” scenario, Net Zero by
2050 A Roadmap for the Global Energy Sector (2021), the International Energy Association (IEA) forecasts a significant
increase in the demand for minerals that are key components in the electrification supply chain, such as lithium, copper,
and cobalt. Currently, these minerals are mined onshore, but it is expected that mineral deposits on or beneath the
seafloor, called “marine minerals,” are likely to play an important role in meeting this demand in the coming years and
decades.
The marine mineral industry is in its infancy. The International Seabed Authority (ISA) has granted several concessions
in international waters, and Norway is planning a concession round as early as 2024. There are already several
Norwegian and international companies evaluating a possible participation in the upcoming concession round in
Norway.
There are three main categories of marine minerals: nodules, crusts, and Seafloor Massive Sulfides (SMS). Most of the
marine mineral deposits discovered to date are at the seabed in ultra-deep waters. Within the Norwegian Exclusive
Economic Zone (EEZ) both crusts and SMSs have been discovered in the area of the mid-Atlantic spreading ridge.
SMS deposits are created by volcanic activity. Marine life thrives while the system is volcanically active. Only SMS
deposits that have ceased to be volcanically active (i.e., extinct) are considered for commercial exploitation. The mineral
content of these extinct SMS deposits vary in both mineral content and volume, and only a few of the many extinct SMS
deposits are expected to have valuable metallic minerals in large enough quantities to be of commercial interest for
offshore mineral excavation. Therefore, geophysical techniques are important in order to cost-effectively search for
and identify potential SMS prospects for sampling, drilling and eventual excavation.
Electromagnetic systems are expected to play a significant role in the exploration and appraisal of marine minerals, and
can be an important part of the geophysical toolbox. Towards this end, but also for other applications, EMGS has
developed a deep-towed EM streamer solution for efficient mapping of seabed geology at, and near, the seabed. A
prototype of the system was used in ATLAB survey in 2022. It will be possible to use the towed system on a stand-alone
basis or together with EM seabed nodes, Autonomous Underwater Vehicles (AUV), as well as with acoustic surveying
methods such as high resolution seismic and multi-beam echosounder bathymetry.
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Development of EM technology
Development of marine EM equipment
EMGS is soon to launch a new source system, which will be its sixth-generation source system. The new source
technology has been developed inhouse, based on years of experience with the marine controlled source
electromagnetic (CSEM) method and deep-towed CSEM source systems. A key element of the new source system is its
scalable and modular design enabling EMGS to quickly produce bespoke source systems for specific applications. The
modular design of the new source allows for simple replacement of entire modules offshore, improving reliability and
decreasing the likelihood of extended periods of technical downtime during operations.
The first new 6
th
generation source system, Tx-D 5006, will replace the Conventional Source as a backup for the Deep
Blue (Tx-D 10005) and will be capable of transmitting up to 5000 ampere.
Figure: IGBT A Module
The Tx-D 5006 source system is expected to be ready for sea trials during Q3 2024.
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Board of Directors
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Frederik W. Mohn, Chairman of the Board
Frederik W. Mohn is the sole owner and managing director of the Company’s second largest
shareholder Perestroika, a Norwegian investment company with investments in oil and gas,
shipping, infrastructure, real estate development and financial services. Frederik was
previously Chairman of the Board of Songa Offshore SE and currently is a member of the
Board of Directors of Transocean Ltd.
Beatriz Malo de Molina, Board member
Beatriz Malo de Molina is a Managing Director at Alvarez & Marsal, a global professional
services firm. Beatriz has served as Senior Vice President and Head of M&A at Orkla ASA and
has previously held positions at Kistefos Private Equity and McKinsey & Co in Oslo, after a ten
year career in the Investment Banking Division of Goldman, Sachs & Co. in London, Frankfurt,
New York City and Mexico City. Beatriz began her career in 1994 within Ernst & Young’s
financial advisory department in New York City.
Ms. Malo de Molina has board experience from publicly listed and privately held companies
both in Norway and internationally, including chair positions.
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Mimi Berdal, Board member
Mimi Berdal runs an independent corporate counseling and investment business. She holds
a Cand. Jur. (law) degree from the University of Oslo.
Mimi Berdal is also a member of the Board of Directors of the listed companies Goodtech ASA
(Chairman), Norsk Titanium AS and Thor Medical ASA, in addition to Freyr Battery SA (listed
NYSE).
Jørgen Westad, Board member
Jørgen Westad is an Executive Director and Secretary of Siem Industries S.A. He is also a
Director of Deusa GmbH. Prior to joining the Siem Group in 2015, he was CFO for a privately
held shipping company as well as working as a commercial and investment banker at Hambros
Bank Ltd and Bankers Trust Company. He holds a B.Eng in Naval Architecture and Shipbuilding
and an MSc in Management Studies. Jørgen is a Norwegian citizen, resident in Luxembourg.
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Board of Directors’ Report
.
2023 proved to be a difficult year for EMGS, with little activity. The Atlantic Guardian
remained warm-stacked for the entire year. As a result of the low activity level the
Company’s focus was on developing backlog and keeping other cash outlays to a
minimum, with the exception of required capital expenditures.
During the year, EMGS secured its first contract within the renewable energy
infrastructure industry. EMGS will acquire Magneto Telluric (MT) data to be used in
the design phase of an infrastructure project in Southeast Asia.
EMGS also developed new modular source technology which will be used in a new
generation (6
th
generation) of deep towed electromagnetic sources. The first system,
which is currently in production, will be deployed on the Atlantic Guardian and used
as a backup for the Deep Blue source system.
About EMGS
Vision, Values and Strategy
Electromagnetic Geoservices ASA (“EMGS” or the “Company”), with its subsidiaries (together, the “Group”), is the
global leader in electromagnetic (“EM”) surveying technology in the offshore oil and gas exploration industry.
EMGS’ vision is
to make EM an integral part of the E&P workflow and make EM as fully adopted as seismic.
By
providing EM data integrated with other subsurface measurement, we enable our customers to reduce uncertainty and
therefore increase success in their exploration and development programmes.
EMGS’ core values are: Integrity, Commitment, Innovation and Quality. These values form an integral part of our
organisation and operations and are included as a topic in the Company’s annual employee appraisal process. EMGS is
constantly working to deliver the best quality product to its customers. The Company’s technology is developed on an
ongoing basis to improve quality and efficiency, as well as to broaden the scope of application and addressable markets.
EMGS also places a high priority on interacting with its customers, to assist in ensuring that the full value of the
Company’s service is captured by our customers.
The integration of EM methods into exploration workflows provides oil and gas companies with an improved de-risking
and appraisal tool when compared to using seismic exploration techniques alone. The use of EM data is complementary
to the use of seismic data, as it provides oil companies with more information about the subsurface. Integrating the use
of EM data into the exploration workflow reduces exploration risk through a better understanding of a reservoir’s
charge, seal and volume estimates. This data can also serve to decrease the environmental impact of a particular
project, since better targeting of drilling activities can serve to reduce the total number of wells drilled into the seabed.
EMGS remains a global leader in the planning, acquisition, processing, modelling, interpretation and integration of EM
data. The Company has extensive experience, well-established proprietary routines and leading-edge processing,
modelling and inversion software.
Over the past two decades EMGS has conducted over 900 surveys across most major mature and frontier basins in the
world in water depths ranging from 20 to 3,600 metres for more than 150 customers.
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Part of EMGS’ strategy is to undertake a mix of proprietary and multi-client projects with a flexible and scalable
operating model. This is enabled by maintaining an asset-light operating model, including chartering vessels from third-
party vessel owning companies. As of 31 December 2023, EMGS had one vessel on charter, the
Atlantic Guardian,
owned by the North Sea Shipping Group. As of 31 December 2023, EMGS had two twelve-month option periods
remaining.
In a typical year, the Group undertakes a mix of proprietary contract work and multi-client projects. International Oil
Companies (IOCs) increasingly prefer the multi-client business model, whereby projects are funded in a consortium or
with the expectation of future late sales National Oil Companies (NOCs) typically prefer to conduct proprietary work
arrangements.
EMGS’ strong focus on cost optimisation and control continues. Through cost discipline and efficient operations, the
product offered to the market by the Company remains at the cutting edge of, and market leader within, EM
technology.
EMGS was listed on the Oslo Stock Exchange in March 2007.
EM technology
The EM technology used by EMGS in its EM survey projects can be divided into two distinct methods: three-dimensional
full azimuth controlled-source EM (3D CSEM) surveying and magnetotelluric (MT) surveying. For more information on
the different methods, please see the separate section in the annual report,
EMGS Technology
.
Important events in 2023
Multi-client investments
The Company’s multi-client business continues to be an important part of the overall business, both in terms of
revenues and in terms of marketing value as the Company can more freely commercialize 3D CSEM data with existing
and new customers, resulting in longer potential revenue streams through “late sales”. In 2023, revenues from multi-
client sales amounted to 90% of total revenues, up from 48% in 2022.
Sales and customers
The Group’s revenues decreased 77% from USD 35.0 million in 2022 to USD 8.0 million in 2023. Sales were dominated
by multi-client late sales.
The EMGS sales and business development organisation is headquartered in Oslo, and is represented globally through
a network of business partners serving key local markets. The organisation consists of commercial sales, technical
advisors and exploration advisors.
Events after the balance sheet date
Fully prefunded multi-client survey in Brazil
In January 2024, EMGS secured a multi-client contract with Petrobras, with an approximate contract value of USD 11.7
million.
Fully prefunded multi-client survey in Norway
In February 2024, EMGS announced that the Company had entered into an agreement for a fully prefunded multi-client
survey in the North Sea with a contract value of USD 2.0 million.
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Demand for EM services
The Company has two main sources of revenue: proprietary contract sales and multi-client sales. In addition, the
Company receives some revenue related to consultancy, processing services and software sales. These revenues are
presented as contract sales. For more information on the different revenue sources, please see the notes to the financial
statements.
The overall demand for EMGS’ services is dependent, in large part, on offshore oil and gas E&P budgets.
Fleet status and utilisation
As per the end of 2023, the Company chartered one vessel, the Atlantic Guardian.
At the end of the reporting period, the Atlantic Guardian has a firm charter agreement until 20 October 2024, with an
option to the Company to extend the charter period.
The Atlantic Guardian was warm-stacked in Norway for the entire year during 2023.
In total, EMGS recorded a total of 12.0 vessel months in 2023, an average of 3.0 per quarter, compared with 11.9 vessel
months in 2022 and an average of 3.0 per quarter in 2022. The Company had a vessel utilisation of 0% in 2023, down
from 22% in 2022.
EMGS’ ability to optimise the performance of its vessel through maximising commercial utilisation and minimising
unpaid activities are key factors for the Group’s longer-term operating performance. Technical downtime, steaming
time between surveys and unpaid standby time all negatively affect the Group’s operating results.
Seasonality
Adverse weather conditions, including ice and winter conditions offshore, can result in lost time when vessels are forced
to remain in dry dock, relocate and/or reduce activity. In addition, the Group’s operational results fluctuate from
quarter to quarter because of oil and gas companies’ spending patterns and/or as related to licensing rounds in Norway
and abroad.
Currency fluctuations
Currency transaction exposure occurs to some extent during the ordinary course of business and when the relevant
exchange rates change between the date of a transaction and the date of the final payment for the transaction. The
Group records such gains or losses in the financial income and expenses line item of its consolidated income statement.
Financial statements
Going concern
The Group has prepared its financial statements under the going concern assumption, and the Board confirms in
accordance with Section 3-3a of the Norwegian Accounting Act that the going concern assumption is applicable. The
Group’s reported results, its business strategy, its current budgets and financing, as well as its long-term strategic
forecasts provide the basis for the going concern assumption. See also “Liquidity risk” below for more information about
the going concern assumption.
As of 31 December 2023, the carrying value of the Group’s equity was USD 0.6 million, down from USD 8.7 million at
the end of 2022. The free cash balance at the end of 2023 was USD 10.3 million. Subsequent to the end of the 2023
financial year, EMGS secured two acquisition contracts with a combined total contract value of over USD 13.7 million.
EMGS is working towards improving equity through profitable operations in 2024, however, this is dependent upon
securing additional backlog in H2 2024.
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The Company’s equity amounted to NOK 23.2 million as of 31 December 2023, up from NOK 5.5 million at the end of
2022.
None of the Company’s debt is past due and the Company does not expect to breach the financial covenants of the
convertible bond loan in the next 12 months.
Results of operations
The year ending 31 December 2023 is compared in the section below with the year ending 31 December 2022.
The Group prepares its accounts in accordance with International Financial Reporting Standards (“IFRS”), as adopted
by the European Union. References to Notes refer to Notes to the Consolidated Financial Statements.
Revenues and operating expenses
In 2023, the Group recorded revenues of USD 8.0 million, down 77% from USD 35.0 million in 2022. Contract sales and
other revenue ended at USD 0.8 million, while multi-client sales totalled USD 7.2 million all of which was late sales. In
2022, USD 18.3 million was recorded as contract sales, while multi-client sales totalled USD 16.7 million. This means
that sales from the multi-client projects accounted for 90% of the revenues in 2023, compared with 48% in 2022.
The decrease in revenues from 2022 to 2023 is mainly explained by a lack of demand for services.
Charter hire, fuel and crew expenses ended at USD 1.2 million, down 71% from USD 4.2 million reported in 2022. The
Group capitalised USD 1.2 million in multi-client expenses in 2022, while no multi-client expenses were capitalised in
2023.
Employee expenses amounted to USD 3.0 million in 2023, down 23% from the USD 3.9 million as reported in 2022. A
more detailed overview of the Group’s employee expenses can be found in Note 8. The number of employees decreased
from 20 at the beginning of 2023 to 19 at the end of 2023.
Other operating expenses amounted to USD 2.8 million in 2023, compared with USD 3.0 million in 2022. A more detailed
overview of the Group’s other operating expenses can be found in Note 9.
Depreciation and amortisation
Other depreciation and amortisation totalled USD 3.7 million in 2023, down from USD 4.2 million in 2022.
Multi-client amortisation amounted to USD 0.6 million in 2023, down from USD 2.5 million in 2022. The Company uses
straight-line amortisation for its completed multi-client projects, assigned over the useful lifetime of four years. The
amortisation is then distributed evenly, independently of sales during the period. As a result of implementing IFRS 15
as of 1 January 2018 the Group started to capitalise multi-client projects with only one customer that were previously
expensed as incurred (converted contracts). For these, the full amortisation of the book value is now recorded at the
point in time when the revenues are recognised at delivery to the customer.
No impairments of long-term assets were made in 2023 or in 2022.
In 2023, depreciation of right of use assets amounted to USD 2.8 million, down from USD 4.0 million in 2022.
Financial items and result for the year before and after taxes
Interest expenses ended at USD 3.1 million in 2023, an increase from USD 2.5 million in 2022. EMGS recorded a gain on
net foreign currency of USD 58 thousand in 2023 compared with a loss of USD 7 thousand in 2022.
The Group recorded a gain of USD 0.7 million on the repurchase of bonds with a nominal value of USD 5.0 million in
2022. The bonds were repurchased at 13.5 per cent discount to par. No bonds were repurchased in 2023.
Net financial items ended at negative USD 2.1 million in 2023, an increase from negative USD 2.0 million in 2022.
For 2023, EMGS recorded a loss before income taxes of USD 8.2 million, compared with a profit before income taxes of
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USD 11.1 million in 2022.
Income tax expenses of negative USD 21 thousand were recorded in 2023, compared with negative USD 46 thousand
in 2022.
EMGS reported a net loss of USD 8.2 million for 2023, down from a net profit of USD 11.2 million for 2022.
Cash flow and balance sheet
Cash flow from operating, investing and financing activities
For 2023, net cash flow from operating activities was positive USD 5.0 million, compared with USD 16.6 million in 2022.
EMGS applied USD 0.9 million to investing activities in 2023. The investments consist of USD 0.9 million in property,
plant and equipment. In 2022, cash applied in investing activities amounted to USD 2.0 million. The investments
consisted of USD 317 thousand in property, plant and equipment, USD 1.6 million in multi-client investments and USD
33 thousand in purchase of intangible rights.
Cash flow from financial activities ended at negative USD 5.2 million in 2023. The cash flow from financial activities in
2023 includes financial lease liabilities of USD 2.6 million, interest lease liabilities USD 0.3 million and USD 2.3 million in
interest payments. In 2022, cash flow from financial activities ended at negative USD 13.0 million. The cash flow from
financial activities in 2022 includes financial lease liabilities of USD 6.2 million, convertible bond repurchase of USD 4.3
million, interest lease liabilities USD 0.5 million and USD 2.1 million in interest payments.
In summary, cash decreased by USD 1.2 million in 2023. As of 31 December 2023, cash and cash equivalents totalled
USD 10.3 million.
Financial position
EMGS total assets amounted to USD 27.8 million as of 31 December 2023, down from USD 42.7 million as of 31
December 2022.
The carrying value of the Group’s multi-client library was USD 1.0 million at the end of 2023, a decrease of USD 0.5
million since the end of 2022.
Total borrowings were USD 21.9 million at the end of 2023, down from USD 24.9 million at the end of 2022.
Liquidity requirements and financing facilities
The Group’s need for liquidity fluctuates from quarter to quarter depending on revenues, capital expenditures, vessel
operations and cash balance.
The Company’s convertible bond contains a financial covenant requiring free cash and cash equivalents of at least USD
2.5 million. As of 31 December 2023, the free cash and cash equivalents totalled USD 10.3 million. EMGS’ management
follows the Company’s liquidity risk closely, including weekly updates of the Group’s sales forecast and vessel schedule,
in addition to a corresponding update of the cost and free cash forecast.
As per 31 December 2023, EMGS has one listed convertible bond with a carrying value of USD 19.6 million, non-current
lease liabilities of USD 0.1 million, and current lease liabilities of USD 2.2 million.
Research and development
To maintain its strong position within the EM market, EMGS has invested significant time and resources in research and
development (“R&D”) over several years. The industry in which EMGS operates is highly technical and the requirements
for the acquisition and processing of EM data evolve continuously.
As a result of the industry downturn and the decision to move to a low-cost setup in 2020, EMGS found it necessary to
significantly reduce its investments in R&D. The reduction is likely to have limited revenue impact in the short term, as
the Company maintains its strong technological position.
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EMGS did not incur R&D related costs in 2023 or in 2022.
The Group did not capitalise any employee costs in 2023 or in 2022 related to R&D.
Allocation of Net Income
The Board of Directors proposes that the net income of EMGS, the parent company, shall be attributed to
Other equity
NOK 17.7 million
Net income/(loss) allocated
NOK 17.7 million
Distributable equity as of 31 December 2023 was NOK 0.
Financial risk
The Group’s principal financial liabilities are trade and other payables and loans and borrowings. The Group has various
financial assets such as trade receivables, cash and short-term deposit which arise directly from its operations.
The Group is exposed to market risk, credit risk and liquidity risk. The Group’s management and Board review and agree
policies for managing each of these risks which are summarised below. For further details see Note 3 to the financial
statements.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in market prices. Market prices comprise two types of risk for the Group: interest rate risk and currency risk. Financial
instruments affected by market risk include bonds, loans, borrowings, and Available For Sale (AFS) investments. Please
see sensitivity analysis in Note 3.
i) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group has exposure to interest rate risk, though this is primarily only related to
the Group’s long-term convertible bond of USD 19.5 million with floating interest rate (SOFR + 6.5%).
ii) Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates. The Group operates internationally and therefore has exposure to foreign
exchange risk arising from transactions executed in other currencies than the functional currency of each company.
EMGS ASA has USD as functional currency, so the foreign currency risk is primarily with respect to NOK in EMGS ASA.
For 2023, approximately 95% of the Group’s sales revenues were denominated in USD, whilst approximately 32% of
the costs were denominated in USD.
Foreign exchange risk arises from future commercial transactions, recognised as assets and liabilities. The Group’s
exposure to foreign currency changes on equity and for all other currencies is not material.
Liquidity risk
Liquidity risk is the risk that the Company will not have sufficient liquidity to be able to meet its financial obligations.
EMGS’ sources of liquidity include cash balances, cash flow from operations, borrowings, existing and new bank facilities
and further debt and equity issues. It is the Company’s objective to balance these sources of liquidity.
The Company’s convertible bond contains a financial covenant requiring free cash and cash equivalents of at least USD
2.5 million. As of 31 December 2023, the free cash and cash equivalents totalled USD 10.3 million. EMGS’ management
follows the Company’s liquidity risk closely.
The financial liabilities with maturity less than one year will be settled through cash flow from operating activities in
2024. Based on current risk-weighted forecasts and information, management considers the liquidity throughout 2024
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sufficient to cover both the Group’s net current liabilities per 31 December 2023 and estimated cash needs in 2024.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables
and cash and cash equivalents, but also from banking in foreign jurisdictions). See Note 20 for the aging analysis of trade
receivables.
In 2021, the Company implemented a new Cash repatriation and risk management standard, which formalises and
streamlines certain mitigating measures undertaken by EMGS to reduce risk related to banking in foreign jurisdictions.
EMGS’ clients are major international, national and independent oil and gas companies, mostly with good credit
standings and histories.
Occasionally, a smaller oil and gas company may be on the client list. In these cases, due diligence is conducted in the
credit evaluation phase and management exercises caution in counterparty selection.
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures.
In addition, receivable balances are monitored on an ongoing basis.
Corporate governance
EMGS is committed to good corporate governance. EMGS’ corporate governance principles are based on equal
treatment of all shareholders, maintaining open and reliable lines of communication with shareholders and other
stakeholders, having a Board that is autonomous and independent of the executive management and ensuring a clear
division of responsibility between the Board and the executive management. The Board also includes two directors that
are independent of the largest shareholders of the company.
The Company produces a comprehensive annual statement on corporate governance as part of its annual report.
Electromagnetic Geoservices ASA holds a Directors and Officers Liability Insurance on behalf of the Board of Directors
and executive management. For further details, please see the section titled
Corporate Governance
in this annual
report. The information is also available on the Company’s homepage.
CSR, working environment, discrimination and external environment
EMGS has adopted a policy and a standard for sustainability and corporate social responsibility (“CSR”). The principles
in the policy cover areas related to labour rights, anti-corruption, environment and human rights.
All work in the Group related to sustainability and corporate social responsibility (together “the CSR work”) is based on
the CSR policy and the standard.
As the Company is a Norwegian public limited company listed on the Oslo Stock exchange, it complies with Section 3-
3c of the Norwegian Accounting Act in respect of corporate social responsibility.
The Company produces an annual statement on its CSR work, including information about the working environment in
the Group, equal opportunities and discrimination statement, the external environment and human rights. For further
details, please see the section titled Sustainability and Corporate Social Responsibility in this annual report. The
information is also available on the Company’s homepage.
Company outlook
The Atlantic Guardian was mobilised at the end of February for a series of projects in Norway and Brazil during the 2024
season. The first survey on the Norwegian Continental Shelf, was completed end March, and the vessel started the
transit to Brazil for the fully prefunded multi-client acquisition project for Petrobras in the Espirito Santos Basin offshore
Brazil. This project is expected to be acquired during the 2nd quarter of 2024.
17
The company is working on securing additional acquisition work for the vessel. The awards in the 2023 APA license
rounds in Norway included several licenses with EM work program obligations, and the Company expects that the
Atlantic Guardian will return to Norway and be active on the Norwegian Continental Shelf after the completion of the
project in Brazil.
EMGS is currently engaged in a number of discussions with customers, both in Norway and internationally, regarding
potential EM acquisition projects for 2024 and beyond. While uncertainty remains high for the second half of 2024,
EMGS is encouraged by the level of customer interest.
Oslo, 17 April 2024
Board of Directors and CEO of Electromagnetic Geoservices ASA
Sign.
18
Responsibility Statement
.
Today the Board of Directors and the Chief Executive Officer reviewed and approved the Board of Directors’ Report and
the consolidated and separated annual financial statements for Electromagnetic Geoservices ASA (“EMGS” or the
“Company”) for the year ended 31 December 2023.
EMGS’ consolidated financial statements have been prepared in accordance with IFRSs and IFRICs as adopted by the
EU and additional disclosure requirements in the Norwegian Accounting Act. The separate financial statements for the
Company have been prepared in accordance with Norwegian Accounting Act and Norwegian accounting standards. The
Board of Directors’ report is in accordance with the requirements in the Norwegian Accounting Act and Norwegian
accounting standard no 16.
To the best of our knowledge:
.
The consolidated and separate annual financial statements for 2023 have been prepared in accordance with
applicable financial reporting standards.
.
The consolidated and separate annual financial statements give a true and fair view of the assets, liabilities,
financial position and profit/(loss) as a whole as of 31 December 2023 for the Group and the Company.
.
The Board of Directors’ report for the Group and the Company includes a fair review of
-
The development and performance of the business and the position of the Group and the Company.
-
The principal risks and uncertainties the Group and the Company face.
Oslo, 17 April 2024
Board of Directors and CEO of Electromagnetic Geoservices ASA
Sign.
19
Report on Corporate Governance
.
EMGS is committed to good corporate governance practices which strengthen and
maintain confidence in the Company, thereby contributing to long-term value
creation for shareholders and other stakeholders. The objective of corporate
governance is to regulate the division of roles between shareholders, the Board and
the executive management more comprehensively than is required by legislation.
EMGS’ principles for corporate governance are based on the following elements:
•
All shareholders are treated equally
•
EMGS will provide open, reliable and relevant communication to shareholders, governmental bodies and the public
about the Company’s activities and its corporate governance commitment
•
EMGS’ Board is fully independent from the Company’s executive management
•
EMGS pays particular attention to ensuring that there are no conflicts of interest between the interests of its
shareholders, the members of its Board and its executive management
•
EMGS will ensure a clear division of responsibility between the Board and the executive management
1. Implementation and reporting on corporate governance
Implementation and reporting
The board of directors (the “Board”) of Electromagnetic Geoservices ASA (the “Company” or “EMGS”) is committed to
maintaining a high standard of corporate governance, in line with both Norwegian and international best practice
standards. In addition to maintaining a high standard of corporate governance, the Board and the executive
management of the Company carry out, on an annual basis, a comprehensive review and evaluation of its principles for
corporate governance and the implementation of these. This report (the “Report”) summarises the Company’s
corporate governance work and compliance with applicable requirements and fulfils the Company’s reporting
obligations under applicable law and other legal frameworks.
EMGS is a Norwegian-registered public limited liability company, with its shares listed on the Oslo Stock Exchange (
Oslo
Børs or “OSE”
).
The Norwegian Accounting Act Section 3-3b, which the Company is subject to, sets out certain corporate governance
related information which is to be disclosed and reported on through the issuance of an annual reporting document.
This Report meets the requirements provided by the Accounting Act. The Accounting Act is available on
www.lovdata.no.
Furthermore, pursuant to section 4.4 of the (non-harmonised)
Oslo Rule Book II – Issuer Rules
(the “OSE Continuing
Obligations”) issued by the Euronext Oslo Stock Exchange, the Company is obligated to publish an annual statement of
their practice related to their policy on corporate governance. In addition to setting out certain minimum requirements
for such reporting (equivalent to those under the Accounting Act), the OSE Continuing Obligations requires that the
Company reports on its compliance with the recommendations of the Norwegian Code of Practice for Corporate
Governance (the “Code”) published by the Norwegian Corporate Governance Board. Both the OSE Continuing
Obligations and the Code require that an explanation is provided where a company has chosen an alternative approach
to specific recommendations in the Code (i.e., a “comply or explain” basis).
EMGS complies with the current Code, issued on 14 October 2021. The Company provides a report on its principles for
20
corporate governance in its annual report and on its website,
www.emgs.com
. EMGS’ objective is to comply with all
sections of the Code, but the Company may in the future choose to deviate from principles in the Code if this is deemed
to be in the best interest of the Company, its shareholders and its other stakeholders.
The OSE continuing Obligations are available on https://www.euronext.com/en/regulation/euronext-regulated-
markets, and the Code is available on
www.nues.no
.
This Report sets out how the Code is accommodated through the financial year 2023.
Values and guidelines for business ethics and corporate social responsibility
EMGS has a set of clearly defined core values: Integrity, Commitment, Innovation and Quality. The values are expressed
in EMGS’ daily operations and management, including in our approach to corporate governance.
The Board recognises that confidence in EMGS as a company and in its business activities is essential for the Company’s
continuing competitiveness. Therefore, EMGS is committed to transparency and openness about its management
systems and procedures. This strengthens value creation, builds internal and external confidence and promotes an
ethical and sustainable approach to business.
The Board has, in close cooperation with the Company’s executive management, established a comprehensive
framework of guidance documents. The core element and top-tier in this framework are the Company’s policy
documents, which include the Company’s ethics policy, the corporate social responsibility policy (see also separate
report in the annual report) and the health, safety and environment policy. Other core guidance documents include the
Company’s Code of Conduct Standard and the EMGS Sustainability and Corporate Social Responsibility Standard. These
policies and standards are evaluated and updated on a regular basis. The Company has adopted a programme for
corporate social responsibility, including an anti-corruption compliance programme incorporating mandatory training
of all employees.
EMGS’ website provides more information about the Company’s business activities, policies and standards.
2. Business
EMGS is the market leader in controlled-source electromagnetic (CSEM) imaging. Pursuant to Section 3 of the
Company’s Articles of Association, the Company’s purpose is as follows:
“The Company's activity is to engage, by itself or through proprietary interests in other companies, in the prospecting
for hydrocarbon deposits in connection with the exploration, development and production of hydrocarbons.”
The Company has clear objectives and strategies for its business within the scope of the definition of the business
purpose in its Articles of Association.
The Board of Directors’ report in the Company’s annual report includes a description of the Company’s objectives and
principal strategies according to the business activities clause from the Articles of Association. The Articles are available
at the Company’s homepage, www.emgs.com.
3. Equity and dividends
Equity and share capital
As of 31 December 2023, the EMGS Group had a combined equity of USD 0.6 million, representing an equity ratio of
2.2%.
The Board’s assessment of the Company’s equity position is set out in the Board of Director’s Report.
The Company’s registered share capital is NOK 130,969,690 divided into 130,969,690 shares each having a par value
of NOK 1.
21
Dividends
The Company has at present no intention to pay dividends. The Board will establish a dividend policy when relevant.
The Company’s objective is to generate a long-term return for its shareholders through dividends and increases in the
share price that are, at least, in line with the return available on similar investment opportunities of comparable risk.
Authorisations to increase share capital and to acquire own shares
At the Annual General Meeting (AGM) held on 21 June 2023, the Board was authorised to increase the share capital of
the Company by up to NOK 26,193,968 (being 20% of the registered share capital of the Company) through one or more
share issues. Further details are set out in the resolution by the AGM that states, amongst others, that the authorisation
may be utilised in connection with potential transaction / M&A activity, and/or to finance general corporate purposes.
The Board was also given an authorisation to increase the share capital by up to NOK 3,929,090 to be utilised for fulfilling
the Company’s obligations towards holders of options, should such options be exercised. All options are based on the
Employee Option Programme.
The two authorisations are valid until the next AGM of the Company, but in no event beyond 30 June 2024. As of
31 December 2023, the Board had not used these authorisations.
4. Equal treatment of shareholders and transactions with close associates
Equal treatment
Equal treatment of shareholders is an important principle for corporate governance in EMGS. The Company has one
class of shares, and any purchases or sales of own shares are carried out over the stock exchange.
The Articles of Association do not impose any restrictions on voting rights. All shares have equal rights.
Pursuant to the Norwegian Public Limited Liability Companies Act, existing shareholders have pre-emption rights in
connection with share capital increases and issuance of financial instruments which grant the holder a right to have
new shares issued. However, this right can be waived from time-to-time by a qualified majority of the shareholders.
When proposing to the shareholders to resolve such a waiver, the Board shall explain the rationale for such a waiver.
Where a share capital increase is resolved by the Board in accordance with an authorisation by the general meeting of
the Company, the pre-emption right may only be set aside where this has been pre-approved by the shareholders as
part of the issuance of the authorisation. Where the Board resolves to carry out an increase in the share capital and
waive the pre-emption rights of the existing shareholders on the basis of such an authorisation granted to the Board,
an explanation will normally be publicly disclosed in a stock exchange announcement issued in connection with the
increase of the capital.
The Board of EMGS will waive the pre-emption of existing shareholders in connection with any share capital increases
to meet the Company’s obligations towards holders of options if and when such options are exercised.
Transactions with close associates
In the event of any material transaction between the Company and its shareholders, a shareholder’s parent Company,
members of the Board, members of the executive personnel or close associates of any such parties, the Board will, as
a general rule, arrange for a valuation by an independent third party.
EMGS has implemented procedures for the Board, the board committees and the executive personnel to ensure that
any conflicts of interest connected to agreements entered into by the Company are reported to the full Board.
5. Freely negotiable shares
The shares in EMGS are freely negotiable and the Articles of Association do not contain any restrictions on negotiability.
EMGS is listed on the Oslo Stock Exchange, and the Company works actively to attract the interest of new shareholders.
22
6. General meetings
General Meetings
General meetings are the Company’s ultimate corporate body. EMGS encourages all shareholders to participate in
general meetings. The Board endeavours to organise the general meetings to ensure that as many shareholders as
possible may exercise their rights by participating, and that such meetings are an effective forum for the views of
shareholders and the Board.
Preparation for the Annual General Meeting (AGM)
The AGM is normally held in June each year, and in any case no later than 30 June, which is the latest date permitted
under applicable law. The 2022 AGM was held on 21 June 2023. The 2023 AGM is scheduled to be held on 19 June 2024.
The notices calling the general meetings are made available on the Company’s website and sent to shareholders in the
form requested in their VPS account, in each event no later than three weeks prior to the meeting.
According to article 8 of the Company’s registered Articles of Association and provided that the shareholders may
participate in general meetings electronically, ref. article 9 in the articles, the AGM may, with the majority required to
amend the Articles of Association and with effect until the next AGM, decide that the notices calling Extraordinary
General Meetings shall be sent no later than two weeks before the date of the meeting.
Shareholders who wish to take part in a general meeting must give notice to the Company by the date stated in the
notice of meeting, which date must be at least two business days before the general meeting.
Each share carries one vote in the Company's general meetings.
Article 10 of the Articles of Association stipulates that the supporting documents dealing with matters to be considered
by the AGM can be made available on the Company’s website rather than being sent to shareholders directly. However,
shareholders are still entitled to receive the documents by post upon request.
The calling notice to the general meeting along with a form for appointing a proxy and sufficiently detailed supporting
information, including proposals for resolutions and comments on matters where no resolution is proposed, are
disclosed on the Company’s website. Resolutions and supporting information are sufficiently detailed and
comprehensive to enable shareholders to form a view on matters on the agenda to be considered in the meeting. The
Company will make appropriate arrangements for the general meeting to vote separately on each candidate nominated
for the Company’s corporate bodies.
As a routine, the financial calendar for the coming year is published no later than 31 December as a stock exchange
announcement, and it is also made available on the Company’s website.
Participation in general meetings
Shareholders who do not attend the general meeting may be represented and exercise their voting rights by way of a
proxy. A person will be nominated to be available to vote as a proxy on behalf of shareholders. Proxy forms will enable
the proxy holder to cast votes for each item on the agenda separately. The final deadline for shareholders to give notice
of their intention to attend the meeting or to vote by proxy will be set in the notice for the meeting. According to article
9 of the Articles of Association, the Board may decide that the shareholders can participate in the general meeting by
mean of an electronic aid, including that they may exercise their rights as shareholders electronically.
Agenda and conduct of the AGM
The Board decides the agenda for the AGM. The main agenda items are determined by the requirements of the Public
Limited Liability Companies Act.
The Code stipulates that the Board should have arrangements to ensure an independent Chairman for the general
meetings. The Company has evaluated the recommendation but decided that it was in the interest of the Company and
the shareholders that the general meeting held in 2023 was chaired by the Chairman of the Board.
23
The AGM minutes are published by the issuance of a stock exchange announcement and are also made available on the
Company’s homepage.
7. Nomination Committee
EMGS has a Nomination Committee elected by the AGM. According to article 11 in the Company’s Articles of
Association, the committee shall consist of 2 to 3 members who shall be elected by the AGM for a period of 2 years,
unless the AGM decides a shorter period.
At the Extraordinary General Meeting held on 25 November 2021, in which Frederik W. Mohn replaced the previous
Chairman of the Company, Christos Makrygiannis replaced Frederik W. Mohn as a Member of the Nomination
Committee.
As per 31 December 2023, the Nomination Committee consisted of two members;
•
Kristian Siem (Chairperson)
•
Christos Makrygiannis
The Nomination Committee has refrained from accepting a fee for their work on the Nomination Committee. The
Nomination Committee proposes candidates for election to the Board and for the remuneration of the members of the
Board. Also, the Nomination Committee proposes candidates for election to the Nomination Committee and suggests
changes to the mandate or guidelines of the Nomination Committee.
EMGS’ Nomination Committee is in contact with shareholders, the Board and the Company’s executive management
when searching for candidates for election to the Board.
The recommendation to the AGM relating to the election should be available in time to be sent with the notice calling
the meeting, so that the shareholders have the opportunity to submit their views on the recommendation to the
Nomination Committee ahead of the meeting. Further details are set out in article 11 of the Articles of Association and
in the guidelines for the nomination committee, which were approved by the AGM in 2012.
8. Board: composition and independence
The composition of the Board
EMGS does not have a corporate assembly.
According to article 5 in the Company’s Articles of Association, the Board shall consist of 3–11 board members. At the
end of 2023, EMGS’ Board consisted of four directors. Two of the directors are female and two are male.
The shareholder-elected members represent varied and broad experience from relevant industries and areas of
speciality, and the members bring experiences from both Norwegian and international companies. Any proposal for the
election of shareholder-elected board members are made with a view to ensure that the Board can attend to the
shareholders’ common interest and the Company’s need for competence, capacity and diversity. Also, the Board should
function well as a collegial body. The Chairman of the Board is elected by the general meeting.
As of 31 December 2023, the Board consisted of the following directors:
•
Frederik W. Mohn, Chairman
•
Beatriz Malo de Molina (Independent)
•
Mimi Berdal (Independent)
•
Jørgen Westad
Independence of the Board
The Board does not include any members from the Company’s executive management.
Two of the four shareholder-elected board members, Ms. Malo de Molina and Ms. Berdal, are considered independent
of the Company’s material business associations and major shareholders. Mr. Mohn and Mr. Westad are not considered
independent and are related to one of each of the Company’s two largest shareholders. Mr. Mohn and Mr. Westad are
related to bondholders that hold the majority of the convertible bond.
24
As the majority of the members of the Board are not considered independent, the Company deviates from the Code on
this point. However, the Company believes that this deviation is in the interest of both EMGS and its stakeholders,
including other shareholders, as it allows for short lines of communication between the Company and its largest
shareholders as well as significant experience and competence to the Board which the Company may not be able to
retain without these directors.
9. The work of the Board
The Board’s duties and responsibilities
The Board has the ultimate responsibility for the management of the Company and for supervising its day-to-day
management and activities in general. This includes developing the Company’s strategy and monitoring its
implementation. In addition, the Board exercises supervision responsibilities to ensure that the Company manages its
business and assets and carries out risk management in a prudent and satisfactory manner. The Board is responsible
for the appointment of the CEO. The Board has an annual plan for its work.
Mandate for the Board
In accordance with the provisions of Norwegian company law, the terms of reference for the Board are set out in a
formal mandate that includes specific rules and guidelines on the work of the Board and decision making. The Chairman
of the Board is responsible for ensuring that the work of the Board is carried out in an effective and proper manner in
accordance with legislation.
Mandate for the CEO
The Board issues a mandate for the work of the CEO. There is a clear division of responsibilities between the Board and
the CEO. The CEO is responsible for the operational management of the Company.
Financial reporting
The Board receives periodic reports on the Company’s commercial and financial status. The Company follows the
timetable laid down by the Oslo Stock Exchange for the publication of interim and annual reports.
Board meetings
The Board holds regular meetings and a strategy meeting each year. Extraordinary Board meetings are held as and
when required, to consider matters that cannot wait until the next regular meeting. In addition, the Board has
appointed three sub-committees composed of board members to work on matters in these areas. The Board has
established and stipulated instructions for these committees.
Audit Committee
The Audit Committee is appointed by the Board. Its main responsibilities are to supervise the Company’s systems for
internal control, to ensure that the auditor is independent and assist the Board with oversight. The Audit Committee
has reviewed the procedures for risk management and financial controls for the major areas of the Company’s business
activities.
The Audit Committee receives reports on the work of the external auditor and the results of the audit. Also, the Audit
Committee meets regularly with the auditor where no member of the executive management is present.
As per 31 December 2023, the Audit Committee consisted of the following:
•
Beatriz Malo de Molina, Chairman
•
Jørgen Westad
25
Compensation Committee
The Compensation Committee makes proposals to the Board on the employment terms, as well as conditions and total
remuneration of the CEO and other executive personnel.
As per 31 December 2023, the Compensation Committee consisted of the following:
•
Frederik W. Mohn, Chairman
•
Beatriz Malo de Molina
•
Mimi Berdal
•
Jørgen Westad
Strategy Committee
A Strategy Committee was established by the Board on 11 February 2015. The Strategy Committee shall contribute to
the Company’s strategy development.
The committee consists of the following:
•
Frederik W. Mohn, Chairman
•
Beatriz Malo de Molina
•
Mimi Berdal
•
Jørgen Westad
Annual evaluation
The Board’s working methods and interactions are subject to annual revision.
10. Risk management and internal control
The Board ensures that the Company has sound risk management and an internal control system that is appropriate to
its activities. The risk management and internal control systems in EMGS are based on its corporate values, ethics
guidelines and principles for sustainability and corporate social responsibility (“
CSR
”). The Board reviews the Company’s
internal control system and the main areas of risk annually.
EMGS’ management conducts day-to-day follow-up of financial management and reporting. Management reports to
the Audit Committee, which conducts a review of the quarterly and annual reports before publication. The Audit
Committee inquires into the integrity of EMGS’ accounts, also in its interactions with the independent auditor. It also
inquiries into, on behalf of the Board, issues related to financial review and internal control, and the external audit of
EMGS’ accounts. The Board ensures that EMGS is capable of producing reliable annual reports and that the external
auditor’s recommendations are given thorough consideration.
A description of the Company’s financial risk management objectives and policies are included in Note 3 to the financial
accounts.
11. Remuneration for the Board
The AGM decides the remuneration paid to members of the Board annually. The Nomination Committee prepares
proposals for the AGM regarding remuneration for Board members. The remuneration of the Board reflects the Board’s
responsibility, expertise and time commitment, and the complexity of the Company’s activities.
The Code recommends that remuneration of the Board should not be linked to the Company’s performance and,
further, that the Company should not grant options to members of its Board.
None of the shareholder-elected board members are engaged by the Company in any other role (e.g., as consultant)
other than that as Board members.
Details on the remuneration to the Board can be found in notes to the financial statements of the Company.
26
12. Remuneration of the executive personnel
The Board determines salary and other remuneration systems for key management personnel pursuant to the
provisions of the Norwegian Public Limited Liability Companies Act. The CEO’s employment conditions, and
remuneration are determined by the Board and are presented to the AGM. The Board annually evaluates salary and
other remuneration for the CEO. Details on the remuneration to the Company’s executive personnel are included in
notes to the financial statements of the Company.
The guidelines of the remuneration system for the executive personnel are determined by the Board and is presented
to the AGM through a declaration on principles for management remuneration, which is required by law. This
declaration is also included in the Company’s annual report.
Performance-related remuneration of the executive personnel is linked to value creation for shareholders or the
Company’s performance over time. The performance-related remuneration to the executive personnel is subject to an
absolute limit.
The Board believes that the salary levels of executive personnel should be competitive.
In accordance with the public limited liability companies act (ASAL §6-16), a remuneration report will be made
available on
www.emgs.com
prior to the AGM to be held on 19 June 2024.
13. Information and communications
EMGS maintains regular dialogue with analysts and investors. The Company considers it very important to inform
shareholders and investors about the Company’s commercial and financial performance.
The Company strives to continuously publish all relevant information to the market in a timely, effective and non-
discriminatory manner. All stock exchange announcements are made available both on the Company’s website and on
the Oslo Stock Exchange news website at www.newsweb.no, and are also distributed to news agencies (via Hugin).
Financial reports
EMGS publishes its provisional annual accounts as soon as possible after the end of each financial year. The complete
annual report and accounts are made available to shareholders no later than three weeks prior to the AGM and no later
than by the end of April, as required by the Securities Trading Act (section 5-5 (1)).
Quarterly reports are normally published within six weeks following the end of the quarter, except for the report for
the second quarter which is normally published approximately seven weeks following the end of the quarter.
The Company’s financial calendar for the coming year is published no later than 31 December in accordance with the
rules of the Oslo Stock Exchange. The financial calendar is available on the Company’s website and on the Oslo Stock
Exchange website.
EMGS holds recorded web-based presentations in connection with the publication of its interim results. These
presentations review the published results, market conditions and the Company’s future prospects. The presentations
are given by the CEO and/or the CFO and are distributed by webcast so that anyone can follow the presentation.
Quarterly reports, presentation material and webcasts are all available on the Company’s website.
Other market information
In addition to the dialogue between the shareholders in the general meeting, the Board aspires to maintain contact
with shareholders throughout the year, if possible in relation to the quarterly presentations and the participation in
seminars mainly aimed at investors. This contact is coordinated between the Chairman of the Board, the CEO and/or
the CFO.
The Company has a policy of identifying the positions entitled to speak on behalf of the Company on various subjects,
and who should communicate with the media, investors and investment bankers.
27
14. Takeovers
The Board endorses the recommendation of the Code for corporate governance on takeover bids. EMGS’ Articles of
Association do not contain any restrictions, limitations or defence mechanisms on acquiring the Company’s shares.
In accordance with the Securities Trading Act and the Code, the Board has adopted guidelines for possible takeovers.
In the event of a takeover bid, the Board will, in accordance with its overall responsibility for corporate governance, act
for the benefit of all Company shareholders. The Board will not seek to hinder or obstruct takeover bids for EMGS’
activities or shares, unless the interests of the Company’s shareholders so warrants.
If an offer is made for EMGS’ shares, the Board will normally both make a recommendation as to whether the
shareholders should accept the offer and arrange a valuation from an independent expert.
15. Auditor
The external auditor presents an annual plan to the Audit Committee covering the main features for carrying out the
audit. The external auditor presents the result of the audit to the Audit Committee and the Board in the meeting dealing
with the annual financial statements, including presenting any material changes in the Company’s accounting principles
and significant accounting estimates, and reporting any material matters on which there has been disagreement
between the external auditor and EMGS’ executive management.
The external auditor annually presents internal control weaknesses and improvement opportunities to the Audit
Committee and, when appropriate, to the Board. The Board holds a meeting with the auditor at least once a year where
no member of the executive management is present.
The Board has adopted instructions as to the executive personnel’s access to the use of the external auditor for services
other than auditing. The external auditor provides an overview of remuneration divided into fee paid for audit work
and any fees paid for other specific assignments, which are presented to the Audit Committee and at the Annual General
Meeting. This disclosure is also included in the annual report.
The external auditor has given the Board a written notification confirming that the requirements for independence are
satisfied.
Oslo, 17 April 2024
Board of Directors and CEO of Electromagnetic Geoservices ASA
Sign.
28
Report on Sustainability and
Corporate Social Responsibility
.
Introduction
This report from the Board of Directors (the “Board”) of Electromagnetic Geoservices ASA (“EMGS” or “the Company”)
describes EMGS’ principles, efforts, measures and results related to sustainability and corporate social responsibility
(“CSR”) in the year of 2023.
The report is based on the principles in EMGS’ policy for sustainability and corporate social responsibility and the EMGS
sustainability and corporate social responsibility standard (together, the “CSR Policy Documents”). These principles
cover the areas labour rights, anti-corruption, the environment and human rights. The CSR Policy Documents applies to
both national and international operations.
It is the intention of EMGS that the Company’s efforts within (i) working environment issues, including safety measures,
(ii) anti-corruption procedures and training, and (iii) the culture encouraged from our employees through the CSR Policy
Documents shall contribute to improved understanding for human rights, working ethics, work environment, health,
safety and environmental impact.
The work related to sustainability and CSR (together “the CSR work”) in EMGS is based on the core values of the
Company:
•
Integrity
in all our relationships
We earn trust through demonstrating integrity. We dare to challenge, and we are honest. Our honesty benefits
all our relationships.
•
Commitment
to value creation
We are strong believers in the value our technology creates for both customers and shareholders. We go the
extra mile.
•
Innovation
in products and services
We set the stage for the future of the industry. We are passionate about developing what our customers need.
•
Quality
in every step
We care about our people, our customers and our deliveries. We don’t compromise on safety or on quality. This report
covers CSR work related to EMGS with its subsidiaries (together, the “Group”) in 2023.
The report is primarily based on feedback from management in the Group and various internal committees, reporting
systems and reports. Throughout 2023, as in previous years, CSR issues were discussed in management meetings and
by the Board.
This report includes an introduction to the abovementioned principles, the EMGS commitment, implementation and
actions as well as the measures and outcome specific for 2023.
29
The CSR policy is available on the Company’s homepage
www.emgs.com
.
Transparency Act Statement
As required under Section 5 of the Norwegian Transparency Act of 18 June 2021, EMGS has prepared an approved a
separate statement pertaining to our work related to human rights and decent working conditions. The statement is
attached to this Report on Sustainability and Corporate Social Responsibility and is also published on the Company’s
homepage
www.emgs.com
.
Statement on CSR work 2023
All work in the Group related to CSR is based on the CSR Policy Documents. Below is an overview of the principles, as
well as a description of how the Company reports issues relate to CSR, and measures taken under each of the main CSR
principles.
Quality, Health, Security, Safety and Environment
In 2023, the general objectives for Quality, Health, Security, Safety and Environment (QHSSE) were met. Several areas
of improvement were identified during the course of 2023, as is natural given the nature of CSR compliance. The
Company’s five-year trailing QHSSE statistics are in line with its peers.
EMGS complies with the highest standards from IOGP, the International Association of Oil and Gas Producers, as well
as with specific QHSSE requirements from customers and authorities.
QHSSE performance is reviewed on a regular basis with the Board and management team.
Labour rights
EMGS adheres to the following principles for labour rights:
•
Freedom of association and right to collective bargaining;
•
No forced or compulsory labour;
•
No child labour; and
•
No discrimination
The working environment and the employees
As of 31 December 2023, the EMGS Group had 19 employees, of which three work in Trondheim, Norway, eleven at
the regional office in Oslo, Norway, four offshore and one in Mexico City, Mexico.
EMGS takes a proactive approach to the welfare and safety of its employees and has initiated a number of measures to
keep short-and long-term sick leave amongst the employee group at current low levels. The Company experienced no
lost time injury events in 2023.
Equal opportunities and discrimination statement
EMGS’ 19 employees represent five different nationalities with different cultures.
EMGS has defined and implemented guidelines to protect against gender discrimination. At the end of 2023, two of the
Group’s 19 employees, or 11%, were female, which is higher as compared to male/female ratio as of 31 December
2022.
The Group will continue to prioritise its goal of improving the current imbalance by actively following a recruiting
strategy to this effect. EMGS recognises that the average compensation for its female employees is lower than the
average workforce figure. This can be explained by a high degree of representation of males at management level and
among the technical professionals. As per 31 December 2023, the executive management team consisted of three
persons, whereof all are male.
30
The Discrimination Act’s objective is to promote gender equality, ensure equal opportunities and rights, and to prevent
discrimination due to ethnicity, national origin, descent, skin colour, language, religion and faith. The Group is actively
and systematically working to encourage the Act’s purpose within its business. The activities include recruiting,
remuneration, working conditions, promotion, development opportunities and protection against harassment. These
are issues of importance for EMGS’ working environment, as the Group has employees from five nations with a various
languages, cultures, ethnicities, religions and faiths.
The Group’s aim is to have a workplace with no discrimination due to reduced functional ability. For employees or new
applicants with reduced functional ability, individual arrangements can be made concerning the workplace and
responsibilities. For offshore work, the Group has limited possibilities for offering work to employees with reduced
functional ability.
Working environment measures
EMGS management encourages and facilitates close dialogue between management and employees, and between the
different departments within the Group. Some of the actions to facilitate dialogue are through bi-weekly meetings held
with all employees.
Office inspections are carried out on a regular basis to capture potential working environment hazards.
The Maritime Labour Convention, MLC 2006 was implemented in August 2013 and the Norwegian law implementing
this convention, the Shipworker Act, was implemented on the same day. By the end of 2019, the MLC 2006 had been
ratified by 94 countries. EMGS’ working environment and terms were already in line with the MLC 2006 and the
Shipworker Act requirements before its implementation.
Anti-Corruption
Corruption undermines all sound business activities and free competition. Business should work against corruption in
all its forms, including extortion and bribery. EMGS has a zero-tolerance policy with respect to corruption in all its forms,
including bribery and facilitation payments. Adherence to this principle is a basic and fundamental requirement for all
contractors and suppliers.
The Group and all of its employees shall at all times adhere to all applicable legislation related to bribery and anti-
corruption, and as a minimum always to the provisions of the FCPA, the UK Bribery Act and the Norwegian penal code.
The Company has over the years given significant attention to the Company’s active pursuit to prevent corruption and
bribery.
EMGS has several policies and standards related to its anti-corruption compliance programme, including but not limited
to the Ethics Policy and Code of Conduct as well as an anti-corruption compliance training programme. The training is
a combination of web-based and more in-depth training in meetings.
The Group has established a whistle-blower procedure in line with best practice industry standards and all applicable
regulations. EMGS encourages and supports employees who report dilemmas and incidents in relation to attempted
and/or actual corruption, bribery and/or fraud to management (“whistle blowers”). The Company has not received any
reports from employees related to anti-corruption during 2023.
EMGS continues to place a high priority on the Company’s compliance work.
External environment
EMGS is of the opinion that a more systematic use of its EM data in offshore oil exploration will reduce the
environmental footprint of oil exploration activities by among other things reducing the number of dry or non-
commercial wells being drilled before finding and appraising hydrocarbon reservoirs.
EMGS is committed to acting responsibly and in full transparency to monitor and reduce its environmental impact and
continually improve the overall environmental performance of its services. This is an integral and fundamental part of
31
EMGS’ business strategy, operating methods and technology development implemented through EMGS’ QHSSE Policy,
Environmental Standard and Environmental Management Plan.
EMGS is tracking its environmental footprint on each survey and identifying and monitoring the main waste streams
including hazardous waste.
The technology EMGS uses supports the Company’s environmental ambitions. The anchors used to keep receivers in
place are made from an eco-friendly compound which dissolves in the months after the receivers are released, thus the
anchors do not harm the environment. This means that the anchors are reduced to disaggregated sand after a survey,
leaving no discernible survey footprint and no hazard to subsea operations or fishing.
Human Rights
Principles related to Human Rights:
•
Support and respect the protection of human rights; and
•
Make sure not to be complicit in human rights abuses.
Human rights abuses shall not occur at EMGS. It is the intention of EMGS that the working environment effort, including
safety measures, the anti-corruption procedures and training as well as the attitude encouraged from the Company’s
employees shall contribute to improved understanding for human rights, working ethics and a cleaner environment in
the areas of the world where the Group operates.
The reputation of the Company is created by the collective conduct of each individual employee. The employees are
obligated to study the EMGS policies, including but not limited to Ethics Policy and Code of Conduct and perform their
duties accordingly.
On an operating level, EMGS seeks to ensure that there is a good working environment without discrimination of any
kind in the Group. The managers handle all minor issues related to human rights. If/when there are issues of broader
magnitude, HR, and legal are involved.
No claim regarding Human Rights has been reported to HR, QHSE or Legal in 2023.
32
2023 Transparency Act Statement
INTRODUCTION AND PURPOSE
Avoiding any form of contribution to, or risk of contributing to, human rights violations has always been central to
Electromagnetic Geoservices ASA’s (together with its subsidiaries, “EMGS” or the “Company”) obligations towards its
stakeholders, including most notably the various local communities in which EMGS operates.
Our commitment to the protection of human rights is incorporated as a core tenet in our most important guidance
documents, including our Code of Conduct. EMGS requires all sales agents and other key service providers to adhere to
our own Code of Conduct, unless they can document that they have already implemented a similar guidance document
with requirements no less stringent than those incorporated in EMGS’ Code of Conduct.
Following the implementation of the Norwegian Transparency Act of 18 June 2021 (the “Transparency Act”), EMGS’
efforts to ensure that we perform adequate risk assessments to identify actual or potential risks of human rights
infringements, directly or indirectly through our suppliers and supply chains, has been further strengthened.
This statement has been prepared in accordance with Section 5 first subsection of the Transparency Act and was
approved by the EMGS board of directors in April 2024.
OUR BUSINESS, ORGANISATION AND HUMAN RIGHTS COMPLIANCE
About EMGS
EMGS acquires, processes and markets CSEM (controlled-source electromagnetic) and MT (magnetotelluric) data,
primarily for use in offshore oil and gas exploration, using its own proprietary EM technology.
The EM data is acquired using a designated EM acquisition vessel, which EMGS charters on a time charter basis (i.e.
including, amongst other things, provision of the maritime crew operating the vessel) from North Sea Commander
Shipping AS, a Norwegian shipowner and operator.
In addition to data acquisition operations, EMGS processes EM data and provides certain consulting services related to
our principal lines of business.
For further details regarding EMGS, its business, organisation, and operations, please refer to earlier sections of the
annual report and other information published on the Company’s webpage (www.emgs.com).
EMGS’ work to ensure no human rights infringement risk
EMGS has, prior to the implementation of the Transparency Act, adopted a risk-based approach to ensuring that we do
not contribute to, or risk contributing to, human rights violations. Specifically, this means that the Company on a regular
basis and as part of all relevant risk analysis (e.g. prior to performing acquisition operations outside of Norway)
specifically considers these questions with a view to identifying human rights risks and ensuring that appropriate
measures are implemented to avoid or, as the case may be, seek to fully mitigate them.
Following the implementation of the Transparency Act, EMGS has, additionally, introduced a company group-wide risk
analysis.
In addition to continuing this specific event- and risk-based work to ensure our compliance with fundamental human
rights, EMGS has, based on the requirements of the Transparency Act, instituted a semi-annual group-wide risk analysis
based on the process set out in the OECD Due Diligence Guidance for Responsible Business Conduct. The results of this
review are reported to the Audit Committee and, on an annual basis, to the Board of Directors.
33
Any findings identified through the due diligence review process (or otherwise during the ordinary course of business),
are followed up separately with continuous reporting to the Audit Committee.
DUE DILIGENCE FINDINGS AND AREAS OF FOCUS
Under the Transparency Act, EMGS is obligated to publish the “[…] actual negative consequences for basic human rights
and decent working conditions, and significant risk of negative consequences […]” (office translation) identified by the
Company as part of the due diligence review.
EMGS has not, during the period covered by this statement, identified any actual negative consequences for basic
human rights and decent working conditions as a direct or indirect result of its business or operations.
Based on a risk-based approach, EMGS has identified the following two areas as those with the highest risk (meaning,
in this context, more than a remote or hypothetical possibility) of negative consequences for human rights and/or
decent working conditions:
•
EMGS operates on a worldwide basis. Consequently, the Company will from time-to-time operate in countries
where local requirements, laws and regulations applicable to our operations (e.g. requirements for fishing
representatives onboard our vessel during operations) do not sufficiently safeguard the interest of local fishing
communities and/or indigenous peoples. Consequently, when performing offshore acquisition operations in
such countries, the Company would, if it solely relied on meeting the requirements under applicable local law,
still risk infringing on the rights and interests of such local fishing communities and/or indigenous peoples. To
mitigate this risk, EMGS undertakes specific human-rights related risk analysis when operating in such
jurisdictions and implements mitigating initiatives and efforts if and as appropriate. Based on the concrete
circumstances, such mitigating initiatives and efforts may include voluntary use of fishing representative(s),
retaining one or more local community/fishing liaisons, consultation with affected or potentially affected local
communities and fishermen, and paying appropriate compensation in case of disruption to fishing activity
(including in the form of pre-emptive compensation; paying compensation to local fishing communities so that
they may temporarily cease their fishing activity in EMGS’ area of operation). Based on extensive experience
from operating in such areas, and considering the robust mitigating measures EMGS employs, we consider the
risk to be very low (although not negligible). During 2023 EMGS did not operate in such areas as the vessel was
warm-stacked in Norway for the entire year. Based on planned acquisition activity in 2024, EMGS considers
this risk factor to be germane going forward.
•
At the end of 2023, EMGS had 19 full time employees (whereof 18 were based in Norway), in addition to
certain direct contractors. EMGS considers the risk of potential non-compliance with the right to decent
working conditions among its own employees and direct contractors, including in both instances with respect
to those working on the Company’s vessel/offshore, to be very low. EMGS also relies on the consultants,
contractors, and employees of our suppliers. As we are not the employer/direct contracting party to this
personnel, regular interaction and follow up is required to ensure that their working conditions are, as a
minimum, decent and generally acceptable. EMGS mitigates this risk by specifically addressing these questions
with our contracting counterparties both during the sourcing/contracting phase and (for longer/recurring
engagements) with regular intervals during the course of the relationship. Furthermore, our own employees
are encouraged to report, either through their line manager or, if deemed appropriate, through our whistle-
blower channel if they suspect that working conditions for such personnel are below the requirements of
EMGS. EMGS considers this risk to be very low (although not negligible).
INFORMATION REQUESTS
Under Section 6 of the Transparency Act, any person has the right to submit a written request for further information
to EMGS. We kindly ask that such requests are sent to emgs@emgs.com.
Oslo, 17 April 2024
Board of Directors and CEO of Electromagnetic Geoservices ASA
Sign.
34
Determination of Salary
Statement
.
The following statement has been prepared by the Board of Directors of Electromagnetic Geoservices ASA (“EMGS” or
the “Company”) and outlines the main principles for the current remuneration policy but does not constitute the official
accepted guidelines. The official guidelines made in accordance with section 6-16a of the Norwegian Public Limited
Liability Companies Act was accepted by the 2021 AGM and is published on
www.emgs.com
. The Board’s Senior
Executive Remuneration Report for 2023 will be available in the 2024 AGM Calling Notice and on
www.emgs.com
following AGM on 19 June 2024.
1.
Main principles for determination of management remuneration
The objective of the Company’s compensation policy for the executive management (“Management”), is to attract and
retain the best leadership capabilities available to lead and develop the Company and thus maximise shareholder and
stakeholder value. The compensation is based both on a non-variable element (“Base Salary”) and variable elements
such as bonus, stock options and variable special payments (“Variable Compensation”, and, together with Base Salary,
“Overall Compensation”).
For the CEO, the compensation level is determined by the Board of Directors without involvement from the CEO. For
other members of Management, compensation is determined by the Board based on recommendations from, and
discussions with, the CEO.
The Base Salary shall be competitive to local market levels and is determined by the manager’s skills and level of
responsibility in the organisation. The Base Salary is determined by using industry benchmarks with local relevance for
similar roles.
The Variable Compensation, such as bonuses, is applied using Company performance and individual performance. Long
term incentives, such as stock option plan, are applied by assessing the criticality of the role to the Company, and as an
instrument to retain critical skills in the Company.
When determining compensation for the CEO and other members of Management, the Board takes into consideration
not only industry benchmarks and individual performance, but also the average compensation level for all other
employees of the Company.
2.
Salaries and remuneration
2.1
Base Salary
The Management’s fixed annual salary is defined as the Base salary and is subject to annual review.
2.2
Performance Bonus
The Company has a performance bonus programme linked to annual performance. The objective of the programme is
to compensate individuals based on the achievement of Company objectives as well as personal performance. The
objectives of the Company are established by the Board of Directors.
Management has a bonus potential of up to 50% of Base Salary, and the rates are specified in the individual employment
agreements. Management’s bonuses are based on achieving KPIs set by the Board of Directors. The KPIs vary from year
35
to year, but typically include achieving financial targets and operating in a safe and efficient manner. In 2023,
Management did not achieve the KPI financial targets set by the Board of Directors. For further details to Management’s
compensation, please see Note 6 to EMGS ASA’s financial statements or the Remuneration Report 2022 available on
www.emgs.com
.
A Bonus programme is established as a general programme for all employees with a bonus potential of 10 – 50% of
Annual Base Salary. No bonus was accrued in 2023.
2.3
Share Option Programme
Management participates in the Company’s Stock Option Plan which is used to attract and retain employees. The
programme was established with the aim to provide a long-term incentive.
For new grants, the minimum exercise price is set at fair market value at the date of grant. The vesting of such options
takes place over a four-year period from the date of the grant.
Any new grants under the share option programme will be determined by the Board based on authorisation from the
annual general meeting (as described directly below).
The Company’s share option programme is based on an authorisation from the annual general meeting of the Company.
The authorisation was renewed at the annual general meeting in 2023 and is thus subject to renewal at the 2024 annual
general meeting. The authorisation, which covers all employees and not only Management, is limited to a maximum of
3,929,090 options.
The total number of outstanding options (for all employees and not only Management) under the share option
programme as of 31 December 2023 was 112,500.
2.4
Pension plan
Management participates in the Company´s general collective pension plan. The Company has defined contribution
pension plans, and the plan applicable in Norway involves a contribution level of 5% of Base Salary from 0 G up to 7.1
G and 15% of Base Salary from 7.1 G up 12 G, where G is the base amount (Folketrygdens grunnbeløp) that equals NOK
118 620 as of 31 December 2023.
The Company does not offer any top-up pension plan for Management.
2.5
Benefits in kind
Management participates in the Company’s ordinary benefits in kind schemes (i.e. telephone expenses, laptop and free
broadband connection and use). The Board may, on a case-by-case basis and based on their own discretion, award
other reasonable and benefits in kind provided that such benefits do not deviate from what is generally accepted in the
Norwegian market.
2.6
Severance plan
As is customary in the Norwegian market, the CEO has, in his employment agreement, agreed that he may be
terminated at the discretion of the Board (i.e. termination at will). In the event of such termination, the CEO is entitled
to severance pay equal to 12 months’ Base Salary. No other members of Management have any agreements to receive
Base salary and benefits beyond the statutory notice period.
Agreements may be signed regarding severance pay for other members of general management to attend to the
Company's needs at all times to ensure that the selection of managers is in commensuration with the Company's needs.
Pursuant to the Working Environment Act, such agreements may not have a binding effect on general management
other than the CEO.
36
3
.
Management salaries and remuneration in subsidiaries of EMGS
Companies within the EMGS group are to follow the main principles of the Company’s managerial salary policy as
described in section 1. It is an ambition of the Company to globally coordinate the wage policy and the plans used for
variable compensation throughout the EMGS Group.
4.
Review of the executive management remuneration policy that has been carried out in the
financial year 2023
The remuneration policies set out in the declaration on determination of salary and other compensation to the
Management for 2023 were followed in all respects.
Oslo, 17 April 2024
Frederik W. Mohn
for and on behalf of the Board of Directors of Electromagnetic Geoservices ASA
Sign.
37
Financial
statements
.
EMGS Group
38
Consolidated Income Statement
.
Amounts in USD 1 000
Note
2023
2022
Operating revenues
Contract sales
6
Multi-client pre-funding
6, 16
Multi-client late sales
6, 16
Other revenue
6, 25
Total revenues
Operating expenses
Charter hire, fuel and crew expenses
7
Employee expenses
8
Depreciation right-of-use assets
27
Multi-client amortisation
16
Other depreciation and amortisation
16, 27
Other operating expenses
9, 10
Total operating expenses
Operating profit/ (loss)
-6,102
Financial income and expenses
Interest income
11
Interest expense
11
-3,094
-2,516
Interest expense lease liabilities
11, 27
-310
-504
Impairment financial assets
4, 11
Gains on financial assets and liabilities
11, 23
-1
Net foreign currency income/(loss)
11
-7
Net financial items
-2,097
-1,969
Income/ (loss) before income taxes
-8,199
Income tax expense
12
-21
-46
Income/ (loss) for the period
-8,178
Basic income/(loss) per share in USD
-0.06
Diluted income/(loss) per share (EPS) in USD
-0.06
39
Consolidated Statement
of Other Comprehensive
Income
.
The items recorded in Other comprehensive income/(loss) do not have any tax effect in 2023 or 2022. Amounts are
wholly allocated to the owners of the parent.
Amounts in USD 1 000
Note
2023
2022
Income/ (loss) for the period
-8,178
Other comprehensive income to be reclassified to profit or loss
in subsequent periods:
Exchange differences on translation of foreign operations
-4
-5
Other comprehensive income/(loss)
-4
-5
Total other comprehensive income/(loss) for the period
-8,182
40
Consolidated Statement
of Financial Position
.
Oslo, 17 April 2024
Board of Directors and CEO of Electromagnetic Geoservices ASA
Sign.
Amounts in USD 1 000
Note
2023
2022
ASSETS
Non-current assets
Multi-client library
16
Other intangible assets
16
Property, plant and equipment
17
Right-of-use assets
27
Other receivables and prepayments
18
Assets under construction
17
Total non-current assets
Current assets
Spare parts, fuel, anchors and batteries
19
Trade receivables and accrued revenues
20
Other receivables and prepayments
18
Financial lease receivables
18
Cash and cash equivalents
21
Restricted cash
21
Total current assets
Total assets
EQUITY
Capital and reserves attributable to equity holders
Share capital, share premium and other paid-in equity
14
Other reserves
-1,579
-1,575
Retained earnings
-69,407
-61,232
Total equity
LIABILITIES
Non-current liabilities
Provisions
25
Borrowings
23
Non-current leasing liabilities
23, 27
Total non-current liabilities
Current liabilities
Trade payables
24
Current tax liabilities
12
Other short term liabilities
26
Current leasing liabilities
23, 27
Total current liabilities
Total liabilities
Total equity and liabilities
41
Consolidated Statement
of Cash Flows
.
Amounts in USD 1 000
Note
2023
2022
Net cash flow from operating activities
Income/ (loss) before income taxes
-8,199
Adjustments for:
Total taxes paid
-59
-342
Depreciation right-of-use assets
27
Multi-client amortisation
16
Other depreciation and amortisation
16,17
Impairment of other long term assets
16,17
Cost of share-based payment
15
Change in trade receivables
20
-6,632
Change in inventories
19
-345
Change in trade payables
24
-1,793
Change in other working capital
-1,792
-1,388
Finance Income
11
-671
Finance Cost
Net cash flow from operating activities
Investing activities:
Purchase of property, plant and equipment
17
-946
-317
Investment in multi-client library
16
-1,602
Purchase of intangible assets
16
-33
Cash used in investing activities
-946
-1,953
Financial activities:
Principal amount leases
23
-2,580
-6,157
Interest lease liabilities
27
-310
-504
Repayment/settelment of loan
23
-4,297
Interest paid
11
-2,295
-2,070
Cash used in/provided by financial activities
-5,185
-13,027
Net change in cash
-1,179
Cash balance beginning of period
Cash balance end of period
Net change in cash
-1,179
42
Consolidated Statement
of Changes in Equity
.
Amounts in USD 1 000
Note
Share capital
share premium
and other paid-in-
capital
Other reserves
Retained
earnings
Total equity
Balance as of 1 January 2022
14
-1,570
-72,433
-2,514
Income/(loss) for the period
Other comprehensive income
-5
-5
Total comprehensive income
-5
Cost of share-based payments
Balance as of 31 December 2022
14
-1,575
-61,232
Income/(loss) for the period
-8,178
-8,178
Other comprehensive income
-4
-4
Total comprehensive income
-4
-8,178
-8,182
Cost of share-based payments
Balance as of 31 December 2023
14
-1,579
-69,407
43
Notes
.
hydrocarbons in offshore reservoirs. The Company’s services help oil and gas companies to improve their exploration
The Company is a public limited liability company incorporated and domiciled in Norway
publicly traded. The address of its registered office is Karenslyst allè 4, 0278 Oslo, Norway.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Reporting Standards (IFRS
® Accounting Standard “IFRS”)
as adopted by the European Union (EU). IFRS as adopted by
the EU differ in certain respects from IFRS as issued by the International Accounting Standards Board (IASB).
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements are disclosed in Note 4.
The consolidated financial statements have been prepared on a historical cost basis. The consolidated financial
statements are presented in US dollars and all values are rounded to the nearest thousand except when otherwise
indicated.
The consolidated financial statements provide comparative information in respect of the previous period. In addition,
the Group presents an additional statement of financial position at the beginning of the earliest period presented
The consolidated financial statements incorporate the financial statements of EMGS and entities controlled by EMGS
(subsidiaries). Control is achieved when the Group 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.
Specifically, the Group controls an investee if and only if the Group has:
-
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
investee)
-
Exposure, or rights, to variable returns from its involvement with the investee
-
The ability to use its power over the investee to affect its returns
44
Generally, there is a presumption that a majority of the voting rights results in control. To support this presumption
and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all
relevant facts and circumstances in assessing whether it has power over an investee, including:
-
The contractual agreement(s) with the other vote holders of the investee
-
Rights arising from other contractual arrangements
-
The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control
over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses
of a subsidiary acquired or disposed during the year are included in the consolidated financial statements from the
date the Group gains control until the date the Group ceases to control the subsidiary.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions
are eliminated in full.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using
The Group presents assets and liabilities in the statement of financial position based on current/non-current
classification. An asset is classified as current when it is:
-
Expected to be realised or intended to be sold or consumed in normal operating cycle
-
Held primarily for the purpose of trading
-
Expected to be realised within twelve months after the reporting period, or
-
Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period
All other assets are classified as non-current.
A liability is current when:
-
It is expected to be settled in normal operating cycle
-
It is held primarily for the purpose of trading
-
It is due to be settled within twelve months after the reporting period, or
-
There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting
period
The financial statements of each entity within the Group reflect transactions recorded in the currency of the economic
environment in which it operates (the functional currency). The functional currency of the Company is US Dollars
(USD).
The consolidated financial statements are presented in USD which is the Group's presentation currency. Each entity
in the Group determines the functional currency and items included in the financial statements of each entity are
b) Transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency
spot rate on the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in
45
foreign currencies are translated at the functional currency spot rate at the reporting date. All differences are recorded
in profit and loss.
Non-monetary items that are measured in terms of historical costs in a foreign currency are translated using the
exchange rates on the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates on the date when the fair value is determined. The gain or loss arising
on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss
on the change in fair value of the item.
The results and financial position of Group companies (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency
as follows:
(i)
Assets and liabilities for each balance sheet presented are translated at the rate of exchange ruling at the
reporting date.
(ii)
Revenues and expenses for each income statement presented are translated using the foreign exchange rates
on the specific transaction date.
Revenue from contracts with customers is recognised when control of the goods and services are transferred to the
customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for
those goods or services.
The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from contracts
with customers are provided in Note 4. Revenue is shown net of withholding and value-added taxes. Revenue is
recognised as follows:
a) Proprietary contract sales
The Group performs EM services under contract for a specific customer, whereby the EM data is owned by the
customer. The Group recognises contract revenues (whether priced as Lump Sum, Day Rate or Unit Price) over time.
The Percentage of Completion (“POC”) revenue recognition method is used for proprietary contract sales. Under the
POC method revenue is recognised in proportion to the stage of completion of the agreement. The Group believes the
POC method is the most accurate way in which to measure performance obligations satisfied.
A map outlining the specific area to be acquired, processed or reprocessed along with related latitude/longitude
coordinates and related parameters for acquisition or processing are part of the agreement. This provides EMGS with
significant information about the area, geographical location and other matters which substantially impact the
Company’s estimate of time to complete the project. Such estimates are documented prior to the beginning of the
project agreement and progression tracking is documented daily in the vessel operational logs.
In most cases, a third-party is included in the daily review and approval process during acquisition. Approved daily
acquisition reports serve as the basis for determining physical progress in the POC calculations.
Mobilisation Fees
Costs related to mobilisation are deferred and recognised over the acquisition period (which is the time from the first
receiver is dropped to the last retrieval) of the contract, using the percentage of completion method. The deferral of
mobilisation costs can only begin after an agreement has been signed between EMGS and the client. Until a contract
is signed or anticipated, costs are expensed as incurred.
46
b) Sales of multi-client library data
Pre-funding agreements
Multi-client licensing sales made prior to commencement of acquisition for a project and licensing sales while the
projects are in progress, are presented as pre-funding revenues. The advantages for pre-funding customers are
generally the possibility to influence the project specifications, early access to acquired data, and discounted prices.
The Group recognises pre-funded revenue at the point in time when data is made accessible to the customer.
Late sales
Customers are granted a license from the Group which entitles them to access a specific part of the multi-client data
library. The license payment is fixed and is required when the license is granted. The late sale revenue is recognised
when a valid licensing agreement is signed, and the multi-client library data is made accessible to the customer.
Uplift
Uplift revenues can arise if a customer that has already bought a license for EM data, is awarded acreage covered by
the data bought. Uplift revenue is recognised when the customer is awarded the acreage.
Contract balances
Accrued revenue
Accrued revenue is the right to consideration in exchange for goods or services transferred to the customer. If the
Group is transferring goods or services to a customer before the customer pays consideration or before payment is
due, a contract asset is recognised for the earned consideration that is conditional.
A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the
Group transfers goods or series to the customer, a contract liability is recognised when the payment is received, or
the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs
under the contract.
Significant financing component
The Group has received funding from third parties building the next generation EM equipment. There is a significant
financing component for these contracts considering the length of time between the parties’ payment and the
beneficial period. As such, interest costs are calculated on this contract liability recorded as provision in the balance
sheet. The interest rate is commensurate with the rate that would be reflected in a separate financing transaction
Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated
impairment losses. Historical cost includes costs directly attributable to the acquisition of the item. Costs are included
in the asset’s carrying amount or recognised as a separate asset, if appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Costs of all repairs and maintenance are expensed as incurred.
47
useful life, as follows:
Useful life: |
|
Machinery and equipment* |
3 - 8 years |
Cluster ** |
5 years |
Hardware equipment and furniture |
3 - 5 years |
*Machinery and equipment are mainly placed onboard the vessel. Parts of the equipment are under water during
operation and have a shorter useful life.
** A cluster consists of IT equipment comprising of large number of processors for doing advanced data processing.
The assets’ residual values, useful lives, and method of depreciation are reviewed at each balance sheet date and
adjusted if appropriate. If an asset’s carrying amount is greater than its estimated recoverable amount, the asset is
immediately written down to the recoverable amount (Note 2.11).
Assets under construction are carried at cost, less accumulated impairment. Depreciation commences when the asset
is ready for its intended use.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal
or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition
of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is
The Group assesses at the contract inception whether a contract is, or contains, a lease. That is, if the contract conveys
the right to control the use of an identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and
leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
a) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset
is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of
lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement
date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of
the lease term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of
a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are
also subject to impairment (Note 2.10).
b) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value
of lease payments to be made over the lease term. The lease payments include fixed payments less any lease
incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid
under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably
certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the
Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are
recognised as expenses in the period in which the event or condition that triggers the payment occurs.
48
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for
the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification,
a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change
in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase
the underlying asset.
c) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment
(i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a
purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment
that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired
in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite useful lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and method are
reviewed at least every financial year end.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level (Note 2.10).
a) Patents
Patents have a finite useful life and are recorded at historical cost less accumulated amortisation and any accumulated
impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of patents over their
estimated useful lives (10-15 years). Administrative costs associated with patents are expensed as incurred.
b) Computer software
The cost of acquired computer software licenses is capitalised based on the expenses incurred to acquire and bring
the specific software to use. These costs are amortised over the estimated useful life (3 years).
The costs of design of software interfaces, installing, testing, creating system and user documentation, defining user
reports and data conversion are capitalised together with the software cost.
These costs are directly related to developing the software application for the Group’s use.
Costs associated with maintaining computer software are expensed as incurred. Costs directly associated with the
production of identifiable and unique software products controlled by the Group, which are expected to generate
economic benefits in excess of cost (beyond one year) are recognised as intangible assets. Direct costs include software
development employee costs and an appropriate portion of relevant overheads. Computer software development
costs recognised as assets are amortised over their estimated useful life, not to exceed three years.
Research costs are expensed as incurred. Development expenditure on individual projects is recognised as an
intangible asset when the Group can demonstrate:
-
The technical feasibility of completing the intangible assets so that it will be available for use or sale
-
Its intention to complete and its ability to use or sell the asset
-
How the asset will generate future economic benefits
49
-
The availability of resources to complete the asset
-
The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any
accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development
is complete and the asset is available for use. It is amortised over the period of expected future benefit (normally 3
years).
During the period of development, the asset is tested for impairment annually.
d) Multi-client library
The multi-client library consists of surveys of electromagnetic data. The surveys can be licensed to customers on a
non-exclusive basis. Directly attributable costs associated with the production and development of multi-client
projects such as acquisition costs, processing costs, and direct project costs are capitalised.
A multi-client project is considered complete when all components or processes associated with the acquisition and
processing of the data are finished, and all components of the data have been properly stored and made ready for
delivery to customers.
After a project is completed, a straight-line amortisation is applied. The straight-line amortisation is assigned over the
useful life, which is set at four years. The straight-line amortisation is distributed evenly through the financial year
Inventories are valued at the lower of cost or net realisable value. Cost is determined using the first-in, first-out (FIFO)
method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, such as for goodwill and intangible assets
with infinite useful life, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. Recoverable
amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. In
determining fair value less costs of disposal, recent market transactions are taken into account. If no such transaction
can be identified, an appropriate valuation model is applied.
The Group bases its impairment calculation on budget and forecast calculations.
Non-financial assets, other than goodwill previously impaired, are reviewed at each reporting date for possible reversal
of the previously recorded impairment. A previously recognised impairment loss is reversed only if there has been a
change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was
recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no
50
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through
other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the Group’s business model for managing them. With the exception of trade receivables that do
not contain a significant financing component, the Group initially measures a financial asset at its fair value plus
transaction costs. Trade receivables that do not contain a significant financing component are measured at the
transaction price.
Subsequent measurement
For purposes of subsequent measurements, financial assets are classified in four categories:
-
financial assets at amortised cost (debt instruments)
-
financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
-
financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon
derecognition (equity instruments)
-
financial assets at fair value through profit or loss
Financial assets at amortised cost is the most relevant to the Group. The Group measures financial assets at amortised
cost if both of the following conditions are met:
-
the financial asset is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows, and
-
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are
subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or
impaired. The Group’s financial assets at amortised cost includes trade receivables.
The Group does not have any financial assets measured at fair value through OCI, financial assets designated at fair
value through OCI, or financial assets at fair value through profit or loss.
A financial asset is derecognised when the rights to receive cash flows from the asset have expired; or the Group has
transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows
in full without material delay to third party under a “pass-through” arrangement; and either (i) the Group has
transferred substantially all the risks and rewards of the asset, or (ii) the Group has neither transferred nor retained
For trade receivables, the Group applied a simplified approach in calculating expected credit losses (ECL). The Group
recognises a loss allowance based on lifetime ECLs at each reporting date. This is based on the historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic environment, see Note 3
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans
51
and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net
of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition at fair value through profit or loss.
This category includes derivative financial instruments entered into by the Group that are not designated as hedging
instruments in hedge relationships as defined by IFRS 9.
Financial liabilities at amortised cost (loans and borrowings)
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when
the liabilities are derecognised as well as through the EIR amortisation process.
The EIR amortization is included as finance costs in the statement of profit or loss.
This category applies to interest-bearing loans and borrowings.
Convertible bond
The convertible bond is separated into a liability and an equity component. On issuance of the convertible bond, the
fair value of the liability component is determined using a market rate for equivalent non-convertible instrument. This
amount is classified as a financial liability measured at amortised costs (net of transaction costs) until it is extinguished
on conversion or redemption. The remainder of the proceeds is allocated to the conversion option that is recognised
and included in equity. Transaction costs are deducted from equity. The carrying amount of the conversion option is
not remeasured in subsequent years. Transaction costs are apportioned between the liability and equity components
of the convertible bond, based on the allocation of proceeds to the liability and equity components when the
instrument is initially recognised.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, this is treated as derecognition of the original liability and recognition
a) Current income tax
Current income tax assets and liabilities for the current and prior periods are measured using the amount expected to
be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and
generates taxable income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the income
statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax is provided for using the liability method on temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax
52
rates (and laws) that have been enacted or substantially enacted on the balance sheet date and are expected to apply
when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of
the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference
will not reverse in the foreseeable future.
Expenses and assets are recognised net of the amount of sales tax, except:
-
When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in
which case, the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item,
as applicable
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables
a) Pension obligations
The Company operates a defined contribution plan. The net pension cost for the period is presented as an employee
The Group operates an equity-settled, share-based compensation plan. The cost of equity-settled transactions with
employees is measured by reference to the fair value at the date on which they are granted. The fair value is
determined by an external valuation expert using an appropriate pricing model, further details are given in Note 15.
The cost of equity-settled transactions is recognised in Employee expenses, together with a corresponding increase in
equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which
the relevant employees become fully entitled to the award (the vesting date). The cumulative expense recognised for
equity- settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period
has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income
statement charge or credit for a period represents the movement in cumulative expense recognised as at the
beginning and end of that period. When options are exercised, the proceeds received net of any directly attributable
The Group recognises a provision for bonus expenses where contractually obliged or where there is a past practice
Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate
Cash and short-term deposits in the statement of financial position and consolidated statement of cash flows comprise
cash at banks and on hand and short-term highly liquid deposits with a maturity of three months or less, that are
53
2.17 Standards and interpretations issued, but not yet adopted
The financial statements have been prepared based on standards effective for the year ending 31 December 2023.
IASB has issued standards/amendments to standards that are not yet effective.
The Group plans to implement the new standards, amendments and interpretations when they are effective and
The Group’s principal financial liabilities comprise trade and other payables and loans and borrowings. Payments
related to EMGS’s Senior Unsecured Convertible Bond 2018/2025 are paid quarterly and are interest only. The main
purpose of these financial liabilities is to finance the Group’s operations. The Group has various financial assets such
as trade receivables, cash and short-term deposits which derive directly from its operations.
The Group is exposed to market risk, credit risk and liquidity risk. The Group's executive management oversees the
management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks which
are summarised below.
The Group did not apply hedge accounting in 2023 or 2022.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in market prices. Market prices comprise two types of risk for the Group: interest rate risk and currency risk.
The sensitivity analysis in the following sections relates to the position as of 31 December 2023 and 2022. The
sensitivity analysis has been prepared on the basis that the amount of net debt and the portion of financial instruments
in foreign currencies are all constant. The analysis excludes the impact of movements in market variables on the
carrying value of pension, provisions and on the non-financial assets and liabilities of foreign operations.
The sensitivity of the relevant income statement item is the effect of the assumed changes in respective market risk.
This is based on the financial assets and financial liabilities held as of 31 December 2023 and 2022.
i) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily
to the Group's long-term loan with floating interest rate.
With all other variables held constant, a reasonably possible increase in SOFR of 2.5% will increase the Group's annual
net interest expense on the long-term loan by approximately USD 490 thousand as of 31 December 2023 (2022: USD
488 thousand).
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates. The Group operates internationally and therefore has exposure to foreign
exchange risk arising from transactions executed in other currencies than the functional currency of each company.
EMGS ASA has USD as functional currency, hence the foreign currency risk is primarily with respect to NOK in EMGS
ASA. Approximately 95% of the Group’s sales are denominated in USD (2022: 97%), whilst approximately 32% of costs
are denominated in USD in 2023 (2022: 63%).
Foreign exchange risk arises from future commercial transactions, recognised as assets and liabilities.
54
The following table summarises the sensitivity to a reasonably possible change in the NOK exchange rate, with all
other variables held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and
liabilities). The Group's exposure to foreign currency changes on equity and for all other currencies is not material.
Increase/ decrease in NOK rate |
Effect on income/(loss) before tax |
|
Amounts in USD 1000 |
||
2023 |
20 % |
129 |
-20 % |
-129 |
|
2022 |
20 % |
69 |
-20 % |
-69 |
The Group is exposed to credit risk from its operating activities (primarily for trade receivables and cash and cash
equivalents). See Note 20 for aging analysis of trade receivables.
The Group trades with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to
trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on
an ongoing basis.
For trade receivables, the Group applied a simplified approach in calculating expected credit losses (ECL). The Group
recognises a loss allowance based on expected credit losses at each reporting date. This is based on the historical
credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment,
see Note 2.11 a). The maximum exposure to credit risk at the reporting date is the carrying value of each class of
With respect to credit risk arising from the other financial assets of the Group such as cash and cash equivalents, the
Group’s exposure to credit risk arises from default of the counter party, with maximum exposure equal to the carrying
Liquidity risk is the risk that the Company will not have sufficient liquidity to be able to meet its financial obligations.
EMGS’ sources of liquidity include cash balances, cash flow from operations, borrowings, it’s existing and new bank
facilities and further debt and equity issues. It is the Company’s objective to balance these sources of liquidity.
The Group’s convertible bond contains a financial covenant requiring free cash and cash equivalents of at least USD
2.5 million. As of 31 December 2023, the free cash and cash equivalents totaled USD 10.3 million. EMGS’ management
follows the Group’s liquidity risk closely.
The financial liabilities with maturity less than one year will be settled through cash flow from operating activities in
2024. While EMGS is still working on securing meaningful backlog, the flexible operating cost base allows EMGS to
significantly reduce costs during periods of vessel warm stack. Management considers the liquidity throughout 2024
55
The table below summarises the maturity profile of the Group’s financial liabilities 31 December based on contractual
payments.
6 |
||||||||
Less |
months |
|||||||
On |
than 3 |
3 to 6 |
to 1 |
1 to 2 |
2 to 5 |
|||
Amounts in USD 1 000 |
demand |
months |
months |
year |
years |
years |
> 5 years |
Total |
Year ended 31 December 2023 |
||||||||
Interest bearing loans and borrowings |
0 |
564 |
558 |
1,140 |
20,637 |
0 |
0 |
22,898 |
Trade and other payables |
0 |
1,731 |
287 |
3,230 |
0 |
0 |
0 |
5,248 |
Other financial liabilities |
0 |
653 |
672 |
870 |
96 |
43 |
0 |
2,333 |
Year ended 31 December 2022 |
||||||||
Interest bearing loans and borrowings |
0 |
552 |
545 |
1,127 |
2,261 |
20,637 |
0 |
25,123 |
Trade and other payables |
0 |
4,142 |
1,006 |
3,910 |
0 |
0 |
0 |
9,058 |
Other financial liabilities |
0 |
1,085 |
1,605 |
2,650 |
118 |
0 |
0 |
5,458 |
See Note 23 for financial liabilities.
Electromagnetic Geoservices ASA Senior Unsecured Convertible Bonds 2018/2025 with a current outstanding amount
of USD 19.5 million contains a financial covenant requiring free cash and cash equivalents of at least USD 2.5 million.
In addition, the bond agreement restricts the Company's ability, among other things, to sell multi-client library, declare
or make any dividend payments, incur additional indebtedness, change our business, and enter speculative financial
derivative agreements.
For the purpose of the Group's capital management, capital includes equity attributable to the equity holder of the
parent.
The primary objective of the Group’s capital management is to ensure healthy capital ratios to support its business
and maximise shareholder value.
In order to achieve this overall objective, the Group's capital management, amongst other things, aims to ensure that
it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure
requirements. Breaches in meeting the financial covenants would permit the lenders to immediately call loans and
borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowings in
the current period.
The Group manages its capital structure and adjusts it considering changes in economic conditions. To maintain or
The preparation of the Group’s financial statements requires management to make estimates, judgements and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities. Uncertainty about these
assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount
of the assets or liabilities affected in the future periods. Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
56
4.1 Estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates could deviate
from the actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of non-financial assets
An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount,
which is the higher of its fair value less costs of disposal and its value in use. The value in use calculation is based on a
discounted cash flow (DCF) model. The cash flows are derived from the financial budget approved by the management
and do not include restructuring activities that the Group is not yet committed to or significant future investments
that will enhance the asset’s performance of the cash generating unit being (CGU) tested. The recoverable amount is
sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate
used for extrapolation purposes. These estimates are most relevant to the multi-client library and DeepBlue (see
description under Assets under construction below) recognised by the Group. The key assumptions used to determine
the recoverable amount, including a sensitivity analysis, are disclosed and further explained in Note 16.
DeepBlue
At least annually, management forecasts future cash flows from the Joint Industry Project (“the DeepBlue”). The
DeepBlue is the Next Generation EM equipment. The project has been on-going since 2012. EMGS performed its first
commercial survey with the DeepBlue equipment in 2017. The net carrying value of the DeepBlue as of 31 December
2023 of USD 5 294 thousand (2022: USD 8 470 thousand) has been recorded as property, plant and equipment.
In estimating future cash flows, future market demand and additional expenses to operate the vessel are taken into
account. Because the inherent difficulty in estimating these factors, it is possible that future cash flows from these
activities will not be sufficient to recover the existing carrying value of the DeepBlue. See Note 17 for more details
regarding the impairment test.
Impairment of financial assets
In September 2021, Mexican bank regulators revoked Accendo Banco S.A.’s banking license and initiated a liquidation
process of the bank. EMGS had deposits with Accendo of approximately USD 2.1 million. EMGS was entitled to receive
approximately USD 135 thousand from the Mexican Bank Savings Protection Fund. An impairment of the deposits in
the Accendo account, less the USD 135 thousand received, was made at the end of the third quarter 2021 in the
amount of USD 1.9 million. A reliable recovery estimate is not possible at this time, so no adjustment to the impairment
has been made subsequent to the end of 2023.
Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount
and timing of future taxable income. The Group is subject to income taxes in several jurisdictions. Given the wide
range of international business relationships, differences arising between the actual results and the assumptions
made, or future changes in such assumptions, could necessitate future adjustments to tax income and expense already
recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audit by the
tax authorities of the respective countries in which it operates. The amount of such provisions is based on several
factors, such as the experience of previous tax audits and differing interpretations of tax regulations by the taxable
entity and the responsible tax authority. Such differences in interpretation may arise for a wide variety of issues
depending on the conditions prevailing in the respective domicile of the Group companies. EMGS has USD 1.3 million
included as a receivable based on prepaid taxes in Malaysia related to a 2019 survey.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be
available against which the losses can be utilised. Significant management judgement is required to determine the
amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable
profits together with future tax planning strategies.
Unrecognised tax assets as of 31 December 2023 are USD 89 837 thousand (2022: USD 85 771 thousand).
57
Useful lives of the Group’s property, plant and equipment, and intangible assets (technical innovations, climate-related
matters, Ukraine and macroeconomic situation)
The Group’s management determines the estimated useful lives and related depreciation and amortisation charges
for its property, plant, and equipment and intangible assets. When remaining useful lives of assets are determined to
be too high, management will make appropriate estimate revisions and adjust depreciation charges prospectively.
Items determined to be technically obsolete, or which have been abandoned will be written off completely.
Management considers technical innovations and increased competition as the most material factor with respect to
assessing the remaining useful life of the Company’s assets.
Additionally, a number of other potential factors are, although it is management’s current assessment that they are
unlikely to have a material impact on the value of our assets, considered. This includes:
•
Geopolitical conflicts
The war in Ukraine and the associated energy situation in Europe, has led to increased oil and, in particular,
gas prices, and has increased national governments’ focus on energy security. Although there are still a
number of uncertainties, it is likely that this will result in increased exploration spending and budgets going
forward.
Management continuously assesses the impact of the war in Ukraine and the Houthi attacks in the Red Sea
and the potential impacts on the Company’s operations, including with respect to supply chain issues. It is
management’s current assessment, however, that these impacts, if any, are likely to be immaterial and that
the Company will be able to fully mitigate them.
•
Climate-related risks
Irrespective of the actual pace of the green transition, it is management’s opinion that the Company is well
positioned. In addition to its core E&P offering, where in particular gas exploration is likely to increase as a
result of gas replacing coal power, the Company is in the early stages of positioning itself in the expected
future marine minerals exploration market. The Company is also assessing various options for including
certain services to the offshore wind market.
•
Other macro considerations
The Company is also subject to a number of macroeconomic factors, which are difficult to predict and where
various experts may disagree as to the likely future developments. Among these factors are, most notably,
future interest rate levels, whether the current high-inflation environment will normalise and any future
economic recessions. Management takes all of these factors into consideration when determining the need
for additional impairments.
4.2 Judgement
In the process of applying the Group’s accounting policies, management has made the following judgements, which
have the most significant effect on the amounts recognised in the consolidated financial statements:
Revenue recognition – contract sales
IFRS 15 requires entities to exercise judgement taking into consideration all the relevant facts and circumstances when
applying each step of the model to contracts with their customers. The Group uses the percentage of completion
method in accounting for its proprietary contracts, as the revenue should be recognised over time by measuring the
progress towards complete satisfaction of the performance obligation. Progress is measured in a manner generally
consistent with the physical progress on the project. Use of the percentage of completion method requires the Group
to estimate the services performed to date as a proportion of the total services to be performed. The proportion of
services performed to total services to be performed can differ from management’s estimates, influencing the amount
of revenue recognised in the period. Generally, the percentage of completion is agreed upon with the customer on a
monthly basis and is based upon acquisition of data, measuring receiver deployment; receiver recovery; and tow lines
58
completed.
Determining the lease term of contracts with renewal options – Group as lessee
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by
an option to extend the lease if it is reasonably certain to be exercised. The Group has lease contracts for one vessel
that includes extension options. The Group applies judgement in evaluation whether it is reasonably certain whether
or not to exercise the option to renew the lease. That is, it considers all relevant factors that create an economic
incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there
is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to
exercise the option to renew.
The renewal periods for the vessel Atlantic Guardian are not included as part of the lease term as these are not
reasonably certain to be exercised.
Refer to Note 27 for information on leases.
Development costs
Development costs are capitalised in accordance with accounting policy in Note 2.8 c). Initial capitalisation of costs is
based on management’s judgement that technological and economic feasibility is confirmed, usually when a product
development project has reached a defined milestone according to established project management model. As of 31
December 2023, the carrying amount of capitalised development costs is USD 12 thousand (2022: USD 106 thousand).
The Group has prepared its financial statements under the going concern assumption, and the Board confirms in
accordance with Section 3-3a of the Norwegian Accounting Act that the going concern assumption is applicable. The
Group’s reported results, its business strategy, its current budgets and financing, as well as its long-term strategic
forecasts provide the basis for the going concern assumption. See also “Liquidity risk” above for more information
about the going concern assumption.
The cash and cash equivalent position as of 31 December 2023 was USD 10.3 million. As further described under Risks
and uncertainty factors, the Company’s outstanding convertible bond and its bank facilities contain financial covenants
requiring that the Company has a minimum of USD 2.5 million in free cash and / or cash equivalents.
As of 31 December 2023, the carrying value of the Group’s equity was USD 0.6 million, down from USD 8.7 million at
the end of 2022.
The Company’s equity amounted to NOK 23.2 million as of 31 December 2023, up from NOK 5.5 million at the end of
The Group has entered several cooperation agreements regarding EM multi-client surveys in the Barents Sea, Gulf of
Mexico and Brazil. The cooperation agreements are joint operations.
EMGS has received funding and/or seismic data against a revenue share on prefunding, late sales and uplift revenues.
EMGS has provided the vessel, performed the data acquisition and finally provided the data processing services. The
acquired data remains the property of EMGS.
When EMGS licenses data to customers in areas subject to revenue sharing, the Group invoices and collects payments
from the customers for the entire sales amount. The related accounts receivable is presented gross, while the portion
due to the partner upon collection from the customer is presented as a short-term liability.
EMGS did not recognize any revenue in 2023 from the sale of multi-client library with cooperation agreements in 2023
EMGS’ share of the revenue from the sale of data from the multi-client library with a cooperation agreement in 2022
was USD 6 062 thousand. EMGS only recognises revenue net of revenue share on late sales in which a cooperation
59
For management purposes, the Group is organised into one reportable segment. The Group offers EM services, and
the sale contracts and costs are incurred worldwide.
The Group uses a patented electromagnetic survey method to find hydrocarbons in offshore reservoirs. The Group’s
services help oil and gas companies to improve their exploration success rates.
Management monitors the operating result of the single reportable segment for the purpose of making decisions
about resource allocation and performance assessment.
No operating segments have been aggregated to form the above reportable operating segment. The customers are
international oil companies, and the risk and profitability are similar in the different geographical areas.
The Group's property, plant and equipment is mainly the survey equipment on the vessel. As the surveys are executed
worldwide, the Group is not able to allocate any assets to different geographical areas.
Geographic information
Revenues from external customers:
Amounts in USD 1 000 |
2023 |
2022 |
Europe, Middle East and Africa* |
11 |
44 |
Norway |
7,426 |
20,884 |
North and South America |
444 |
14,010 |
Asia and the Pacific Ocean |
107 |
41 |
Total |
7,988 |
34,979 |
*excluding Norway
The revenue information above is based on the location of the survey.
Two external customers amounted to 10% or more of the Group's total revenues in 2023 (two external customer in
2022). Total revenues from these customers were in 2023 USD 3 300 thousand and USD 1 245 thousand (for 2022:
Amounts in USD 1 000 |
2023 |
2022 |
Charter hire and crew expenses |
674 |
897 |
Fuel |
14 |
2,291 |
Withholding tax cost |
0 |
-56 |
Capitalisation of multi-client costs |
0 |
-1,214 |
Other external services |
541 |
2,323 |
Total charter hire, fuel and crew expenses |
1,228 |
4,241 |
60
Amounts in USD 1 000 |
2023 |
2022 |
Employee expenses |
||
Salaries |
2,071 |
3,170 |
Social security tax |
553 |
380 |
Pension costs (Note 22) |
208 |
180 |
Other payments |
115 |
151 |
Cost of share based payment (Note 15) |
3 |
4 |
Total employee expenses |
2,950 |
3,884 |
Compensation of key management personnel of the Group |
||
Salary |
465 |
1,088 |
Bonus paid in the year |
266 |
0 |
Share options |
0 |
1 |
Pension benefits |
40 |
40 |
Other benefits |
5 |
5 |
Total management remuneration |
776 |
1,135 |
The average number of full-time equivalents in management was 3 in 2023 (2022: 3).
61
Amounts in USD 1 000 |
2023 |
2022 |
Office rental and housing expenses |
195 |
319 |
Consumables and maintenance |
251 |
270 |
Consultancy fees * |
1,330 |
1,696 |
Travel expenses |
168 |
103 |
Insurance |
322 |
354 |
Marketing |
61 |
46 |
Other operating expenses |
518 |
231 |
Total other operating expenses |
2,844 |
3,018 |
* Fees to auditor included in consultancy fees: |
||
Statutory audit services |
133 |
121 |
Further assurance services |
24 |
22 |
Tax advisory services |
6 |
6 |
Total fees to auditor |
163 |
149 |
Research and development costs consist of USD 0 (2022: USD 0) charged to the income statement as part of operating
expenses.
62
Amounts in USD 1 000 |
2023 |
2022 |
Financial income: |
||
Interest income |
1,251 |
388 |
Gains on financial assets and liabilities |
(1) |
671 |
Total financial income |
1,250 |
1,059 |
Financial expenses: |
||
Interest expenses lease liabilities |
310 |
504 |
Interest expense on bonds |
2,395 |
2,071 |
Interest expense partner contribution DeepBlue source |
- |
154 |
Foreign exchange losses related to loans and receivables |
(58) |
7 |
Impairment financial assest |
0 |
0 |
Other interest expenses |
700 |
290 |
Total financial expenses |
3,347 |
3,027 |
Net financial items |
(2,097) |
(1,969) |
The exchange rate effects in 2023 and 2022 are mainly related to accounts receivables and trade payables in NOK in
EMGS ASA, and accounts receivables and trade payables in NOK or other currencies than USD in other group
Amounts in USD 1 000 |
2023 |
2022 |
Change in deferred tax asset |
0 |
0 |
Current tax |
-21 |
-46 |
Total income tax expense |
-21 |
-46 |
The expense/(benefit) for income taxes from continuing operations differs from the amount computed when applying
the Norwegian statutory tax rate to income/(loss) before taxes as the result of the following:
63
Amounts in USD 1 000 |
2023 |
2022 |
Income/(Loss) before tax |
-8,199 |
11,146 |
Tax at the domestic rate of 22% |
-1,804 |
2,452 |
Non-deductible expenses |
-575 |
835 |
Change in non recognised deferred tax asset |
2,379 |
-3,287 |
Effect of change in tax rate |
0 |
0 |
Effect of change in accounting principles |
0 |
0 |
Foreign income taxes |
-21 |
-46 |
Total tax charge |
-21 |
-46 |
The current tax liabilities in 2023 of USD 2 945 thousand mainly consist of accruals for taxes related to operations in
Amounts in USD 1 000 |
2023 |
2022 |
Deferred taxes detailed: |
||
Property, plant and equipment |
351 |
1,157 |
Inventory |
0 |
0 |
Accrued foreign income taxes |
166 |
-666 |
Loss carried forward |
-88,667 |
-86,262 |
Total deferred tax (asset)/liability |
-88,150 |
-85,771 |
Non-recognised deferred tax assets |
88,150 |
85,771 |
Net deferred tax asset |
0 |
0 |
Deferred tax assets are recognised only to the extent that the realisation of the related tax benefit through the future
taxable profits is probable.
Unused tax losses are generated in Brazil, Norway, Mexico, Malaysia and the US. It can be carried forward indefinitely
64
Number of |
Ordinary |
Other |
|||
shares |
share |
paid- |
|||
capital |
Share |
in |
|||
Amounts in USD 1 000 (except number of shares) |
premium |
capital |
Total |
||
At 1 January 2022 |
130,969,690 |
15,285 |
0 |
56,206 |
71,490 |
0 |
|||||
At 31 December 2022 |
130,969,690 |
15,285 |
0 |
56,206 |
71,490 |
At 1 January 2023 |
130,969,690 |
15,285 |
0 |
56,206 |
71,490 |
Cost of shares issued |
0 |
0 |
0 |
99 |
99 |
At 31 December 2023 |
130,969,690 |
15,285 |
0 |
56,305 |
71,589 |
The Board is granted authorisation to increase the share capital by 30,123,029 shares so the total authorised number
of ordinary shares is 161 092 719 (2022: 161 092 719) with a par value of USD 0.10 (NOK 1) per share. Total number
of shares as of 31 December 2023 is 130 969 690 (2022: 130 969 690). All issued shares are denominated in NOK and
fully paid.
65
The largest shareholders as of 31 December 2023:
Number of |
||
ordinary |
||
shares |
Percentage |
|
Siem Investments S.À.R.L. |
43,327,467 |
33.08 % |
PERESTROIKA AS |
38,652,795 |
29.51 % |
RAGE, PER EGIL |
2,340,500 |
1.79 % |
NORDNET LIVSFORSIKRING AS |
1,722,137 |
1.31 % |
METIZ CATCHLOG AS |
1,008,150 |
0.77 % |
SPORTSMAGASINET AS |
1,000,000 |
0.76 % |
HEGGELUND, JAN |
915,240 |
0.70 % |
JAGLAND, ERIK SMITH |
900,000 |
0.69 % |
Nordnet Bank AB |
806,653 |
0.62 % |
KEMP, KRISTIAN NEIL |
750,000 |
0.57 % |
NÆRINGSENTREPRENØREN AS |
603,000 |
0.46 % |
SKOGMO, OLE JØRGEN |
601,000 |
0.46 % |
STAVSETH AS |
600,000 |
0.46 % |
SOUTHGARDEN AS |
591,110 |
0.45 % |
KONGSRUD, RUNE JACOB |
507,837 |
0.39 % |
RYGG, JAN WIGGO |
505,000 |
0.39 % |
EIKANGER INVEST AS |
500,000 |
0.38 % |
ØVERLAND, JARLE |
457,039 |
0.35 % |
SLENESET BYGG AS |
447,983 |
0.34 % |
The Bank of New York Mellon |
443,761 |
0.34 % |
Other |
34,290,018 |
26.18 % |
Total |
130,969,690 |
100 % |
The expense recognised for employee services during the year is:
Amounts in USD 1 000 |
2023 |
2022 |
Expense arising from share based payment transactions |
1 |
4 |
The vesting period is the period during which the conditions to obtain the right to exercise are to be satisfied. The
66
options granted in previous years vest as follows:
• 25% on the one-year anniversary of the Grant Date
• 25% on the two-year anniversary of the Grant Date
• 25% on the three-year anniversary of the Grant Date
• 25% on the four-year anniversary of the Grant Date
The Grant expires two years following the Vesting Date. A condition to hold options within the Company is continued
employment.
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may
not be actual outcome.
The Group has no legal or constructive obligation to repurchase or settle the options in cash.
The cost of the options is calculated based on the Black Scholes option pricing model.
The following table lists the inputs to the model used for the plan for the option granted during the year ended 31
December 2023:
2023 | |
Expected volatility | 86 % |
Risk free interest rate | 1.28 % |
Expected life of options (years) | 3.5 |
Weighted average share price (USD) | 2.14 |
Expected volatility was determined based on historic volatility on comparable listed companies. Movements in the
number of share options outstanding and their related weighted average exercise prices are as follows:
2023 | 2022 | |||
Average | Average | |||
exercise | exercise | |||
price in | price in | |||
USD per | USD per | |||
share | Options | share | Options | |
At 1 January | 0.22 | 168,750 | 0.25 | 168,750 |
Granted | 0.00 | 0 | 0.00 | 0 |
Exercised | 0.29 | -28,125 | 0.00 | 0 |
Released | 0.00 | 0 | 0.00 | 0 |
Forfeited | 0.22 | -12,500 | 0.00 | 0 |
Expired | 0.22 | -15,625 | 0.00 | 0 |
At 31 December | 0.21 | 112,500 | 0.22 | 168,750 |
Exercisable at 31 December | 0.21 | 112,500 | 0.22 | 168,750 |
67
Share options outstanding at the end of the year have the following expiry date and exercise prices:
2023 |
||
In USD per share |
Options |
|
2024 |
0.21 |
28,125 |
2025 |
0.21 |
28,125 |
2026 |
0.21 |
28,125 |
2027 |
0.21 |
28,125 |
112,500 |
The weighted average remaining contractual life for the share options outstanding as of 31 December 2023 is 1.1 years
(2022: 1.55 years).
68
Software |
Multi- |
|||
and |
client |
|||
Amounts in USD 1 000 |
licenses |
Patents |
library |
Total |
Year ended 31 December 2022 |
||||
Opening carrying value |
422 |
0 |
2,412 |
2,834 |
Additions |
34 |
0 |
1,602 |
1,636 |
Amortisation charge |
-350 |
0 |
-2,513 |
-2,863 |
Impairment |
0 |
0 |
3 |
3 |
| Closing carrying value |
106 |
0 |
1,504 |
1,610 |
At 31 December 2022 |
||||
Accumulated cost |
17,400 |
3,667 |
161,899 |
182,967 |
Accumulated amortisation and impairment |
-17,294 |
-3,667 |
-160,395 |
-181,356 |
| Net carrying value |
106 |
0 |
1,504 |
1,610 |
Year ended 31 December 2023 |
||||
| Opening carrying value |
106 |
0 |
1,504 |
1,610 |
Additions |
0 |
0 |
0 |
0 |
Transferred from assets under construction to intangible assets |
0 |
0 |
0 |
0 |
| Accumulated costs on disposals |
0 |
0 |
0 |
0 |
Amortisation charge |
-93 |
0 |
-553 |
-646 |
Accumulated depreciation on disposals |
0 |
0 |
0 |
0 |
Impairment |
0 |
0 |
0 |
0 |
| Closing carrying value |
13 |
0 |
951 |
964 |
At 31 December 2023 |
||||
Accumulated cost |
17,400 |
3,667 |
161,899 |
182,967 |
Accumulated amortisation and impairment |
-17,387 |
-3,667 |
-160,948 |
-182,003 |
| Net carrying value |
13 |
0 |
951 |
964 |
Asset |
Estimated useful life |
Patents |
10 – 15 years |
Software and licenses |
3 years |
Multi-client library |
4 years |
The Group performs impairment tests when there are indicators of impairment at least once a year. The Group
considers the relationship between the total revenue forecast and the book value of each multi-client project when
reviewing for indicators of impairment, hence the book value of the multi-client projects is highly influenced by the
future sales forecasts.
The Group did not record impairments of the multi-client library in 2023 or in 2022. The impairment test was done for
69
each multi-client project individually. The net present value of the future sales for each project was compared to the
book value of the project. When calculating the net present value of future sales, a discount rate of 15% was used. A
1 % increase in the discount rate would have reduced the total net present value of future sales by USD 13 thousand
70
Machiner |
Hardwar |
Assets |
|||
y and |
e and |
under |
|||
equipme |
furnitur |
Cluste |
constructi |
||
Amounts in USD 1 000 |
nt |
e |
r |
Total |
on |
Year ended 31 December 2022 |
|||||
Opening carrying value |
12,520 |
121 |
107 |
12,748 |
3 |
| Additions |
295 |
22 |
0 |
317 |
0 |
| Accumulated costs on disposals |
0 |
0 |
0 |
0 |
0 |
Transferred from assets under construction to PPE |
0 |
0 |
0 |
0 |
0 |
Transferred from assets under construction to |
0 |
0 |
0 |
||
intangible assets |
0 |
0 |
|||
Depreciation charge |
-3,713 |
-53 |
-46 |
-3,812 |
0 |
Accumulated depreciation on disposals |
0 |
0 |
0 |
0 |
0 |
| Impairment |
0 |
0 |
0 |
0 |
0 |
Closing carrying value |
9,102 |
89 |
61 |
9,253 |
3 |
At 31 December 2022 |
|||||
153,442 |
22,041 |
12,51 |
187,99 |
||
Accumulated cost |
3 |
5 |
3,127 |
||
-144,341 |
-21,952 |
- |
- |
-3,124 |
|
12,45 |
178,74 |
||||
Accumulated amortisation and impairment |
1 |
5 |
|||
| Net carrying value |
9,102 |
89 |
61 |
9,253 |
3 |
Year ended 31 December 2023 |
|||||
Opening carrying value |
9,102 |
89 |
61 |
9,253 |
3 |
Additions |
919 |
27 |
0 |
945 |
0 |
| Accumulated costs on disposals |
0 |
0 |
0 |
0 |
0 |
| Transferred from assets under construction to PPE |
0 |
0 |
0 |
0 |
0 |
Transferred from assets under construction to |
0 |
0 |
0 |
||
intangible assets |
0 |
0 |
|||
| Depreciation charge |
-3,518 |
-76 |
-19 |
-3,613 |
0 |
| Accumulated depreciation on disposals |
0 |
0 |
0 |
0 |
0 |
Impairment |
0 |
0 |
0 |
0 |
-3 |
| Closing carrying value |
6,502 |
40 |
42 |
6,585 |
0 |
At 31 December 2023 |
|||||
154,361 |
22,067 |
12,51 |
188,94 |
||
Accumulated cost |
3 |
1 |
3,127 |
||
-147,859 |
-22,028 |
- |
- |
-3,127 |
|
12,47 |
182,35 |
||||
Accumulated amortisation and impairment |
0 |
8 |
|||
| Net carrying value |
6,502 |
40 |
42 |
6,585 |
0 |
71
Asset |
Estimated useful life |
Machinery and equipment |
3 – 8 years |
Hardware and furniture |
3 - 5 years |
Cluster |
5 years |
Assets under construction
Assets under construction are internal capital expenditure projects that are not completed. These projects are mainly
development and production of acquisition the EM equipment, including receivers, the source and the navigation
system.
The DeepBlue
EMGS commenced a Joint Industry Project (“the DeepBlue”) in 2012, supported by Shell and Equinor, for developing
the Next Generation EM equipment. The benefit of using the DeepBlue equipment is deeper penetration and
significantly improved imaging at increased burial depths. The improved imaging leads to improved confidence and
enhanced interpretation possibilities. The prototype equipment was completed in 2017 with its first commercial
survey summer 2017. The carrying value of the DeepBlue equipment as of 31 December 2023 was USD 5 294 thousand
(2022: USD 8 470 thousand).
The Group performs impairment tests when there are indicators of impairment and at least once a year. The Group
considers the relationship between the total revenue forecast and the total carrying value of the DeepBlue when
reviewing for indicators of impairment.
No impairment was made to the DeepBlue equipment set in 2023 nor in 2022. The recoverable amount used in the
impairment test was determined based on cash flow projections from the 2024 budget and assumptions regarding
additional revenue stream from the DeepBlue equipment. The discount rate applied to cash flow projections was 12%.
The Company used the best estimate of additional revenue stream from the DeepBlue equipment compared with the
conventional equipment as revenue forecast in the impairment model. The DeepBlue expanded the addressable
market for the Group as the extra power can be used to increase the imaging depth from 2000-2500m to 3000-4000m
below the seabed, and/or improve the imaging resolution and ability to see smaller targets at shallower burial depths.
The discount rate used in the net present value calculation was based on the specific circumstances of the Group and
was derived from its weighted average cost of capital (WACC). The WACC took both debt and equity into account. The
cost of equity was derived from the expected return on investment by the Group's investors. The cost of debt was
based on the interest-bearing borrowings the Group is obliged to service. The beta factor was in line with the industry
Sensitivity analysis for key assumptions
The table below shows the percentage change clearance provided by the current headroom of USD 6 968 thousand
(2022: USD 2 125 thousand) for the DeepBlue equipment set by changing assumptions, given that the remainder of
the assumptions are constant:
Headroom |
||||
Clearance |
||||
2023 |
2022 |
2021 |
||
Discount rate |
increase |
572 % |
10 % |
3 % |
Dayrate |
decrease |
-58 % |
-10 % |
-4 % |
Number of survey days per year |
decrease |
-63 % |
-24 % |
-8 % |
72
Amounts in USD 1 000 |
2023 |
2022 |
Non-current |
||
Other receivables and prepayments |
2,929 |
2,693 |
Financial lease receivables |
0 |
0 |
2,929 |
2,693 |
|
Current |
||
Other receivables and prepayments |
179 |
506 |
179 |
506 |
|
Total other receivables and prepayments |
3,108 |
3,199 |
Amounts in USD 1 000 |
2023 |
2022 |
Equipment components and parts, at cost |
2,639 |
2,773 |
Anchors and batteries, at cost |
514 |
514 |
Fuel, at cost |
857 |
871 |
Total Spare parts, fuel, anchors and batteries |
4,010 |
4,158 |
An impairment, related to spare parts, fuel anchors and batteries, of USD 79 thousand was made in 2023, no
Amounts in USD 1 000 |
2023 |
2022 |
Accounts receivable |
1,020 |
7,276 |
Accrued revenues |
104 |
622 |
Impaired receivable |
0 |
0 |
Total trade receivables and accrued revenues |
1,124 |
7,898 |
Trade receivables are non-interest bearing and the payment terms are generally net 30-60 days.
Fair value of the receivables approximates the nominal values, less provision for doubtful receivables.
Generally, the Group trades with recognised, creditworthy customers. The customers are usually large oil companies
with an appropriate credit history.
73
Only in a few instances, services are performed for smaller companies with limited credit history.
Per 31 December 2023 EMGS did not find it necessary to make a provision for doubtful trade receivables (2022: USD
0).
The aging analysis of trade receivables is as follows:
Amounts in USD 1 000 |
|||||||
Total |
Not Due |
< 30 |
30 - 60 days |
60 - 90 days |
90 - 120 days |
> 120 |
|
31 December 2023 |
1 020 |
546 |
400 |
7 |
67 |
0 |
0 |
31 December 2022 |
7 276 |
7 245 |
29 |
0 |
0 |
0 |
2 |
Amounts in USD 1 000 |
2023 |
2022 |
Cash and cash equivalents |
10,255 |
11,434 |
Restricted cash |
193 |
196 |
Total cash and cash equivalents and restriced cash |
10,448 |
11,630 |
Cash earns interest at floating rates based on daily bank deposit rates.
Restricted cash consists of USD 193 thousand held in restricted accounts as security against employee taxes withheld.
The Company is required to have an occupational pension plan in accordance with the Norwegian law on required
occupational pension ("lov om obligatorisk tjenestepensjon"). The Company's pension arrangements fulfill the
requirements of the law.
In 2023, the defined contribution plan involved a contribution level of 5 % of Base Salary from 0 to 7.1 G and 15 % of
Base Salary from 7.1 up to 12 G, where G is the National Insurance basic amount (Folketrygdens grunnbeløp). G
equals to NOK 118 620 as of 31 December 2023.
The Company`s contribution to the Norwegian defined contribution plan for the year ended 31 December 2023 was
USD 195 thousand (2022: USD 173 thousand).
As of 31 December 2023, there were 18 employees covered by the defined contribution pension plan (2022: 19).
Defined contribution schemes
Employees not eligible for coverage under the defined contribution plan applicable in Norway are eligible to
participate in other Company pension schemes or to receive a pension compensation. All the schemes are considered
defined contribution plans. For some of the schemes, subject to statutory limitations, employees may make voluntary
contributions in addition to the Company’s contributions. Total pension scheme contributions made by the Company
74
Interest rate |
Maturity |
|||
Amounts in USD 1 000 |
2023 |
2022 |
||
Non-current |
||||
May 9th 2025 |
||||
Senior Unsecured Convertible Bonds 2018/2023(2025) EMGS 03 |
SOFR + 6.50% |
19,584 |
19,484 |
|
2-3 years |
||||
Lease liabilites |
11.9% |
139 |
118 |
|
19,722 |
19,601 |
|||
Current |
||||
Up to 1 year |
||||
Lease liabilites |
3.6-11.9% |
2,194 |
5,341 |
|
2,194 |
5,341 |
|||
Total financial liabilities |
21,917 |
24,942 |
USD 32.5 million convertible bond
On 9 May 2018, EMGS secured a USD 32.5 million convertible bond bearing an interest at 3 months LIBOR + 5.50%
p.a. The loan can at any time be converted into common shares in EMGS at the conversion price of USD 0.42677 until
the maturity date on 9 May 2023. On 9 February 2022, the Unsecured Convertible Bond 2018/2023 was extended by
24 months, until 9 May 2025, and the interest margin was increased by 100 bps to LIBOR + 6.5%. The updated terms
have been assessed not to be substantially different from the original terms. Thus, the original bond has not been
derecognised, and the extension has instead been accounted for as a modification of the original bond. The
modification did not lead to any significant adjustments to the amortised cost of the bond. On 26 June 2023, EMGS
entered into an amendment agreement to switch the reference rate from 3 months LIBOR to the Compounded Daily
SOFR. The interest margin remains unchanged at 6.5%, however, a credit adjustment spread of 0.26161 per cent per
annum was added.
The USD 32.5 million convertible bond can be seen as a contract settled by an entity by delivering a fixed amount of
its own equity instruments in exchange for a fixed amount of foreign currency. The economic components of this
convertible bond are:
(a)
A liability. On issuance of the convertible bond, the fair value of the liability component was determined using a
market rate for an equivalent non-convertible bond; and classified as a financial liability measured at amortised
cost (net of transaction costs) until it is extinguished on conversion or redemption.
(b)
An equity component. The residual of the proceeds was allocated to the conversion option that was recognised
in shareholders’ equity.
At inception, the value of the liability component was estimated to USD 30.2 million. Amortised cost as 31 December
2023 was USD 19.6 million (2022: USD 19.5 million) including two separate bond buy-backs with a combined nominal
value of USD 8 million in 2021 and one bond buy-back with a nominal value of USD 5.0 million in 2022. The equity
component, the carrying amount of the conversion option, was estimated to USD 1.9 million at inception and is not
remeasured in subsequent periods.
The convertible bond contains financial covenants requiring free cash and cash equivalents of at least USD 2.5 million.
In addition, the bond agreement has restrictions regarding the Company's ability to sell the multi-client library, declare
or make dividend payments, incur additional indebtedness, change its business or enter into speculative financial
derivative agreements. As of 31 December 2023, the free cash and cash equivalents totaled USD 10.3 million (2022:
USD 11.4 million).
75
The convertible bond is unsecured.
Lease liabilities and interest bearing debt
The Group has lease contracts for various items of IT-equipment, offices and vessels. The Group’s obligations under
its leases are secured by the lessor’s title to the leased assets, see Note 27.
The maturity of non-current borrowings is as follows:
The exposure of the Group’s borrowings to interest rate changes related to floating rate obligations and the contractual
repricing dates of those obligations at the balance sheet dates are as follows:
Amounts in USD 1 000 | 2023 | 2022 |
6 months or less | 21,917 | 24,942 |
6-12 months | 0 | 0 |
1-5 years | 0 | 0 |
Over 5 years | 0 | 0 |
Total | 21,917 | 24,942 |
The carrying amounts and fair value of the non-current borrowings are as follows:
Carrying amounts | ||
Amounts in USD 1 000 | 2023 | 2022 |
Senior Unsecured Convertible Bonds 2018/2023(2025) EMGS 03 | 19,584 | 19,484 |
Leasing liabilities | 2,333 | 5,458 |
The carrying amount of the Group’s borrowings are as follows:
Amounts in USD 1 000 | 2023 | 2022 |
USD denominated | 21,537 | 24,485 |
NOK denominated | 380 | 457 |
Other | 0 | 0 |
Total | 21,917 | 24,942 |
76
The liabilities arising from financing activities are as follows:
2022 |
||||||
Cash |
||||||
Non- cash changes |
Closing |
|||||
flows |
||||||
Opening |
New Leases |
Financial |
||||
Financial |
||||||
Currency |
& |
lease |
||||
Gain |
||||||
Amounts in USD 1 000 |
Modifications |
liabilities |
||||
Current interest bearing loans |
0 |
0 |
0 |
0 |
0 |
0 |
Current lease liabilities |
6,239 |
0 |
4,854 |
0 |
-5,753 |
5,341 |
Non-current interst bearing loans |
24,295 |
157 |
0 |
-671 |
-4,297 |
19,484 |
Non-current lease liablities |
522 |
0 |
0 |
0 |
-404 |
118 |
Total 2022 |
31,056 |
157 |
4,854 |
-671 |
-10,454 |
24,942 |
2023 |
||||||
Cash |
||||||
Non- cash changes |
Closing |
|||||
flows |
||||||
Opening |
New Leases |
Financial |
||||
Financial |
||||||
Currency |
& |
lease |
||||
Gain |
||||||
Amounts in USD 1 000 |
Modifications |
liabilities |
||||
Current interest bearing loans |
0 |
0 |
0 |
0 |
0 |
0 |
Current lease liabilities |
5,341 |
0 |
-655 |
0 |
-2,491 |
2,194 |
Non-current interst bearing loans |
19,484 |
101 |
0 |
-1 |
0 |
19,584 |
Non-current lease liablities |
118 |
0 |
111 |
0 |
-90 |
139 |
Total 2023 |
24,942 |
101 |
-544 |
-1 |
-2,580 |
21,917 |
The fair value hierarchy discloses how fair value is determined for financial instruments recorded at fair value in the
consolidated financial statement.
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2: assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs
that are observable either directly or indirectly.
Level 3: techniques for which all inputs which have a significant effect on the recorded fair value that is not based on
observable market data.
The carrying amounts of cash and cash equivalents, restricted cash, trade receivables, other receivables, trade
payables and other short-term liabilities approximate their respective fair values because of the short maturities of
Trade payables are generally non-interest bearing and the payment terms are net 30 days. Fair value of the payables
77
Amounts in USD 1 000 |
2023 |
2022 |
Accrued expenses |
583 |
1,109 |
Holiday pay |
287 |
261 |
Social security taxes and other public duties |
272 |
251 |
Other short term liabilities |
27 |
1,482 |
Total other short term liabilities |
1,169 |
3,104 |
The Group has lease contracts for various items of IT-equipment, offices and vessels. The Group’s obligations under
its leases are secured by the lessor’s title to the leased assets. Some of the lease contracts include extension options.
See Note 4 for information on extension options.
The Group also has certain leases with lease terms of 12 months or less and leases of office equipment with low value.
The Group applies the “short-term lease” and “lease of low-value assets” recognition exemptions for these leases.
These leases include laptops and printers for which a total expense recorded in 2023 was USD 22 thousand (2022: USD
34 thousand).
Set out below are the carrying amounts of right-of-use assets and lease liabilities recognised and the movements
during the period: The modification to the vessel lease in 2023 is related to the extension of the lease for the Atlantic
Guardian by one year. The modification to the office leases is related to the extension of the Oslo and Trondheim
office leases.
Interest |
||||||
expense |
||||||
Lease |
on lease |
|||||
| Right-of-use assets |
liabilities |
liabilitiles |
||||
Vessel |
Office |
IT |
||||
Amounts in USD 1 000 |
leases |
leases |
equipment |
Total |
Total |
|
As at 1 January 2022 |
3,757 |
443 |
265 |
4,465 |
6,762 |
|
Additions |
0 |
0 |
0 |
0 |
0 |
|
Depreciation expense |
-3,738 |
-197 |
-114 |
-4,049 |
0 |
|
Depreciation capitalised as multi-client expenses |
-388 |
0 |
0 |
-388 |
0 |
|
Modification |
4,854 |
0 |
0 |
4,854 |
4,854 |
|
Payments |
0 |
0 |
0 |
0 |
-6,157 |
-504 |
As at 31 December 2022 |
4,484 |
246 |
151 |
4,882 |
5,459 |
-504 |
78
Interest |
||||||
expense |
||||||
Lease |
on lease |
|||||
| Right-of-use assets |
liabilities |
liabilitiles |
||||
Vessel |
Office |
IT |
||||
Amounts in USD 1 000 |
leases |
leases |
equipment |
Total |
Total |
|
As at 1 January 2023 |
4,484 |
246 |
151 |
4,882 |
5,459 |
|
Additions |
0 |
0 |
0 |
0 |
0 |
|
Depreciation expense |
-2,506 |
-195 |
-107 |
-2,808 |
0 |
|
Depreciation capitalised as multi-client expenses |
0 |
0 |
0 |
0 |
0 |
|
Modification |
-808 |
264 |
0 |
-544 |
-544 |
|
Payments |
0 |
0 |
0 |
0 |
-2,580 |
-310 |
As at 31 December 2023 |
1,170 |
315 |
44 |
1,530 |
2,333 |
-310 |
The maturity analysis of the lease liabilities is disclosed below:
Amounts in USD 1 000 |
2023 |
2022 |
Lease agreements – minimum lease payments: |
||
No later than 1 year |
2,329 |
5,562 |
After 1 year and no more than 5 years |
151 |
120 |
After more than 5 years |
0 |
0 |
Total minimum lease payments |
2,480 |
5,682 |
Future finance charges on leases |
-147 |
-224 |
Present value of lease agreements |
2,333 |
5,458 |
The following amounts are recognised in profit or loss:
Amounts in USD 1 000 |
2023 |
2022 |
Depreciation expense of right-of-use assets |
2,808 |
4,049 |
Interest expense on lease liabilities |
310 |
504 |
Total amounts recognised in profit or loss |
3,118 |
4,553 |
The Group had total cash outflows for leases of USD 2 890 thousand in 2023 (2022: USD 6 661 thousand). The future
cash outflows relating to leases that have not yet commenced are disclosed in Note 29.
Depreciation of right-of use assets as presented in the Consolidated Income Statement USD 2 808 thousand (2022:
USD 4 049 thousand) is net of depreciation capitalised as multi-client expense as opposed to the Consolidated
Statement of Cash Flows. Gross depreciation of USD 2 808 thousand (2022: USD 4 437 thousand) is included in
The Group does not have any contingent liabilities in respect of guarantees and matters arising in the ordinary course
79
Lease commitments:
The Group has lease agreements on IT-equipment, offices and vessels.
The future aggregate minimum lease payments under non-cancellable leases are as follows:
Amounts in USD 1 000 |
2023 |
2022 |
No later than 1 year |
2,194 |
5,539 |
After 1 year and no more than 5 years |
139 |
113 |
Total operating lease commitments |
2,333 |
5,653 |
Contract terms on renewal of the leases are to be negotiated at or before the expiry of the contracts. The vessel
Note 30 – Legal claims
EMGS is involved in the following legal processes:
EMGS is engaged in several tax discussions with the Brazilian internal revenue service. These discussions are related
to two main categories of claims by the IRS: (i) a non-approval by the IRS of certain tax offset requests by EMGS related
to a credit of Social Contribution on Net Profits (all as provided for under Brazilian law); and (ii) payment of an
administrative penalty fee of 50% over a previously disputed tax credit claim. EMGS disputes all of the claims received
from the IRS and has initiated administrative proceedings in Brazil to that effect. While EMGS views a negative
outcome as unlikely, should EMGS ultimately be unsuccessful in disputing these claims, the aggregate potential
additional tax liability amounts to approximately USD 200 thousand (exclusive of interest and penalties).
In March of 2024, EMGS won a court case related to the applicability of service tax on multi-client sales, filed by the
Rio de Janeiro municipality in the amount of BRL 29.7 million. In the current litigation, the city of Rio de Janeiro is
ostensibly trying to collect the same tax under which EMGS received a positive final verdict in 2019. While EMGS
expects that the 2024 ruling will be appealed, we do not anticipate the decision being overturned. EMGS has not made
80
Basic earnings/(loss) per share is calculated by dividing net profit attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares outstanding during the year.
Amounts in USD 1 000 |
2023 |
2022 |
Income/(loss) attributable to equity holders of the Company |
-8,178 |
11,192 |
Basic earnings per share |
-0.06 |
0.09 |
Diluted earnings per share |
-0.06 |
0.09 |
Weighted average number of ordinary shares for the purpose of basic earnings per share (thousands) |
130,970 |
130,970 |
Effect of dilutive potential shares: |
||
Share options (thousands) |
113 |
169 |
Weighted average number of ordinary shares for the purpose of diluted earnings per share (thousands) |
131,082 |
131,138 |
The following table provides the amounts paid on transactions that have been entered into with related parties for
the relevant financial year:
Amounts in USD 1 000 |
2023 |
2022 |
Momentum S.A.R.L. |
0 |
0 |
Perestroika AS |
0 |
0 |
RWC European Focus Master Inc. |
0 |
4,221 |
Total |
0 |
4,221 |
In 2022, the Company performed a bond buy-back with a total combined nominal value of USD 5 million. The bonds
were repurchased at 86.5% of par. The total paid to related parties as part of the bond buy-back program was USD 4.2
81
Amounts in USD 1 000
Share |
Share |
||||
ownership |
ownership |
||||
/ voting |
/ voting |
||||
| rights |
rights |
Equity 31 |
Equity 31 |
||
2023 |
2022 |
Decembe |
Decembe |
||
Company |
r 2023 |
r 2022 |
Location |
||
Sea Bed Logging - Data Storage Company AS |
100 % |
100 % |
23 |
25 |
Oslo, Norway |
EMGS Americas 1 AS |
100 % |
100 % |
11,924 |
11,852 |
Oslo, Norway |
CSEM Production AS |
100 % |
100 % |
12 |
11 |
Oslo, Norway |
EM Multi-client AS |
100 % |
100 % |
1,768 |
1,705 |
Oslo, Norway |
EMGS Global AS |
100 % |
100 % |
618 |
857 |
Oslo, Norway |
EMGS Americas Inc |
100 % |
100 % |
-1,063 |
-1,020 |
Delaware, USA |
EMGS Shipping Mexico S. de R.L. de C.V. |
99%/100% |
99%/100% |
597 |
538 |
Col. Del Valle, Mexico |
EMGS Sea Bed Logging Mexico S.A. de C.V. |
100 % |
100 % |
-2,766 |
-2,709 |
Col. Del Valle, Mexico |
EMGS Services Mexico S.A. de C.V. |
99 % |
99 % |
236 |
264 |
Col. Del Valle, Mexico |
British Columbia, |
|||||
Electromagnetic Geoservices Canada Inc |
100 % |
100 % |
-9 |
-701 |
Canada |
Servicios Geologicos Electromagneticos do Brasil |
|||||
Ltda |
100 % |
100 % |
-51,026 |
-51,027 |
Rio de Janeiro, Brasil |
EMGS Surveys AS |
100 % |
100 % |
39,038 |
7,337 |
Oslo, Norway |
Electromagnetic Geoservices UK Ltd |
100 % |
100 % |
309 |
4,071 |
London, UK |
Kuala Lumpur, |
|||||
Electromagnetic Geoservices Malaysia Sdn Bhd |
1%/100% |
1%/100% |
335 |
810 |
Malaysia |
Kuala Lumpur, |
|||||
EMGS Asia Pacific Sdn Bhd |
100 % |
100 % |
763 |
457 |
Malaysia |
EMGS Labuan Ltd |
100 % |
-22 |
Labuan, Malaysia |
||
EMGS Asia Pacific Labuan Ltd |
100 % |
-162 |
Labuan, Malaysia |
||
EMGS Australia Pty Ltd |
100 % |
85 |
Perth, Australia |
The Group consolidates Electromagnetic Geoservices Malaysia Sdn Bhd and emgs Shipping Mexico S. de R.L. de C.V.
at 100 % as the Company has control over these companies.
The Group has started the process of voluntary winding up of EMGS Asia Pacific Sdn Bhd and EMGS Electromagnetic
Geoservices Malaysia Sdn Bhd. The Group has wound-up Labuan Ltd., emgs Asia Pacific Labuan Ltd. And EMGS
Australia Pty Ltd. In 2024, the Group plans on merging Sea Bed Logging – data Storage Company AS, CSEM Productions
Fully prefunded multi-client survey in Brazil
In January 2024, EMGS secured a multi-client contract with Petrobras, with an approximate contract value of
USD 11.7 million.
Fully prefunded multi-client survey in Norway
In February 2024, EMGS announced that the Company had entered into an agreement for a fully prefunded
82
Financial
statements
.
EMGS ASA
83
Income Statement
.
1 January - 31 December
Amounts in NOK 1 000
Note
2023
2022
Operating revenues
Contract sales
1, 3
8,502
135,614
Multi-client sales
1, 3
72,533
142,158
Other revenue
1, 3
0
40,500
Total operating revenues
81,035
318,272
Operating expenses
Charter hire, fuel and crew expenses
4
39,376
92,075
Employee expenses
5, 6
30,066
38,282
Depreciation and ordinary amortisation
7
25,830
25,833
Multi-client amortisation
7
4,785
16,192
Other operating expenses
4, 8
25,548
28,209
Total operating expenses
125,605
200,592
Operating income
-44,570
117,680
Financial income and expenses
Financial income
9
94,978
11,444
Financial expense
9
-32,714
-28,186
Net financial items
62,264
-16,742
Income/(loss) before income tax
17,694
100,938
Income tax expense
10
0
57
Income/(loss) for the year
17,694
100,881
84
Balance Sheet
.
As of 31 December
Amounts in NOK 1 000
Note
2023
2022
ASSETS
Non-current assets
Multi-client library
7
8,213
12,998
Other intangible assets
7
111
947
Property, plant and equipment
7, 11
47,077
62,935
Assets under construction
7
0
0
Investments in subsidiaries
12
49,191
1,191
Total non-current assets
104,592
78,071
Current assets
Spare parts, fuel, anchors and batteries
13
25,109
26,608
Trade receivables
3, 11, 14
11,375
77,839
Receivables group companies
14, 15
56,462
0
Other receivables
16
17,747
16,536
Cash and cash equivalents
96,788
99,492
Restricted cash
17
1,744
1,720
Total current assets
209,227
222,196
Total assets
313,819
300,267
85
Balance Sheet
.
Oslo, 17 April 2024
Board of Directors and CEO of Electromagnetic Geoservices ASA
Sign.
As of 31 December
Amounts in NOK 1 000
Note
2023
2022
EQUITY
Paid-in-capital
Share capital
18, 19
130,970
130,970
Share premium
18, 19
0
0
Other paid-in-capital
18, 19
415,671
415,655
Total paid-in-capital
546,641
546,625
Retained earnings
Other equity
19
-523,456
-541,151
Total retained earnings
-523,456
-541,151
Total equity
23,184
5,474
LIABILITIES
Non-current liabilities
Borrowings
7, 21
198,233
192,052
Non-current leasing liabilities
21
0
568
Total non-current liabilities
198,233
192,620
Current liabilities
Trade payables
11,272
28,364
Payable group companies
15
67,114
43,710
Current tax liabilities
10
1,704
1,952
Public taxes and duties payable
22
2,593
2,339
Other short term liabilities
23
9,150
24,682
Current leasing liabilities
21
568
1,127
Total current liabilities
92,401
102,172
Total liabilities
290,635
294,793
Total equity and liabilities
313,819
300,267
86
Cash Flow Statement
.
1 January - 31 December
Note
2023
2022
A) Cash flow from operating activities
Funds sourced from operations *)
73,605
156,181
Changes in inventories, accounts receivable and accounts payables
17,813
-69,613
Other changes in working capital
-11,787
1,985
Net cash flow from operating activities
79,632
88,553
B) Cash flow from investing activities
Purchase of property, plant and equipment
7
-9,136
-3,119
Investment in multi-client library
7
0
-8,964
Investment in subsidiaries
12
-48,000
49,369
Net cash flow from investing activities
-57,136
37,286
C) Cash flow from financial activities
Proceeds from issuance of ordinary shares
Repayment/settlement of loan
21
0
-42,449
Payment of interests on loans
9
-24,050
-18,512
Financial lease payments
-1,127
-897
Net cash flow from financial activities
-25,177
-61,859
A+B+C) Net change in cash and cash equivalents
-2,680
63,980
Cash and cash equivalents as 01.01
101,213
37,233
Cash and cash equivalents as 31.12
98,532
101,213
Calculation of cash and cash equivalents
Cash and cash equivalents
96,788
99,492
Restricted cash
17
1,744
1,720
Cash and cash equivalents 31.12
98,532
101,213
*) Calculation of funds sourced from operations
Income/(loss) before income tax
17,694
100,938
Depreciation and amortisation
7
30,615
42,025
Income tax expense
10
0
-57
Amortisation of interest
25,296
19,900
Financial gain on repayment of bond
0
-6,625
73,605
156,181
87
Notes
.
Accounting Principles
The financial statements have been prepared in accordance with the Norwegian Accounting Act and generally
accepted accounting principles in Norway.
Use of estimates
The management has used estimates and assumptions that have had an impact on assets, liabilities, income, expenses
and information on potential liabilities in accordance with generally accepted accounting principles in Norway.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at acquisition date fair value. Acquisition costs incurred are
expensed and included in other operating expenses.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date.
Revenue recognition
Revenue from contracts with customers is recognised when control of the goods and services are transferred to the
customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for
those goods or services.
Revenue is recognised as follows:
a) Proprietary contract sales
EMGS performs EM services under contract for a specific customer, whereby the EM data is owned by the customer.
The Company recognises contract revenues (whether priced as Lump Sum, Day Rate or Unit Price) over time. Progress
is measured in a manner generally consistent with the physical progress on the project.
Mobilisation Fees
Revenues for mobilisation are usually contracted with the customer and should cover the vessel’s transit to the actual
area. Revenues and costs related to mobilisation are deferred and recognised over the acquisition period (which is the
time from the first receiver is dropped to the last retrieval) of the contract, using the percentage of completion
method. The deferral of mobilisation costs can only begin after an agreement has been signed between EMGS and the
client. Until a contract is signed, costs are expensed as incurred.
b) Sales of multi-client library data
Pre-funding agreements
Sales made prior to commencement of acquisition for a project and sales while the projects are in progress, are
presented as pre-funding revenues. The advantages for pre-funding customers are generally the possibility to
influence the project specifications, early access to acquired data, and discounted prices.
The Company recognises pre-funded revenue at the point in time when data is made accessible to the customer.
88
Late sales
Customers are granted a license from the Company which entitles them to access a specific part of the multi-client
data library. The license payment is fixed and is required when the license is granted. The late sale revenue is
recognised when a valid licensing agreement is signed, and the multi-client library data is made accessible to the
customer.
Uplift
Uplift revenues can arise if a customer that has already bought a license for EM data, is awarded acreage covered by
the data bought. Uplift revenue is recognised when the customer is awarded the acreage.
Contract balances:
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the
Company performs by transferring goods or services to a customer before the customer pays consideration or before
payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Company’s right to an amount of consideration that is unconditional (i.e., only the passage
of time is required before payment of the consideration is due).
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the
Company transfers goods or series to the customer, a contract liability is recognised when the payment is made, or
the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs
under the contract.
Balance sheet classification
Current assets and short term liabilities consist of receivables and payables due within one year, and items related to
the inventory cycle. Other balance sheet items are classified as fixed assets / long term liabilities.
Current assets are valued at the lower of cost and fair value. Short term liabilities are recognised at nominal value.
Fixed assets are valued at cost, less depreciation and impairment losses. Long term liabilities are recognised at nominal
value.
Subsidiaries
Subsidiaries are valued at cost in the Company's accounts. The investments are valued at the cost of acquiring shares
in the subsidiary or joint venture, provided that no write down is required. A write down to fair value will be carried
out if the reduction in value is caused by circumstances which may not be regarded as incidental and deemed necessary
by generally accepted accounting principles. Write downs will be reversed when the cause of the initial write down is
no longer present.
89
Foreign currency translation
Transactions in foreign currency are translated at the rate applicable on the transaction date. Monetary items in a
foreign currency are translated into NOK using the exchange rate applicable on the balance sheet date. Non-monetary
items that are measured at their historical price expressed in a foreign currency are translated into NOK using the
exchange rate applicable on the transaction date. Non-monetary items that are measured at their fair value expressed
in a foreign currency are translated at the exchange rate applicable on the balance sheet date. Changes to exchange
rates are recognised in the income statement as they occur during the accounting period.
Property, plant and equipment
Property, plant and equipment are capitalised and depreciated linearly over the estimated useful life. Significant fixed
assets which consist of substantial components with dissimilar economic life have been unbundled; depreciation of
each component is based on the economic life of the component. Costs for maintenance are expensed as incurred,
whereas costs for improving and upgrading property, plant and equipment are added to the acquisition cost and
depreciated with the related asset. If carrying value of a non-current asset exceeds the estimated recoverable amount,
the asset is written down to the recoverable amount. The recoverable amount is the greater of the net realisable value
and value in use. In assessing value in use, the discounted estimated future cash flows from the asset are used.
Research and development
Development costs are capitalised provided that a future economic benefit associated with development of the
intangible asset can be established and costs can be measured reliably. Otherwise, the costs are expensed as incurred.
Capitalised development costs are amortised linearly over its useful life.
Research costs are expensed as they are incurred.
Multi-client library
The multi-client library consists of surveys of electromagnetic data. The surveys can be licensed to customers on a
non-exclusive basis. Directly attributable costs associated with the production and development of multi-client
projects such as acquisition costs, processing costs, and direct project costs are capitalised.
A multi-client project is considered complete when all components or processes associated with the acquisition and
processing of the data are finished, and all components of the data have been properly stored and made ready for
delivery to customers.
After a project is completed, a straight-line amortisation is applied. The straight-line amortisation is assigned over the
useful life, which is set at four years. The straight-line amortisation is distributed evenly through the financial year
independently of sales during the quarters.
Leased assets
Leases that provide EMGS with substantially all the rights and obligations of ownership are accounted for as finance
leases. Such leases are valued at the present value of minimum lease payment and recorded as assets under tangible
assets. The assets are subsequently depreciated, and the related liabilities are reduced by the amount of the lease
payments less the effective interest expense. Other leases are accounted for as operating leases with lease payments
recognised as an expense over the lease term.
Inventories
Inventories are valued at the lower of cost or net selling price. The selling price is the estimated selling price in the
case of ordinary operations minus the estimated completion, marketing and distribution costs. The cost is arrived at
using the FIFO method and includes the costs incurred in acquiring the goods and the costs of bringing the goods to
their current state and location.
90
Trade and other receivables
Trade receivables and other current receivables are recorded in the balance sheet at nominal value less provisions for
doubtful accounts. Provisions for doubtful accounts are based on an individual assessment of the different receivables.
Income tax
Tax expenses in the profit and loss accounts comprise of both tax payable for the accounting period and changes in
deferred tax. Deferred tax/tax assets are calculated on all differences between the book value and tax value of assets
and liabilities.
Deferred tax is calculated at 22 percent on the basis of existing temporary differences and the tax effect of tax losses
carried forward. Temporary differences, both positive and negative, that will reverse within the same period, are
recorded net. Deferred tax assets are recorded in the balance sheet when it is more likely than not that the tax assets
will be utilised.
Taxes payable and deferred taxes are recognised directly in equity to the extent that they relate to equity transactions.
Share based payments
Options for employees are valued at the fair value of the option at the time the option plan is adopted. The Black -
Scholes model is used for valuation of options. The cost of the options is allocated over the period during which the
employees earn the right to receive such options. This arrangement is presented as other paid-in capital in the balance
sheet. Provisions are made for the social security taxes related to the share option plan, which are related to the
difference between the issue price and the market price of the share at year-end, on the basis of the vesting period of
the program.
Provisions
Provisions are recognised when the Company has a present obligation as a result of a past event, where it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Provisions for loss on contracts are recognised when it is clear
that the contract will result in a loss. The calculation is made by comparing the contracted revenues to the expected
direct operating costs for the contract period.
Cash flow statement
The cash flow statement is presented using the indirect method. Cash and cash equivalents include cash and bank
deposits.
Note 1 – Operating revenues
None of the NOK 81 035 thousand in total operating revenues in 2023, was intercompany revenues (2022: NOK 3 408
thousand).
The Company consists of one business area only. EMGS operates globally.
Amounts in NOK 1 000
2023
2022
Regions
Norway
77,343
193,953
Europe, Middle East and Africa
118
389
North and South America
2,306
122,778
Asia and the Pacific Ocean
1,269
1,153
Total
81,035
318,272
91
Note 2 – Shared revenue
The Company has since 2013 entered several cooperation agreements regarding EM multi-client surveys in the Barents
Sea and Brazil.
EMGS has received funding and/or seismic data against a revenue share on prefunding, late sales and uplift revenues.
EMGS has provided the vessel, performed the data acquisition and finally provided the data processing services. The
acquired data remains the property of EMGS.
When EMGS licenses data to customers in areas subject to revenue sharing, the Company invoices and collects
payments from the customers for the entire sales amount. The related accounts receivable is presented gross, while
the portion due to the partner upon collection from the customer, is presented as a short-term liability.
EMGS did not have any shared revenue from the sale of multi-client library with cooperation agreements in 2023
(2022: NOK 65 995 thousand).
Note 3 – On-going projects
Part of trade receivables that are recognised in 2023, but not invoiced per 31 December 2023 amounts to NOK 1 051
thousand (2022: NOK 6 133 thousand).
Deferred revenue as of 31 December 2023 amounts to NOK 87 thousand (2022: NOK 6 111 thousand).
The Company does not expect any loss on contracts in 2023 (2022: NOK 0).
Note 4 – Operating leases
Note 5 – Pensions
The Company is required to have an occupational pension plan in accordance with the Norwegian law on required
occupational pension ("lov om obligatorisk tjenestepensjon"). The Company's pension arrangements fulfill the
requirements of the law.
In 2023, the pension plan involved a contribution level of 5 % of Base Salary from 0 to 7.1 G and 15 % of Base Salary
from 7.1 up to 12 G, where G is the National Insurance basic amount (Folketrygdens grunnbeløp). G is equal to NOK
118 620 as of 31 December 2023.
The Company`s contribution to the Norwegian defined contribution plan for the year ended 31 December 2023 is NOK
EMGS'
revenue share
Multi-client survey
Brazil 2013
95%
Barents Sea 2013
70%
Barents Sea 2014
50%
Barents Sea 2015
50%
Barents Sea 2016
50%
Barents Sea 2017
50%
Amounts in NOK 1 000
2023
2022
Operating leases recognised as expense in the period
Charter hire
25,881
55,320
Office premises
3,063
3,755
Total
28,944
59,075
92
2 057 thousand (2022: NOK 1 705 thousand).
As of 31 December 2023, there are 18 employees covered by the defined contribution pension plan (2022: 19).
Note 6 – Remuneration
The average number of employees during 2023 was 18.
Executive Management remuneration
**Other benefits include electronic communication, group life insurance and health insurance.
Remuneration Policy
All members of the Executive Management Group have fixed salaries. In addition to the fixed salary,
a bonus plan is in place. The bonus system is based on a combination of fulfillment of EMGS´s goals and individual
goals.
The Executive Management Group is included in the Company´s ordinary pension plan.
There are no other variable elements included in the remuneration for the Executive Management Group.
Board of Directors remuneration
The amounts listed under Directors fee have been expensed and paid in 2023.
Share base payment
The Company has an option program (more details about the program is presented in note 15 for the Group).
Amounts in NOK 1 000
2023
2022
Employee expenses:
Salaries and bonus
21,110
31,606
Payroll tax
5,669
3,543
Pension costs
2,038
1,640
Other benefits
1,249
1,493
Total
30,066
38,282
Amounts in NOK 1 000
Salaries
Bonus
Share options
Pension benefit
Other
benefits**
Total
remuneration
Executive Management
Bjørn Petter Lindhom
2023
2,762
1,332
1
139
17
4,252
Knut Anders Eimstad, CFO
2023
1,827
705
1
137
16
2,686
Dag Helland-Hansen, Global EA / President EMEA
2023
2,441
777
1
144
17
3,380
Total
7,030
2,815
4
421
50
10,318
Amounts in NOK 1 000
Directors fee
2023
Board of Directors
Fredrik W. Mohn
Chairman of the Board
01.01.-31.12.
0
Mimi Berdal
Board member
01.01.-31.12.
294
Beatriz Malo de Molina
Board member
01.01.-31.12.
401
Petteri Soininen
Board member
01.01.-21.06.
0
Jørgen Westad
Board member
01.01.-31.12.
0
695
93
The Company uses Black Scholes model to estimate the value of the options.
B – average exercise price for number of options by 31 December 2023
.
Loans and guarantees
No loans or loan guarantees have been granted to the Executive Management of the Board of Directors or other
related parties.
Auditor expense
Note 7 – Tangible and intangible assets
Depreciation/amortisation of fixed assets is calculated using the straight-line method.
The registered patents rights relate to electromagnetic surveys (EM).
The DeepBlue
EMGS has been working on a Joint Industry Project (“the DeepBlue”), supported by Shell and Equinor, for developing
the Next Generation EM equipment. The benefit of using the DeepBlue equipment is deeper penetration and
significantly improved imaging at increased burial depths. The improved imaging leads to improved confidence and
enhanced interpretation possibilities. The project commenced 2012 and the prototype equipment was completed in
2017 with its first commercial survey summer 2017. The carrying value of the DeepBlue equipment as of 31 December
Amounts in NOK 1 000
Number of
options OB
Forfeited
options
Granted options
Number of
options CB
Weighted
average
excercise price B
Weighted
average
remaining
contractual life
Executive Management
Bjørn Petter Lindhom
9,375
0
0
9,375
2.17
1.10
Knut Anders Eimstad
9,375
0
0
9,375
2.17
1.10
Dag Helland-Hansen
9,375
0
0
9,375
2.17
1.10
Amounts in NOK 1 000
2023
2022
Auditor expenses
Statutory audit services (excl VAT)
907
799
Tax advisory services (excl VAT)
0
183
Further assurance services (excl VAT)
220
46
Total
1,127
1,028
Amounts in NOK 1 000
Property,
plant and
Patents
Software
licenses etc.
Multi-client
library
Total
Assets under
construction
Acquisition cost at 1 January 2023
1,132,652
26,415
105,641
723,158
1,987,866
24,906
Adjustment of opening value
0
0
0
0
0
0
Transferred from assets under construction to intangible assets
0
0
0
0
0
0
Purchases
9,136
0
0
0
9,136
0
Disposals
0
0
0
0
0
0
Acquisition cost at 31 December 2023
1,141,788
26,415
105,641
723,158
1,997,002
24,906
Accumulated depreciation 1 January 2023 (Restated*)
1,069,716
26,415
104,694
710,161
1,910,986
24,906
Depreciation/amortisation for the year
24,993
0
836
4,785
30,614
0
Transferred from assets under construction to
intangible assets
0
0
0
0
0
0
Disposals
0
0
0
0
0
0
Impairment
0
0
0
0
0
0
Accumulated depreciation 31 December 2023
1,094,709
26,415
105,530
714,946
1,941,600
24,906
Net carrying value
47,077
0
111
8,213
55,402
0
Depreciation rate (%)
13-33
7-10
33
25
94
2023 was NOK 33 967 thousand (2022: NOK 54 348) (more details about the DeepBlue in presented in note 17 for the
Group). The carrying value of the DeepBlue equipment as presented in note 17 for the Group is USD 5 294 thousand.
Assets under construction
Assets under construction are internal capital expenditure projects that are not completed. These projects are mainly
development and production of acquisition equipment, but also interpretation and modelling software.
Finance leases
Finance leases are capitalised at the lease’s commencement at the lower of the present value and cost.
The leasing contracts have a duration of 5 years and the asset will be depreciated over a 3-5-year period.
The term of the agreement is 3-month NIBOR + 1.11%
Note 8 – Other operating expenses
Amounts in NOK 1 000
2023
2022
Capitalised in the balance sheet 31 December
5,624
5,624
Accumulated depreciation
-5,245
-4,337
Net carrying value
378
1,286
Depreciation
908
1,884
Amounts in NOK 1 000
2023
2022
Nominal
Present
Nominal
Present
value
value
value
value
Leases due within 12 months
577
568
1 170
1 127
Leases due within the next 13-60 months
0
0
577
568
Remaining debt on leasing contracts 31 December
577
568
1 747
1 695
Amounts in NOK 1 000
2023
2022
Other operating expenses
Rental and housing expenses
4,430
5,103
Consumables and maintenance
2,752
2,838
Consultancy fee
11,541
14,108
Travel expenses
1,786
988
Insurance
3,174
3,109
Marketing
616
426
Intercompany expenses
-23
0
Other operating expenses
1,270
1,637
Total
25,548
28,209
95
Note 9 – Financial items
The increase in net gains of financial assests in 2023 is the result of a reversal of a previous impairment of EMGS ASA’s
investments in EMGS Surveys AS and EMGS Multi-client AS. See note 12 for more detail.
Amounts in NOK 1 000
2023
2022
Financial income:
Group contribution
0
0
Interest income subsidiaries
0
0
Interest income on short term bank deposits
12,533
3,740
Foreign exchange gains
34,445
1,079
Gain on bond buy back
0
6,625
Net gains of financial assets
48,000
0
Total
94,978
11,444
Financial expenses:
Interest expense subsidiaries
0
4,055
Interest expense
32,714
24,131
Net foreign exchange loss
0
0
Net loss on financial assets and liabilities
0
0
Financial expenses repayment of bond loan
0
0
Other financial expenses
0
0
Total financial
32,714
28,186
Net financial items
62,264
-16,742
96
Note 10 – Income taxes
Current tax liabilities are related to operations abroad. Accrued year end is NOK 1 704 thousand (2022 NOK 1 952
thousand)
Note 11 – Collaterals
There are no long-term liabilities due in more than five years from 31 December 2023 or 31 December 2022.
Amounts in NOK 1 000
2023
2022
Tax base specification
Profit before tax
17,694
100,938
Permanent differences
-74,772
29,796
Changes in temporary differences
-1,249
-7,492
Recieved group contribution
0
0
Tax expense abroad, paid
0
0
Taxable profit (this year tax base)
-58,327
123,241
Tax losses carried forward
58,327
-123,241
Taxable profit (this year tax base)
0
0
Income tax expenses:
Non-creditable foreign income taxes
0
57
Total income tax expense
0
57
Temporary differences
Fixed assets
-48,734
-49,995
Accounts receivable
0
0
Inventory
0
0
Provisions tax liability abroad
11,497
11,509
Other accruals
-40,559
-40,559
Tax losses carried forward
-1,463,511
-1,405,184
Total temporary differences
-1,541,306
-1,484,228
Non-recognised deferred tax asset
-339,087
-326,530
Non-recognised deferred tax asset
Amounts in NOK 1 000
Tax base
22%
tax
Explanation why the tax is not 22% of income before tax
22% tax of income before tax
17,694
3,893
Permanent difference
74,772
-
16,450
-
Change in deferred tax assets, not recognised
57,078
12,557
Correction of errors in previous years
-
-
Reversed group contribution previous years
-
-
Effect of tax on group contribution
-
-
Calculated tax
0
-
Effective tax rate in %
0%
Amounts in NOK 1 000
2023
2022
Pledged assets:
Trade receivables
400
370
Assets held under finance leases
378
1,286
Total carrying value of pledged assets
778
1,657
97
Note 12 – Investment in subsidiaries
Note 13 – Spare parts, fuel, anchors and batteries
Note 14 – Receivables
The Company has no accounts receivables with due dates later than 12 months.
There has not been made any provision for loss on external receivables per 31 December 2023 (2022: NOK 0).
Amounts in NOK 1 000
Profit/Loss 2023
Location
Sea Bed Logging - Data Storage Company AS
100%
0
-20
125
Trondheim, Norway
EMGS Americas 1 AS
100%
0
-1,121
339
Trondheim, Norway
CSEM Production AS
100%
118
-16
102
Trondheim, Norway
EM Multi-client AS
100%
11,000
281
17,457
Trondheim, Norway
EMGS Global AS
100%
217
390
7,408
Trondheim, Norway
EMGS Surveys AS
100%
37,000
37,618
38,294
Trondheim, Norway
EMGS Shipping Mexico S. de R.L de C.V.
99%
0
426
6,042
Col. Del Valle, Mexico
EMGS Sea Bed Logging Mexico S.A. de C.V.
100%
0
3,237
7,727
Col. Del Valle, Mexico
Servicos Geologicos Electromagneticos Do Brazil LTDA
99%
0
7
-516,504
Rio de Janeiro, Brazil
Electromagnetic Geoservices Malaysia Sdn Bhd
1%
0
-5,017
3,392
Kuala Lumpur, Malaysia
emgs Asia Pacific Sdn Bhd
100%
856
3,237
7,727
Kuala Lumpur, Malaysia
Total
49,191
39,022
-427,892
Net carrying value
shares in
subsidiaries
Equity 31 December
2023
Share ownership/
Voting rights
Amounts in NOK 1 000
2023
2022
Inventory
type
Equipment, components and parts
14,150
15,411
Anchors and batteries
2,756
2,857
Fuel
8,203
8,341
Total
25,109
26,608
98
Note 15 – Related parties
Sales and purchases of services, receivable and liabilities: receivables and liabilities are show on a net basis.
In 2023, the Company reversed a portion of previous years accrued losses on group company receivables with NOK 26
440 thousand (2022 accrued loss on group company receivables: NOK 29 742 thousand)
Note 16 – Other receivables and prepayments
Note 17 – Bank deposits
Restricted cash as of 31 December 2023:
Amounts in NOK 1 000
Liabilities
Receivables
Purchase
Sales
Liabilities
Receivables
Purchase
Sales
Related parties
Sea Bed Logging - Data Storage Company AS
0
0
0
0
0
0
0
0
emgs Americas 1 AS
-42
-42
0
0
32
0
0
0
CSEM Production AS
0
0
0
0
0
0
0
0
EM Multi-client AS
13,263
0
0
0
12,885
0
0
0
emgs Global AS
0
-10,839
0
0
10,478
0
0
0
emgs Americas 1 AS Mexican Branch
0
0
0
0
0
0
0
0
emgs Americas
Inc
-11,033
-11,033
0
0
0
0
0
0
EMGS Shipping Mexico S. de R.L de C.V.
14,289
9,531
0
0
4,880
0
0
0
EMGS Sea Bed Logging Mexico S.A. de C.V.
11,217
26,329
0
0
-1,183
0
0
0
EMGS Sevices Mexico S.A de C.V
0
304
0
0
0
0
0
0
Electromagnetic Geoservices Canada Inc
30
5,871
0
0
-10,221
0
0
-3,408
Servicos Geologicos Electromag. Do Brazil LTDA
-1,532
43,235
0
0
-17,986
0
0
0
EMGS Surveys AS
0
0
0
0
-35
0
0
0
EMGS UK Ltd
37,772
0
0
0
34,783
0
0
0
Electromagnetic Geoservices Malaysia Sdn Bhd
1,332
0
0
0
1,297
0
0
0
emgs Asia Pacific Sdn Bhd
1,817
-6,893
0
0
8,688
0
0
0
emgs Labuan Ltd
0
0
0
0
94
0
0
0
EMGS AP Labuan Ltd
0
0
0
0
0
0
0
0
67,114
56,462
0
0
43,710
0
0
-3,408
2022
2023
Amounts in NOK 1 000
2023
2022
Other receivables
Prepaid expenses
4,168
2,620
VAT
379
455
Withholding tax
13,201
13,461
Other
0
0
Total
17,747
16,536
Amounts in NOK 1 000
2023
2022
Restricted cash
Guarantees
400
370
Employee tax
1,345
1,350
Total
1,744
1,720
99
Note 18 – Share capital and Shareholder information
The total authorised number of ordinary shares is 161 092 719 as of 31 December 2023 (2022: 161 092 719) with a
par value of NOK 1 per share. All issued shares are denominated in NOK and fully paid.
The largest shareholders as of 31 December 2023:
Note 19 – Equity
Number of
ordinary shares
Percentage
Siem Investments S.À.R.L.
43,327,467
33.08%
PERESTROIKA AS
38,652,795
29.51%
RAGE, PER EGIL
2,340,500
1.79%
NORDNET LIVSFORSIKRING AS
1,722,137
1.31%
METIZ CATCHLOG AS
1,008,150
0.77%
SPORTSMAGASINET AS
1,000,000
0.76%
HEGGELUND, JAN
915,240
0.70%
JAGLAND, ERIK SMITH
900,000
0.69%
Nordnet Bank AB
806,653
0.62%
KEMP, KRISTIAN NEIL
750,000
0.57%
NÆRINGSENTREPRENØREN AS
603,000
0.46%
SKOGMO, OLE JØRGEN
601,000
0.46%
STAVSETH AS
600,000
0.46%
SOUTHGARDEN AS
591,110
0.45%
KONGSRUD, RUNE JACOB
507,837
0.39%
RYGG, JAN WIGGO
505,000
0.39%
EIKANGER INVEST AS
500,000
0.38%
ØVERLAND, JARLE
457,039
0.35%
SLENESET BYGG AS
447,983
0.34%
The Bank of New York Mellon
443,761
0.34%
Other
34,290,018
26.18%
Total
130,969,690
100%
Shares
Leading representatives of the Company as of 31 December 2023 hold the following shares:
CEO
17,003
Business Unit President EMEA & Global Exploration Advisor
40,000
Chairman of the Board, Frederik Wilhelm Mohn (Perestroika AS)
38,652,795
Board member, Mimi Berdal (MKB Invest AS)
70,303
Total
38,780,101
Amounts in NOK 1 000
Share capital
Share
premium
Other
paid-in capital
Available-for-sale
reserve
Actuarial
gains/(losses)
Other equity
(uncovered loss)
Total
At 31 December 2022
130,970
0
413,605
2,050
13,377
-554,527
5,474
Group contribution
0
0
0
0
0
0
0
At 1 January 2023
130,970
0
413,605
2,050
13,377
-554,527
5,474
Other transactions
0
0
16
0
0
0
16
Income for the year
0
0
0
0
0
17,694
17,694
At 31 December 2023
130,970
0
413,621
2,050
13,377
-536,833
23,184
100
Note 20 – Provisions
The Company has recorded no provision per 31 December 2023 (2022: 0 thousand).
Note 21 – Financial liabilities
USD 32.5 million convertible bond
On 9 May 2018, EMGS secured a USD 32.5 million convertible bond bearing an interest at 3 months LIBOR + 5.50%
p.a. The loan can at any time be converted into common shares in EMGS at the conversion price of NOK 4.32 (USD
0.42677) until the maturity date on 9 May 2023. On 9 February 2022 the Unsecured Convertible Bond 2018/2023 was
extended by 24 months, until 9 May 2025, and the interest margin was increased by 100 bps to LIBOR + 6.50% p.a.
The updated terms have been assessed not to be substantially different from the original terms. Thus the original bond
has not been derecognised, and the extension has instead been accounted for as a modification of the original bond.
The modification did not lead to any significant adjustments to the amortised cost of the bond. On 26 June 2023, EMGS
entered into an amendment agreement to switch the reference rate from 3 months LIBOR to the Compounded Daily
SOFR. The interest margin remains unchanged at 6.5%, however, a credit adjustment spread of 0.26161 per cent per
annum was added.
The USD 32.5 million convertible bond can be seen as a contract settled by an entity by delivering a fixed amount of
its own equity instruments in exchange for a fixed amount of foreign currency. The economic components of this
convertible bond are:
(a)
A liability. On issuance of the convertible bond, the fair value of the liability component was determined using a
market rate for an equivalent non-convertible bond; and classified as a financial liability measured at amortised
cost (net of transaction costs) until it is extinguished on conversion or redemption.
(b)
An equity component. The residual of the proceeds was allocated to the conversion option that was recognised
in shareholders’ equity.
At inception, the value of the liability component was estimated to NOK 246.4 million, and amortised cost as of 31
December 2023 was NOK 198.2 million (2022: NOK 192.1 million). The equity component, the carrying amount of the
conversion option, was estimated to NOK 15.8 million at inception and is not remeasured in subsequent periods.
One bond repurchase, at a 13.5 per cent discount, was completed in 2022 with a combined nominal value of NOK 49.0
million.
The convertible bond contains financial covenants requiring free cash and cash equivalents of at least USD 2.5 million
on group level. In addition, the bond agreement has restrictions regarding the Company's ability to sell the multi-client
library, declare or make dividend payments, incur additional indebtedness, change its business or enter into
speculative financial derivative agreements. As of 31 December 2023, the free cash and cash equivalents of the Group
totalled USD 10.3 million.
The convertible bond is unsecured.
101
Lease liabilities
The finance lease liabilities relate to certain property, plant and equipment and are capitalised leases for financial
reporting purposes. The related leased property, plant and equipment serve as the collateral under such leases.
Note 22 – Public taxes and duties payable
Note 23 – Other current liabilities
Note 24 – Events after the reporting period
Fully prefunded multi-client survey in Brazil
In January 2024, EMGS secured a multi-client contract with Petrobras, with an approximate contract value of USD 11.7
million.
Fully prefunded multi-client survey in Norway
In February 2024, EMGS announced that the Company had entered into an agreement for a fully prefunded multi-client
survey in the North Sea with a contract value of USD 2.0 million.
Amounts in NOK 1 000
Interest rate
Maturity
2023
2022
Non-current
USD 32.5 million convertible bond
SOFR
+ 6.50%
5/9/2025
198,233
192,052
Lease liabilites
0
568
Total
198,233
192,620
Current
Lease liabilites
3.6%-8.1%
Up to 1 year
568
1,127
Total
568
1,127
Total financial liabilities
198,801
193,747
Amounts in NOK 1 000
2023
2022
Public taxes and duties payable
Employee taxes withheld
1,330
1,335
Employment tax
1,263
1,004
Tax foreign employees
0
0
Other
0
0
Total
2,593
2,339
Amounts in NOK 1 000
2023
2022
Other current liabilities
Provision for onerous contract
0
0
Accrued holiday pay
2,665
2,391
Accrued salaries
167
7,510
Deferred revenues
87
6,111
Accrued shared revenues
0
742
Accrued vessel expenses
2,799
2,606
Other liabilities
3,431
5,321
Total
9,150
24,682
102
Auditor’s
report
.
2023
103
104
105
106
107
108
EMGS ASA
Karenslyst Allé 4, 4th floor
N-0278 Oslo
Norway