Untitled

Annual report

2021

Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

The company

Magseis Fairfield in brief

At a glance

CEO message

Vision and values

Business areas

Executive Management

Board of Directors report

Board of Directors

Board of Directors report

Responsibility statement

Governance

Corporate governance

Sustainability

Governance and Commitment

People

The planet

Responsible business practice

Financial statements

Consolidated financial statements

Notes to the consolidated financial statements

Parent company financial statements

Notes to the Parent company financial statements

Independent auditor’s report

120

Appendix

124

Alternative Performance Measures (APMs)

124

Financial calendar 2022

125

CONTENT

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Magseis Fairfield ASA – Annual report 2021

OcesOslo, headquarter Operational Experience

Magseis Fairfield

is the leader in providing Ocean Bottom Node seismic

data acquisition to our energy customers, enabling them

to make data driven field development decisions both in

the oil and gas and renewables business. The company

is headquartered in Lysaker outside Oslo, Norway.

The Group has oces in Houston (USA), Warminster (UK), Rio de Janeiro (Brazil) and

in Singapore, and provides seismic services to customers globally.

The company’s technology hubs in Oslo and Houston work closely with the organisation

and clients to ensure best possible results from the deployment of Magseis Fairfield’s

proprietary technology and dierentiated solutions.

CONTENTS

THE COMPANY

BOARD OF DIRECTORS REPORT

GOVERNANCE

SUSTAINABILITY

FINANCIAL STATEMENTS

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The companyThe company | Magseis Fairfield in briefThe company | Magseis Fairfield in brief

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

The information from the seismic data is primarily

used by energy companies for exploration

and production of oil and gas, de-risking and

monitoring CO

storage sites, de-risking oshore

wind farm placement and in mapping deep-sea

minerals.

Ocean Bottom Node (OBN) acquisition technique

includes collecting four-component (4C) seismic

data using one hydrophone and three geophones

and is widely recognized as delivering the highest

quality seismic data commercially available.

CONTENTS

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

At a glance

Operations, Safety

and Environment

• Acquired our 100

OBN survey

• Strong operational performance and project

execution

• Strict COVID-19 protocols, with avoidance

of oshore COVID-19 cases ensuring

operational continuity

• Total recordable case frequency (TRCF)

increased to 2.37 from 1.09 in 2020

• Completed the ISO certification audits

by ABS QE. Received ISO 9001:2015

certification for all Magseis Fairfield sites and

operations and certification for ISO 14001

and 45001 for our Warminster site in the UK

• Announced an ambition to become carbon

neutral by 2040, or earlier

• Executed the first carbon neutral OBN

project, in collaboration with a client in the

Gulf of Mexico

Financial

performance

• Revenue increased to USD 258.1 million

due to an improving market

• Reported EBITDA increased to USD 47.0

million following higher activity

• Full year SG&A of USD 24.5 million and

capital expenditure of USD 12 million, both in

line with guidance

• Reported EBIT loss of USD 25.1 million

• Net loss after tax of USD 32.3 million

• Year-end cash position of USD 29.7 million

Asset-light and

dierentiated technology

• Oering dierentiated modular and asset-

light solutions

• Launched Echova

, the first OBN technology

platform

• As part of the renewables strategy, became

a member of the Center of Geophysical

Forecasting in Norway and partner in the

Greensand project consortium in Denmark

Positive market

outlook

• Building on excellent client feedback on

operational, technological and QHSE

performance

• Increased backlog by 48 percent to

USD 293 million at the end of the year

• New contracts are being secured at

increasing margins

• Strong recovery for greenfield development

projects expected from 2022 (14 percent

between 2022-2025)

• Based on awarded contracts and forecasted

tender activity the company predict 25

percent overall market growth in 2022

• Renewables strategy being executed, with

opportunities being pursued in USA, Europe,

and Asia

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Key figures

Profit and loss 2021 2020

Revenues 258.1 193.4

Gross profit 71.5 62.8

Gross margin 28% 32%

General and administrative costs (24.5) (27.3)

EBITDA 47.0 35.5

EBITDA excluding special items 41.3 38.4

EBITDA % 16% 20%

EBIT (25.1) (14.6)

Net profit/(loss) (32.3) (19.7)

Other key figures 2021 2020

Net cash from operating activities 6.8 20.5

Net cash used in investing activities (12.9) (25.2)

Net cash from investing activities (18.7) 4.7

Total assets 305.0 344.6

Equity ratio 53% 56%

Cash and cash equivalents 29.7 54.8

Net interest-bearing debt/(cash) 1.7 (21.9)

Book value Multi-Client library 22.5 20.9

Backlog 31 December 293.0 198.0

All figures in USD million

Revenues EBITDA

Order backlog

100

200

300

400

500

20212020201920182017

137

460

193

258

Cash flow from operations

20212020201920182017

100

200

300

400

500

20212020201920182017

418

165

198

293

120

150

20212020201920182017

145

A significant part of the backlog in 2018 was related to a big node sale,

which positively impacted revenue, EBITDA and cash flow in 2019.

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

CEO MESSAGE

Extended our leadership position

2021 was a year in which we strengthened our position as the leader

in OBN acquisition in a tough market impacted by COVID-19. The key

to our success was a relentless focus on project execution, continued

cost discipline, and a customer-centric focus to secure key projects.

We increased revenue by 34 percent to

USD 258.1 million with a gross margin of 28

percent, and maintained SG&A spend at a low

level of USD 24.5 million. Capital spending dis-

cipline was maintained at a low level of 12 million

(13 million in 2020), enabling us to preserve

our financial strength and flexibility through

2021. We increased our order backlog by 48

percent during the year and entered 2022 with

a backlog of USD 293 million, of which ~190

million are for delivery in H1 2022. This puts us

in a good position as the OBN market leader to

fully benefit from the improving market we see

going forward.

I want to recognize the whole Magseis Fairfield

team for their excellent performance in 2021.

We continued to operate well in our core areas

of the Gulf of Mexico and the North Sea and

successfully executed a project in West Africa

and startup of a new project in Asia. We did

this during a global pandemic, with lockdowns,

severe travel restrictions, and serious logistical

challenges. Well done to the whole team! This

has truly been a One Team performance and

is the kind of spirit and performance our cus-

tomers will remember. This also puts us in the

best possible position to secure new projects in

2022 and beyond.

Magseis Fairfield has long been committed

to operate safely to protect the health and

well-being of our employees, our customers, our

stakeholders, the communities that we operate

in, and the environment. For 2021, the Total

Recordable Case Frequency (TRCF) was 2.37

and was the result of four recordable events

(three medical treatment cases requiring a

person to take prescription medication and

one medical treatment where a person required

stitches). This compares with a TRCF of 1.09 in

2020.. We continue to stress the importance

of situational awareness, and contractor man-

agement to improve our performance. On a very

positive note, we have had no COVID-19 cases

oshore on our crews. This shows the benefits

of our strict and eective COVID-19 protocols,

including quarantine, testing regimes and vac-

cinations. This ensured operational continuity

throughout the year. In 2021 we completed

the ISO certification audits by ABS QE. The

company received ISO 9001:2015 certification

for all Magseis Fairfield sites and operations,

and certification for ISO 14001 and 45001 for

our Warminster site in the UK.

In 2021 we extended our environmental com-

mitment to include an ambition to become

carbon neutral by 2040, or earlier. Our strategy

is focused on understanding and capturing the

total Greenhouse Gas (GHG) inventory that

results from our operations and taking on initia-

tives to reduce that inventory over time. This will

be accomplished by implementing technology

solutions, and by working with our suppliers and

customers to improve eciency and decrease

the carbon footprint. Any final emissions which

cannot be reduced can be oset. In 2021 we

achieved an industry first by executing the

first carbon neutral OBN survey in the Gulf of

Mexico.

“With the best people,

dierentiated technology and

an asset light business model,

we will continue to deliver

value adding solutions to our

customers.”

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

In 2021 we installed software on all our vessels

to accurately measure our fuel consumption

and provide us with a baseline to reduce emis-

sions. While the number of operating days

increased 77 percent YoY, fuel consumption only

increased 35 percent. Average CO

emissions

per operating day declined by 36 percent year-

on-year. The primary reason for this is that our

vessels were working continuously in the same

geographical area, which reduced transits.

In 2021 we acquired our 100

OBN survey. To

put this in perspective, this highlights that we

have acquired 50 percent more OBN surveys

than all other players in the market combined.

We are very proud of this achievement and the

confidence and trust we have received from

our customers to achieve this milestone. It

further underscores the depth and breadth of

our experience and knowledge in acquiring cost

eective and high quality OBN data.

Delivering on our Strategy in both the oil

& gas and Renewables

We continued to deliver on a strategy to

strengthen our position in our core areas US

Gulf of Mexico and North Sea while growing into

new areas and new markets.

We delivered on this by successfully execut-

ing projects in the Gulf of Mexico with our two

ZXPLR crews, and in the North Sea with our

Z700, MASS and three Reservoir Monitoring

and Source crews. In addition, we successfully

mobilized our ZXPLR2 crew to execute a project

in West Africa.

To grow into new areas and new markets, we are

actively pursuing key alliance partners. We are

delivering on this part of the strategy through

our 50/50 partnership with CGG on the

Cornerstone Multi-Client survey. This project

moved into the late-sales phase for the main

survey area in Q4. In addition, we won work in

Asia together with a local partner and success-

fully started this project on schedule in Q4. In

2021 we also signed a hybrid-alliance with PGS

to oer both node and streamer acquisition

at the same time. This provides us with addi-

tional access to the towed streamer 4D market.

Hybrid surveys provide a potential solution to

shorten the exploration cycle for our customers

by delivering better data, earlier. Last, but not

least, we started to deliver on our renewables

strategy by being selected to become part of

the Greensand consortium for a CCS project in

Denmark. We also executed a wind farm pilot

project in Denmark, using TGS as our process-

ing and interpretation partner.

Launched first OBN technology platform

Magseis Fairfield is known as a technology

leader in the Ocean Bottom Node seismic

industry, and our launch of Echova

in 2021

is the world’s first OBN technology platform

integrating the OBN seismic value chain. While

current OBN deliveries typically are limited to the

acquisition phase, the Echova

OBN platform

integrates the planning, survey design, acquisi-

tion and data delivery phases of an OBN project,

using our technology, workflows and expertise

in collaboration with our customers. This brings

value to our customers through faster data

delivery and visualization which allows for better

decision-making at reduced project cost.

Through the Echova

OBN platform we not

only continue to lead the OBN acquisition

market but also expand the scope of our oer-

ing as we will enable project optimization from

planning to data delivery. This reduces total

project cost to the benefit of both our custom-

ers and Magseis Fairfield and enables us to

grow existing markets and enter new ones. We

are looking forward to rolling-out Echova

over

the coming years.

Improving market outlook

Oil and gas demand is returning to pre-COVID

levels and is proving resilient even during the

most recent Omicron outbreak, and the eects

of years of under-investments are becoming

evident in the energy market.

Energy demand is expected to continue

to grow in a post-COVID new normal, with

air travel recovering throughout 2022 and

beyond. In this macro setting, our customers

generate very healthy cashflows which could

drive increased oshore upstream capex

spend. Given the long investment cycle from

exploration to production, short- to medi-

um-term energy supply will need to come

from already explored assets. With regards

to longer-term investments, many oil and gas

companies still seem to find it challenging to

meet long-term return requirements given the

changing global energy mix.

What we see is that the need for increased oil

and gas supply in the short- to medium-term

will translate into investments to increase

recovery rates from already explored assets.

This provides lower-carbon barrels that can be

delivered quickly to the market with attractive

payback on investments. These investments

will naturally include OBN projects. This forms

the basis for our increasingly optimistic outlook

for a market recovery for OBN services and

supports our view that we will see double-digit

market growth from 2022 onwards.

2022 and beyond

Our market has permanently shifted towards

value and cash generation from already

explored fields, and growth in renewables as

part of the energy transition. As the leader in

OBN acquisition we are therefore also expand-

ing our scope into the renewables business, and

we are very well positioned to benefit from this

market shift. With the best people, dierenti-

ated technology and an asset light business

model, we will continue to deliver value adding

solutions to our customers and take full benefit

of this market opportunity.

Carel Hooijkaas

CEO, Magseis Fairfield

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

VISION AND VALUES

We believe that success for the Magseis Fairfield Group is

attained through consistent and relentless focus on achieving

our goals without ever compromising on our values. Our people

are our most valuable asset, so their safety and well-being are

always our top priority.

When our people are safe and sound we can

focus on the Group’s mission, which is to

bring value to our global energy partners and

stakeholders by delivering leading edge, safe

and sustainable solutions through technology

dierentiation and key alliances. This drives us

toward our vision to be the leading and trusted

partner in subsurface imaging solutions.

Having the most experienced people in the

industry is a clear competitive advantage, but

the real magic happens when you align every-

one to work together as ONE TEAM. Our ONE

TEAM culture not only extends to our team and

our customers, but also to our suppliers and

partners; this open collaboration between all

involved in addressing challenge and concerns,

and sharing ideas and experiences is what is

needed to continuously move boundaries for

safety, sustainability, eciency, and quality of

subsurface data acquisition.

believe

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Magseis Fairfield ASA – Annual report 2021

Be the leading and trusted

partner in subsurface imaging

solutions.

Vision

Bring value to our global energy

partners and stakeholders by

delivering leading edge, safe,

sustainable solutions, through

technology dierentiation and

key alliances.

Mission

Values

Safety first

Our belief is that all incidents are

preventable, and we are committed to

minimizing the health and safety risk to

our employees, contractors, visitors and

others who may come in contact with or

be aected by our activities.

Sustainability Minded

Our goal is to develop a sustainable

business whose footprint benefits, rather

than impacts, the quality of life of society

and the environment across the globe.

Trust Matters

We earn and maintain the confidence

of our people, our customers and the

community, who rely on us to act with

honesty, integrity and reliability.

Innovation Welcome

We pursue continuous improvement in

our technology and business practices,

combat fear of change and remain open

to collabo ration and creative ideas that

challenge the status quo.

Excellence Expected

We strive for perfection and lead the

industry by setting new standards

for quality, safety and performance,

exceeding the expectations of our

colleagues, customers and the

community at large.

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Business areas

Magseis Fairfield’s business has its foundation in proprietary

technology dierentiation, with in-house developed proprietary

ocean bottom nodes (OBN) and handling and deployment systems.

These hold the potential to significantly improve subsurface imaging,

allowing our customers to make data driven field development

decisions, and deliver eciency and reduce project cost. The

combination of improved eciency for OBN seismic and high data

quality has made it an increasingly attractive option among the

various seismic survey technologies, and puts Magseis Fairfield

in a position to increase the addressable market.

The Group provides marine data acquisition

services to energy companies, which are used

from exploration to development, to production

of oil and gas fields, de-risking and monitor-

ing of CO

storage sites, selection of suitable

placement of oshore wind farms and in

mapping deep-sea minerals.

Magseis Fairfield’s main revenue stream is from

E&P companies, utilizing our services to extract

more resources from existing fields, both proven

and to be developed reserves as well as pro-

ducing assets.

The company has an asset light operational

model which means that we do not own any

vessels. This asset-light setup minimize the

potential financial impact of idle time and also

enable the switching of vessels if there are

better alternatives in terms of eciency, emis-

sion footprint, contractual terms etc.

Magseis Fairfield had eight crews in operation

in 2021. Four crews performed node operations,

three performed source operations for reservoir

monitoring and the last crew performed oper-

ations in our renewables business. The node

crews currently operate two dierent tech-

nology stacks, MASS and Z-technology. The

introduction of Echova

will ensure all opera-

tions are conducted on one uniform platform.

As of end 2021, the company had a total of

30 000 nodes available for operations.

In 2021, Magseis Fairfield completed its 100

oshore OBN acquisition survey, which is more

than all competitors combined. To put this in

perspective, this highlights that the company

has acquired 50 percent more OBN surveys

than all other players in the market combined.

We are very proud of this achievement and the

confidence and trust we have received from

our customers to achieve this milestone. It

further underscores the depth and breadth of

our experience and knowledge in acquiring cost

eective and high quality OBN data.

“We continued to deliver

on a strategy to strengthen

our core while growing into

new areas and new markets.”

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

The Group’s main

business units

Acquisition

The Group acquires proprietary seismic data on behalf of custom-

ers who obtain full ownership of the data acquired. This business

unit accounts for the majority of Magseis Fairfield sales and value

creation. An acquisition contract typically require Magseis Fairfield

to acquiring sucient quality data covering a certain area usually

in the range from 100-2000km

. To acquire data the company

deploys nodes on the seabed using chartered vessels and a com-

bination of Magseis Fairfield and subcontracted crew.

Key strategies and priorities:

• Enable our customers to make timely data

driven field development decisions

• Reduce cost of node operations through

eciency gains to increase the addressable

market

• Further strengthen the company’s position in

core areas

• Grow outside core areas through strategic

alliances

Multi-Client

The Group and its partners acquires seismic data and retains part

or full ownership of the data. The acquired data can be licensed

to any customer that has an interest in the area. The cost of the

acquisition is typically partly or wholly pre-funded by customers.

The company prioritizes OBN Multi-Client (MC) data acquisition

over mature areas with dierent exploration licenses. This ensures

that the future sales potential is a combination of customers who

are already active in the area as well as customers who are con-

sidering to acquire a new license or farm in to the area. MC surveys

are typically larger than proprietary surveys to attract interest

from many customers. Multi-Client was added as a business line

in 2019 and the first MC surveys was acquired in 2020. The pro-

cessing was completed in 2021 and the data is now available for

late sales.

Key strategies and priorities:

• Continue to evaluate MC opportunities

• Prioritize new MC opportunities which can

be executed in partnership with industry

partners

• Prioritize well prefunded MC projects, by

either customers or strategic partners

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Reservoir Monitoring and Source

The Group provides services for monitoring production from exist-

ing fields. The customers permanently install the sensors on the

seafloor and the company delivers the source acquisition. This

is a steady business, as we operate under long term agreements

(typically 3-5 years) with some of our key customers. Although

the revenue from this business is low relative to our acquisition

business, the associated risks are also lower. This business there-

fore delivers predictable revenues and margins. Our main region of

operation is currently the North Sea, but this model can easily be

applied in other regions.

Key strategies and priorities:

• Continue to deliver a steady service to the

existing customers

• Explore synergies with Acquisition unit,

where ocean bottom nodes can be added as

supplement to the source acquisition

• Pursue additional opportunities in the North

Sea and expand into other mature basins

Equipment Lease & Sales

The Group either leases or sells nodes and node handling systems.

Only a selected subset of the company’s technology stack is avail-

able for lease and sales. Nodes are only being built on a per-order

basis for this business. Requests to lease equipment are evaluated

on a case-by-case basis.

Key strategies and priorities:

• Provide continued support and supplies to

existing customers

• Evaluate new lease and sales opportunities

Renewables

The Group oers services tailored to the Oshore Wind Farm,

Oshore Minerals, and Carbon Capture and Storage (CCS)

markets. This is a new business area for Magseis Fairfield. During

the year we became a partner in the Centre for Geophysical

Forecasting and entered into an MoU for Greensand phase

2 project, a CCS project in Denmark, which was awarded funding

in December. We also executed a wind farm pilot project oshore

Denmark. These projects and partnerships will provide data and

experience to develop this startup business. The company has

one crew dedicated to Renewables with a technology setup that is

flexible and can be tailored to the requirements for each project.

Key strategies and priorities:

• Collaborate on research and technology

development together with customers,

strategic partners and academia

• Grow the business through close relation-

ships with customers and strategic partners

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Carel Hooijkaas

CEO

Carel Hooijkaas has over 25

years of experience in the oilfield

services and equipment industry.

Before joining Magseis Fairfield

in 2019 he held various inter-

national leadership positions at

Schlumberger. He holds a MSc

in Measurement & Control from

Delft University of Technology in

the Netherlands.

Stig Hognestad

CFO

Stig Hognestad joined Magseis

Fairfield as CFO on the 1

December 2021. Stig has worked

in the oilfield service industry for

nearly 30 years, in various posi-

tions in Europe, North America

and the Far East. Before joining

Magseis Fairfield he held CFO

and later CEO position in IKM

Acona. Stig holds an MBA from

Edinburgh Business School,

Heriot Watt University and a BSc

in Finance from Kansas State

University.

Mark Zajac

CTO

Mark Zajac has more than 30

years of experience from the

oilfield service and equipment

industry, most of that time with

WesternGeco/Schlumberger. Mark

began his career on a Western

Geophysical 3D marine seismic

crew after obtaining a BSc in

Oceanographic Technology

from the Florida Institute of

Technology. He also holds an

MBA in Technology Management

from the University of Phoenix.

Tom Scoulios

COO

Tom Scoulios has over 25 years of

experience within the seismic and

oil and gas industries. He holds

a BSc in Marine Sciences from

Texas A&M University. Tom held

various roles at Schlumberger and

Polarcus before joining Magseis

Fairfield in 2017.

Executive

Management

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Simon Hayter

CSO

Simon Hayter has over 25

years of industry experience,

serving in dierent regional

operations, sales and manage-

ment roles in South East Asia,

Russia, Houston and London,

mostly within WesternGeco &

Schlumberger. Simon holds a BSc

from University College London

and MSc from Imperial College

London.

Sharon Barclay

CHRO

Sharon Barclay has more than

25 years of experience in

leading HR teams in interna-

tional companies in the Oil &

Gas, High Technology, Software

and Manufacturing industries.

She holds a Bachelor degree

in Business Administration and

a Masters’ Degree in Human

Resources Management from

Texas A&M University in the USA.

Ivar Gimse

EVP Business Development

Ivar Gimse has more than 30

years of seismic industry expe-

rience and have held various

senior management positions

with Geco-Prakla, PGS and InSeis

before founding Magseis AS. He

holds a MSc in Geophysics from

the University of Oslo.

Laila Myksvoll

Group General Counsel

Laila Myksvoll has more than 25

years of experience in legal man-

agement and advisory roles. Prior

to joining Magseis Fairfield she

served as general counsel and

corporate secretary at media-

and telecom operators Get AS

and TDC AS (now Telia) and as

a lawyer and partner at several

Oslo based top tier law firms. She

holds a Master of Laws from the

University of Bergen, Norway.

Executive Management cont.

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Board of Directors

Wenche Kjølås

Chair of the Board

Wenche Kjølås has more than 30 years’

management experience. She has held

the position as CEO and CFO of Grieg

Maturitas AS, CFO of Grieg Logistics

AS and Kavli Holding AS, CEO of

O. Kavli AS, Manager and manage-

ment consultant of Deloitte. Ms. Kjølås

has 20 years board experience, and

has served on board of directors and

in audit committees in Grieg Seafood

ASA, DOF ASA, PGS ASA, Cermaq

ASA and Selvaag Bolig ASA. She was

Chair of Flytoget, and today Chair in

Keolis Norge AS. She holds an MBA

degree from the Norwegian School of

Economics and Business Administration

(NHH) in Bergen.

Angela Durkin

Board member

Angela Durkin has more than 26

years of experience from the oil &

gas service industry. She worked for

almost 20 years at Baker Hughes

in various international positions in

drilling, operations, sales and HSE,

before joining Maersk Drilling as Senior

Vice President and Chief Operating

Ocer from 2015 to 2019. In 2020,

Mrs. Durkin joined the board of KCA

Deutag as Non-Executive Director and

Chair of the Remuneration Committee.

Mrs. Durkin holds a Master’s degree

in Electrical Engineering from the

Technical University in Braunschweig,

Germany.

Luis Antonio Gomes Araujo

Board member

Luis Antonio Gomes Araujo has more

than 35 years’ experience in the oil

& gas and energy industry. He was

CEO at Aker Solutions until 2020

and prior to that held senior positions

at GE, Wellstream, ABB and FMC

Technologies internationally. Mr. Araujo

is currently Chairman of the board of

Ocean Pact and Principle Power Inc.

He is also independent board member

in Akastor and DBO Energy. Mr. Araujo

holds a Bachelor of Engineering in

Mechanical Engineering from Gama

Filho University in Brazil and Masters

of Business Administration from the

University of Edinburgh in Scotland.

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Roar Bekker

Board member

Roar Bekker is a senior executive

manager with over 30 years of inter-

national experience in senior and

executive management positions

worldwide. Mr. Bekker served as CEO

of EMGS ASA. Prior to joining EMGS,

Mr. Bekker spent 23 years working

for Schlumberger. Other positions

inter alia include vice president of

SAP Norway Engineering Center

of Excellence, chair and member of

the board of Fedem Technology AS

and serving as industry advisor to

Investinor. Mr. Bekker holds a Master’s

degree in Geophysics from the

University of Oslo.

Janie Garcia

Board member (employee elected)

Janie Garcia has been with the

company for 15 years and is currently

Manager of the Project Geophysical

Services department. She joined the

industry in the processing department

and has participated in oshore 3D

and 4D node surveys from West Africa,

Brazil, Qatar, the North Sea, and Gulf

of Mexico. Ms. Garcia holds a Master’s

degree in Geophysics from Rice

University in Houston, Texas, U.S.A.

Board of Directors cont.

Anthony J. Dowd

Board member

Anthony J. Dowd is President and CEO of

Fairfield-Maxwell LTD, a position he has

held since January 2017, and serves on

its Board of Directors. Mr. Dowd is also a

Director of Metal Powder Products Inc.,

and Outworx, Inc., portfolio companies of

Mill Point Capital. Prior to joining Fairfield,

Mr. Dowd had more than 25 years’ expe-

rience in private equity. He has served

on the boards of directors of numerous

private and public companies. During the

Financial Crisis, he was the Chief of Sta

for Paul Volcker, the Chairman of the

President’s Economic Recovery Advisory

Board. He holds a Master of Business

Administration degree from the Wharton

School of the University of Pennsylvania.

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Board of Directors report

Introduction

Magseis Fairfield is a Norwegian technology

company headquartered in Lysaker outside

Oslo, Norway and performs ocean bottom

seismic (OBS) operations. The Group has oces

in Houston (USA),Warminster (UK), Rio de

Janeiro (Brazil) and in Singapore, and provides

services to customers globally.

Magseis Fairfield was created through Magseis

ASA’s purchase of Fairfield’s seismic tech-

nologies business from Fairfield Industries

Incorporated in December 2018. The purchase

included the WGP Group which was previously

acquired by Fairfield. Fairfield was founded in

1974 while Magseis was founded in 2009.

Our customers use seismic data in their explo-

ration, development and production phases of

their assets. As part of the energy transition,

our customers focus on cash and value gen-

eration from already explored assets and on

investments in renewables. Magseis Fairfield

oers its services in both markets. The compa-

ny’s business model and segments are further

described in the Business areas section of the

annual report.

Focus for 2021

2021 was a year where the company strength-

ened its position as the leader in OBN

acquisition in a tough market, impacted by

COVID-19. Safe, reliable and ecient project

execution remained at the center of our atten-

tion.

The company continued the focus on cost disci-

pline. Despite a revenue increase of 34 percent

in 2021, SG&A levels remained flat YoY, below

USD 25 million, and capex spend remained

below our target of USD 15 million.

Focusing on the customers to secure key

projects remained a priority for the company.

Backlog increased by 48 percent YoY with the

2022 backlog reaching USD 215 million at the

end of 2021. The company backlog for 2022

was secured at increasing rates as the market

continues to improve.

Multiple projects were successfully executed

in the core areas of the Gulf of Mexico and

the North Sea, as well as expanding into new

geographical areas. In 2021, this included the

successful execution of a project in West Africa

and the successful mobilization and com-

mencement of a large project in Asia. Moreover,

the company entered the Renewables market

and created a new Renewables entity. In 2021,

the company became a partner in the Centre

for Geophysical Forecasting and entered into an

MoU for the Greensand phase 2 project, a CCS

project in Denmark, which was awarded funding

in December. The company also executed a

wind farm pilot project oshore Denmark during

the summer. These projects and partnerships

will provide data and experience to develop this

startup business.

In 2021 the company launched Echova

, the

first OBN technology platform that integrates

the OBN seismic value chain from planning to

image. While current OBN services typically are

limited to the acquisition phase, the Echova

OBN platform integrates technology, workflows

and expertise in collaboration with custom-

ers. The platform will bring value to customers

through faster data delivery and visualization

which allows for better decision-making at

reduced project cost. The total project cost

reduction puts Magseis Fairfield in a posi-

tion to increase market opportunities while

increasing value to our customers. With the

launch of Echova

and the continued invest-

ment in Technology development, the company

strengthens its technology focus and leadership

position in the market.

The company continues its focus on safe oper-

ations to protect the health and well-being of

its employees, customers, stakeholders, the

communities that we operate in and the envi-

ronment. As part of this focus, the company

acquired an industry first carbon neutral survey

in 2021 and committed to become carbon

neutral by 2040, or earlier.

Operational review

QHSE and overall activity

For 2021, the Total Recordable Case Frequency

(TRCF) was 2.37 as the result of four record-

able events (three medical treatment cases

requiring a person to take prescription medica-

tion and one medical treatment where a person

required stitches). This compares with a TRCF

of 1.09 in 2020.

Magseis Fairfield operated crews on 14 dif-

ferent node projects during 2021, in addition

to the repeating Reservoir Monitoring/Source

programs in the North Sea and performing

equipment rental, sales and maintenance

activities.

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The ZXPLR 1 crew was nearly fully utilized

throughout the year, with the only break in the

operation’s schedule being a short drydock

and maintenance period in Q1. The crew began

the year completing a deep-water project

in the Mexican portion of the Gulf of Mexico.

Upon completion, the crew transited north for

drydocking and commencement of three back-

to-back surveys in the US Gulf of Mexico, with

the latest project being completed in Q1 2022.

The ZXPLR 2 crew moved to a project in West

Africa following completion of a project in the

US Gulf of Mexico. Following an idle period in

Q4, the crew will remobilize in the US Gulf of

Mexico for a project commencing in Q1 2022.

The Mass crew operated on three projects in

the North Sea throughout the season with the

latest being completed in November. Surveys

included a node drop survey, as well as a node

survey in conjunction with one of our Reservoir

Monitoring /Source crews.

The Z700 Node on a Rope (NOAR) crew

worked on three projects in 2021. In Q1 and

Q2, the crew acquired a project in the North

Sea for a repeat customer. In October, the crew

completed a North Sea project for a customer

and mobilized an additional NOAR handling

vessel. Upon completion of the project, the

fleet united both node handlers and transited

to India. The mobilization and project start, in

India, were completed on time. The India project

is scheduled to be complete in Q2 2022 and

the crew will transit back to the North Sea for

it’s next project.

The company’s three Reservoir Monitoring/

Source crews completed permanent reservoir

monitoring services and 4D seismic over four

major oil fields in the North Sea. These crews

are operating under long-term contracts for

repeat customers.

We also executed a wind farm pilot project

oshore Denmark utilizing extended-high-res-

olution 3D seismic acquisition over an oshore

wind farm with known seabed challenges to

demonstrate our technology.

Order backlog

The order backlog was USD 293 million at the

end of 2021, representing an increase of 48

percent from the end of 2020. USD 215 million

of the backlog is scheduled for delivery in 2022

and USD 79 million in 2023 and beyond.

In 2021, the backlog increased sequentially

every quarter, improving visibility, and allowing

for ecient project planning and execution. For

2022, the current backlog is centered in the Gulf

of Mexico and the North Sea for repeat custom-

ers, in Asia with continuation of a project which

was started in 2021 and in the Mediterranean

for a repeat customer. The project in the

Mediterranean will be the company’s first in that

region and is in line with the strategy of broad-

ening our geographical footprint.

Magseis Fairfield 2021 crew activity

Q1 2021 Q2 2021 Q3 2021 Q4 2021

Crew Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

ZXPLR Crew 1

ZXPLR Crew 2

Z700 Crew

MASS Crew

RM Source Crew 1

RM Source Crew 2

RM Source Crew 3

Renewables projects

Gulf of Mexico North Sea West Africa India Idle/maintenance

Backlog

2021

Revenue

2021

2023 and beyond

USD million

258

293

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Technology update

Technology organization

We continued to execute our strategy to glo-

balize our Technology group to better leverage

our talent pool. We completed the restruc-

turing of the Engineering team and created

three global technical domains. We closed the

oce in Sweden to consolidate the footprint

of the Technology team and optimize our cost

structure. With these changes in place, the

organization gains eciency in the product

development, sustaining, and support pro-

cesses.

Echova

In September 2021, we launched Echova

, a

platform integrating the entire OBN seismic

value chain. Through the Echova

OBN plat-

form we further extend our lead in our OBN

acquisition services, but we also expand the

value of our oering by collaborating across

the planning, survey design and data delivery

phases of the acquisition projects. This inte-

grated oering will enable project optimization

from design to image, will reduce total project

cost, and will enable us to grow existing markets

and enter new ones. This will generate value

for our customers, partners, shareholders and

Magseis Fairfield.

We will be introducing the Echova

tech-

nologies to the market in phases. The core

capabilities, including a new node, recorder, and

customer portal will come in 2022 and 2023,

followed by additional capabilities and function-

alities based on customer priorities.

Manufacturing

We continue our commitment to technology in

both development and manufacturing and we

delivered the latest batch of MASS III nodes

in the second quarter of 2021. These nodes

were immediately put to work in the North Sea

for the summer 2021 programs. In the US, we

completed the move of our node manufacturing

to our manufacturing partner’s facilities. They

have completed the qualification process for

component and product level manufacturing

and will deliver the first group of nodes in Q1

2022 with an expected delivery of a second

batch in Q4 2022. In Q4 2021, we committed

to another build of MASS III nodes to complete

a full deep water crew and we committed to a

build of ZXPLR nodes that will supplement the

node inventory on our existing crews.

The manufacturing supply chain has under-

gone significant tightening since the onset of

the COVID-19 pandemic. The he subsequent

increased component demand and associated

global GDP growth has further complicated

the supply chain. While further challenges are

expected in 2022, the company is working

closely with suppliers and customers to minimize

supply chain risks on our operations. Through

close collaboration with manufactures and

suppliers, the company has authorized orders

for items that have long lead times in advance

of a build. The company has committed to build

further MASS III nodes for delivery in 2023.

Renewables

Within our Renewables segment, we have

established several strategic partnerships.

The partnerships will help develop imaging

solutions for the Wind Farm, Carbon Capture

and Storage and Minerals markets. In 2021,

we also became a partner with the Centre for

Geophysical Forecasting (CGF), one of The

Research Council of Norway’s funded centers

that is hosted by Norwegian University of

Science and Technology (NTNU). We see this

partnership as a good opportunity to collabo-

rate with our customers and other partners to

further develop solutions within the renewables

space.

During the year we entered into a memoran-

dum of understanding for participation in the

Greensand phase 2 project in Denmark. Project

Greensand aims to demonstrate that CO

can

be injected into the Nini West reservoir oshore

Denmark, and to validate cost-eective and

environmentally safe monitoring technologies.

The pilot project will not only be important for

the Greensand project but also for maturing

other CO

storage sites in Denmark and Europe.

A wind farm pilot project was executed oshore

Denmark utilizing Extended-high-resolution 3D

seismic acquisition over an oshore wind farm

with known seabed challenges to demonstrate

our technology.

Financial review

These consolidated financial statements com-

prise Magseis Fairfield ASA (referred to as the

“company” or “parent”) and its subsidiaries

(referred to as “the Group”).

The company and its subsidiaries have func-

tional currency and presentation currency in

United States Dollar (USD). The consolidated

financial statements for the Group are pre-

sented in United States Dollars (USD). Unless

otherwise stated, all financial information has

been rounded to the nearest thousand and

figures in brackets represent figures for 2020.

Revenues

The Group’s revenue for 2021 amounted to

USD 258.1 million, compared to USD 193.4

million in 2020. The increase is primarily driven

USD million

Revenue mix

20212020

Acquistions

Systems

RM/Source

Multi-client

193

258

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by higher revenues from data acquisition as a

result of higher utilization of the crews.

80 (68) percent of Group revenue was from

data acquisition contracts, 9 (22) percent

from systems (sale, repair and lease of equip-

ment) while 7 (10) percent was from Reservoir

Monitoring/Source programs. Phase 1 of the

large Cornerstone OBN Multi-Client survey,car-

ried out in partnership with CGG, was finalized

for delivery to customers towards the end of

2021. The remainder of the project is scheduled

for delivery in first half of 2022. Prefunding for

Cornerstone of USD 8.7 million was recognized

as revenue in Q4 2021.

Operational costs

Group cost of sales amounted to USD 186.6

million in 2021 (130.6), mainly relating to vessel

operation costs such as time charter, crew cost

and fuel.

The gross profit was USD 71.5 million (62.8) and

the gross margin 28 percent (32 percent). In the

first half of 2021 the company executed lower

margin contracts that were signed in a chal-

lenging market environment due to the outbreak

of coronavirus. For the first half of 2021 the

gross profit was 24 percent while this improved

to 30 percent for the second half greatly sup-

ported by a successful project execution in

West Africa. Despite lower activity in system

sales, gross profit was healthy 80 percent from

this activity.

Selling, general and administrative expenses

(SG&A) amounted to USD 24.5 million in 2021,

down from 27.3 in 2020. SG&A for the year

was in line with the guided cost level of around

USD 25 million. Based on the current activity

outlook, the company expects SG&A to be

between USD 25 and 30 million for 2022. It

should be noted that the SG&A figures include

expensed research and development costs.

EBITDA

The Group reported EBITDA of USD 47.0 million

for 2021, compared to USD 35.5 million in

2020.

The 2021 EBITDA includes positive special

items of USD 5.7 million, mainly related to

USD 3.6 million for a U.S. loan program received

in 2020 which was fully forgiven in 2021. This

compares to USD 2.9 million of negative special

items in 2020.

Adjusted EBITDA was hence USD 41.3 million

(38.4).

Depreciation, amortization

and impairment

Depreciation, amortization and impairments

totaled USD 72.1 million (50.1).

Depreciation amounted to USD 51.5 million for

the full year (39.4) The increase reflects that

the company in 2020 acquired a Multi-Client

survey where all costs related to that survey

were capitalized, including depreciation.

Amortization amounted to USD 14.2 million

(8.7). The increase from 2020 is due to

USD 5.5 million of Multi-Client amortization.

An impairment of USD 6.5 million (1.9) was rec-

ognized in 2021 related to older equipment and

R&D projects with limited or no expected future

use and value.

Operating result (EBIT)

The operating result (EBIT) for 2021 showed a

loss of USD 25.1 million, compared to a loss of

USD 14.6 million in 2020.

Net financial items

Total finance income amounted to USD 0.8

million in 2021 (6.6).

Total finance costs were USD 4.0 million (9.8),

comprising both interest on debt and interest on

financial leases under IFRS 16.

Net finance costs were hence USD 3.2 million in

2021, in line with 2020.

Profit/loss

Net loss before tax was USD 28.3 million in

2021, compared to a net loss before tax of

USD 17.8 million in 2020.

Income tax expense amounted to

USD 3.9 million (1.9), and net loss after tax was

USD 32.3 million (19.7). The increase in income

taxes is driven by the projects in West Africa

and India.

The company currently does not recognize any

tax loss carried forward as tax assets.

Q4Q3Q2Q1Q4Q3Q2Q1

0.0

12.5

25.0

3 7. 5

50.0

Q4Q3Q2Q1Q4Q3Q2Q1

USD million

Gross Profit and Margin

Gross margin Gross profit

15.312.3

23%

42%

35%

32%

19%

29%

30%

18.9 16.2 7. 9 16.8 24.1 21.6

2020 2021

0.00

6.25

12.50

18.75

25.00

Q4Q3Q2Q1Q4Q3Q2Q1

USD million

EBITDA split

Negative special items Positive special items

12.2

5.8

9.9

10.4

0.6

14.3

19.7

12.4

2020 2021

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Balance Sheet

Total assets for the Group were USD 305.0

million per the end of 2021 compared to

USD 344.6 million at the end of 2020.

Property, plant, and equipment (PPE) amounted

to USD 115.8 million, versus USD 150.1 million at

the end of 2020. Reduction in net book values

is expected to decrease at a slower pace going

forward due to reassessment of useful life of

seismic equipment.

The Multi-Client library is recognized as a

non-current asset of USD 22.5 million up from

USD 20.9 million at the end of last year. The

investment in 2021 relates to data processing

costs.

Other intangible assets were USD 49.8 million

compared to USD 57.7 million at the end of

2020. The changes are mainly due to amortiza-

tion and a USD 1.8 million impairment.

During the year, the company has performed

impairment tests considering the shifts in

market fundamentals due to COVID-19 and the

impact to the E&P industry. No impairments

were found to be required, with the exception of

a USD 6.5 million impairment related to older

equipment and R&D projects with limited or no

expected future use and value.

Total non-current assets amounted to

USD 188.2 million, compared to USD 228.7

million at the end of 2020.

Inventories decreased to USD 6.2 million from

USD 7.7 million at the end of 2020, whereas

trade receivables decreased to USD 17.4 million

from USD 38.1 million at the end of 2020. Other

current assets increased to USD 63.0 million

from USD 15.3 at the end of 2020, mainly

driven by start-up of the large project in India

and related unbilled revenue.

Cash and cash equivalents amounted to

USD 29.7 million at the end of 2021, compared

to USD 54.8 million at year-end 2020.

Total current assets amounted to USD 116.8

million at the end of the year, compared to

USD 115.9 million at the end of 2020.

The Group’s equity amounted to

USD 161.5 million at the end of 2021, down

from USD 192.5 million at the end of 2020.

This mainly reflects the losses in the period.

The equity ratio is 53 percent, compared to

56 percent at the end of 2020. The equity

ratio covenant was permanently reduced to 40

percent eective from Q4 2021.

Non-current liabilities amounted to USD 42.3

million at the end of 2021, compared to

USD 44.5 million at the end of 2020.

The non-current liabilities comprised inter-

est-bearing liabilities of USD 29.4 million (30.6),

lease liabilities of USD 8.3 million (8.8), and

noninterest-bearing liabilities of USD 4.6 million

(5.1).

Current liabilities declined to USD 101.2 million

from USD 107.6 million at the end of 2020, with

trade payables increasing to USD 20.9 million

from USD 17.2 million at year-end 2020. Other

current liabilities declined to USD 80.3 million

from USD 90.4 million at the end of 2020,

with the current portion of lease liabilities at

USD 16.2 million, current tax payable at USD 5.1

million, and other current liabilities at USD 57.0

million. The latter comprises project accruals,

salary accruals, warranty accruals, deferred

revenue, and other operational accruals. The

current portion of interest-bearing liabilities is

USD 2.0 million.

Cash Flow and Investments

The Group had a positive operating cash flow of

USD 6.8 million in 2021, compared to USD 20.5

million in 2020. The variance between the

operating cash flow of USD 6.8 million and

EBITDA of USD 47.0 million in 2021 are mainly

explained by negative working capital move-

ments of USD 28 million and other non-cash

elements in the EBITDA, such as US COVID-19

loan forgiveness and provision releases. The net

working capital at year-end was impacted by

start-up of the large project in India where first

cash inflows will start in first quarter 2022.

Cash outflow from investing activities amounted

to USD 12.9 million for 2021, compared to

USD 25.2 million in 2020. The decrease mainly

reflects the lower investment in Multi-Client

project in 2021, where the data set was pro-

cessed in 2021 and acquired in 2020.

USD million

Assets

20212020

PPE

MC library

Other intangibles

Other current

Cash

345

305

USD million

Equity and liabilities

20212020

Total equity

Non-current

liabilities

Current liabilities

345

305

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Capital expenditure (excluding Multi-Client

investments) accounted for USD 11.9 million

of the cash outflows from investing activities,

coming in below the company’s full-year finan-

cial guidance of USD 15 million. The company

plans to maintain capital expenditure at or

below USD 15 million also in 2022, although

increased demand and potential new contract

awards could trigger additional equipment

investments.

The net cash flow from financing activities was

an outflow of USD 18.7 million, compared to

a cash inflow of USD 4.7 million in the same

period last year. The net inflow in 2020 was

due to private placement of USD 25.5 million.

In 2021, cash outflow from financing activities

mainly related to payment of finance lease

liabilities and interests.

Funding

The company’s cash position was USD 29.7

million at the end of 2021, compared to a cash

position of USD 54.8 million at the end of

2020. As described above, the cash position

at the end of the year was aected by working

capital requirements mainly related to the large

project in India.

In 2021, Magseis Fairfield reached an agree-

ment with DNB to amend the covenant

structure for the RCF and extend the matu-

rity one year to December 2023. Under the

new covenants, the required equity ratio has

been reduced from 50 percent to 40 percent.

This change allows for increased flexibility

with regards to working capital requirements

expected from higher operational activity.

Given the current activity level and financial

forecasts, the company will have sucient

liquidity through 2022. The liquidity forecast is

subject to certain risk factors, such as project

execution, timely collections from customers or

changes in phasing and scope of projects.

Magseis Fairfield remained in compliance with

all financial covenants through 2021. Please

see note 21 for further details.

Parent company

Magseis Fairfield ASA is the parent company

of the Magseis Fairfield Group. In 2021,

Magseis Fairfield ASA reported a loss after

tax of USD 47.4 million, compared to a loss of

USD 20.8 million in 2020.

At year-end 2021, Magseis Fairfield ASA had

total assets of USD 204.6 million, compared to

USD 240.5 million at the end of 2020.

Allocation of comprehensive loss

The Board of Directors proposes the following

allocation of the reported comprehensive loss:

Carried forward as uncovered loss of USD 47.4

million.

At year-end 2021, Magseis Fairfield ASA had a

total equity of USD 148.6 million, compared to

USD 194.7 million at the end of 2020.

Accounting principles

The consolidated financial statement for 2021

have been prepared and presented in accord-

ance with the International Financial Reporting

Standards (IFRS), as approved by the EU. The

financial statements for the parent company

have been prepared in accordance with the

simplified application of IFRS and section 3-9

of the Norwegian Accounting Act.

Going concern

The financial results for the Group were charac-

terized by continued financial and operational

challenges in 2021, due to the COVID-19 pan-

demic and volatile market environment. The

impact on the E&P industry has been profound

and Magseis Fairfield’s clients have cut their

capex and cancelled or postponed their invest-

ment plans to preserve cash. However, Magseis

Fairfield has maintained a strong focus on cost

and capital expenditures to preserve cash and

safeguard business continuity.

The Group’s backlog for 2021 increased during

the fourth quarter 2021 and the first months

of 2022, oering increasing support for the

2022 budget and forecasts. Magseis Fairfield

forecasts a market growth in 2022 of 25

percent and new contracts are being secured at

increasing margins. This backlog and tendering

activity for 2022 provides a basis for optimism,

although the company acknowledges the risks

and uncertainties regarding future market

development.

The company ended the year with USD 29.7

million in cash and cash equivalents. Given

the current activity level and financial fore-

casts, it is the Board of Directors’ view that the

company will have sucient liquidity through

2022. The liquidity forecast is subject to

certain risk factors, such as project execution,

timely collections from customers or changes in

phasing and scope of projects.

Although there are uncertainties related to

events or conditions that might impact the

future cash flows, the Board and Management

are of the opinion that the going concern

assumption is appropriate and the accounts are

prepared under this assumption.

USD million

(excluding MC investments)

Capex

20212020

Sustaining capex

Growth capex

13.3

12.0

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APPENDIX

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Working environment

and personnel

At the end of 2021, the Group had a total of

401 FTEs, with 320 employees and 81 con-

tractors. This was an increase from 370 at the

end of 2020, split between 334 employees and

36 contractors. The increase mainly relates

to oshore employees as a result of increased

activity.

The Parent company had a total of 55 FTEs,

of which 47 employed and 8 contractors. This

compares to 58 FTE’s at the end of 2020, with

51 employed and 7 contractors.

The employees in the Group represented 13

percent women, and 87 percent men. About 58

percent of the employees were based oshore

(234) and 42 percent onshore (170).

Magseis Fairfield has adopted guidelines, pol-

icies and procedures relating to human rights,

employee rights and social matters, prevention

of corruption, harassment, and discrimination in

the working environment and in our employment

practices. A statement on Magseis Fairfield’s

corporate responsibilities involving people,

planet and business practice is provided in a

separate section later in this annual report.

The sick leave percentage for the group in 2021

was 0.43 percent for the oshore crew (1.94

percent in 2020) and 0.53 percent for the

onshore personnel (1.66 percent in 2020). Sick

leave for the parent company, onshore person-

nel only, was 1.6 percent in 2021 (2.26 percent

in 2020).

For 2021, the Total Recordable Case Frequency

(TRCF) was 2.37 and was the result of four

recordable events (three medical treatment

cases requiring a person to take prescription

medication and one medical treatment where a

person required stitches). This compares with a

TRCF of 1.09 in 2020. Magseis Fairfield main-

tained its ISO 9001:2015 certification and its

ISO 45001 certification in Health and Safety.

The number of exposure hours amounted to

1.68 million, based on 12 hours daily exposure,

compared to 1.84 million in 2020.

Risk factors

Magseis Fairfield is exposed to a variety of risk

factors, including risk related to global eco-

nomic growth and demand for and prices of oil

and gas products. These factors aect the oil

and gas companies’ capital expenditure such as

seismic services.

Revenue risk

Magseis Fairfield operates in competitive

markets, and most of the Group’s contracts

are obtained through competitive bidding

processes. Rapid technological changes may

aect the Group’s competitive position.

The Group’s order book (or backlog) estimates

are based on certain assumptions and may be

subject to unexpected adjustments and can-

cellations. The backlog may thus not be timely

converted to revenues or be indicative of the

Group’s actual operating results for any future

period. Contracts for the provision of seismic

services can be cancelled at the sole discretion

of the client without payment of significant

cancellation costs to the service provider. This

indicates that there can be no assurance that

such contracts will be wholly executed by the

Group. Similarly, there can be no guarantee that

the company will be able to meet customers’

contractual terms and conditions in a timely

manner, which may also have an adverse eect

on the Group’s operations and financial posi-

tion.

Failure of the company to meet customers’

contractual terms and conditions may have an

adverse eect on the Group’s operations and

financial position. The Group can experience

delays in certain contracts due to change of

scope from the operator, and delayed con-

tract signature. Furthermore, the company’s

mobile operations use multiple spot-chartered

vessels and remotely operated underwater

vehicle (“ROV”) equipment and crews, and lack

of performance according to plan may lead to

significant delay of surveys.

Material breakdown, damage to or total loss

of the company’s short-term and long-term

chartered vessels may have a material adverse

eect on the Group’s financial prospects. The

company will from time to time incur class

docking, upgrade and repair costs related to

the long-term chartered vessel or modular

systems, and non-available periods related to

transit of vessel or modular systems or other

circumstances. This may have a negative eect

on revenues and earnings, which could impact

the Group’s business.

The Group may invest significant amounts in

acquisition and processing of seismic data for

its Multi-Client data library. No guarantee can

be given that the Group will be able to meet

expectations neither with respect to how much

seismic data it will be able to sell, nor at which

price the seismic data will be sold in the future.

Credit risk

Credit risk relates to the risk of non-payments

of trade receivables or other receivables, which

may adversely impact financial results and

liquidity.

The Group’s customers are concentrated

within the energy industry and may be similarly

aected by changes in the industry sentiment.

Many of the customers are large and solid oil

and gas companies, and the company pays due

consideration to the credit quality of potential

new customers to minimize the risk during con-

tract negotiations.

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The credit risk of the company is assessed to

be limited.

Liquidity risk

Liquidity risk is the risk that Magseis Fairfield

is not able to meet its payment obligations.

The company is dependent on both access

to long-term funding and timely payments of

receivables from customers, and no assur-

ance can be given with respect to the ability to

secure new sources of funding in the event of a

cash shortfall.

Generally, the Group’s existing or future debt

arrangements could limit the Group’s liquidity

and flexibility in obtaining additional financ-

ing in pursuing other business opportunities.

If the Group’s operating income is insucient

to service its current or future indebtedness,

the Group will be forced to take action such

as reducing or delaying its business activities,

acquisitions, investments or capital expendi-

tures, restructuring or refinancing its debt or

seeking additional equity capital. The Group

may not be able to aect any of these remedies

on satisfactory terms.

At the end of 2021, the Group had cash and

cash equivalents of USD 29.7 million. The Group

has a revolving credit facility of USD 30 million,

which was fully drawn at the end of 2021. Given

the current activity level and financial forecasts,

the company will have sucient liquidity through

2022. The liquidity forecast is subject to

certain risk factors, such as project execution,

timely collections from customers or changes in

phasing and scope of projects.

Foreign exchange risk

The Group’s functional currency is USD. The

Group operates globally and is hence exposed

to foreign currency movements. The exposure

to foreign exchange risk is mainly mitigated

through use of USD nominated customer

revenue contracts, and the company utilizes

hedging arrangements against parts of its

operational cost exposure in NOK and GBP.

The Group’s expenses are primarily, and in

order of exposure, in USD, NOK, GBP and EUR.

Changes in currency may aect operational

costs, e.g., salaries paid in local currency.

Changes in currency exchange rates relative

to the USD may aect the USD value of the

assets and thereby impact the total return on

such assets.

Currency fluctuations of an investor’s currency

of reference relative to the USD may adversely

aect the value of an investor’s investments.

Commodity prices

The company is exposed to fluctuations in

the price of certain key commodities such as

oil prices, fuel and transportation costs. The

company is assessing hedging arrangements

to mitigate the possible adverse eects for fuel

prices on a project-by-project basis.

Legal

The Group business is subject to laws and

regulations in various jurisdictions, and the

requirements of, changes in or violations of such

laws or regulations may adversely aect the

Group’s business and profitability. The Group

invests financial and managerial resources

to maintain compliance with these laws and

regulations, and failure to do so could result

in fines or penalties, enforcement actions,

claims for personal injury or property damages,

or obligations to investigate and remediate

contamination. The adoption of laws and

regulations that directly or indirectly curtail

exploration by oil and gas companies could also

materially adversely aect the Group’s opera-

tions by reducing the demand for the Group’s

geophysical products and services. The Group

may also be aected by new environmental laws

or regulations.

Claims may be asserted against the Group for

the violations of Intellectual Property Rights

(IPR) of third parties, and the allocation of

resources to defend such claims as well as the

outcome of such disputes may have material

adverse eect on the operations, business

and financial condition of the company. The

company has developed a patent portfolio

which is important to the company’s operations

and business, but it is still possible for third

parties to claim that the patents (registered or

pending) or activities of the company violate

their intellectual property rights.

Since acquiring Fairfield in December 2018, the

Company has been involved in a patent lawsuit

against Seabed Geosolutions for infringement

of four of the Group’s U.S. patents. This and

other lawsuits and disputes regarding IPR

infringement, may force the company to incur

substantial costs in defending itself and its IP

portfolio.

Magseis Fairfield continues to assert

patent infringement claims against Seabed

Geosolutions and remains confident in its lit-

igation position. The Group intends to press

forward with its lawsuit and demands for mon-

etary damages and a permanent injunction in

2022.

The lawsuit was brought in the U.S. District

Court for the Southern District of Texas and

alleges that Seabed infringes four Magseis

Fairfield U.S. Patents (Nos. RE45 268 (‘268),

9 829 589 (‘589), 8 228 761 (‘761), and

8 879 362 (‘362)). The Court has presently

stayed the suit pending final resolution of

three Inter Parties Review petitions challenging

patent validity which Seabed filed with the U.S.

Patent and Trademark Oce, including appeals

thereof. These appeals are expected to be

resolved in 2022, after which Magseis Fairfield

will seek to lift the litigation stay and timely

resume litigation in the district court.

The company has an ongoing process with

Fairfield Industries Inc. regarding certain

contractual claims between the parties that

relates to a project in the Middle East. This

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project represented a major part of Fairfield

Seismic Technologies’ project backlog at the

time of the transaction where Magseis ASA

purchased all the shares in Fairfield Industries

International Limited and all membership inter-

ests in Fairfield Seismic Technologies LLC from

Fairfield Industries Inc. The transaction was

completed on 18 December 2018. The first

notification regarding a potential claim was sent

by Magseis Fairfield to Fairfield Industries Inc.

in March 2019. The company announced 18

of February 2022 that the mediation process

was cancelled and that the dispute between the

parties is thereby to be solved by arbitration in

accordance with the parties’ contract. Magseis

Fairfield will provide further information about

the arbitration process when relevant, includ-

ing with respect to any material developments

in such process. No certainty can be given to

the outcome of the arbitration process nor the

timing of any such outcome.

COVID-19 risk

The outbreak of COVID-19 highlighted the

importance of continued risk assessments. The

reduction in economic activity that followed,

led to a sharp and significant reduction in oil

demand and generated an oversupply situation

with lower and more volatile oil prices. During

2021 the outbreak has aected the supply

chains for most organizations and people, which

is expected to continue in 2022.

While the pandemic persists, the risks and

uncertainties regarding extraordinary measures

and economic eects limit the visibility. During

the pandemic, several oil and gas companies

announced significant reductions in capital

spending, including spending for exploration

and development expenditures such as seismic

services. While the outlook has since improved,

the impact on the ocean seismic market has

been significant.

The company’s business continuity plans have

ensured compliance with all regulations and

recommendations from local authorities in

all locations, with strict testing and sanita-

tion standards for both oshore and onshore

operations allowing for continued operations

throughout the period.

Other business risk

Seismic acquisition operations may be exposed

to extreme weather, hazardous conditions and

activity in the work area. The Group’s own insur-

ance may not be adequate to cover potential

losses.

Reliance upon a single source or specialist

suppliers for certain electronic and other com-

ponents leaves Magseis Fairfield vulnerable to

delays, increased costs or possibly halt in pro-

duction of nodes due to lack of availability of

critical parts. Manufacturing and hence supply of

equipment may significantly increase in cost, be

delayed, or even stopped due to lack of availa-

bility of critical parts or components. In addition,

the nodes contain many commodity electronic

components which are bought on the world elec-

tronics market. Lack of replacement may lead to

a time lag where the Group is not able to supply

a certain electronic board for the nodes.

Cyber criminality risk is increasing globally as

more and more is stored and handled digitally.

This threat is relevant for all devices connected

to internet. To protect Magseis Fairfield and

its assets and IP, precautions and procedures

are taken continuously, also in 2021. The most

common attack vector is ‘phishing emails’.

Magseis Fairfield has taken steps to improve

protection of email, improve capabilities to iden-

tify ongoing malicious activities and increase

employee awareness of cyber threats.

Magseis Fairfield is dependent upon its ability

to attract and retain personnel with required

skill sets, and failure to do so may have a

material adverse impact on the company’s

operations and technology development. The

Group’s employees are highly sought after in

the industry and have been targeted by the

Group’s competitors for poaching at all levels in

the organization. The company is thus required

to meet or exceed industry expected levels.

Depending on the development of the war in

Ukraine and the associated sanctions and

travel restrictions there might be elevated risk

related to the safety and security of our crew

members and to the availability of the employ-

ees for Magseis Fairfield. The company may be

impacted by other events aecting energy and

commodity prices and the safety, security and

availability of human resources. As per the end

of 2021, around 3 percent of the company’s

employees were of Russian or Ukrainian nation-

ality.

Climate risk

Climate-related risks might be divided into

two major categories: (1) risks related to the

transition to a lower-carbon economy and (2)

risks related to the physical impacts of climate

change. As part of the energy transition, we have

seen a fundamental shift in the market where our

customers focus on cash and value generation

from already explored assets. This means that

our customers are prioritizing investments in

high-quality seismic data over and around exist-

ing assets, and specifically OBN seismic data to

make data driven field development decisions.

While this is a potential upside for the company,

there is a political risk if authorities decide to

significantly reduce or completely stop produc-

tion of oil and gas in key markets.

Magseis Fairfield has entered the renewables

business using our technology and knowledge

from the oil and gas industry. We completed a

wind farm pilot project in 2021 and will conduct

a carbon capture and storage pilot project in

2022. We see several opportunities in 2022

and will continue our eort to expand the

renewables part of our business.

We believe that the services Magseis Fairfield

oer is a part of the solution for the transition

into a lower-carbon economy. The valuation risk

due to climate on our assets and technology are

assessed to be low.

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Physical risk resulting from climate change, in

the form of costs caused by physical damage is

considered low to moderate. Seismic acquisition

operations may be exposed to extreme weather,

hazardous conditions and activity in the work

area. The Group’s own insurance may not be

adequate to cover potential losses.

Corporate governance

Magseis Fairfield seeks to comply with the

Norwegian Code of Practice for Corporate

Governance (NUES) of 14 October 2021. A

statement on Magseis Fairfield’s corporate

governance principles and practices is provided

in a separate section later in this annual report.

Magseis Fairfield did not deviate from any sec-

tions of the Code of Practice as at year-end

2021.

Sustainability

As a global and leading operator in the Ocean

Bottom Seismic market, Magseis Fairfield has

an opportunity, but also a responsibility to

commit to high standards relating to working

environment and personnel welfare, environ-

mental impact and business practices. An ESG

report is provided in a separate section later in

this annual report.

Other

An insurance policy is in place for members of

the Board of Directors and the CEO for their

potential liability towards the Company and

third parties.

Strategy and outlook

Delivering on our Strategy

We continued to deliver on a strategy to

strengthen our core business while growing

into new areas and new markets in 2021. To

strengthen the core business, we are working

hard to further improve our service delivery to

our key customers while expanding into new

geographical areas and maintaining our position

in the core areas. We succeeded in doing that in

both the Gulf of Mexico and the North Sea last

year. To grow into new areas and new markets,

we are actively pursuing key alliance partners,

within acquisition technology, Multi-Client ser-

vices and new geographies, and within oil and

gas and renewables markets. We succeeded in

doing that with our Multi-Client partnership with

CGG, a hybrid-alliance with PGS, local partner-

ships in new geographies and participation in

the Greensand renewables project in Denmark.

Our entry into renewables is progressing as

planned. Milestones in 2021 included the

successful execution of a wind farm pilot project

in Denmark, this was achieved in Q3. In 2022

we plan to acquire our first Carbon Capture and

Storage (CCS) pilot project. The acquisition for

the Greensand project in Denmark is scheduled

for the fourth quarter 2022. The company

is working on several renewables tenders for

acquisition commencing in 2022.

Magseis Fairfield has long been committed

to operate safely to protect the health and

well-being of our employees, our customers, our

stakeholders, the communities that we operate

in, and the environment. In 2021 we extended

this commitment to include an ambition to

become carbon neutral by 2040, or earlier.

Our strategy is focused on understanding and

capturing the total GHG inventory that results

from our operations and taking on initiatives

to reduce that inventory over time. This will

be accomplished by implementing technology

solutions, and by working with our suppliers and

customers to improve eciency and decrease

the carbon footprint. Any final emissions which

cannot be reduced can be oset. In 2021 we

achieved an industry first by executing a carbon

neutral OBN survey in the Gulf of Mexico.

Moving forward, the company’s business plans

will continue to be driven by a financial strategy

that can be summarized as follows:

• Ensuring profitable growth

• Maintaining a viable financial structure

throughout the business cycle

• Improving return on capital employed

Within this financial framework, the company

pursues a business strategy focusing on:

• Technology leadership in 4D and sparse node

acquisition

• Technology dierentiation to grow existing

markets and unlock new markets

• Diversified revenue streams, with Multi-Client

services and Renewables adding to the

existing business in Acquisition, Reservoir

Monitoring/Source, and Technology Sales and

leases

New technology: Echova

platform

Magseis Fairfield is known as a technology

leader in the Ocean Bottom Node seismic

industry, and our launch of Echova

in 2021

is the world’s first OBN technology platform

integrating the OBN seismic value chain. While

current OBN deliveries typically are limited

to the acquisition phase, the Echova

OBN

platform integrates planning, survey design,

acquisition, and data delivery, using our tech-

nology, workflows, and expertise in collaboration

with our customers. This brings value to our

customers through faster data delivery and

visualization which allows for better deci-

sion-making at reduced project cost.

Through the Echova

OBN platform we not

only continue to lead the OBN acquisition

market but also expand the scope of our oer-

ing as we will enable project optimization from

planning to data delivery. This reduces total

project cost to the benefit of both our custom-

ers and Magseis Fairfield and enables us to

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grow existing markets and enter new ones. We

are looking forward to rolling-out Echova

over

the coming years.

The Echova

platform addresses three key

market and customer requirements:

• Reduced total project costs to increase the

addressable market.

• Expanded oering, addressing changes in

customers’ in-house resource base.

• Faster delivery of data, addressing the need

to make well-informed and ecient, data-

driven field development decisions.

The rationale and thinking behind our new

Echova

platform fit well with important and

fundamental changes we see in our market.

Most of our customers have restructured their

organization to adapt to changing energy

markets, and smaller customer organizations

responsible for geophysics have broadened

their scope from oil and gas to also include

renewable projects. Given the broader scope of

the Echova

platform, these changes provide

an increasing business opportunity for Magseis

Fairfield.

Magseis Fairfield is excited about the launch of

the Echova

OBN platform and the possibility

to grow existing markets, open new markets,

and improve profitability going forward.

Market fundamentals and outlook

Oil and gas demand is returning to pre-COVID

levels and is proving resilient even during the

most recent Omicron outbreak, and the eects

of years of under-investments are becoming

evident in the energy market.

Energy demand is expected to continue to grow

in a post-COVID new normal, with air travel

recovering throughout 2022 and beyond. Given

the long investment cycle from exploration to

production, short- to medium-term energy

supply will need to come from already explored

assets. With regards to longer-term invest-

ments, many oil and gas companies still seem

to find it challenging to meet required long-term

return requirements given the changing global

energy mix.

The need for increased oil and gas supply in the

short- to medium-term is expected to translate

into investments to increase recovery rates

from already explored assets. According to data

from Rystad Energy, this view is supported by a

significant increase in project sanctioning, and

the forecasted sanctioned greenfield capex is

expected to increase by 14 percent in 2022 and

by a further 40 percent in 2023. These projects

will provide lower-carbon barrels that can be

delivered quickly to the market with attrac-

tive payback on investments and will naturally

include OBN projects. This forms the basis for

an increasingly optimistic outlook for a market

recovery for OBN services, and the company’s

view that the OBN market will see double-digit

growth from 2022 onwards.

The 2022 market opportunities continue to

grow, and the company sees customer interest

extending beyond the core areas in the Gulf

of Mexico and North Sea to include also Latin

America, Asia and Africa. Based on awarded

contracts and forecasted tender activity the

company predicts 25 percent overall market

growth in 2022. The company maintained a

close relationship with its customers through-

out the year and increased the backlog by

48 percent to USD 293 million. The new

contracts are being secured at increasing

margins. This backlog and tendering activity for

2022 provides a basis for optimism, although

the company acknowledges the risks and

uncertainties regarding future market develop-

ment.

We are dedicated to managing what we can

control, and we have a strong and agile organ-

ization which responds to changing market

conditions aided by dierentiated technical

solutions for our customers. This presents the

company with a clear market advantage, una-

vailable to companies which oer commoditized

solutions.

Well positioned for the future

The BoD would like to express its gratitude to

the employees of Magseis Fairfield for their

outstanding eorts and contributions during a

challenging 2021. The team has responded very

well to the challenges caused by COVID-19 and

related travel restrictions, and logistical issues,

while maintaining our service oering through-

out the year.

Magseis Fairfield is well positioned for the

future, with a professional and engaged team

moving forward in developing new and existing

markets in partnership with our customers and

strategic partners.

Subsequent events

On 6 January 2022, Magseis Fairfield

announced the conditional award of an Ocean

Bottom Node (OBN) survey from a repeat

customer. Start-up is expected in Q3 2022,

and the project will run for approximately two

months. On 21 January, it was announced that

this conditional award was converted into a

signed contract.

On 11 January 2022, Magseis Fairfield ASA

disclosed an ongoing mediation process

between Magseis Fairfield ASA and Fairfield

Industries Inc. regarding certain contractual

claims between the parties. On 30 October

2018 Magseis ASA entered into a transaction

agreement for the purchase of all the shares

in Fairfield Industries International Limited and

all membership interests in Fairfield Seismic

Technologies LLC from Fairfield Industries Inc.

The transaction was completed on 18 December

2018. The mediation process relates to a

project in the Middle East that represented a

major part of Fairfield Seismic Technologies’

project backlog at the time of the transaction.

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

On 21 January 2022, Magseis Fairfield

announced that a customer exercised an

optional project in US GoM, which is scheduled

to start in Q2 2022 and run for approximately

two months.

On 9 February 2022, Magseis Fairfield

announced that preparatory discussions

between Magseis Fairfield ASA and Fairfield

Industries Inc, ahead of the final mediation

meeting, have revealed that there is no common

ground upon which to reach a mediated solution

to the contractual claims between the parties.

The final mediation hearing that was scheduled

for March 2022 has been cancelled and the

dispute between the parties is thereby to be

solved by arbitration in accordance with the

parties’ contract.

On 3 March 2022, Magseis Fairfield announced

its acquisition of the node-on-a-rope handling

systems from Carbon Transition. This further

consolidates the OBN market and gives the

company further flexibility for future growth.

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Responsibility statement

Confirmation from the Board of Directors and Chief Executive Ocer

The Board of Directors and the chief executive ocer of Magseis Fairfield ASA have today considered and approved the annual report and financial statements

for the 2021 calendar year ended on 31 December 2021.

We confirm, to the best of our knowledge, that:

• The 2021 financial statements for the group and parent company have been prepared in accordance with all applicable accounting standards

• The information provided gives a true and fair view of the group’s and parent company’s assets, liabilities, financial position and results

• The Board of Directors report provides a true and fair overview of the development, performance and financial position of Magseis Fairfield ASA and the

Group together with a description of the principal risks and uncertainties that they face

Board of Directors and CEO of Magseis Fairfield ASA

Lysaker, 10 March 2022

Wenche Kjølås

Chair of the Board

Roar Bekker

Board member

Anthony J. Dowd

Board member

Luis Araujo

Board member

Angela Durkin

Board member

Janie Garcia

Board member

(employee elected)

Carel Hooijkaas

CEO

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Corporate governance

Magseis Fairfield ASA (“Magseis Fairfield” or the “Company” and

when taken together with its consolidated subsidiaries the “Group”)

believes that good and sound corporate governance creates

shareholder value and reduces risks by instilling trust and confidence

in the Company. Thus, the Group has made a strong commitment to

develop high standards of corporate governance.

To Magseis Fairfield, good corporate govern-

ance is characterized by clear role distribution

between the Company’s governing bodies.

Furthermore, open and responsible communica-

tion and cooperation between the Company’s

shareholders, the Board of Directors (the

Board) and executive management is imperative

to secure ample control, but at the same time

encourage innovation and entrepreneurship.

1. Implementation and reporting on

corporate governance

Magseis Fairfield ASA is a Norwegian public

limited company listed on the Oslo Stock

Exchange and bases its corporate governance

structure on Norwegian legislation and rec-

ommended guidelines. The company seeks to

comply with the Norwegian Code of Practice for

Corporate Governance (the code), last revised

on 14 October 2021 which is available on the

Norwegian Corporate Governance Committee’s

website at www.nues.no.

Application of the code is based on the “comply

or explain” principle and any deviation from the

code is explained under the relevant item. The

principles and implementation of the code are

subject to annual reviews by the Board and a

statement is included in the Board of Directors

section of the annual report in accordance with

the requirements of the continuing obligations

for listed companies from Oslo stock exchange

as well as the Norwegian code.

2. The business

Magseis Fairfield’s vision is to be the leading

and trusted partner in subsurface imaging solu-

tions. The mission is to bring value to our global

energy partners and stakeholders by deliver-

ing leading edge, safe, sustainable solutions,

through technology dierentiation and key alli-

ances. Key elements for success are to continue

to reduce operational costs in a sustainable

manner in order to increase the addressable

market. The Company’s operations comply with

the business objective set forth in its articles of

association article 3, which reads:

“The company’s business activities include

development of geophysical equipment and

methods, generation, marketing and sale

of exclusive and non-exclusive geophysical

exploration and other activities related thereto

activities, including investments in such

activities”.

The Board has defined clear goals, strategies,

and risk profile for its operations within the

scope of the definition of its business, to create

value for its shareholders in a sustainable

manner and to ensure that its resources are

utilized in an ecient and responsible manner.

When carrying out this work the Board will take

financial-, social- and environmental considera-

tions. The objectives, strategies and risk profile

are subject to annual review by the Board. The

company’s objectives and strategies are further

described in the annual report and on the com-

pany’s website www.magseisfairfield.com.

Magseis Fairfield has adopted guidelines and

procedures relating to human rights, employee

rights and social matters, the external envi-

ronment, environmental impact, working

environment, equal treatment, non-discrimina-

tion, and prevention of corruption. The purpose

of these guidelines is to provide business prac-

tice guidance, and for such considerations to be

integrated in the Company’s value creation.

3. Equity and dividends

Capital adequacy

As of 31 December 2021, the Group’s equity

amounted to USD 162 million, which corre-

sponds to an equity ratio of 53 percent and

total liabilities-to-equity ratio of 0.89.

During 2021, Magseis Fairfield has strength-

ened its position as theOBN acquisition leader

in a tough market impacted by COVID-19. The

operational performance has been strong ,

with focus on project execution, continued cost

discipline and outward focus to work with cus-

tomers to secure backlog and key projects.

Dividends and dividend policy

Magseis Fairfield has successfully executed

the turn-around of the company. Dividends or

share purchase programs have not been on

the agenda during 2021. Any future decision to

buy back shares or to pay dividend will depend

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

on the company’s financial position, operating

profit, and capital requirements.

Authorizations to the Board

At the annual general meeting (AGM) on 7 April

2021, three authorizations were granted to the

Board:

• Authorization to increase the Company’s

share capital by a total of up to 10 percent

of the registered share capital in connection

with the Company’s share incentive program

for its employees. As of 31 December 2021,

this authorization has been used to issue

shares to employees under the Company’s

share incentive program. The authorization

will be further used in the period January –

March 2022 to issue shares to employees

under the same program.

• Authorization to increase the share capital

by up to 20 percent of the registered share

capital to provide the Company with finan-

cial flexibility, including investments and

acquisitions. As of 31 December 2021, this

authorization has not been used.

• Authorization to increase the share capital

by a total of up to 1 percent of the registered

share capital in connection with grant of

RSUs to board members as remuneration. As

of 31 December 2021, this authorization has

not been used. However, the authorization is

planned to be used in March 2022 by issuing

shares to board members as remuneration for

serving on the Board in the period from AGM

2021 to AGM 2022.

All authorizations are valid until Magseis

Fairfield’s AGM in 2022, and no later than

30 June 2022. There was a separate vote on

all three authorizations. For supplementary

information, reference is made to the minutes of

the AGM. As at 31. December 2021, the Board

has not been granted any authorization to

acquire treasury shares.

4. Equal treatment of shareholders

According to the Norwegian Public Companies

Act, the Company’s shareholders have

pre-emption rights in share oerings against

cash contribution. Such pre-emption rights may

be set aside, either by the general meeting or

by the Board based on an authorization to the

Board. Any resolution to set aside pre-emption

rights will be justified by the common interests

of the Company and the shareholders, and such

justification will be publicly disclosed through

a stock exchange notice from the Company.

In connection with the issuance of shares for

employees and board members in 2021 as

mentioned above, the pre-emption rights for

shareholders were set aside.

Any transactions in own shares, i.e. a share

buy-back program, will be carried out either

through Oslo stock exchange or otherwise at

stock exchange prevailing prices. If there is

limited liquidity in the Company’s shares, the

Company will consider other ways to ensure

equal treatment of all shareholders. There were

no transactions in own shares during 2021.

5. Shares and negotiability

Magseis Fairfield has one class of shares,

and all shares carry equal voting rights. The

Company’s shares are freely transferable on the

Oslo stock exchange. There are no restrictions

on owning, trading, or voting for shares pursu-

ant to the Company’s articles of association.

6. General Meetings

The general meeting is the Company’s highest

authority. All shareholders are entitled to submit

items to the agenda, attend, speak and vote

at general meetings, but only if the share-

holder is registered with the Norwegian Central

Securities Depository (VPS) five business days

prior to the general meeting (record date). The

Annual General Meeting (AGM) is held each year

before the end of June. Extraordinary General

Meetings (EGM) may be called by the Board at

any time.

The Board will ensure that the notice, resolu-

tions and supporting information distributed

are suciently detailed and comprehensive to

allow shareholders to form a view on all matters

to be considered at the meeting, and that any

deadline for shareholders to give notice of their

intention to attend shall not be earlier than two

days before the meeting. Notice, appendices,

and minutes of meetings will be available from

the Company’s website www.magseisfairfield.com.

The Chair, the CEO and the CFO will attend the

general meetings. The auditor and the nomi-

nation committee will attend the AGM and any

EGM to the extent required by the agenda items

or other relevant circumstances. The Board

ensures an independent chair for the general

meeting.

Shareholders can vote on each individual

matter, including on each individual candidate

nominated for election. Shareholders who

are unable to attend the meeting in person

are encouraged to participate by proxy. The

Company will prepare a proxy form that permits

separate votes for each item up for considera-

tion by the general meeting.

In 2021, Magseis Fairfield held its AGM on

7 April with 46.01 percent of the share capital

represented. In addition, an EGM was held

on 10 May 2021 with 44.92 percent of the

share capital represented. The EGM was held

in connection with proposed changes to the

composition of the Board and the Nomination

Committee. For details see EGM protocol and

stock exchange releases from 10 May 2021.

7. Nomination committee

The nomination committee is governed by the

articles of association section 9. The nomina-

tion committee shall consist of two to three

members elected by the general meeting.

The members of the nomination committee

shall consider the interests of shareholders in

general. The nomination committee shall not

include any executive personnel or members of

the Board. The nomination committee elects its

own chair, and the members are elected for a

period of up to two years.

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Roar Bekker was elected Chair of the nomi-

nation committee at the AGM in April 2021.

Anders Farestveit and Chris Sugahara were

elected members of the nomination committee

at the same meeting. In May 2021 an extraor-

dinary general meeting was held where Roar

Bekker was elected as a new board member. In

the same meeting, Ryan Schedler was elected

as a new member of the nomination commit-

tee as a replacement for Roar Bekker. Anders

Farestveit resigned from the nomination com-

mittee in June 2021.

As of 31 December 2021, Magseis

Fairfield’s nomination committee com-

prises of Chris Sugahara and Ryan Schedler.

Christopher Sugahara is the CEO of Fairfield

Geotechnologies and CIO of Fairfield-Maxwell

Ltd. which is the largest shareholder in the

Company. Ryan Schedler is the managing

partner of Condire Investors LLC, a Dallas,

TX based investment firm focused on natural

resources. Condire Investors LLC is the second

largest shareholder in the Company. The

members are elected until the AGM in 2022.

The nomination committee gives its recommen-

dation to the general meeting regarding the

election and remuneration of members of the

Board, in addition to the election and remuner-

ation of members of the nomination committee.

The nomination committee’s recommendations

are justified on an individual basis. The nomi-

nation committee is expected to have contact

with the shareholders and to hold individual

discussions with members of the Board and the

CEO as part of proposing new candidates for

the Board.

8. Board of Directors:

Composition and independence

Pursuant to the Company’s articles of asso-

ciation, the Board may consist of up to ten

directors, whereof up to three directors can be

elected by the employees. The members of the

Board, including its Chair, are elected by the

general meeting for a period of up to two years

and may be re-elected.

The composition of the Board is based on the

Company’s needs for expertise, capacity and

balanced decision making, together with the

aim of ensuring that the Board can operate

independently of any special interests and that

the Board can function eectively as a collegial

body. A summary of the competence and

background of each individual board member

is available in the annual report and on the

company’s website www.magseisfairfield.com.

All board members are regarded as independ-

ent in relation to the Company’s executive

management and material business contacts.

Four of the five current board members that are

elected by the shareholders are considered as

independent of the company’s main sharehold-

ers, please refer to the table below.

Name Role

Considered independent of

main shareholders Served since Term expires

Participation Board

Meetings 2021

Shares in Magseis Fairfield

(direct/ indirect)

as of 31 December 2021

Wenche Kjølås Chair of the Board Yes 22.05.2019

AGM 2023 100% 426 038

Jan Gateman Board member No 04.09.2009 AGM 2021 100% N/A

Roar Bekker Board member Yes 10.05.2021 AGM 2023 100% 20 000

Angela Durkin Board member Yes 22.05.2019 AGM 2023 100% 128 892

Luis A. Gomes Araujo Board member Yes 22.05.2019 AGM 2023 100% 95 000

Anthony Dowd Board member No

23.04.2020 AGM 2022 100% 50 000

Janie Garcia Employee elected Board member Yes Apr-20 Apr-22 100% 10 000

Jonathan Cudmore Employee elected Board member Yes Sep-20 Resigned August 2021 90% N/A

Johan Jungholm Employee elected Board member Yes Aug-21 Resigned September 2021 100% N/A

Ciaran Moore Employee elected deputy Board member Yes Apr-20 Apr-22 0% -

Participation in Board meetings for the duration of the period of holding Directorship in 2021.

Elected as board member at the AGM in 2019, and then as Chair at the EGM in 2019.

Mrs. Kjølås holds 351 038 of her shares indirectly through Jawendel AS.

Mr. Dowd is President and CEO of Fairfield-Maxwell Ltd., a company that owns 100% of the shares in Fairfield MS LLC, the largest shareholder in Magseis Fairfield ASA.

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Board members are encouraged to hold shares

in the Company to promote a common financial

interest between the Directors and the sharehold-

ers of the Company.

The Board continuously evaluates conflict of

interest and its members independence in each

resolution.

9. The work of the Board of Directors

Pursuant to the Norwegian Public Companies

Act, the Board is responsible for the over-all

management of the Company and shall super-

vise the Company’s day-to-day management

and its business activities in general.

In addition to legal requirements, the Board has

adopted supplementary rules of procedures,

which provides further regulation such as the

responsibilities of the Board, administrative

procedures, quorum requirements, disqualifi-

cation issues, meeting procedures, the division

of work between the Board and the CEO, and

confidentiality.

The Board meets several times over the year.

The meetings include reviews and discussions

related to the Company’s strategy, financial

development, risk profile and other matters of

extraordinary nature or of major importance to

the Company. During 2021, the Board held 16

meetings. The working methods for the Board

are subject to open discussion.

Between meetings, the Chair and CEO update

the other board members on current matters.

Each Board meeting includes a briefing by the

CEO followed by a Q&A session, and a session

for board members only without management

present. The Board has adopted an annual plan

which focuses on the strategic goals of the

Group. The Board has also established instruc-

tions for the CEO.

In cases where the Chair of the Board is or has

been actively involved, another member of the

Board will be asked to lead the discussions. This

has not been the case in 2021.

The Board has adopted guidelines for noti-

fication by board members and executive

management if they have any material direct or

indirect interest in any transaction entered by

the Company. This also includes that if one of

the board members’ interest in a matter does

not disqualify him or her from considering the

matter, the Company may need to take the

individual’s interest into consideration when

considering the item.

The Board has adopted instructions on how

the Board and executive management shall

handle agreements with related parties, includ-

ing whether an independent valuation must be

obtained. The Board shall obtain an independ-

ent third-party valuation of all related party

transaction above a threshold of USD 1 million.

For information regarding related party trans-

actions in 2021, see Note 11 in the annual

report.

Once per year, the Board conducts an assess-

ment of its performance and expertise, which

is presented to the nomination committee. The

assessment includes the work of the board, the

work of its committees and the contribution

made by the various board members.

Board committees

Audit and risk committee

The Company’s audit and risk committee is

governed by the Norwegian Public Companies

Act and a separate instruction adopted by

the Board. The audit and risk committee shall

consist of minimum two board members. Board

members who are also members of the exec-

utive management cannot be members of the

audit committee. As of 31 December 2021, the

audit and risk committee consisted of board

members Wenche Kjølås (Chair), Roar Bekker

and Angela Durkin, all three considered inde-

pendent of the executive management.

The main tasks of the audit and risk committee

are to;

i. review management’s risk assessment and

internal control, as well as annual budget

process

ii. oversee corporate reporting, and act as a

preparatory organ for the Board on interim

and annual financial reporting processes

iii. review the external audit process, here-

under maintain ongoing contact with the

Company’s auditor regarding the audit

of the annual accounts and ensure the

company has an adequate internal control

and risk management, as well as assess and

monitor the auditor’s independence and

potential conflicts of interests and;

iv. prepare audit committee reporting to the

Board after each meeting and report any

circumstances with material impact on the

company’s financial and/or operational

situation. The committee is also responsible

for reviewing and updating its instructions

and evaluate the individual and joint work of

the committee.

The audit committee shall have a minimum of

five meetings each year, coordinated with the

Company’s financial reporting schedule. The

audit and risk committee held seven meetings

in 2021.

Compensation and talent committee

The Company’s compensation and talent com-

mittee is governed by a separate instruction

adopted by the Board. The members of the

committee are appointed by and among the

members of the Board and shall be independent

of the Company’s executive management. As

of 31 December 2021, the compensation and

talent committee consisted of Anthony Dowd

(Chair), Luis Araujo and Wenche Kjølås.

The primary purpose of the compensation and

talent committee is to assist and facilitate the

decision-making of the Board in matters related

to remuneration of the executive management,

review recruitment policies, career and succes-

sion planning and management development

plans, and prepare matters relating to other

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material employment issues with respect to the

executive management. The compensation and

talent committee held two meetings in 2021.

10. Risk management and internal control

The Board, together with the executive man-

agement, evaluates the risks related to the

Group’s operations on a continuous basis. Key

risk factors relate to current 2021 operations as

well as construction of the Group’s proprietary

system, obtaining contractual counterparties,

retaining key sta and general financial risks. In

addition, risks inherent in the business plan are

monitored: commodity prices, exchange rates,

competition, the political and regulatory envi-

ronment, counter-party performance, and the

potential growth of the business and the appli-

cation of new technology.

Each year, as a minimum, the Board will conduct

a thorough assessment of the Company’s

most important areas of exposure to risk. The

annual review is carried out together with the

Board’s review of the annual accounts, and the

Company’s auditor is expected to attend this

meeting.

The Board, through its work with the financial

department and the annual audit process,

ensures that the Group has reliable internal

controls and systems for risk management. The

Company’s Code of Conduct sets the standard

for the behavior which can be expected inter-

nally and externally by anyone employed by or

associated with Magseis Fairfield and includes

guidance on how to report any concerns related

to illegal or unethical conduct.

Magseis Fairfield prepares its consolidated

financial statements in accordance with the

International Financial Reporting Standards

(IFRS), which are intended to give a true and

fair view of the company’s and the group’s

assets, liabilities, financial position and results

of operations. The Board is presented with

and approves the annual budget/forecast at

the end of the preceding financial year or in

the beginning of the commencing financial

year. Thereafter, the Board is presented with

regular updates and reports identifying material

variations from the approved budget/fore-

cast. Explanations are obtained for material

variances. The Board also approves interim

financial statements on a quarterly basis, based

on a review together with the executive man-

agement.

11. Remuneration of

the Board of Directors

The remuneration of the Board is decided by the

general meeting, based on a recommendation

from the nomination committee. The proposal

from the nomination committee is submitted to

the Company’s shareholders together with the

notice for the AGM.

The remuneration of the Board reflects the

responsibility and competence of the Directors,

as well as the time spent and complexity of

the business of the Group. Board members

who participate in Board committees receive

additional compensation for this. The remu-

neration is not linked to the Company’s

performance and does not contain any share

options. However, for 2021 the remuneration

is to be paid partly in cash and partly in RSUs.

Detailed information on the remuneration of the

Board members is specified in note 31 to the

annual report and in the 2021 Remuneration

report.

Board members and/or companies with which

they are associated should not take on other

assignments than the directorship for the

Company, in order to maintain independent.

However, if they do, this shall be disclosed to

the full board and remuneration for such addi-

tional duties will be approved by the Board.

12. Salary and other remuneration

for leading personnel

The Board has prepared guidelines on salary

and other remuneration for leading person-

nel. The guidelines shall contribute to the

Company’s commercial strategy, long-term

interests and financial viability and ensure that

leading personnel and shareholders have con-

vergent interest.

The components of the remuneration of senior

executives includes a base salary, an annual

Performance Cash Incentive or “STIP”, a long-

term equity-based performance incentive,

or “LTIP”, as well as participation in share

programs and pension schemes. The total

remuneration shall ensure that Magseis Fairfield

attracts, motivates, retains and rewards leading

personnel with desired skills and experience.

Performance related remuneration are subject

to an absolute limit.

The Board’s guidelines for salary and other

remuneration to leading personnel in Magseis

Fairfield was presented to and adopted by the

AGM in 2021. The guidelines are available on the

Company’s website (www.magseisfairfield.com).

Detailed information on the salary and other

remuneration for leading personnel are spec-

ified in note 31 to the annual report and in the

2021 Remuneration report.

13. Information and communications

Communication with shareholders, investors

and analysts is a high priority for Magseis

Fairfield. The Company believes that objective

and timely information to the market is a pre-

requisite for a fair valuation of the Group, and in

turn, the generation of shareholder value.

The Board has adopted an investor relations

policy, to clarify roles and responsibilities

related to financial reporting and regulate

contact with shareholders and the investor

market. The policy is based on openness and

considers equal treatment of all market partic-

ipants. The CEO and the CFO are responsible

for investor and shareholder relations outside

general meetings. As a rule, no such commu-

nication shall be conducted within a two-week

period prior to the disclosure of the interim

reporting. In addition, the Board has adopted

instructions pertaining to the handling of inside

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GovernanceGovernance | Corporate governanceGovernance | Corporate governance

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

information, in which the company’s obliga-

tions and procedures as a stock exchange

listed company are explained. The instructions

for handling of inside information have been

updated to reflect the Market Abuse Regulation

(MAR) which came into force in Norway on

1 March 2021.

Interim reports are provided on a quarterly

basis, in accordance with the Oslo stock

exchange’s recommendation. Magseis Fairfield

provides presentations in connection with

the company’s interim reports, to provide

an overview of the operational and financial

developments, market outlook and the com-

pany’s prospects. All information distributed to

the Company’s shareholders will be provided

in English and published on the Company’s

webpage (www.magseisfairfield.com) at the

same time as it is sent to the shareholders.

14. Take-overs

Magseis Fairfield’s articles of association do not

contain any restrictions, limitations or defense

mechanisms against take-over bids, nor have

other measures been implemented to hinder the

acquisition of shares in the Company.

In accordance with the Securities Trading

Act and the Code, the Board has adopted

guidelines for how it shall act in the event of a

takeover bid. In the event of an oer, the Board

shall ensure that the company’s shareholders

are treated equally, and that the company’s

activities are not unnecessarily interrupted.

Furthermore, the Board will not seek to hinder

or obstruct takeover bids for Magseis’ activities

or shares. Any agreement with the bidder that

acts to limit the Company’s ability to arrange

other bids for the Company’s shares will only

be entered into where the Board believes it is

in the common interest of the Company and its

shareholders. Any transaction that is in eect a

disposal of the Company’s activities should be

decided by the general meeting.

Information about agreements entered into

between the Company and the bidder that are

material to the market’s evaluation of the bid

will be publicly disclosed no later than at the

same time as the announcement that the bid

will be made is published.

If an oer is made for the shares of Magseis

Fairfield, the Board will make a recommendation

on whether the shareholders should accept the

oer or not. The Board may arrange for a valu-

ation from an independent expert.

15. Auditor

The Company’s statutory auditor is Deloitte

AS. The auditor is appointed by the general

meeting and is regarded as independent of the

Company. The Board will from time to time eval-

uate the audit arrangement for the Company.

The Board requires that the auditor par-

ticipates in meetings of the audit and risk

committee and in meetings of the Board that

deal with the annual accounts. The auditor

shall present to the Board a report outlining the

audit activities in the previous fiscal year and

highlight the areas that caused the most atten-

tion or discussions with management, together

with a plan for the work related to the Group’s

audit. In connection with the annual audit, the

Board also requires the auditor to review the

Company’s internal control procedure, includ-

ing weaknesses identified and proposals for

improvement. At least once per year, the Board

meets with the Company´s auditor without any

members of the executive management present.

The Board has established guidelines for the

use of the auditor by the executive manage-

ment for services other than the audit, in order

to prevent any potential conflicts of interest and

not put the auditor’s integrity and independ-

ence at risk.

The remuneration of the auditor is approved

by the AGM. The Board will inform the general

meeting about the fees paid to the auditor for

services other than the annual audit and the

details are given in notes to the annual report.

For more information about remuneration to the

auditor, see note 8 in the 2021 financial state-

ments.

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GovernanceGovernance | Corporate governanceGovernance | Corporate governance

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SUSTAINABILITY REPORT

Governance and

Commitment

As a global leader in the Ocean Bottom Seismic market, Magseis

Fairfield has an opportunity, but also a responsibility, to commit to

high standards relating to the working environment and personnel

welfare, environmental impact and business practices.

Magseis Fairfield aspires to be an honest, ethical

and trustworthy company as its reputation

depends upon understanding and implementing

the principles of corporate responsibility, and

continuously demonstrating integrity and honesty

in daily business conduct. That is why the core

values are so important for the company, as they

guide how business is conducted: Safety, Trust,

Innovation, Excellence and Sustainability.

The company has adopted policies, procedures

and guidelines relating to human rights, employee

rights and social matters, anti-corruption,

harassment and discrimination in the working

environment and in employment practices.

In 2021 we extended our environmental

commitment to include an ambition to

become carbon neutral by 2040, or

earlier. A definite highlight in this regard

was the execution of an industry first

carbon neutral OBN survey.”

– Carel Hooijkaas, CEO

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SustainabilitySustainability | Governance and CommitmentSustainability | Governance and Commitment

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Magseis Fairfield has a Corporate Social Responsibility (CSR) policy, committing the company to responsible business practices in accordance with UN Global Compact.

Three focus areas are highlighted: People, Planet, Business practice.

People The planet Business practice

UN Global Compact

Labor principles

3, 4, 5, 6

UN Global Compact

Human Rights principles

1, 2

UN Global Compact

Environment principles

7, 8, 9

UN Global Compact Anti-corruption principle 10

Employees

and labor

People at large

(community)

Environment Internal

control

Corporate

governance

Business ethics

and compliance

• Vision, Mission, Values

• Code of conduct

• H&S policy

• H&S manual

• H&S hazard

• Register(s)

• Employee handbook

• HR procedures in the MS

• Vision

• Mission

• Values

• Code of conduct

• Project planning and

execution procedures

• Vision, Mission, Values

• Code of conduct

• Environmental policy

• Environmental manual

• Environmental aspects and

impacts register

• Environmental procedures

in the MS

• Vision, Mission, Values

• Code of conduct

• Board and management

instructions in the MS

• Vision, Mission, Values

• Code of conduct

• Board and management

instructions in the MS

• Vision, Mission, Values

• Code of conduct

• Anti-corruption standard

This figure is from our Corporate Responsibility procedure in our Management System (MS) to visualize the alignment with United Nations Global Compact

The company are committed to contribute to the UN Sustainable Development Goals. Following an

assessment of the company’s operations and activities, we have selected eight of the UN Sustainability

goals that we can impact the most.

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People

Magseis Fairfield’s employees are our most valuable assets, so

the health, safety and wellbeing of our employees and others

participating in the company’s activities are considered the utmost

priority. It is an area of continuous focus for the company and its

importance was further emphasized by the continued COVID-19

pandemic throughout 2021.

Safe operations

There were zero fatalities associated with

the company’s operations in 2021. The Total

Recordable Case Frequency (TRCF) was 2.37,

driven by four recordable events (four medical

treatment cases), of which two were Magseis

Fairfield employees and two were subcontrac-

tors. This compares with TRCF of 1.09 in 2020.

The company reports figures based on 12-hour

exposure per day for oshore personnel.

Proactively, the employees submitted a total of

15 328 reports into the company’s InSite safety

reporting system. This represented an average

of nearly 38 reports per user, against a target

of 10. Magseis Fairfield uses a Health & Safety

Input Factor (HSIF)

as a primary leading indi-

cator for operations. The company has seen

a positive development with an approximately

30 percent decrease in the HSIF factor since

adoption in 2018.

In 2021, the organization focused on con-

tinuing to improve overall HSE performance.

Internally, Magseis Fairfield revitalized its

“Work Smart – Work Safe” program, fully

implemented the One Team program, formally

adopted the International Association of Oil &

Gas Producers (IOGP) “Life Saving Rules” and

further developed individual safety leadership

skills through an enhance training program.

People and working environment

Magseis Fairfield strives to maintain and pro-

gress a fair and equitable working environment

for all employees free of discrimination and

one that supports the diversity of thought and

expression of innovation among employees. This

goal is reflected in our global terms and condi-

tions of employment, Health & Safety policies,

and our Code of Conduct, which states that

the Company shall provide equal employment

opportunity for all applicants and employ-

ees. Magseis Fairfield adheres to all national,

federal, state and local employment laws and

regulations.

A supplier pre-qualification, monitoring and

management system follows up on employment

conditions at the Company’s suppliers, ensuring

our philosophy extends to those with whom we

do business

Key performance figures

Ambition 2021 2020 2019

Health and safety

Exposure hours (millions) 1.68 1.84 2.79

Fatalities - - - -

Total Recordable Case Frequency (TRCF)

1.51

2.37 1.09 2.15

Health and Safety Input Factor (HSIF)

< 26 19 < 26 < 35

Sick leave onshore

< 3% 0.53% 1.66% 0.95%

Sick leave oshore < 3% 0.43% 1.94% 0.84%

A 12-month rolling average total recordable case frequency per 1 million manhours. Manhours are based on a 12-hour

working day or actual hours worked if recorded.

Magseis Fairfield converted the exposure hour factor to 12 hr/day (oshore crew) vs. 24 hr./day midyear. This was to align

with the IOGP/IAGC metrics.

Represents a 20 percent decrease from the 2019 industry average of 1.89.

HSIF is a leading indicator that represents the number of hours divided by the number of health & safety inputs (safety

meetings, observation cards, audits, hazard hunts). The lower the number the better.

Day to day sick absence is not tracked for US employees, so this statistic represents all onshore employees, except US.

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Magseis Fairfield adheres to the UN Global

Compact Principles under Human Rights –

Principles 1 and 2, and Labor – Principles 3

to 6, which are derived from the Universal

Declaration of Human Rights and the

International Labor Organization’s Declaration

of Fundamental Principles and Rights at Work.

On a wider scale, the impact on individuals and

communities aected by Company operations is

managed through project planning and execu-

tion, hand in hand with the Code of Conduct.

UN Global Compact Principles:

• Human Rights - Principle 1: Businesses

should support and respect the protection of

internationally proclaimed human rights

• Human Rights - Principle 2: make sure that

they are not complicit in human rights abuses.

• Labor - Principle 3: Businesses should uphold

the freedom of association and the eective

recognition of the right to collective bargaining

• Labor - Principle 4: the elimination of all

forms of forced and compulsory labor

• Labor - Principle 5: the eective abolition of

child labor

• Labor - Principle 6: the elimination of dis-

crimination in respect of employment and

occupation.

The United Nations Global Compact Principles 1

through to 6 are derived from:

• The Universal Declaration of Human Rights

• The International Labor Organization’s

Declaration on Fundamental Principles and

Rights at Work

Key performance figures

Ambition 2021 2020 2019

Employees and working environment

Number of employees 404 370 622

Percentage of employees oshore/onshore 58% 43% 43%

Percentage of women/ men – total 13.10% 15% 15.6%

Percentage of women/ men – management 25% 25% 16.67% 17%

Percentage of women/men – middle management 25% 20.90% 17.15% 18.75%

Percentage of women/ men – Board of Directors >= 40% 40% 40% 40%

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The company went through a restructuring in

late 2019 to reduce the cost and streamline the

organization. These changes were implemented

top-down, and therefore aected the entire

organization. Further cuts were made during

2020 to adapt the organization to further

decline in forecasted activity level. The project

activity in 2021 was higher than in 2020, which

resulted in an increase in the number of oshore

employees.

Initiatives and programs

Equal opportunities

Magseis Fairfield employs more than 400

people worldwide, including full time employees

and contractors working on vessels oshore.

The organization primarily has employees

across three major regions – the US, UK and

Norway. The employee base is diversified and

represents many nationalities.

During 2021, Magseis Fairfield has worked

rigorously to ensure visibility to talent in the

organization through special projects, suc-

cession planning and career development

discussions. In 2022, Magseis Fairfield will

continue its Succession Planning and Talent

Management eorts to identify key talent in the

organization, regardless of gender or race. This

proactively provides visibility and opportunities

within the organization, through project assign-

ments, development, training and promotion

opportunities.

Magseis Fairfield is committed to promoting

equal opportunity for all sta and job appli-

cants. We aim to create a working environment

in which all individuals are able to make best use

of their skills, free from discrimination or har-

assment, and in which all decisions are based on

merit. This includes hiring, development oppor-

tunities, training, transfers and promotions.

Findings and results from the work for equality

and non-discrimination

• The Oshore Industry is heavily male

dominated

• High average age in the company

Measures and goals:

• Every year, we conduct an employee engage-

ment survey where we ask questions about

gender equality and the risk of discrimination

• In 2021 we conducted an ‘’outliers’’ project -

equal pay for equal work with considers under

equal if it is equal skills, equal eort and

equal responsibility is performed under equal

working conditions.

Further plans for the work with equality and

non-discrimination

• In the past year, we have especially suc-

ceeded in providing visibility to talent in the

organization through special projects, suc-

cession planning and career development

discussions.

Criteria Actions/Policy

Gender Seismic is historically a male dominated industry. As such, we

actively seek a pool of eligible candidates that include significant

representation of women, as well as men, to ensure that our process

if fair and equitable from a gender standpoint.

Pregnancy, leave on due to birth

or adoption care tasks

According to local law and regulations, we have policies in place for

paternity and maternity leave, or “family leave”.

Ethnicity, religion and outlook

on life

It is an optional question in the recruitment process, not needed

to be announced.

Disability Anti-discrimination disability policies in place globally and in

accordance with country-specific regulations.

Sexual Orientation, gender

identity and gender expression

We do not ask about sexual orientation or gender identity in

recruitment process and is not considered in any of our decisions.

Age All ages considered regardless of experience

Work life balance MSFF facilitate flexible workspace for employees. The onshore

employees can, within some limits and in alignment with line manager,

choose for themselves where they want to carry out the work.

Stereotyping Unconscious bias training for managers

Harassment and gender

– based violence

Hot line, Zero Tolerance policy regarding harassment

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• In the future, we will continue our focus on

equal opportunity and promoting opportuni-

ties for qualified females and minorities in our

organization through robust recruiting activ-

ities that seek candidates from candidate

pools that are well represented by each.

• The employee engagement survey gives

the impression that most employees believe

that everyone has equal opportunities in the

company, regardless of gender, nationality,

age, physical health, personal background or

other grounds for discrimination. The same

applies to the fact that most employees feel

that they can be themselves at work. This

is very positive from the company’s point of

view. However, there is potential for further

improvements, and this will be followed up in

the individual environments when actions are

taken as part of the follow-up process.

Compensation and benefits

Magseis Fairfield seeks to oer competitive

remuneration to all employees, reflecting their

education, related experience, professional

qualifications and performance/merit. The

company is further committed to equitable pay

for the same work and performance regardless

of gender.

Magseis Fairfield will continue to employ sound

Performance Management and market-based

global salary data to make remuneration deci-

sions for employees.

Globally, Magseis Fairfield has implemented

centralized titles and position levels and has

a market-based pay range associated with

each level of position in the organization. The

company does not employ salary bands, but

rather a position-by-position market bench-

mark analysis.

In 2021, Magseis Fairfield implemented a global

GDPR compliant human capital management

system (HCM) to further support talent man-

agement eorts, including clarity on any pay

inequity situations for the same work/position

to identify and close potential wage gaps that

may be due to gender or other aspects. This

system will launch on February 1, 2022.

Magseis Fairfield uses a valid Performance

Management system to set goals and objec-

tives for all employees and methods for

conducting performance evaluations on an

annual basis. The result of the performance

evaluation serves as a key factor in the annual

merit and salary review process, as well as

the calculation for any bonus payments for

Company performance.

Independent market surveys are utilized on an

annual basis for pay evaluation and considera-

tion for any merit based or market equity-based

pay increases for employees. An annual review

is conducted by Human Resources globally

to ensure that all employees have pay equity

for their level of experience and performance,

regardless of gender or race.

Community outreach

While 2021 was in some cases an exception due

to limitation imposed by COVID-19, Magseis

Fairfield has been very active in its local com-

munities, particularly with programs sponsoring

children and educational pursuits.

Outreach eorts included holiday toy drives

for the underprivileged, as well as an annual

Operation Backpack drive with the YMCA in the

US to provide school supplies, backpacks and

associated funds to at risk children in the com-

munity.

It is the company’s goal ‘post-COVID’ to expand

outreach in the community to include volun-

teer support for programs such as Habitat for

Humanity, Junior Achievement, Houston Food

Bank and organizations of similar scope across

our global locations.

Women’s salary as a % of men’s salary

Org level Position Women's salary in % of men’s salary

1 C-level and SVP 81.7%

2 VP 96.3%

3 Director, General Manager

Sr. Manager

96.3%

4 Managers w/Direct reports

Principle-Expert Level Professionals

84.5%

5 Functional Managers without Direct Reports 84.5%

6 Party Chiefs

Sr. Sta Level Professionals/Ind Contributors

67.8%

7 Supervisors

Chiefs

67.8%

8 Professionals Level Individual Contributors ''II'' 76.7%

9 All

Entry Level Professional Individual Contributors ''I''

Paraprofessionals

Vessel Crew (non-management/supervisory)

119.4%

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In some countries where we work, it is custom-

ary for the company to buy a Christmas gift for

its employees. The company however decided

to make donations to the following charities

instead:

• In Norway: Barnekreftforeningen

• In the UK: Great Ormand Street Hospital

Children’s Charity

• In the US: St. Jude Children’s Research

Hospital

Responding to the pandemic

The COVID-19 pandemic continued to impact

the company’s working environment and oper-

ating processes throughout 2021. At the start

of the pandemic, Magseis Fairfield implemented

a focused and proactive risk management

strategy to mitigate any potential business

interruption from the virus outbreak.

A task force comprised on the CEO, COO, CTO,

CHRO, VP Ops, and the SVP Ops Support &

QHSE met at least bi-weekly to assess the

status of the outbreak and to review the risk

management plan and assess any required

adjustments to address the dynamically chang-

ing global conditions.

Frequent communications were sent to all

employees to update them on the status of the

virus relative to the business and to advise of

any changes to protocols.

A communication and contact system was

established for employees in quarantine (either

preventative or precautionary) to track their

status and wellbeing during the quarantine

period.

Magseis Fairfield also implemented a mental

health support and awareness campaign for

all employees to address potential challenges

presented by the pandemic and remote working

conditions.

Based on the proactive measures implemented

to protect people and operations, Magseis

Fairfield successfully maintained fully opera-

tional crews throughout 2021. These measures

included quarantine and testing protocols for all

oshore employees before joining their crews.

Oces were closed or access was restricted to

“critical task” use only, according to authorities

local guidelines, to minimize exposure for infec-

tion in onshore environments.

The organization adapted well to the remote

working conditions and travel restrictions and

maintained good collaboration internally and

with external stakeholders, like contractors,

authorities and customers to continue oper-

ations uninterrupted by the virus and execute

projects as scheduled through 2021.

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The planet

Magseis Fairfield recognizes that all our activities have an impact

on the environment via the use of raw materials, emissions to air

and water, waste generation, and interaction with marine life and

habitat. Magseis Fairfield is committed to minimizing this impact for

both oshore and land-based activities. This is done by maintaining

a program of continual improvement in environmental performance

incorporating suitable measurement and monitoring.

The company has developed an

Environmental Sustainability Strategy

(ESS) to contribute to the UN

Sustainable Development Goals.

Our ESS is based on the UN Sustainable

Development Goals 7 (aordable and

clean energy), 8 (decent work and

economic growth), 12 (responsible con-

sumption and production), 13 (climate

action) and 14 (life below water). These

are mapped against the pillars of our ESS

as highlighted below, which also includes

the respective target timeline.

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ISO 14001

ISO 20400

ISO 26000

ISO 45001

Magseis

Fairfield

Community

Customers

Suppliers

Reuse &

Recycle

Carbon

Neutral

Operation

Waste

Stream

Reduction

Remote

Access

Air

Quality

Clean

Ocean

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Focus area Key elements Target timeline

2020 2030 2040 2050

Carbon neutral operation

• Reduced & Cleaner Operation/Vessel Emissions

• Advanced Technology Application (Scope 1&2)

• Reduced Footprint (facilities, etc.)

• Carbon Credit/Resource Conservation Programs

Waste stream reduction

• Eliminate Single Use Products

• Technology Consolidation / Common Platforms

• Waste Management Plans

• Process Optimization (LEAN 6-sigma)

Remote access

• Advanced Communication Technology

• Remote Operations (PAM/ROV/OBP/QC)

• Reduced oshore headcount

Air quality

• Reduced & Cleaner Operation/Vessel Emissions

• Advanced Technology Application (Scope 1&2)

• Reduced Commute Days

Clean ocean

• Advanced Electrification Systems (reduce/eliminate LOPC’s)

• Preventative Maintenance Programs / Biodegradable Prods Ghost Net Initiative

Reuse & recycle

• High Density Battery Systems / Rechargeable

• Fuel Cells

• NAS (Network Attached Storage) & Seismic Tapes (3592’s)

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The increase in emission numbers for 2021

compared to 2020 is related to a 77 percent

increase in vessel operating days compared to

2020. However, there was only a 35 percent

increase in overall fuel consumed.

Average Fuel/Vessel/Day was tracked from

2020 through 2021. An overall reduction of

32.3 percent was realized year over year. Part

of the reduction was due to adding the support

vessels to the fleet mix in 2021. Removal of

these vessels demonstrates an overall reduc-

tion of 17.3 percent for the Node Handling and

Source Vessel fleet.

Initiatives and projects

Minimizing footprint

In 2020, Magseis Fairfield started tracking

vessel emissions. By ensuring compliance

with the IMO 2020 fuel standards, using only

low-sulfur MGO for vessel operations, the

company realized a net reduction in sulfur oxide

(Sox) emissions.

Magseis Fairfield has implemented the use of

the Maress System onboard our node han-

dling and source vessels. This provides direct

feedback from the vessels machinery systems

through an online portal, which allows for better

planning and management of vessel opera-

tional modes, with a focus on reduction. Further

tracking measures are being developed to

capture the total company emission footprint,

as a key element of mapping further emission

reduction potential.

A carbon reduction strategy and roadmap

have been launched, with clear ambition to be

carbon neutral by 2040, or earlier. In 2021

the company conducted the first ever carbon

neutral OBN project in the GOM, retiring 8 348

VCU’s, (Verified Carbon Unit) which represents

a reduction or removal of one ton of CO

equiv-

alent.

The company has implemented recycling pro-

grams both oshore and in onshore oces,

including a campaign focused on the elimination

of single-use plastics in our oshore operations.

Responsible node lifecycle

Magseis Fairfield practices environmentally

responsible recycling of node components once

they have reached their life expectancy.

In over 15 years of global OBN operations,

Magseis Fairfield have deployed nodes at more

than 915 000 unique locations with a near 100

percent recovery rate after completion of oper-

ations.

Protecting life below water

Magseis Fairfield implements mitigation meas-

ures to reduce any real threats to marine

species. These measures are based on the best

available science, and consistent with existing

practices that are proven to be eective and

operationally feasible.

Magseis Fairfield is a governing member of the

EnerGeo Alliance (formerly IAGC) and is com-

mitted to the association’s values of conducting

its operations in an environmentally responsible

manner, utilizing mitigation measures, such as

exclusion zones, soft-starts, Passive Acoustic

Monitoring (PAM) and protected species

observers to further reduce any possibility of

impact to marine life.

More than five decades of extensive world-

wide seismic survey activities and scientific

research indicate that the risk of direct physical

injury from soundwaves to marine mammals is

extremely low. Additionally, there is no scientific

evidence demonstrating biologically significant

negative impacts on marine mammal popula-

tions.

Since 2006, a group of international oil and

gas companies, in partnership with the geo-

physical industry, have funded a research

program to advance the understanding of

the interaction between sound from oil and

gas operations and marine life. Under the

auspices of the International Association of

Oil & Gas Producers (IOGP), the “Exploration

& Production Sound and Marine Life Joint

Industry Program” (JIP) has become the largest

non-governmental research program in this

field.

Lost fishing gear or ‘ghost gear’ is among the

greatest killers in our oceans, trapping and

killing fish, crustaceans, marine mammals,

sea turtles and even seabirds, some of which

are endangered species. This ghost gear can

also cause damage to underwater habitats

and coral reefs, as well as causing damage

to marine vessels. Magseis Fairfield actively

participates in EnerGeo Alliance’s Ghost Net

Key performance figures

Ambition 2021 2020 2019

Environmental impact

Nodes recovered 100% >99% >99%

Average fuel/vessel/day (mT) Reduce 8.6 12.7

Vessel Emissions

Reduce

MGO consumption (mT) 25 572 18 926 na

(mT ) 73 637 60 911 na

NOx (kg) 1 244 781 853 278 na

SOx (kg) 16 380 19 205 na

“Fuel Consumed / Vessel / Day” is being used as a metric that the Company will work with over time going forward. A reduc-

tion in this metric will produce lower emissions overall.

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APPENDIX

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SustainabilitySustainability | The planetSustainability | The planet

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Initiative aimed at removing fishing and marine

debris encountered during operations. In 2021,

the operations team made recovery of aban-

doned fishing buoys, fishing rope and line, and

other marine debris on 46 separate occasions,

which was subsequently reported and properly

disposed.

Risk Management

Magseis Fairfield introduced a new integrated

Management System in 2020 for the enter-

prise, replacing the individual management

systems operated by each legacy business. As

a result, the existing ISO certifications for the

individual businesses expired.

In 2021, Magseis Fairfield completed the

enterprise-wide certification process for ISO

9001:2015 and certified its Warminster UK

facility for ISO 45001 and 14001, with the

target of certifying the entire company against

these standards in 2022-23.

The Environmental policy is made actionable

through the Environmental Manual, procedures

and instructions which together constitute the

Magseis Fairfield Environmental Management

System.

Recovery types

Fishing net 348.0 kg

Other 291.7 kg

Plastic packing bands 0.4 kg

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Responsible business practice

Magseis Fairfield operates with strict focus on fair and ethical

business practices. This is embedded in one of the three Magseis

Fairfield-values, Trust, and is reflected in the related principle

statement: ‘We conduct our business with honesty and integrity’.

The company has guidelines and processes in place to ensure this

value is met and continuously upheld.

These are operationalized through the Code

of Conduct, the Anti-Corruption Compliance

Standard, the Corporate Responsibility

Procedure, and a series of related operating

instructions published on the Magseis Fairfield

Management System.

Code of Conduct

The Code of Conduct is the cornerstone of the

Company’s Management System. It lays down

five key principles:

• Conduct business with honesty and integrity

• Follow the letter and spirit of the law

• Treat each other fairly

• Act in the best interests of Magseis Fairfield

and avoid conflicts of interest

• Protect the company’s assets and reputation

The Code of Conduct covers the whole spec-

trum of business ethics, from compliance with

laws and regulations (including anti-trust, inter-

national sanctions, export control restrictions,

money laundering, insider trading etc.) to the

strict prohibition of any form of bribery, to the

respect of human rights and furtherance of

equality and non-discrimination.

All employees and other representatives of

Magseis Fairfield are expected to abide by both

the letter and the spirit of the Code of Conduct.

Together with all associated procedures and

manuals, the Code of Conduct is communi-

cated to new employees and contractors, who

are required to sign a certificate declaring their

understanding of their respective contents and

commitment to comply with those.

Corporate Social Responsibility (CSR)

The CSR procedure complements the Code of

Conduct and further explores the corporate

responsibility related themes. It is based on the

Ten Principles of the UN Global Compact which

is derived from:

• The Universal Declaration of Human Rights

• The International Labor Organization’s

Declaration on Fundamental Principles and

Rights at Work

• The Rio Declaration on Environment and

Development

• The United Nations Convention against

Corruption.

The Corporate Responsibility Procedure is

designed to further emphasize that Magseis

Fairfield aspires to conduct business with

honesty and integrity, in line with international

human rights, whilst valuing the health and

safety of employees, customers, contractors,

suppliers and minimizing impact on the environ-

ment. It basically embodies the key elements of

the Company’s moral conscience when it comes

to respecting people and the environment and

Key performance figures

Ambition 2021 2020 2019

Responsible business conduct

Breach of company policies 0 0 2

Reported corruption or bribery issues/concerns 0 0 0

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applying honesty and integrity in business

practice.

All the aforementioned high-level principles and

commitments permeate the Magseis Fairfield

Management System processes and operating

instructions and are regularly reiterated through

Training (see below) to ensure that they do not

stay in a hypothetical sphere, but instead are

actioned and implemented on a daily basis.

Anti-corruption

The Anti-Corruption Compliance Standard and

related documentation describe the various

tools implemented by the Company to keep any

form of corruption or bribery firmly at bay. The

Compliance Ocer oversees their implemen-

tation as and when required and is the primary

point of contact for any queries relating to

those matters.

Magseis Fairfield has zero tolerance for corrup-

tion, bribery and any other unfair or unethical

dealings, and seeks to ensure that the tenuous

line between legitimate gifts/ business courte-

sies and bribery/ facilitation payments is never

crossed.

The Company recognizes the peculiar risks

associated with having third party agents and

commercial representatives acting on its behalf

in certain jurisdictions due to local content

requirements.

All international agent contracts contain strict

anti-corruption clauses as well as annual

certification requirements and the obligation to

comply with training requirements (see also the

Training section below).

The Magseis Fairfield legal team’s small size

allows it to be agile and very involved with all

commercial and operational departments,

ensuring that any new contracts and commer-

cial relationships are canvassed, that adequate

pre-emptive measures are taken and appropri-

ate contractual safeguards imposed.

All employees are expected to exercise proper

judgement in their work, in line with the Manual’s

instructions, and to continuously monitor the

conduct of their business partners and associ-

ates.

Employees, contractors, and agents are

encouraged to report suspected wrongdoings

confidentially through line management, directly

to the Compliance Ocer, or via the Company’s

dedicated whistleblower hotline, without fear of

retribution, as further explained below.

Whistleblowing

The Company has established stringent

whistleblower procedures: one outlines report-

ing mechanisms for employees or external

stakeholders wanting to denounce any past

or ongoing violation of the Magseis Fairfield

Policies, Manuals or Procedures; the other

sets out actions required to be taken by the

Company’s management in order to eciently

address any reported issue. Those procedures

are published on the Magseis Fairfield

Management System.

The Company’s whistleblower reporting

mechanisms were improved in late 2020 with

the addition of a 24-7 international tele-

phone hotline provided by expert supplier

ComplianceLine, who specializes in compliance

management, hotline and sanction screen-

ing solutions, in order to facilitate reporting

worldwide whilst further preserving the poten-

tial desired anonymity of a reporter. The

ComplianceLine subscription also oers the

possibility of confidentially reporting issues

online through a dedicated portal. A training

session describing the ComplianceLine func-

tionalities was rolled out in early 2021, and

this was further reiterated in the 2021 Anti-

Corruption & Whistleblowing online course.

Employees are regularly reminded of the avail-

ability of such reporting recourses via training

sessions and regular communications from the

HR department. The new global intranet site,

including without limitation the HR and Legal

& Compliance SharePoint pages, prominently

showcases links to relevant procedures, as

well as all international toll-free numbers and

access to the reporting portal, in order to maxi-

mize visibility and user-friendliness.

As previously stated, the Company supports

any reporting by employees and will not tolerate

any retaliation or unfair treatment as a result of

a report having been made.

ICT security and data privacy

The Personal Data Protection Manual con-

tains information on, and establishes routines

for, the processing of personal data by the

Company and all its subsidiaries. The purpose

of the Manual is to ensure that all processing

of personal data by Magseis Fairfield complies

with the General Data Protection Regulation

(EU 2016/679) and any applicable national

implementing laws, regulations and secondary

legislation, and that best practice methods are

implemented in order to protect personal data

privacy in the daily conduct of the Company’s

business.

The Manual also sets out, inter alia, the secu-

rity and organizational measures implemented

by the Company, the process for reporting any

data breaches, the rights of data subjects with

respect to their personal information, and an

explanation as to how personal data transfers

abroad and amongst group companies are

handled.

During 2021, several cyber security improve-

ment programs were initiated and finalized with

focus on increasing security and confidenti-

ality of data (whether personal or Company

proprietary), device and user protection with a

view to strengthening the overall cybersecurity

posture of the Company. Cybersecurity and

data privacy remain a high priority for Magseis

Fairfield going forward.

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The importance of Training

Magseis Fairfield has developed a detailed

interactive training program that comprises the

following sessions:

• Corporate Responsibility

• GDPR refresher - key rules and guidelines

• Cyber Security

• Anti-Corruption & Whistleblowing

• Global Export Control

• Insider Trading

• General contractual liability – the importance

of risk shifting through contracts

Any new international agents and commercial

representatives are required to complete the

Corporate Responsibility and Anti-Corruption

& Whistleblowing courses as part of their

onboarding process, as well as other training

sessions, to the extent deemed necessary.

They must also review and formally confirm

their understanding and acceptance of the

Company’s Code of Conduct and other key

Standards and Manuals regarding such topics.

In 2022, the Company will further strengthen

onboarding processes and routines for interna-

tional agents and commercial representatives.

The Company will review, improve and re-issue

the above-mentioned training sessions to all

employees, contractors and agents in 2022.

The Company also plans on preparing and

issuing training sessions on anti-trust, global

corporate compliance, and key insurance

principles - as well as an in-depth interactive

anti-corruption training program for the Board

of Directors, the management team and other

senior managers. Such training will be con-

structed with the assistance of an external

subject-matter expert, and will also be rolled

out to relevant international agents and com-

mercial representatives locally, as and when

required.

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Consolidated financial statements

Consolidated statement of

comprehensive income

Consolidated statement of

financial position

Consolidated statement of

changes in equity

Consolidated statement of cash flow

Notes to the consolidated

financial statements

1. Company information

2. Basis of preparation

3. Group structure and business

combinations

4. Share information

5. Segment information

6. Revenue from customer contracts

7. Cost of sales

8. General and administrative costs

9. Finance income and costs

10. Income tax

11. Related party transactions

12. Earnings per share

13. Property, plant and equipment

14. Intangible assets

15. Impairment of non-current assets

16. Leases

17. Cash and cash equivalents

18. Inventories

19. Trade receivables and contract assets

20. Prepaid expenses and other current

assets

21. Borrowings

22. Cash flow information

23. Other current liabilities

24. Financial risk management

25. Capital management

26. Fair value measurement

27. Financial assets and financial liabilities

28. Pledged securities

29. Commitments

30. Share-based payments

31. Management remuneration

32. Legal claims

33. IFRS issued but not yet eective

34. Events occurring after the

reporting date

Parent company financial statements

Statement of comprehensive income

Statement of financial position

Statement of changes in equity

Statement of cash flows

Notes to the Parent company

financial statements

1. General Information and basis of

preparation

2. Share information

3. Revenue from customer contracts

100

4. Costs of sales

103

5. Other operating expenses

103

6. Financial income and expense

104

7. Income tax

105

8. Related party and intercompany

transactions

106

9. Property, plant and equipment

107

10. Other intangible assets

108

11. Impairment of non-current assets

108

12. Leases

110

13. Cash and cash equivalents

111

14. Inventories

111

15. Trade receivables and contract assets

112

16. Other current assets

112

17. Borrowings

113

18. Cash flow information

114

19. Other current liabilities

115

20. Financial risk management

115

21. Capital management

115

22. Fair value measurement

115

23. Financial assets and financial liabilities

116

24. Pledged securities

117

25. Commitment

117

26. Share-based payments

118

27. Management remuneration

119

28. IFRS issued but not yet eective

119

29. Events occurring after the

reporting date

119

Financial statements

Independent auditor’s report

120

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Financial statementsFinancial statements Financial statements

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Consolidated financial statements

Consolidated statement of comprehensive income

USD thousands Note 31 Dec 2021 31 Dec 2020

Revenues and other income

Revenues and other income 5, 6 258 129 193 391

Operating expenses

Cost of sales 7 (186 645) (130 616)

General and administrative costs 8 (24 506) (27 317)

Depreciation 13, 16 (51 507) (39 406)

Amortization 14 (14 156) (8 719)

Impairment 15 (6 458) (1 940)

Total operating expenses (283 272) (207 998)

Operating profit/(loss) (25 143) (14 607)

Finance income and costs

Finance income 819 6 647

Finance costs (4 004) (9 833)

Net finance income/(costs) 9 (3 185) (3 185)

Net profit/(loss) before tax (28 328) (17 793)

Income tax expense 10 (3 926) (1 857)

Net profit/(loss) and total comprehensive income (32 254) (19 650)

Earnings per share

Basic (USD) 12 (0.12) (0.08)

Diluted (USD) 12 (0.12) (0.08)

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Financial statementsFinancial statements | Consolidated financial statementsFinancial statements | Consolidated financial statements

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Consolidated statement of financial position

USD thousands Note 31 Dec 2021 31 Dec 2020

Non-current assets

Property, Plant and Equipment 13, 15 115 852 150 075

Multi-client library 14 22 526 20 906

Other intangible assets 14, 15 49 840 57 689

Total non-current assets 188 217 228 669

Current assets

Cash and cash equivalents 17 29 737 54 829

Trade receivables 19 17 389 38 141

Inventories 18 6 182 7 711

Derivatives 26 519 -

Other current assets 20 62 959 15 253

Total current assets 116 787 115 933

Total assets 305 004 344 602

USD thousands Note 31 Dec 2021 31 Dec 2020

Equity

Share capital 4 1 584 1 578

Share premium 4 151 021 407 662

Other equity 8 909 (216 767)

Total shareholders' equity 161 514 192 473

Non-current liabilities

Interest bearing liabilities 21, 22 29 429 30 624

Lease liabilities 16, 21, 22 8 275 8 784

Non-interest-bearing liabilities 22 4 609 5 118

Total non-current liabilities 42 313 44 526

Current liabilities

Trade payables 24, 27 20 901 17 179

Current tax payable 10 5 060 5 455

Current portion of interest-bearing liabilities 21, 22 2 000 2 293

Current portion of lease liabilties 16, 21, 22 16 201 19 361

Other current liabilities 23 57 015 63 315

Total current liabilities 101 177 107 603

Total liabilities 143 490 152 129

Total equity and liabilities 305 004 344 602

Board of Directors and CEO of Magseis Fairfield ASA

Lysaker, 10 March 2022

Wenche Kjølås

Chair of the Board

Roar Bekker

Board member

Anthony J. Dowd

Board member

Luis Araujo

Board member

Angela Durkin

Board member

Janie Garcia

Board member

(employee elected)

Carel Hooijkaas

CEO

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Consolidated statement of changes in equity

For the year ended 31 December 2021

USD thousands Share capital

Share premium

reserve

Share based

payments

reserve Other equity Total

Balance 1 January 2021 1 578 407 662 7 496 (224 262) 192 473

Share based payments 6 - 1 413 - 1 419

Other changes - - - (125) (125)

Allocation of retained deficit - (256 641) - 256 641 -

Profit/(Loss) for the period - - - (32 254) (32 254)

Balance 31 December 2021 1 584 151 021 8 909 - 161 514

For the year ended 31 December 2020

USD thousands Share capital

Share premium

reserve

Share based

payments

reserve Other equity Total

Balance 1 January 2020 1 167 382 148 5 784 (204 505) 184 594

Share issuance tranche 1 199 13 301 - - 13 500

Expenses related to tranche 1 - (683) - - (683)

Share issuance tranche 2 213 14 249 - - 14 462

Expenses related to tranche 2 - (1 354) - - (1 354)

Share based payments - - 1 712 - 1 712

Other changes - - - (107) (107)

Profit/(Loss) for the period - - - (19 650) (19 650)

Balance 31 December 2020 1 578 407 662 7 496 (224 262) 192 473

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Consolidated statement of cash flow

USD thousands Note 2021 2020

Cash flows from operating activities

Profit / (loss) before tax (28 328) (17 793)

Income tax paid 10 (4 322) (2 803)

Depreciation, amortization and impairment 13, 14, 15, 16 72 122 50 066

Share-based payments expense 30 1 413 1 712

Finance expense 9 4 004 9 833

Finance income 9 (819) (6 647)

Net book value sold and disposed assets 13 7 594 -

Other non-cash (7 094) -

(Increase)/decrease in current assets (28 980) 17 116

Increase/(decrease) in current liabilities (8 796) (31 001)

Net cash from operating activities 6 794 20 481

USD thousands Note 2021 2020

Cash flows from investing activities

Interest received 9 - 99

Investment in Multi-Client library 14 (881) (12 026)

Investment in other intangibles 14 (1 538) (1 001)

Acquisition of equipment 13 (10 454) (12 304)

Net cash used in investing activities (12 874) (25 232)

Cash flows from financing activities

Down payments of interest-bearing liabilities 21, 22 - (3 333)

Net proceeds from new loans 21, 22 2 000 3 568

Payment of finance lease liabilities 16, 21, 22 (18 044) (17 731)

Net proceeds from issue of share capital 4 6 25 513

Interest paid 9 (2 631) (3 326)

Net cash from financing activities (18 669) 4 691

Net change in cash and cash equivalents (24 748) (60)

Currency eects on cash (345) 1 457

Cash and cash equivalents at period start 17 54 829 53 432

Cash and cash equivalents at period end 17 29 737 54 829

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Notes to the consolidated financial statements

1. Company information

Magseis Fairfield provides 3D, 4D, near field and sparse node ocean bottom node (OBN) technology, mainly to

exploration and production companies within the oil and gas industry.

Magseis Fairfield (the Group) consists of Magseis Fairfield ASA and its subsidiaries. Magseis Fairfield ASA

is a public limited company incorporated in Norway. The Company’s registered oce is at Strandveien 50,

Lysaker, Norway. The consolidated financial statements of Magseis Fairfield ASA (referred to as the Company

or Parent) incorporate the financial statements of the company and its subsidiaries collectively referred to as

“the Group”.

2. Basis of preparation

2.1 Statement of compliance

The consolidated financial statements have

been prepared in accordance with International

Financial Reporting Standards (IFRS) as

approved by the European Union, their interpre-

tations adopted by the International Accounting

Standards Board (IASB) and the additional

requirements of the Norwegian Accounting Act as

of 31 December 2021.

The consolidated financial statements were

authorized for issuance by the Board of Directors

and the Chief Executive Ocer (CEO) on 10 March

2022. The consolidated financial statements will

be presented for approval at the Annual General

Meeting on 7 April 2022. Until this date the Board

of Directors have the authority to amend the

financial statements.

2.2 Financial reporting principles

The relevant financial reporting principles are

described in each note to the consolidated finan-

cial statements. Magseis Fairfield focuses on

describing the reporting within the IFRS frame-

work rather than repeating the actual text of the

standard.

2.3 Basis of measurement

The consolidated balance sheet has been pre-

pared on the historical cost basis except for

certain financial liabilities as presented in note 27

measured at fair value on each reporting date. The

financial information presented in United State

Dollars (USD) has been rounded to the nearest

thousand (USD thousand), therefore the subtotals

and totals in some tables may not equal the sum of

the amounts shown. Certain comparative figures

have been adjusted to conform to the presentation

adopted in the current year.

2.4 Going Concern

The financial results for the Group were charac-

terized by continued financial and operational

challenges in 2021, due to the COVID-19 pan-

demic and a volatile market environment. The

impact on the E&P industry has been profound

and Magseis Fairfield’s clients have cut their capex

and cancelled or postponed their investment plans

to preserve cash. However, Magseis Fairfield has

maintained a strong focus on cost and capital

expenditures to preserve cash and safeguard

business continuity.

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The Group’s backlog for 2021 increased during

the fourth quarter 2021 and the first months of

2022, oering increasing support for the 2022

budget and forecast. Magseis Fairfield forecast

a market growth in 2022 of 25 percent and new

contracts are being secured at increasing margins.

This backlog and tendering activity for 2022 pro-

vides a basis for optimism, although the company

acknowledges the risks and uncertainties regard-

ing future market development.

The company ended the year with USD 29.7

million in cash and cash equivalents. Given the

current activity level and financial forecasts, it is

the Board of Directors’ view that the company will

have sucient liquidity through 2022. The liquidity

forecast is subject to certain risk factors, such as

project execution, timely collections from custom-

ers or changes in phasing and scope of projects.

Although there are uncertainties related to events

or conditions that might impact the future cash

flows, the Board and management are of the

opinion that the going concern assumption is

appropriate and the accounts are prepared under

this assumption.

2.5 Consolidation

The consolidated financial statements comprise

the parent company Magseis Fairfield ASA and

its subsidiaries. Subsidiaries are all entities over

which the Group has control. The Group controls

an entity when the Group is exposed to, or has

rights to, variable returns from its involvement with

the entity and can aect those returns through

its power to direct the activities of the entity.

Subsidiaries are fully consolidated from the date

on which control is transferred to the Group. They

are deconsolidated from the date that control

ceases. The acquisition method of accounting is

used to account for business combinations by

the Group.

Intercompany transactions, balances and unre-

alized gains on transactions between Group

companies are eliminated. Unrealized losses are

also eliminated unless the transaction provides

evidence of an impairment of the transferred

asset. Accounting policies of subsidiaries have

been changed where necessary to ensure consist-

ency with the policies adopted by the Group.

2.6 Functional and presentation currency

Items included in the financial statements of each

of the Group’s entities are measured using the

currency of the primary economic environment

in which the entity operates (‘the functional cur-

rency’). The consolidated financial statements are

presented in USD which is Magseis Fairfield ASA’

and all other Group entities functional currency

and the Group’s presentation currency.

2.7 Transactions and balances

Foreign currency transactions are translated into

the functional currency using the exchange rates

at the dates of the transactions.

Foreign exchange gains and losses resulting from

the settlement of such transactions and from

the translation of monetary assets and liabilities

denominated in foreign currencies at year end

exchange rates are generally recognized in profit

or loss.

Foreign exchange gains and losses that relate

to borrowings are presented in the statement

of profit or loss, within financial items. All other

foreign exchange gains and losses are presented

within operating profit.

Non-monetary items that are measured at fair

value in a foreign currency are translated using the

exchange rates at the date when the fair value was

determined. Translation dierences on assets and

liabilities carried at fair value are reported as part

of the fair value gain or loss.

2.8 Statement of cash flows

The statement of cash flows is presented

according to the indirect method. Cash and cash

equivalents include cash and other short-term

cash convertible investments.

2.9 Significant judgements

and critical estimates

The preparation of consolidated financial

statements in conformity with IFRS requires

management to make judgements, estimates and

assumptions each reporting period that aect

the income statement and balance sheet. The

accounting estimates will seldom precisely match

actual results, and changes in assumptions may

have a significant impact on the consolidated

financial statements in the period the assumptions

changed. Management believes the underlying

assumptions are appropriate.

The main areas where significant judgements and

critical estimates have been made are described in

each of the following notes:

• Note 6 Revenue from customer contracts

• Note 10 Incom e Tax

• Note 13 Property, Plant and Equipment

• Note 14 Intangibles

• Note 15 Impairment of non-current assets

• Note 16 Leases

• Note 18 Inventories

• Note 23 Other current liabilities

2.10 New Financial Reporting Standards

There has not been any new or amended IFRS

standards eective from 2021 with material

impact to the group accounts.

2.11 Other

Figures in brackets reflect figures for the corre-

sponding period in the previous year.

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3. Group structure and business combinations

3.1 Financial Reporting Principles

The acquisition method of accounting is used to

account for all business combinations, regardless

of whether equity instruments or other assets are

acquired. The consideration transferred for the

acquisition of a subsidiary comprises the:

• Fair values of the assets transferred

• Liabilities incurred to the former owners of the

acquired business

• Equity interests issued by the Group

• Fair value of any asset or liability resulting from

a contingent consideration arrangement

• Fair value of any pre-existing equity interest in

the subsidiary

Identifiable assets acquired and liabilities and

contingent liabilities assumed in a business com-

bination are, with limited exceptions, measured

initially at their fair values at the acquisition date.

The Group recognizes any non-controlling interest

in the acquired entity on an acquisition-by-ac-

quisition basis either at fair value or at the

non-controlling interest’s proportionate share of

the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as

incurred. Goodwill is recognized as the excess of

the consideration transferred and the acquisi-

tion-date less the fair value of the net identifiable

assets acquired is recorded. If those amounts

are less than the fair value of the net identifiable

assets of the business acquired, the dierence is

recognized directly in profit or loss as a bargain

purchase.

Where settlement of any part of cash considera-

tion is deferred, the amounts payable in the future

are discounted to their present value as at the

date of exchange. The discount rate used is the

entity’s incremental borrowing rate, being the rate

at which a similar borrowing could be obtained

from an independent financier under comparable

terms and conditions. Contingent consideration is

classified either as equity or a financial liability.

Amounts classified as a financial liability are sub-

sequently remeasured to fair value with changes

in fair value recognized in profit or loss. If the

business combination is achieved in stages, the

acquisition date carrying value of the acquirer’s

previously held equity interest in the target is

remeasured to fair value at the acquisition date.

Any gains or losses arising from such remeasure-

ment are recognized in profit or loss.

3.2 Business combinations

There have been no business combinations in

2021 or 2020.

3.3 Group structure

The following subsidiaries are included in the consolidated financial statements:

Company Country of incorporation Main operations

Magseis Operations AS Norway Geophysical services

Magseis Renewables AS Norway Geophysical services

Magseis FF AS Norway Geophysical services

Magseis FF LLC USA Geophysical services

Magseis Malaysia Sdn. Bhd. Malaysia Geophysical services

Magseis Singapore Services Pte. Ltd. Singapore Crewing services

Magseis Do Brazil Ltda. Brazil Geophysical services

Magseis Fairfield Industries International Ltd UK Geophysical services

Magseis WGP Group Ltd UK Geophysical services

Magseis Technology AB Sweden Dormant

The company holds 100 percent of all shares and all voting rights for its subsidiaries.

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4. Share information

Ordinary shares - Issued and fully paid

Number of

Share capital

USD ‘000

Share premium

USD ‘000

Balance 1 January 2020 185 170 592 1 167 382 148

Private placement 17 February 2020 37 034 118 199 12 618

Private placement 17 March 2020 44 565 882 213 12 895

Balance 31 December 2020 266 770 592 1 578 407 662

RSU settlements 951 750 6 -

Allocation of retained deficit (256 641)

Balance 31 December 2021 267 722 342 1 584 151 021

Nominal value

The nominal value of the shares is NOK 0.05. The share capital is fully paid. Magseis Fairfield ASA has one

class of shares, ordinary shares, with equal rights for all shares. The holders of ordinary shares are entitled to

receive dividends and are entitled to one vote per share at general meetings.

Share based payments reserve

Share-based payments represent cost charged to income statement over the vesting period based on the fair

value measured at grant date for equity-settled share-based payments provided to employees, including key

management personnel, as part of their remuneration.

Shareholders

The 20 largest shareholders as of 31 December 2021:

Number of

Ownership

interest

FAIRFIELD MS LLC 48 262 582 18.0%

MORGAN STANLEY & CO. LLC 37 847 255 14.1%

AS CLIPPER 11 283 402 4.2%

WESTCON GROUP AS 8 156 291 3.0%

BNP PARIBAS 7 520 000 2.8%

CACEIS BANK 7 203 200 2.7%

SEB CMU/SECFIN POOLED ACCOUNT 6 969 933 2.6%

ANFAR INVEST AS 6 546 391 2.4%

VERDIPAPIRFONDET KLP AKSJENORGE 6 446 448 2.4%

SOBER AS 6 159 205 2.3%

SBAKKEJORD AS 4 700 000 1.8%

MERRILL LYNCH PROFESSIONAL CLEARIN 3 900 000 1.5%

GEO INNOVA AS 3 875 943 1.4%

REDBACK AS 3 578 289 1.3%

J.P. MORGAN BANK LUXEMBOURG S.A. 3 530 339 1.3%

BARRUS CAPITAL AS 3 304 410 1.2%

VERDIPAPIRFONDET PARETO INVESTMENT 3 077 319 1.1%

REKSNES 2 002 000 0.7%

HERSETH AS 1 632 000 0.6%

ØRNES AS 1 413 635 0.5%

Total largest shareholders 177 408 642 66.3%

Other shareholders 90 313 700 33.7%

Total outstanding shareholders 267 722 342 100.0%

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5. Segment information

The Group’s CEO (Chief Executive Ocer) is

the chief operating decision maker at Magseis

Fairfield, and the whole Group is managed as one

segment, being geophysical surveys with respect

to products and services. The financial results

from this segment are equivalent to the financial

statements of the Group as a whole.

For internal reporting purposes, payments for

long-term lease contracts under IFRS 16 are

recognized as operating cost and included in

EBITDA to have consistent accounting treatment

for payments of short and long-term leases. Under

IFRS 16, long-term leases are capitalized, and the

cost of the leases are shown as depreciation and

interest expense.

Multi-client revenue is for internal reporting

purposes recognized in accordance with indus-

try practice prior to implementation of IFRS 15

where revenue is calculated using a percentage of

completion method and the related amortization

of Multi-Client library is based upon the ratio of

aggregate capitalized survey costs to forecasted

sales. Under IFRS 15, any prefunding amount

collected from customers prior to completion of

the project is recognized as contract liability and

revenue is recognized at the point in time when the

data access is transferred to the customer.

The below table reconciles internal (segment) and external (IFRS) reporting.

Year ended 31 Dec 2021 Year ended 31 Dec 2020

USD thousands Segment Adj. As reported Segment Adj. As reported

Acquisition 204 742 - 204 742 131 531 - 131 531

Systems 23 746 - 23 746 43 328 - 43 328

Reservoir Monitoring/Source 18 842 - 18 842 18 532 - 18 532

Multi-client prefunding 874 7 429 8 303 12 353 (12 353) -

Multi-client aftersales 385 - 385 - - -

Other revenues - 2 112 2 112 - - -

Total revenues 248 588 9 541 258 129 205 744 (12 353) 193 391

Cost of sales (204 511) 17 866

(186 645) (143 172) 12 556

(130 616)

SG&A and R&D costs (25 150) 645

(24 506) (30 175) 2 858

(27 317)

EBITDA 18 927 28 052 46 979 32 397 3 061 35 458

Multi-client amortization (577) (4 903) (5 480) (8 153) 8 153 -

EBITDA after Multi-Client amortization 18 350 23 149 41 499 24 244 11 214 35 458

Depreciation and amortization (40 642) (19 541)

(60 184) (34 678) (13 448)

(48 125)

Impairments (6 458) - (6 458) (627) (1 313) (1 940)

EBIT (28 750) 3 607 (25 143) (11 061) (3 547) (14 607)

Vessel lease payments

Oce lease payments

Depreciation and impairment of right of use assets (IFRS 16)

A significant portion of the Group’s revenue is generated from customer contracts with a limited number of key customers, where the top three customers generated

revenue of USD 44.5 million, USD 34.7 million, USD 23.7 million respectively for the full financial year 2021.

See note 6 Revenue from customer contracts for the split of revenue by geographical locations.

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6. Revenue from customer contracts

Revenue from contracts with customers

Revenue from contracts with customers arise

primarily from the delivery of exclusive seismic

services, granting of licenses to the Groups’ Multi-

Client survey data library, marine geophysical

services and sales of nodes and other equipment.

Revenue is recognized at the amount that the

Group expects to be entitled to and expects to

collect under the customer contracts. If a cus-

tomer contract consists of multiple performance

obligations, the consideration is allocated among

the performance obligations based on their esti-

mated relative fair values. Amounts received from

customers in advance of the Group satisfying

its performance obligations are recognized as

a contract liability. In the rare event the Group

has satisfied a performance obligation and is

otherwise entitled to compensation under the

contract but there is a significant uncertainty as

to ultimately collecting the compensation, revenue

recognition is deferred until such uncertainty no

longer exists. When the Group has satisfied its

performance obligations and has a right to the

agreed consideration, revenue is recognized.

The principles applied for each of the main types

of contracts with customers are described in more

detail below.

Proprietary acquisition projects/

Reservoir monitoring/Source

The Group performs ocean bottom seismic ser-

vices in accordance with customer specifications,

and where the customer retain ownership to the

seismic data. These contracts are considered to

contain one single performance obligation, and the

performance obligation is satisfied over time since

the Group performs the service at the customer

specification, the resultant seismic data is retained

by the customer and the Group has no alternative

right to otherwise utilize or benefit from the data.

The revenue is measured at the transaction

price agreed under the contract. In most cases,

the consideration is normally due based on the

contractually agreed payment plan when legal

title to the seismic data has been transferred.

While deferred payment terms may be agreed in

rare circumstances, the deferral never exceeds

12 months. The transaction price is therefore not

adjusted for the eects of a significant financing

component. The project is measured based on the

physical progression, and revenue is recognized

based on the ratio of the project’s progress to

date (percentage of completion), provided that the

performance obligation is satisfied. Revenue rec-

ognition can be based on various parameters, such

as number of shots, square kilometers of acquired

data or time progressed.

Multi-client surveys

The Multi-Client library consists of seismic data

surveys which are licensed to customers on a

non-exclusive basis. Revenues generated from

Multi-Client surveys fall into two categories:

Pre-commitment arrangements – Comprise of

contracts where the Group obtains pre-funding

from customers before a seismic project is started,

or during the project period. These pre-commit-

ments cover specific areas or license blocks. In

return for the commitment, the customer obtains

early access to the data, favorable pricing com-

pared to late sales and a degree of influence

over the project scope. Any pre-funding amount

collected from customers prior to completion of

the project is recognized as contract liability as

revenue is recognized at the point in time when the

data access is transferred to the customer.

Late sales – Comprise of contracts where the

Group grants a license entitling non-exclusive

access to utilize a defined portion of the Multi-

Client data library in exchange for a fixed payment.

Revenue is recognized at the point in time when the

customer has been granted access to the data.

For Multi-Client library projects, Magseis Fairfield

may invest in the project with other parties and

have cooperation agreements whereby revenues

will be shared with other companies. These agree-

ments are initiated and agreed as joint operations

where both parties have rights to the assets and

share in the liabilities. Magseis Fairfield recognizes

its share of the investment in the Multi-Client

library, its share of revenues from the sale of the

Multi-Client survey, related amortization, and

expenses. When a partner holds the right to market

and sell the project and invoices and collects from

the customer, Magseis Fairfield recognizes its share

of revenues and related accounts receivables.

Revenue from sale of equipment

The Group provides the sale of nodes to exter-

nal customers, where each sale is defined as a

customer contract. The sales contracts normally

include one performance obligation which is sat-

isfied upon the delivery of an agreed number of

nodes in accordance with the agreed specifica-

tions. Revenue is recognized at the point in time

when the control of the goods is transferred to the

customer, which occurs when the products have

been shipped to a contractual agreed location,

and the risks of obsolescence and loss have been

transferred to the customer. The revenue is meas-

ured at the transaction price as agreed under the

contract.

Other services revenue

Customer contracts for other marine geophysical

services are similar in nature and terms to the

proprietary contract sales. Revenue is recognized

over time as the Group satisfies the performance

obligation and is entitled to the compensation

under the contract. Lease income is recognized on

a straight-line basis over the lease period.

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Significant judgements and critical estimates

The deliveries in the customer contracts are

reviewed to identify distinct performance obliga-

tions, and this assessment may involve significant

judgement. For most of the identified performance

obligations for Proprietary acquisition projects,

control has been assessed to be transferred to the

customer over time as the performance obligation

is satisfied. Revenue is recognized over time using

either a cost-based progress method, or revenue

is recognized as physical progress of the project

represents the transfer of seismic data to the

customer. These methods are assessed to best

reflect the pattern of transfer of control of goods

and services to the customer.

Disaggregation of revenue

In accordance with IFRS 15 management analyze

the revenue contracts with customers and disag-

gregates the revenue into the following product

categories, which depict how the nature, amount,

timing and uncertainty of revenue and cash flows

are aected by economic factors:

• Proprietary acquisition

• Reservoir Monitoring/Source

• Multi-client

• Revenue from sale of equipment

• Other service revenues

Revenue from customers is disaggregated in the

table below by geographical location, by type of

product, and by the timing of the revenue. For propri-

etary acquisition projects and Reservoir Monitoring/

Source Acquisition the geographical specification is

based upon location of performance. For sale and

repair of nodes the geographical specification is

based upon the location of the customer.

Disaggregation of revenue from contracts with customers:

2021

USD thousands

Proprietary

acquisition Multi-client

Sale, repair and

lease of equipment

Reservoir

Monitoring/Source Total

North Americas 105 853 - 2 434 - 108 287

Asia 22 181 - 16 099 - 38 280

Europe 32 135 8 687 - 18 842 59 664

Africa 44 573 - - - 44 573

Revenue from contracts with customers 204 742 8 687 18 532 18 842 250 803

At a point in time revenue recognition

Revenue from sale of equipment - - 18 532 - 18 532

Multi-client revenue - 8 687 - - 8 687

Total at a point in time revenue recognition - 8 687 18 532 - 27 219

Over time revenue recognition

Proprietary acquisition projects 204 742 - - - 204 742

Reservoir monitoring/Source acquisition - - - 18 842 18 842

Total over time revenue recognition 204 742 - - 18 842 223 584

Total revenue from contracts with customers 204 742 8 687 18 532 18 842 250 803

Lease income - - 5 214 - 5 214

Other revenue 2 112 - - - 2 112

Total revenue and other income 206 854 8 687 23 746 18 842 258 129

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2020

USD thousands

Proprietary

acquisition Multi-client

Sale, repair and

lease of equipment

Reservoir

Monitoring/Source Total

North Americas 131 725 - 1 536 - 133 261

Asia - - 27 750 - 27 750

Europe 250 - - 19 297 19 547

Revenue from contracts with customers 131 975 - 29 287 19 297 180 558

At a point in time revenue recognition

Revenue from sale of equipment - - 29 287 - 29 287

Total at a point in time revenue recognition - - 29 287 - 29 287

Over time revenue recognition

Proprietary acquisition projects 131 975 - - - 131 975

Reservoir monitoring/Source acquisition - - - 19 297 19 297

Total over time revenue recognition 131 975 - - 19 297 151 272

Total revenue from contracts with customers 131 975 - 29 287 19 297 180 559

Lease income - - 12 833 - 12 833

Total revenue and other income 131 975 - 42 120 19 297 193 391

Assets and liabilities related to

contracts with customers

Contract assets and contract liabilities from cus-

tomers were USD 41.5 million (USD 4.9 million) and

USD 4.9 million (USD 13.8 million) respectively.

Contract assets

Contract assets are recognized whenever a per-

formance obligation is satisfied before the point in

time where we have right of invoicing. This relates

mainly to proprietary acquisition projects arrange-

ments where the timing of invoicing is decided

by the customer contract. The Group assesses a

contract asset for impairment in accordance with

IFRS 9 using the simplified approach permitted by

IFRS 9, which requires expected lifetime losses to

be recognized from initial recognition of the con-

tract asset. An impairment of a contract asset is

measured, presented and disclosed on the same

basis as a financial asset that is within the scope

of IFRS 9. As of 31 December 2021, no impairment

charges are recognized.

Contract liabilities (Advance

payments from customers)

Advance payments from customers are recognized

if the Group receives consideration or if it has the

unconditional right to receive consideration in

advance of performance. A portion of the Group’s

customers pay in advance, and these prepayments

are recognized as non-financial debt and will be

settled in the Group’s services.

Assets recognized from cost

to fulfil a contract

In addition to the contract balances discussed

above, the Group has also recognized an asset in

relation to costs to fulfil some of the Group’s long-

term contracts for proprietary acquisition projects.

Such costs are recognized as an asset if the costs

relate directly to a contract or to an anticipated

contract that the entity can specifically identify,

the costs generate or enhance resources of the

entity that will be used in satisfying and the costs

are expected to be recovered. These costs relate

primarily to mobilization and relocation of vessels

and is presented within other assets in the balance

sheet. As of 31 December 2021, USD 9.2 million

(USD 2.7 million) was the balance of assets recog-

nized from cost to fulfil a contract.

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7. Cost of sales

Financial Reporting Principles

Other operating expenses are recognized in the period in which the associated goods and services are

delivered to the Group. Personnel expenses include wages, salaries, social security contributions, sick leave,

parental leave and other employee benefits. The benefits are recognized in the year in which the associated

services are rendered by the employees.

Specification of cost of sales:

USD thousands 2021 2020

Charter hire and other vessel costs 112 786 91 384

Wages and contract labor 44 479 50 613

Other cost of sales 29 380 34 820

Capitalized to Multi-Client project - (46 201)

Total cost of sales 186 645 130 616

Specification of crew wages, other personnel costs and contract labor costs:

USD thousands 2021 2020

Salary and contract labor costs 40 802 46 454

Social security tax 2 600 2 376

Pensions 551 714

Other 526 1 070

Total wages and other personnel costs 44 479 50 613

8. General and administrative costs

Financial Reporting Principles

Other operating expenses are recognized in the period in which the associated goods and services are

delivered to the Group. Personnel expenses include wages, salaries, social security contributions, sick leave,

parental leave and other employee benefits. The benefits are recognized in the year in which the associated

services are rendered by the employees.

Specification of other operating expenses:

USD thousands 2021 2020

Wages and other personnel costs

15 027 16 730

Professional services 4 528 4 872

Other 4 950 5 715

Total other operating expenses 24 506 27 317

Includes payments to contracted personnel counted as Full Time Equivalents

Specification of wages, other personnel costs and contract labor costs:

USD thousands 2021 2020

Salary 14 568 10 161

Social security tax 1 329 1 972

Pension costs 733 847

Share-based payment costs 1 833 2 218

Other personnel cost 132 1 533

PPP loan forgiveness

(3 568) -

Total salary and social expenses 15 027 16 730

In April 2020, the Company received U.S. loan program (Paycheck Protection Program) of USD 3.6 million which was fully

forgiven in June 2021. The forgiveness was recognized as a reduction of salary expenses.

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The audit fee (exclusive of VAT) to Deloitte is specified in the table below:

USD thousands 2021 2020

Audit services

Audit of annual financial statements (Deloitte) 304 261

Audit of annual financial statements (other than group auditor) 28 52

Other services

Other assurance and tax services (Deloitte) 16 54

Total audit remuneration 348 366

9. Finance income and costs

Financial Reporting Principles

Interest income include eects from using the eective interest rate method where fees, interest paid, trans-

action costs and other premiums are deferred and amortized over the life of the instrument. Net eects from

fair value gains or losses on financial assets at fair value through profit or loss, and adjustments to the carry-

ing amount of financial liabilities at amortized cost are recognized in other financial items.

Foreign exchange gains and losses arise upon settlement of monetary assets and liabilities that are not

hedged. Foreign exchange gains and losses also include the eects from translating monetary assets and

liabilities denominated in foreign currencies at the balance sheet date.

Finance income includes interest income from financial assets held for cash management purposes, and

finance costs includes borrowing costs, interest expenses in respect of lease liabilities and exchange dier-

ences arising from foreign currency borrowings.

USD thousands 2021 2020

Finance income

Foreign exchange gains 360 6 681

Revaluation of warrants - (135)

Interest income 4 101

Other financial items 454 -

Total finance income 819 6 647

Finance costs

Foreign exchange losses (542) (6 198)

Interest expense loan facility (1 763) (2 046)

Interest expense leases (1 191) (1 547)

Other financial items (728) (245)

Revaluation of warrants 221 -

Capitalized lease interests (Multi-Client project) - 203

Total finance costs (4 004) (9 833)

Net finance income/(costs) (3 185) (3 185)

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10. Income tax

Financial Reporting Principles

Income tax consists of current tax, eect of change in deferred tax positions and withholding tax. Income tax

is recognized in the statement of profit or loss except to the extent that it relates to items recognized directly

in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax

rates enacted or substantially enacted at the reporting date that will be paid during the next 12 months.

Current tax also includes any adjustment of taxes from previous years.

Deferred tax is recognized for temporary dierences between the carrying amounts of assets and liabilities

for financial reporting and the amounts used for taxation purposes. Deferred tax is measured at the tax

rates expected to be applied to temporary dierences when they reverse, based on the laws that have been

enacted or substantively enacted by the reporting date. Deferred tax is not recognized for goodwill identified

in business combinations. Deferred tax assets and liabilities are oset if there is a legally enforceable right

to oset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority.

Deferred tax assets are recognized for unused tax losses, tax credits and deductible temporary dierences.

The deferred tax asset is only recognized to the extent it is considered probable that future taxable profits will

be available to utilize the credits.

Withholding tax

Withholding tax and any related tax credits are generally recognized in the period they are incurred.

Significant judgements and critical estimates

The Group is operating in dierent parts of the world and is thus subject to income taxes in numerous juris-

dictions with increasingly complex tax laws. Judgement may be involved when determining whether the

Groups’ operation constitute a permanent establishment, and consequently the taxable amounts pertaining to

certain projects. Tax authorities in dierent jurisdictions may challenge calculation of taxes payable from prior

periods, and the Group could potentially be liable for material amounts of income tax relating to prior report-

ing periods. Management judgment is required when assessing valuation of unused losses, tax credits and

other deferred tax assets. The recoverability is assessed by estimating taxable profits in future years taking

into consideration also expected changes in temporary dierences.

One of the Group entities is currently undergoing a tax audit for prior years where certain claims for tax

deductibility have been challenged by local tax authorities. Based on management’s assessment of local tax

laws and available information provided by local tax experts, a provision for the uncertain tax position was

recognized in fourth quarter 2019, reflecting management’s best judgement and estimates. This assessment

is unchanged. However, the outcome of such proceedings will always be subject to uncertainties until a final

tax statement have been issued by the local tax authorities.

The Group has incurred several years of consecutive tax losses in the Norwegian and US tax jurisdiction,

including for 2021. Although management believes it will eventually attain a satisfactory level of profitability,

sucient and convincing evidence of such as required by International Accounting Standard 12 is not present

per the reporting date. Hence, no deferred tax asset has been recognized.

Income tax expense specification:

USD thousands 2021 2020

Current tax:

Tax payable 3 927 1 857

Deferred tax:

Changes in recognized deferred tax - -

Tax expense 3 927 1 857

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FINANCIAL STATEMENTS

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A reconciliation of the eective rate of tax and the tax rate in parent’s country of registration:

USD thousands 2021 2020

Net profit/ (loss) before tax (28 328) (17 793)

Income taxes calculated at 22% / 23% (6 232) (3 934)

Adjustment in respect of current income tax of previous years - 325

Changes in unrecognized deferred tax asset 8 519 11 258

Adjustment previous years deferred tax (1 475) (8 418)

Non-deductible expenses 6 968 2 421

Exchange rate variance (6 718) (930)

Withholding tax paid 3 927 215

Eect of other tax rates in subsidiaries 536 57

Other (1 598) 863

Tax expense 3 927 1 857

The deductible temporary dierence and tax losses do not expire under current tax legislation. The net

deferred tax asset for the Group has not been recognized on the basis that it does not meet the criteria for

asset recognition as the Group currently cannot document that the future taxable income can be utilized

against available tax losses. The Norwegian tax rate (attributable to the Parent) is 22 percent.

Deferred tax assets and liabilities, of which none were recognized:

USD thousands 2021 2020

Non-current assets (18 163) (14 361)

Current assets (1 067) (912)

Non-current liability - -

Current liabilities (1 907) (3 736)

Tax- losses carried forward (20 528) (14 061)

Tax credits carried forward (821) (897)

Total (assets)/liabilities (42 486) (33 967)

Not recognized deferred tax assets 42 486 33 967

Net recognized deferred (assets) liabilities - -

11. Related party transactions

Financial Reporting Principles

Related parties’ relationships are defined to be entities outside the Group that are under control (either

directly or indirectly), joint control or significant influence by the owners, Board of Directors or Management

of Magseis Fairfield ASA. Related parties are in a position to enter into transactions with the company that

would potentially not be undertaken between unrelated parties. The terms and conditions of the transactions

with related parties are considered to be on an arm’s length basis.

The aggregate value of transactions and outstanding trade payables with related parties were as follows:

USD thousands Transaction value Accounts payable

Name Note 2021 2020 31 Dec 2021 31 Dec 2020

Westcon Group (shareholder) (I) 9 960 14 125 1 228 798

Fairfield Geotechnologies

(shareholder) (II) 1 162 969 79 -

J B Gateman (Geo Innova AS)

(shareholder) (III) 88 144 - -

Total 11 210 15 238 1 307 798

(I) Time charter agreements for the vessels Artemis Athene, Artemis Angler and Artemis Arctic. Westcon

Group also delivers Marine Management services as a part of the time charters.

(II) Sublease of oce in Houston. The oce lease agreement ends in October 2030 and the total lease

liability is USD 3.2 million as of 31 December 2021.

(III) Jan Gateman was engaged as an independent consultant trough the company Geo Innova AS.

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12. Earnings per share

Financial Reporting Principles

Basic earnings per share is calculated by dividing profit or loss attributable to ordinary equity holders of the

parent entity by the weighted average number of ordinary shares outstanding during the period. Diluted earn-

ings per share include the weighted average number of ordinary shares that would be issued on the conversion

of all the dilutive potential ordinary shares into ordinary shares.

Options granted to management under the employee share purchase program and warrants issued are poten-

tial ordinary shares. They have been included in the determination of diluted earnings per share to the extent

that they are dilutive. The options have not been included in the determination of basic earnings per share as

the strike price for the options have been less than the average market price of ordinary shares during the

reporting period.

Earnings per share:

USD 2021 2020

Basic earnings / (loss) per share on ordinary shares (0.12) (0.07)

Basic earnings / (loss) per share on weighted average number of shares (0.12) (0.08)

Diluted earnings / (loss) per share (0.12) (0.08)

Reconciliation of earnings used in calculating earnings / (loss) per share:

USD thousands 2021 2020

Basic earnings/(loss) per share

Profit/(loss) for the year (32 254) (19 650)

Number of ordinary shares outstanding (in thousands) 267 722 266 771

Profit/(loss) for the year (32 254) (19 650)

Weighted average number of ordinary shares outstanding (in thousands) 267 246 252 993

Diluted earnings/(loss) per share

Profit/(loss) for the year (32 254) (19 650)

Weighted average number of ordinary shares outstanding used as the

denominator in calculating basic earnings per share (in thousands) 267 246 252 993

Adjustments for calculation of diluted earnings per share

Employee stock options (out of money) (in thousands) - 100

Warrants outstanding (out of money) (in thousands) 18 250 18 250

Weighted average number of ordinary shares and potential ordinary shares

that would have been used as the denominator in calculating diluted

earnings per share if the warrants and options were in the money 285 496 271 343

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13. Property, plant and equipment

Financial Reporting Principles

Property, plant and equipment (PPE) are stated at cost less accu-

mulated depreciation and impairment. Components of property, plant

and equipment with dierent useful lives are accounted for separately.

Assets are normally depreciated on a straight-line basis over their

expected economic lives as follows:

• Seismic equipment 3 - 8 years

• Fixtures and fittings 3 years

• IT Equipment 3 years

Depreciation methods, useful lives and residual values are reviewed

at each reporting date and adjusted if appropriate. Equipment under

construction is classified as non-current assets and recognized at

cost and is not depreciated until the asset is ready for use.

Borrowing costs are capitalized as part of the cost of the asset when

significant. The cost of self-constructed assets includes the cost of

materials, direct labor, production overheads and borrowing cost.

Impairment triggers are assessed quarterly, and impairment testing is

performed when triggers have been identified. See note 15 for further

information about impairment of non-current assets.

Significant judgements and critical estimates

Judgement is involved when determining the depreciation period and

when assessing impairment or reversal of impairment. Impairment is

assessed on an individual asset basis and for cash generating units.

The impairment testing involves judgmental assumptions about future

market development, cashflows, determination of weighted average

cost of capital (WACC), growth rate and other assumptions that may

change over time. See note 15 for further information about impair-

ment of non-current assets. As per annual review of the useful life, we

have reassessed the useful life of nodes and backdeck deployment

systems from 5-8 years to 8 years.

USD thousands

Seismic

equipment

Asset under

construction Oce machines

Right-of-use

assets (IFRS 16) Total

Accumulated Investment

Balance 1 January 2020 176 093 56 444 5 672 43 392 281 600

Additions 1 304 10 950 50 18 974 31 278

Disposals/retirements (51 189) - (3 844) - (55 033)

Reclass - asset under construction 31 638 (31 707) 69 - -

Other changes 715 (294) (127) 112 407

Balance 31 December 2020 158 561 35 393 1 821 62 478 258 252

Additions 286 10 124 43 17 624 28 078

Disposals/retirements (13 553) (337) (13 890)

Reclass - asset under construction 8 916 (8 916) - -

Reclass - intangibles - (1 066) - (1 066)

Inventory movements and other changes 377 3 696 (517) (1 298) 2 259

Balance 31 December 2021 154 587 38 894 1 348 78 804 273 633

Accumulated depreciation and impairment

Balance 1 January 2020 (85 206) (1 806) (4 558) (17 939) (109 509)

Depreciation for the year (31 483) - (436) (18 504) (50 422)

Disposals/retirements 49 868 - 3 827 - 53 695

Impairments (627) - - (1 313) (1 940)

Other movements (1 806) 1 806 - - -

Balance 31 December 2020 (69 254) - (1 167) (37 756) (108 176)

Depreciation for the period (31 632) - (334) (19 541) (51 507)

Disposals/retirements 6 300 (4) 6 296

Impairments (3 286) (1 336) - (4 622)

Other movements (139) 346 22 229

Balance 31 December 2021 (98 011) (1 336) (1 159) (57 276) (157 782)

Net carrying amounts

Balance 31 December 2020 89 307 35 393 654 24 722 150 075

Balance 31 December 2021 56 577 37 558 189 21 529 115 852

Commitments

The Group has entered contractual commitments for the acquisition of seismic equipment in 2021 amounting to USD 4 million

as of 31 December 2021. Contractual commitments were USD 5 million per 31 December 2020.

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14. Intangible assets

Financial Reporting Principles

Multi-client library

The Multi-Client library consists of seismic data

surveys which are licensed to customers on a

non-exclusive basis. For Multi-Client projects,

Magseis Fairfield may invest in the project with

other parties and has cooperation agreements

whereby revenues will be shared with other com-

panies. These agreements are initiated and agreed

as joint operations where both parties have rights

to the assets and share in the liabilities. Magseis

Fairfield recognizes its investment net of partner

cost sharing as Multi-Client library and will recog-

nize its 50 percent share of revenues generated by

the library. Any pre-funding amount collected from

customers prior to completion of the project is

recognized as contract liability as revenue is rec-

ognized at the point in time when the data access

is transferred to the customer.

The costs of seismic data acquisition and process-

ing for Multi-Client surveys are being capitalized.

Such costs include vessel charter hire, fuel, crew

and operational support costs and depreciation of

nodes. For vessels on long-term charter hire rec-

ognized according to IFRS 16, the depreciation of

right of use asset and lease interests are capital-

ized rather than the charter hire payment.

A Multi-Client project remains in progress until all

data has been fully acquired and processed. When

the project has been completed; straight-line amor-

tization is applied over the estimated useful life

which is generally four years. In the event that sales

on a completed survey are realized disproportion-

ately sooner within the survey’s 4-year useful life,

an accelerated amortization is recognized.

Variances between the cash flow invested in a

Multi-Client project and the value of capitalized

Multi-Client library should be expected. This is due

to non-cash capitalized costs (e.g., depreciation)

and timing of cost sharing payments from partners.

Other intangibles

Research and development costs are expensed

as incurred until a program has completed the

concept phase. Development activities involve

a plan or design to produce new or substantially

improved products and processes. Development

cost is only capitalized if the product or process

is technically and commercially feasible and the

business case shows a positive net present value.

Capitalized development costs mainly include

internal labor costs in addition to materials for the

development program. Any third-party funding is

presented as a reduction of the capitalized amount.

Other intangible assets also include customer

relations, IT systems and technology develop-

ment acquired through business combinations.

The useful life of the acquired technology is 10

years. Capitalized development costs are normally

amortized over three to six years on a straight-line

basis.

The Multi-Client library consists of seismic data

surveys which are licensed to customers on a

non-exclusive basis. For Multi-Client projects,

Magseis Fairfield may invest in the project with

other parties and has cooperation agreements

whereby revenues will be shared with other com-

panies. These agreements are initiated and agreed

as joint operations where both parties have rights

to the assets and share in the liabilities. Magseis

Fairfield recognizes its investment net of partner

cost sharing as Multi-Client library and will recog-

nize its 50 percent share of revenues generated by

the library. Any pre-funding amount collected from

customers prior to completion of the project is

recognized as contract liability as revenue is rec-

ognized at the point in time when the data access

is transferred to the customer.

The costs of seismic data acquisition and process-

ing for Multi-Client surveys are being capitalized.

Such costs include vessel charter hire, fuel, crew

and operational support costs and depreciation of

nodes. For vessels on long-term charter hire rec-

ognized according to IFRS 16, the depreciation of

right of use asset and lease interests are capital-

ized rather than the charter hire payment.

A Multi-Client project remains in progress until all

data has been fully acquired and processed. When

the project has been completed; straight-line

amortization is applied.

Variances between the cash flow invested in a

Multi-Client project and the value of capitalized

Multi-Client library should be expected. This is due

to non-cash capitalized costs (e.g., depreciation)

and timing of cost sharing payments from partners.

Other intangible assets are mainly related to

technology acquired through business combi-

nations (Fairfield in 2018). The useful life of the

acquired technology is 10 years. Magseis Fairfield

have ongoing research and development projects,

and such costs are expensed as incurred until a

program has completed the concept phase.

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USD thousands

Other

intangibles

Multi-client

library

Accumulated investments

Balance 1 January 2020 81 296 -

Additions 1 001 20 906

Balance 31 December 2020 82 297 20 906

Additions 1 538 7 100

Reclassification from PPE 1 066 -

Other changes 58 -

Balance 31 December 2021 84 960 28 006

Accumulated amortization and impairment

Balance 1 January 2020 (15 889) -

Amortization (8 719) -

Balance 1 January 2021 (24 608) -

Amortization for the period (8 677) (5 480)

Impairment

(1 836) -

Balance 31 December 2021 (35 120) (5 480)

Carrying amounts

Balance at 31 December 2020 57 689 20 906

Balance at 31 December 2021 49 840 22 526

Refer to note 15 for impairment details.

Commitments

The Group has entered contractual commitments for the processing of Multi-Client library data amounting to

USD 7 million. Remaining cost to be recognized in 2022 is approximately USD 1 million.

15. Impairment of non-current assets

Impairment recognized

An impairment of USD 6.5 million was recognized in 2021 related to older equipment and R&D projects with

limited or no expected future use and value.

USD thousands 2021 2020

Asset class

Seismic equipment 4 622 627

Other Intangible assets 1 836 -

Right of use assets – Oce leases (IFRS 16) - 1 313

Total impairment of non-current assets 6 458 1 940

Impairment test of assets

Intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for

impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.

Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying

amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying

amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs

of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels

for which there are separately identifiable cash inflows which are largely independent of the cash inflows from

other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suered

an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Judgements and estimates applied in the impairment test

During 2021, several impairment indicators have been present; the outbreak and spreading of the coronavirus

led to a reduction in the economic activity and a rapid and significant reduction in oil demand and generated

an oversupply situation with significantly lower and more volatile oil prices. The impact on the E&P industry

has been profound and Magseis Fairfield’s customers have cut their capex and cancelled or postponed their

investment plans to preserve cash. Consequently, management has initiated impairment tests for all quarters

during the year.

The impairment test is based on a value-in use calculation in accordance with IAS 36, where assumptions

about future market development, cashflows, the weighted average cost of capital (WACC), growth rate and

other factors are subject to management’s judgement.

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Key assumptions when assessing the recoverable amounts as of 31 December 2021 were:

• Cash flow projections are based on continued growth into 2023 and beyond. We have applied an average

revenue growth rate of 6-8 percent for the period 2023-2025, with an estimation of terminal value in

subsequent periods.

• We have analyzed the historic and future OBS market and assessed our market share, which has been used

as a benchmark for the revenue scenario applied in the cash flow projections

• Terminal value reflects long term steady state revenue and margin levels based on a combination of historic

levels and judgements applied

• Capex levels are aligned with revenue assumptions

• Climate risk is assessed to be low and not significant, hence not reflected in the valuation model

• Weighted average cost of capital applied in the model is 11 percent

The test suggests no impairment required, but it must be emphasized that the model is sensitive to its

assumptions, such as market growth and project margins.

Climate risk and stranded assets

Climate-related risks might be divided into two major categories: (1) risks related to the transition to a low-

er-carbon economy and (2) risks related to the physical impacts of climate change. As part of the energy

transition, we have seen a fundamental shift in the market where our customers focus on cash and value

generation from already explored assets. This means that our customers are prioritizing investments in

high-quality seismic data over and around existing assets, and specifically OBN seismic data to make data

driven field development decisions. While this is a potential upside for the company, there is a political risk if

authorities decide to significantly reduce or completely stop production of oil and gas in key markets.

Magseis Fairfield has entered the renewables business using our technology and knowledge from the oil

and gas industry. We completed a wind farm pilot project in 2021 and will conduct a carbon capture and

storage pilot project in 2022. We see several opportunities in 2022 and will continue our eort to expand

the renewables part of our business.

We believe that the services Magseis Fairfield oer is a part of the solution for the transition into a lower-

carbon economy. The valuation risk due to climate on our assets and technology are assessed to be low.

Stranded assets are assets that may have reduced or no value as a result of risks associated with climate

change. As of 31 December 2021, Magseis Fairfield has no stranded assets and consider the future risk

of stranded assets to be low. The need for increased oil and gas supply in the short- to medium-term is

expected to translate into investments to increase recovery rates from already explored assets. According

to data from Rystad Energy, this view is supported by a significant increase in project sanctioning, and the

forecasted sanctioned greenfield capex is expected to increase by 14 percent in 2022 and by a further 40

percent in 2023. These projects will provide lower-carbon barrels that can be delivered quickly to the market

with attractive payback on investments and will naturally include OBN projects. This forms the basis for an

increasingly optimistic outlook for a market recovery for OBN services, and the company’s view that the OBN

market will see double-digit growth from 2022 onwards.

Physical risk resulting from climate change, in the form of costs caused by physical damage is considered low

to moderate. Seismic acquisition operations may be exposed to extreme weather, hazardous conditions and

activity in the work area. The Group’s own insurance may not be adequate to cover potential losses.

Sensitivities in the impairment test

The impairment test is sensitive to changes in key assumptions, including changes in discount rate, growth

rates, gross margin and EBITDA assumptions. Sensitivity analysis have been performed on key assumptions.

The table below show the changes in key assumptions that may occur before any impairment is required.

Sensitivities (break-even analysis)

Long-term revenue reduction ∆ 13%

Long-term EBITDA margin reduction ∆ 11%

Discount rate increase ∆ 52%

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16. Leases

The Group’s leasing activities and

how these are accounted for

The Group leases various oce buildings, a man-

ufacturing site, warehouses, vessels and other

equipment. Rental contracts are typically made for

fixed periods of 6 months to 5 years but may have

extension options as described below.

Contracts may contain both lease and non-lease

components. The Group allocates the consider-

ation in the contract to the lease and non-lease

components based on their relative stand-alone

prices. However, for leases of real estate for which

the Group is a lessee, it has elected not to sepa-

rate lease and non-lease components and instead

accounts for these as a single lease component.

Lease terms are negotiated on an individual basis

and contain a wide range of dierent terms and

conditions. The lease agreements do not impose

any covenants other than the security interests

in the leased assets that are held by the lessor.

Leased assets may not be used as security for

borrowing purposes.

Financial Reporting Principles

The Group assesses whether a contract is, or

contains, a lease, at inception of the contract. The

Group recognises a right-of-use asset and a cor-

responding lease liability with respect to all lease

arrangements in which it is the lessee, except for

short-term leases (defined as leases with a lease

term of 12 months or less) and leases of low value

assets (such as tablets and personal computers,

small items of oce furniture and telephones). For

these leases, the Group recognises the lease pay-

ments as an operating expense on a straight-line

basis over the term of the lease.

The lease liability is initially measured at the

present value of the lease payments that are not

paid at the commencement date, discounted by

using the rate implicit in the lease. If that rate

cannot be readily determined, which is generally

the case for leases in the Group, the lessee’s incre-

mental borrowing rate is used, being the rate that

the individual lessee would have to pay to borrow

the funds necessary to obtain an asset of similar

value to the right-of-use asset in a similar eco-

nomic environment with similar terms, security and

conditions.

Assets and liabilities arising from a lease are

initially measured on a present value basis. Lease

liabilities include the net present value of the fol-

lowing lease payments:

• Fixed payments (including in-substance fixed

payments), less any lease incentives receivable

• Variable lease payment that are based on an

index or a rate, initially measured using the index

or rate as at the commencement date

• Amounts expected to be payable by the Group

under residual value guarantees

• The exercise price of a purchase option if the

Group is reasonably certain to exercise that

option, and

• Lease payments to be made under reasonably

certain extension options are also included in

the measurement of the liability.

The lease liability is subsequently measured by

increasing the carrying amount to reflect interest

on the lease liability (using the eective interest

method) and by reducing the carrying amount to

reflect the lease payments made.

The Group remeasures the lease liability (and

makes a corresponding adjustment to the related

right-of-use asset) whenever:

• The lease term has changed or there is a signif-

icant event or change in circumstances resulting

in a change in the assessment of exercise of a

purchase option, in which case the lease liability

is remeasured by discounting the revised lease

payments using a revised discount rate

• The lease payments change due to changes

in an index or rate or a change in expected

payment under a guaranteed residual value, in

which cases the lease liability is remeasured by

discounting the revised lease payments using an

unchanged discount rate (unless the lease pay-

ments change is due to a change in a floating

interest rate, in which case a revised discount

rate is used)

• A lease contract is modified and the lease

modification is not accounted for as a separate

lease, in which case the lease liability is remeas-

ured based on the lease term of the modified

lease by discounting the revised lease payments

using a revised discount rate at the eective

date of the modification

The right-of-use assets comprise the initial meas-

urement of the corresponding lease liability, lease

payments made at or before the commencement

day, less any lease incentives received and any

initial direct costs. They are subsequently meas-

ured at cost less accumulated depreciation and

impairment losses.

Right-of-use assets are generally depreciated

over the shorter of the asset’s useful life and the

lease term on a straight-line basis. If the Group is

reasonably certain to exercise a purchase option,

the right-of-use asset is depreciated over the

underlying asset’s useful life.

The Group applies IAS 36 to determine whether

a right-of-use asset is impaired and accounts

for any identified impairment loss as described in

note 15.

Lease payments are allocated between principal

and finance cost. The finance cost is charged to

profit or loss over the lease period to produce a

constant periodic rate of interest on the remaining

balance of the liability for each period.

Variable rents that do not depend on an index or

rate are not included in the measurement the lease

liability and the right-of-use asset. The related

payments are recognised as an expense in the

period in which the event or condition that triggers

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those payments occurs and are included in the line

“Other expenses” in profit or loss.

Payments associated with short-term leases (less

than 12 months) and leases of low-value assets

are recognized on a straight-line basis as an oper-

ating expense in profit or loss.

Significant judgements and critical estimates

The assessment to whether utilize extension and

termination options are done by management on a

contract-by-contract basis in line with operational

requirements for each project. As of 31 December

2021, three vessels are on long-term contracts

and are recognized as right of use asset and lease

liability in the table below. Options to extend are

reflected in the numbers when it is likely they will

be used.

Right-of-use-assets

USD thousands Vessels

Oces and

warehouse Total

Carrying value

Balance 1 January 2020 14 797 10 656 25 453

Additions 18 974 - 18 974

Depreciation (16 339) (2 165) (18 504)

Impairment - (1 313) (1 313)

Other adjustments - 113 113

Balance 31 December 2020 17 432 7 291 24 722

Additions 17 624 - 17 624

Depreciation (17 940) (1 601) (19 541)

Other adjustments (1 298) 21 (1 277)

Balance 31 December 2021 15 818 5 711 21 529

Lease liabilities

USD thousands Non-current Current Total

Carrying value

Balance 1 January 2020 10 707 16 195 26 902

Additions - 18 974 18 974

Lease payments - (17 731) (17 731)

Other adjustments - - -

Reclassification to current (1 923) 1 923 -

Balance 31 December 2020 8 784 19 361 28 145

Additions 4 143 13 481 17 624

Lease payments - (18 044) (18 044)

Reclassification (4 652) 4 652 -

Other adjustments (3 250) (3 250)

Balance 31 December 2021 8 275 16 201 24 476

CONTENTS

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BOARD OF DIRECTORS REPORT

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FINANCIAL STATEMENTS

APPENDIX

CONTENTS

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FINANCIAL STATEMENTS

APPENDIX

Financial statementsFinancial statements | Notes to the consolidated financial statementsFinancial statements | Notes to the consolidated financial statements

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17. Cash and cash equivalents

Financial Reporting Principles

Cash and cash equivalents include cash on hand, demand deposits in banks and other short-term highly liquid

deposits with original maturity of three months or less.

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on

hand, deposits held at call with financial institutions, other short-term, highly liquid investments with origi-

nal maturities of three months or less that are readily convertible to known amounts of cash and which are

subject to an insignificant risk of changes in value and bank overdrafts. Bank overdrafts are shown within

borrowings in current liabilities in the balance sheet.

While cash and cash equivalents are subject to the impairment requirements of IFRS 9, the expected credit

losses are immaterial.

USD thousands 2021 2020

Unrestricted cash balances 28 615 53 564

Restricted cash balances

Deposits 674 686

Employee tax withholding accounts 447 579

Total restricted cash balances 1 121 1 265

Total cash and cash equivalents 29 737 54 829

18. Inventories

Financial Reporting Principles

Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated

selling price in the ordinary course of business, less selling expenses and the estimated cost to complete the

inventory. The cost of inventories is based on the weighted average cost.

Significant judgements and critical estimates

The assessment of obsolete and slow-moving inventory in order to determine inventory write-downs is subject

to management judgment. The selling price in the market must be estimated, and there is a risk that the

actual selling price may turn out to be dierent than the amount estimated by management.

Inventories:

USD thousands 2021 2020

Raw materials equipment (work in progress) 2 119 3 315

Stock finished equipment for sale 3 702 3 691

Battery stock 360 705

Total inventories 6 182 7 711

Write-o other - 525

Total write-os - 525

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FINANCIAL STATEMENTS

APPENDIX

CONTENTS

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FINANCIAL STATEMENTS

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19. Trade receivables and contract assets

Financial Reporting Principles

Trade and other receivables are recognized at the initial invoiced amount, less any impairment losses. The

invoiced amount is approximately equal to the value derived if the amortized cost method would have been

used.

Impairment of accounts receivable and contract assets (financial asset at amortized cost)

Impairment losses are measured at lifetime expected credit losses in accordance with IFRS 9.

The Group’s impairment model for accounts receivable, contract assets and other current assets is a sim-

plified approach based on lifetime expected credit losses (ECL). Impairment is based on an estimate of the

probability of default for the financial assets reflecting an unbiased amount determined by evaluating a range

of possible outcomes; the time value of money and reasonable available information related to past events,

current conditions and forecasts of future economic conditions.

The Group uses an impairment model with the following characteristics: The receivables are organized in

portfolios based on the credit risk of the customers. The primary portfolio is the receivables where invoicing

is done to customers with a high credit rating, typical large listed or state-owned oil companies. This portfolio

has a low risk of default and therefore no impairment loss is initially recognized based on the expectation of

all the accounts being paid. Further, an individual assessment is performed on specific customer receivables,

typically if a customer is in known financial distress or has declared bankruptcy.

USD thousands 2021 2020

Trade receivables 17 389 38 141

Contract assets (accrued, not invoiced to customers) 41 422 4 851

Trade receivables and contract assets 58 811 42 991

Costs to fulfil a contract (mobilization cost) 9 200 2 681

Contract liabilities (prepayments from customers) 4 893 13 790

Overview of trade receivable aging:

USD thousands

31 Dec 2021

Carrying amount

31 Dec 2021

Loss allowance

31 Dec 2020

Carrying amount

31 Dec 2020

Loss allowance

Not overdue 10 888 (85) 28 775 (43)

Past due 0-30 days 2 554 - 7 521 -

Past due 31-120 days 3 637 - 1 853 -

Past due more than 120 days 395 85 (50)

Total 17 474 (85) 38 234 (93)

20. Prepaid expenses and other current assets

USD thousands 2021 2020

Contract assets (unbilled revenue) 41 422 4 851

Costs to fulfil a contract (mobilization costs) 9 200 2 681

Prepayments 8 363 5 324

Other receivables 3 975 2 398

Total other current assets 62 959 15 253

CONTENTS

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FINANCIAL STATEMENTS

APPENDIX

CONTENTS

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FINANCIAL STATEMENTS

APPENDIX

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21. Borrowings

Financial Reporting Principles

Interest-bearing debt is recognized initially at fair value less transaction costs. Subsequent to initial recogni-

tion, interest-bearing debt is stated at amortized cost with any dierence between cost and redemption value

being recognized in the income statement over the period of the borrowings on an eective interest basis.

USD thousands 2021 2020

Interest bearing liabilities (excl. Leases)

Nominal value bank facility 30 000 30 000

Prepaid fees bank facility (571) (675)

Nominal value other loans 2 000 3 592

Total 31 429 32 917

Long term 29 429 30 624

Short term 2 000 2 293

Repayment profile at balance sheet date

2021 - 2 293

2022 2 000 31 299

2023 30 000 -

Total 32 000 33 592

USD thousands 2021 2020

Lease liabilities (see note 16)

Long-term 8 275 8 784

Short-term 16 201 19 361

Total 24 476 28 145

In 2020, the Company successfully refinanced the previous term loan by conversion to a Revolving Credit

Facility (RCF) of USD 30 million. In 2021, Magseis Fairfield reached an agreement with DNB to extend the

RCF with one year to December 2023 and to amend the covenant structure. Under the new covenants, the

required equity ratio has been reduced from 50 percent to 40 percent. This change will allow for increased

flexibility with regards to working capital requirements resulting from higher operational activity. The inter-

est terms are LIBOR + margin of 4.25 percent. The arrangement cost is amortized over the term of the loan

facility.

In April 2020, the Company received U.S. loan program of USD 3.6 million which was fully forgiven in June

2021. An additional loan of USD 2 million was received in April 2021. The loan is payable over five years at an

interest rate of 1 percent, with deferral of payments for the first ten months. The loan and accrued interest can

be fully or partially forgiven on certain conditions.

Financial covenants

Covenants as of 31 December 2021:

• Net interest-bearing debt (NIBD)/Last Twelve Months (LTM) EBITDA < 1.25x. LTM EBITDA calculation is

excluding IFRS 16 impacts

– If LTM EBITDA is negative and the net interest-bearing debt is negative (i.e., net cash position), alterna-

tive cash buer headroom calculation is applied

– If LTM EBITDA is negative and the net interest-bearing debt is positive (i.e., net debt position), the lever-

age ratio is breached

• Equity Ratio > 40 percent

• Clean Down mechanism:

– 2021: NIBD shall be at or below USD 5 million for 5 successive business days in each quarter

– 2022: NIBD shall be at or below zero for 5 successive business days in each quarter

• Equipment loan to value: RCF debt / book value seismic equipment and assets under construction < 50

percent

Magseis Fairfield is in compliance with all financial covenants as of 31 December 2021.

CONTENTS

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FINANCIAL STATEMENTS

APPENDIX

CONTENTS

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Securities

The following security has been provided to DNB Bank ASA, which secures both the loan agreement and any

guarantee facility provided by DNB Bank ASA:

Magseis Fairfield ASA:

• Guarantee of USD 60 million plus interest and expenses

• Pledge over the shares in Magseis FF (UK) Ltd, Magseis FF AS, Magseis Operations AS and Magseis

Renewables AS

• Assignment over any monetary claims under the Fairfield share purchase agreement.

• Floating charges over operating assets, inventory and trade receivables

• Pledge over Norwegian bank accounts

Magseis Renewables AS:

• Guarantee of USD 60 million plus interest and expenses

• Floating charges over operating assets, inventory and trade receivables

• Pledge over Norwegian bank accounts

Magseis Operations AS:

• Guarantee of USD 60 million plus interest and expenses

• Floating charges over operating assets, inventory and trade receivables

• Pledge over Norwegian bank accounts

Magseis FF AS:

• Guarantee of USD 60 million plus interest and expenses

• Pledge over the shares in Magseis FF LLC

• Floating charges over operating assets, inventory and trade receivables

• Pledge over Norwegian bank accounts

Magseis FF (UK) Ltd.:

• Guarantee of USD 60 million plus interest and expenses

• Security over all assets (general debenture)

Magseis FF LLC:

• Guarantee of USD 60 million plus interest and expenses

• Security over all or substantially all assets, including patents/IP and bank accounts

Guarantees

The company has provided guarantees mainly related to project performance of USD 7.7 million as of

31 December 2021.

CONTENTS

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BOARD OF DIRECTORS REPORT

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FINANCIAL STATEMENTS

APPENDIX

CONTENTS

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FINANCIAL STATEMENTS

APPENDIX

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22. Cash flow information

Financial Reporting Principles

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on

hand, deposits held at call with financial institutions, other short-term, highly liquid investments with origi-

nal maturities of three months or less that are readily convertible to known amounts of cash and which are

subject to an insignificant risk of changes in value.

Cash flows relating to leases are presented as follows:

(a) cash payments for the principal portion of the lease liabilities as cash flows from financing activities

(b) cash payments for the interest portion consistent with presentation of interest payments chosen by the

Group, and

not included in the measurement of the lease liabilities as cash flows from operating activities.

Non-cash transactions from financing activities are illustrated in the reconciliation of liabilities from financing

transactions below:

USD thousands

Non-current

liabilities

Current

liabilities

Lease

liabilities Total

Liabilities as 1 January 2020 20 087 16 667 26 902 63 656

Cash flows - (3 333) (17 731) (21 064)

Transactions without cash eect

Refinancing of loan facility 13 334 (13 334) - -

New loan 1 274 2 293 - 3 567

Prepaid fees bank facility 26 - - 26

New leases - - 18 974 18 974

Fair value changes 397 - - 397

Other changes 624 - - 624

Liabilities as 31 December 2020 35 742 2 293 28 145 66 180

Cash flows - - (18 044) (18 044)

Transactions without cash eect

Loan forgiveness (US Paycheck Protection Program) (1 274) (2 293) - (3 567)

New loan (US Paycheck Protection Program) - 2 000 - 2 000

Prepaid fees bank facility 104 - - 104

New leases - - 17 624 17 624

Fair value changes (220) - - (220)

Other changes (314) - (3 250) (3 564)

Liabilities as 31 December 2021 34 038 2 000 24 476 60 513

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APPENDIX

CONTENTS

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23. Other current liabilities

Financial Reporting Principles

Trade and other payables are recognized at the

original invoiced amount. The invoiced amount is

considered to be approximately equal to the value

derived if the amortized cost method would have

been used.

A provision is a liability with uncertain timing and

amount. Provisions are recognized when cash

outflow is considered probable, the amount can be

reliably estimated, and the obligation is a result of

a past event. All provisions are presented as short-

term as they are part of the operating cycle.

A contingent liability is a possible obligation that

arises from past events that typically depends on

a future event outside of the company’s control,

for example a court decision. A provision is made

when it is considered as probable that cash

outflow will take place, and the obligation can be

measured reliably.

Significant judgements and critical estimates

Onerous customer contracts

The provisions for onerous contracts are esti-

mated based on a number of assumptions and

are highly judgmental in nature as they relate to

total estimated losses on customer contracts upon

completion.

As of 31 December 2021, and 2020, no onerous

customer contracts were identified.

Onerous lease contracts

In 2020, excess oce space in US, UK, Norway

and Sweden was made available for sublease. As

a result, a total onerous lease liability of USD 0.8

million was recognized, in addition to USD 1.3

million recognized as impairment of right of use

assets (IFRS 16) related to the long-term lease

agreements.

As per assessment completed in 2021, no adjust-

ments to onerous lease facilities have been

identified. The Norway oce space has been

subleased in 2021.

USD thousands 2021 2020

Accrued expenses 39 861 33 379

Deferred revenue (contract liabilities) 4 893 13 790

Accrued warranties 880 5 477

Accrued salary 6 986 4 077

Other 4 396 6 592

Total other current liabilities 57 015 63 315

24. Financial risk management

Overview

The Group is exposed to a variety of financial risks;

currency, interest rate, price, credit liquidity and

capital risk. The objective of financial risk man-

agement is to manage and control financial risks

exposure and thereby increase the predictability

and minimize the potential adverse eects on the

Group’s financial performance. This also includes

being able to meet the financial covenants related

to the Group’s borrowings.

Risk management

Financial risk management in the Group is main-

tained by a central Finance Function in accordance

with the guidelines approved by the Board. The

Group’s Finance Function identifies, measures,

mitigates and reports on financial risks in close

cooperation with the various operating units. Risk

management policies and procedures are reviewed

regularly to consider changes in the market and

the Group’s activities.

Market risk

Market risk can be defined as the risk that the

Group’s income and expenses, future cash flows

or fair value of financial instruments will vary as

a result of changes in market prices. The market

price includes three types of risks: exchange risks,

interest risks and price risks. Market risk is moni-

tored and managed continuously by the Group.

Foreign exchange risk

Magseis Fairfield is exposed to changes in foreign

exchange rates. The primary currency risk relates

to sales and purchases that are denominated in

a currency other than the respective functional

currency of the Group, United States dollar (USD).

The currencies in which these transactions pri-

marily are denominated are Pound Sterling (GBP)

and Norwegian krone (NOK), but also Euro (EUR),

Singapore Dollars (SGD), and Swedish krona (SEK).

Magseis predominantly sells products and services

in United States dollars, and to a limited extent in

other currencies.

In respect of other monetary assets and liabili-

ties denominated in foreign currencies, the Group

ensures that its net exposure is kept to an accept-

able level.

As shown below, the Group is primarily exposed to

changes in the USD/NOK exchange rates. The sen-

sitivity of profit or loss to changes in the exchange

rates arises mainly from the profit or loss for the

period in the Group’s foreign subsidiaries.

The exposure to foreign exchange risk is partly

mitigated through use of USD nominated con-

tracts, and the company currently utilizes hedging

arrangements against parts of its exposure in

NOK and GBP.

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USD thousands

Increase/

decrease in

NOK/USD

Eect on

EBITDA

2021 +10% 2 246

10% (2 746)

2020 +10% 1 915

10% (2 341)

USD thousands

Increase/

decrease in

GBP/USD

Eect on

EBITDA

2021 +10% 939

10% (1 148)

2020 +10% 940

10% (1 149)

Interest rate risk

The Group’s interest rate risk is mainly related to loans where an element of interest rate is not fixed, where an

increase in floating rates would lead to an increase in interest costs and reduce net income and cash flow.

The table below shows a sensitivity of exposure to interest rate risk at the reporting date. This analysis

assumes that all other variables remain constant and ignores any impact of forecast transactions

USD thousands 2021 2020

Nominal value of interest-bearing debt excluding finance lease obligations 32 000 30 000

Eect on 1 percentage point increase in interest rate on profit before tax 320 300

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails

to meet its contractual obligations and arises principally from the Group’s receivables from customers. Lack

of payments from customers may significantly and adversely impair the Group’s liquidity. The concentration

of the Group’s customers in the oil and gas industry may impact the Group’s overall exposure to credit risk as

customers may be similarly aected by prolonged changes in economic and industry conditions. Further, laws

in some jurisdictions in which the Group operates could make collection dicult or time consuming. The Group

undertakes due consideration to the credit quality of its potential customers during contract negotiations to

minimize the risk of payment delinquency, but no assurance can be given that the Group will be able to fully

avoid this risk.

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For

banks and financial institutions, only independently rated parties with minimum rating “A” are accepted.

Credit exposure

as of 31 December:

Amortised cost / carrying value

USD thousands 31 Dec 2021 31 Dec 2020

Financial assets

Cash and cash equivalents 29 737 54 829

Trade receivables 17 389 38 141

Other current assets 62 959 15 253

Total 110 085 108 222

See also note 19 Trade receivables for additional information related to the loss allowance and for the aging analysis of the

accounts receivable.

Liquidity risk

Liquidity risk is the risk that the Group will encounter diculty in meeting the obligations associated with its

financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to

managing liquidity is to ensure, as far as possible, that it will always have sucient liquidity to meet its liabil-

ities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking

damage to the Group’s reputation. To ensure sucient available cash at hand to meet expected cash out-

flows, the Group uses cash flow forecasts, to monitor cash flow requirements.

In 2020, the company completed a private placement of new shares raising NOK 277.4 million or approxi-

mately USD 30 million. In addition, the loan agreement was refinanced and converted to a Revolving Credit

Facility (RCF) of USD 30 million with new covenants.

In 2021, Magseis Fairfield reached an agreement with DNB to extend the RCF with one year to December

2023 and to amend the covenant structure. Under the new covenants, the required equity ratio has been

reduced from 50% to 40%. This change will allow for increased flexibility with regards to working capital

requirements resulting from higher operational activity.

See note 21 for further details.

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Financial liability maturity schedule

The following are the contractual maturities of the financial liabilities including interest payments at the end of the reporting period:

Year ended 31 December 2021

USD thousands Carrying amount

Less than

3 months 3-12 months 1-2 years >2 years Total

Non-current interest-bearing liabilities 29 429 - - 30 000 - 30 000

Non-current non-interest-bearing liabilities 4 609 - - 4 609 - 4 609

Current portion of interest-bearing liabilities 2 000 - 2 000 - - 2 000

Lease liabilities 24 476 4 435 12 246 5 589 8 817 31 088

Trade payables 20 901 19 795 1 106 - - 20 901

Total financial liabilities 81 415 24 230 15 352 40 198 8 817 88 598

Year ended 31 December 2020

USD thousands Carrying amount

Less than

3 months 3-12 months 1-2 years >2 years Total

Non-current interest-bearing liabilities 30 624 330 990 31 944 - 33 264

Non-current non-interest-bearing liabilities 5 118 - - 5 118 - 5 118

Current portion of interest-bearing liabilities 2 293 - 2 293 - - 2 293

Lease liabilities 28 145 4 571 16 876 2 550 9 593 33 590

Trade payables 17 179 17 179 - - - 17 179

Total financial liabilities 83 359 22 080 20 159 39 612 9 593 91 444

If the Group were to be unemployed for a longer period, it would need to manage its cost base and would, inter alia,

seek to reduce costs or negotiate a grace period from some of its largest cost sources such as the time-chartered

vessels. The Group’s asset light operating model, reflecting a relatively high variable cost base, conversion to an

RCF facility and close follow up of working capital requirements, lowers the liquidity risk to a satisfactory level.

Climate risk

Climate-related risks might be divided into two major categories: (1) risks related to the transition to a low-

er-carbon economy and (2) risks related to the physical impacts of climate change. As part of the energy

transition, we have seen a fundamental shift in the market where our customers focus on cash and value

generation from already explored assets. This means that our customers are prioritizing investments in

high-quality seismic data over and around existing assets, and specifically OBN seismic data to make data

driven field development decisions. While this is a potential upside for the company, there is a political risk if

authorities decide to significantly reduce or completely stop production of oil and gas in key markets.

Magseis Fairfield has entered the renewables business using our technology and knowledge from the oil and

gas industry. We completed a wind farm pilot project in 2021 and will conduct a carbon capture and storage

pilot project in 2022. We see several opportunities in 2022 and will continue our eort to expand the renewa-

bles part of our business.

We believe that the services Magseis Fairfield oer is a part of the solution for the transition into a lower-car-

bon economy. The valuation risk due to climate on our assets and technology are assessed to be low.

Physical risk resulting from climate change, in the form of costs caused by physical damage is considered low

to moderate. Seismic acquisition operations may be exposed to extreme weather, hazardous conditions and

activity in the work area. The Group’s own insurance may not be adequate to cover potential losses.

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25. Capital management

The Group’s objective for its capital management

is to safeguard its ability to continue as a going

concern in order to provide returns for share-

holders and benefit for other stakeholders, while

maintaining an optimal capital structure to reduce

the cost of capital. This includes being able to

meet the financial covenants under the Group’s

credit facility.

The Board’s policy is to maintain a strong capital

base to maintain investor, creditor and market

confidence and to sustain the future development

of the business. Based on the strong growth,

resulting in working capital requirements and

investment programs, the Group’s financial strat-

egy has been to maintain a solid equity ratio and

sucient and applicable debt financing to ensure

necessary liquidity.

26. Fair value measurement

Financial Reporting Principles

The Groups’ use of derivative contracts is limited

and only entered into for economic hedging

purposes to reduce cash flow risk and not as

speculative investments. Derivatives are classified

as FVTPL and initially recognized at fair value on

the date a derivative contract is entered into and

are subsequently remeasured to their fair value

through profit and loss at the end of each report-

ing period. The fair values are based on observable

market prices obtained from external parties and

are based on mid-range marked interest rates

and prices, excluding margins, at the reporting

date. The derivatives are defined as Level 2 in the

fair value hierarchy. The derivatives are classified

as a non-current asset or liability if the maturity

date is later than 12 months from the balance

sheet date and there is no intention to close the

position within 12 months from the balance sheet

date. Changes in the fair value of any derivative

instrument are recognized immediately in profit or

loss and are included in finance income or finance

expense if they are economic hedges for financ-

ing related risks. Derivatives that are economic

hedges for operational cash flows are included

in operating gains and losses in the profit or loss

statement.

Fair value of the derivatives as of 31 December

2021 is USD 519 thousands. Derivatives are

included in level 1 where the fair value is based on

quoted markt prices.

The fair value of the warrants as of 31 December

2021 is USD 177 thousands. Warrants are included

in level 2 where the fair values have been deter-

mined based on the Black–Scholes valuation

model.

Please see Note 27 Financial assets and financial

liabilities for further information.

Fair value estimates

The Group’s policy is to recognize transfers into

and transfers out of fair value hierarchy levels as

at the end of the reporting period.

Level 1: The fair value of financial instruments

traded in active markets (such as publicly traded

derivatives and short-term equity investments) is

based on quoted market prices at the end of the

reporting period. The quoted market price used for

financial assets held by the Group is the current

bid price. These instruments are included in level 1.

Level 2: The fair value of financial instruments that

are not traded in an active market (for example,

over-the-counter derivatives) is determined using

valuation techniques which maximize the use of

observable market data and rely as little as pos-

sible on entity-specific estimates. If all significant

inputs required to fair value of an instrument are

observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is

not based on observable market data, the instru-

ment is included in level 3. This is the case for

unlisted equity securities and contingent consider-

ation. Specific valuation techniques used to value

financial instruments include:

• The use of quoted market prices or dealer

quotes for similar instruments.

• The fair value of interest rate swaps is calcu-

lated as the present value of the estimated

future cash flows based on observable yield

curves.

• The fair value of forward foreign exchange

contracts is determined using forward exchange

rates at the balance sheet date.

• The fair value of the remaining financial instru-

ments is determined using discounted cash flow

analysis.

Warrants are included in level 2 where the fair

values have been determined based on the Black–

Scholes valuation model. Please see Note 27

Financial assets and financial liabilities for further

information.

CONTENTS

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APPENDIX

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27. Financial assets and financial liabilities

Financial Reporting Principles

Financial assets and financial liabilities held by the

Group consist of trade receivables, cash and cash

equivalents, trade payables, borrowings, financial

lease liabilities, derivatives and contingent consid-

eration from the earn-out agreement relating to

WGP Group and the Al Shaheen project.

Financial assets (excluding derivatives)

All financial asset, excluding derivatives, meet the

SPPI (solely payments of principal and interest)

criteria, and are managed in a business model of

Hold to collect. These financial assets are in the

measurement category amortized cost. The Group

measures its trade receivables and cash and cash

equivalents at amortized cost. Subsequent to

initial recognition these assets are measured at

amortized cost using the eective interest method.

Income from these financial assets is calculated

on an eective yield basis and is recognized in the

income statement. Financial assets are classified

as current assets, except for those where manage-

ment has the intention to hold the investment for

over 12 month or financial assets with maturities

later than 12 months after the balance sheet date.

These assets are classified as non-current assets.

Financial liabilities (excluding derivatives)

The Group’s financial liabilities consist of trade

payables, contingent consideration, lease liabili-

ties and borrowings. The Group initially recognizes

financial liabilities at fair value net of transaction

costs. Trade payables and borrowings are sub-

sequently measured at amortized cost using the

eective interest method. Transaction costs related

to borrowings are amortized using the eective

interest method over the maturity of the loan.

Contingent consideration is subsequently meas-

ured at its fair value. Lease liabilities are measured

in accordance with IFRS 16, refer to note 16.

For assets and liabilities recognized at amortized

cost, fair value is not disclosed as the carrying

amount is a reasonable approximation of fair

value.

As a part of the consideration for the acquisi-

tion of Fairfield’s seismic technology business,

the Company issued 18 250 000 warrants.

Each warrant gives the right to one new share

in the Company, nominal value NOK 0.05, at a

subscription price of NOK 25.425. Since the func-

tional currency of Magseis Fairfield ASA is USD,

whereas the warrants are settled in NOK, the IFRS

definition of an equity instrument has not been

met. As a result, the warrants are classified as a

liability. The warrants were valued according to

Black and Scholes model (BS) to market value as

of December 2021 at USD 0.2 million (USD 0.4

million in 2020). The warrants are adjusted to fair

value at each reporting date with a corresponding

charge to income statement.

As a part of the acquisition, an earn-out arrange-

ment was recognized relating to the WGP Group.

The earn-out relates to the purchase, by Fairfield

Geotechnologies, of the business and the assets

of WGP Group Ltd (BVI) and its subsidiaries from

Thalassa Holdings Ltd on 1 January 2018, and

is contingent on WGP Group Ltd (UK) and/or its

subsidiaries, successfully entering into agreements

with a client on two prospective projects. At the

date of the acquisition of WGP Group Ltd (UK)

by Magseis Fairfield ASA on 18 December 2018,

an agreement had successfully been entered into

on the first project. There was also an earn-out

agreement related to project Al Shaheen. As of

31 December 2021, a total combined earn-out

liability of USD 6 million is recognized.

Financial assets and financial liabilities:

2021 2020

USD thousands

Measured at

amortised cost

Measured at

FVTPL

Measured at

amortised cost

Measured at

FVTPL

Financial assets

Cash and cash equivalents 29 737 - 54 829 -

Derivatives - 519 - -

Trade receivables 17 389 - 38 141 -

Total 47 126 519 92 969 -

Financial liabilities

Interest bearing liabilities 31 429 - 32 917 -

Long-term non-interest-bearing loan 4 432 - 4 000 -

Lease liabilities 24 476 - 28 145 -

Warrants

177 - 397

Trade payables 20 901 - 17 179 -

Total 81 239 177 82 241 397

Please see note 26 Financial instruments at fair value

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28. Pledged securities

Below is an overview of assets that are pledged as security for the loan facility with DNB.

USD thousands 2021 2020

Current

Trade receivables 17 389 38 141

Inventories 6 182 7 711

Cash and cash equivalents 28 615 53 564

Total current assets pledged as security 52 187 99 415

Non-current

Property, plant and equipment 94 324 125 354

Total non-current assets pledged as security 94 324 125 354

Total assets pledged as security 146 511 224 769

In addition, all shares in subsidiaries have been pledged as security for the loan facility.

For additional information please see note 21 Borrowings.

29. Commitments

The 2021 Group contractual commitments for the acquisition of seismic equipment amounted to

USD 4 million as of 31 December 2021. Contractual commitments were USD 5 million as of 31 December

2020.

CONTENTS

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APPENDIX

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30. Share-based payments

Financial Reporting Principles

Equity-settled share-based payments are measured at fair value (excluding the eect of non-market-based

vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled

share-based payments is expensed over the vesting period, based on the Group’s estimate of the shares that

will eventually vest, adjusted for the eect of non-market based vesting conditions.

For cash-settled share-based payments, a liability is recognized for outstanding remuneration and measured

at fair value. Until settlement of the liability, the fair value of the liability is reassessed at each balance sheet

date and settlement date and any changes in fair value are recognized through profit or loss.

The grant date for fair value of all share-based payments plan was calculated using the Black-Scholes-

Merton option pricing model. Expected volatility is estimated by consider historic average share price volatility

of comparable listed entities.

In 2012 the Group established a share option program that entitles key management personnel, senior

employees and some members of the board to purchase shares in the Company. In accordance with this

program options are exercisable at the market price of the shares at the end of the grant and all options are

equity settled.

Overview of outstanding options

# of instruments

2021

Weighted

average strike

price 2021(NOK)

# of instruments

2020

Weighted

average strike

price 2020

(NOK)

Outstanding 1 January 100 000 15.65 350 000 14.26

Exercised during the period - - - -

Expired during the period (100 000) 16.65 (250 000) 13.70

Granted during the period - - - -

Outstanding 31 December - - 100 000 -

Exercisable 31 December - - 100 000 -

No share options were granted to the employees in 2021 or 2020.

The share option program was replaced with a Restricted Share Unit (RSU)/Performance Share Unit (PSU)

program in the Annual General meeting 2018.

Overview of outstanding RSU/PSU # of RSU’s

Average

contractual life # of PSU’s

Average

contractual life

Outstanding at 1 January 2020 3 290 574 119 997

Released/terminated during the period (385 199) (93 332)

Adjusted during the period 35 000 -

Granted during the period 3 080 518 117 500

Oustanding at 31 December 2020 6 020 893 1.1 144 165 1.1

Released/terminated during the period (1 674 057) (96 415)

Adjusted during the period - (13 125)

Granted during the period 305 000 70 000

Oustanding at 31 December 2021 4 651 836 0.45 104 625 0.75

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31. Management remuneration

Remuneration to the management in 2021

Variable remuneration

USD thousands

Name Position Base salary Earned STIP

Earned LTIP

Share incentive

program Severance

Pension &

Other benefits Total remuneration

Carel Hooijkaas Chief Executive Ocer 640 302 320 325 - 12 1 599

Mark Ivin Chief Financial Ocer (until Nov 2021) 352 - - 126 1 223 14 1 687

Mark Zajac Chief Technology Ocer 320 78 80 9 - 14 502

Thomas E Scoulios Chief Operating Ocer 325 81 83 99 - 12 599

Simon Hayter Chief Sales Ocer 294 75 77 58 - 21 525

Ivar Gimse SVP Business development 239 63 64 7 - 12 384

Sharon Barclay Chief Human Resources Ocer (from 1 Feb 2020) 235 60 63 50 - 13 421

Laila Myksvoll General Counsel 265 68 72 9 - 13 428

Stig Hognestad Chief Financial Ocer (from Nov 2021) 42 - - 3 - 2 47

Total 2 712 726 759 686 1 223 113 6 219

Short Term Annual Incentive Plan. Maximum 50-125% of base salary

Long Term Incentive Plan. Maximum 50-118% of base salary. Payment is in the form of RSUs/PSUs are vested and issued on a three-year tranche vesting schedule.

Mark Ivin was employed under regulare employment conditions and base salary through February 2022. The following has been paid as severance in February 2022 (USD thousands):

12 months severance of base salary 352

Cash-out long-term incentive program 176

60% Bonus for 2021 and 2022 (pro rata) 247

RSU grants setteled in cash 307

Base salary Jan 2022 and Feb 2022 59

Holiday allowance 83

Total 1 223

Guidelines for remuneration to the

CEO and senior executives

The main purpose of the senior executive remu-

neration programs is to encourage a strong and

sustainable performance-based culture, which

supports growth in shareholder value. The total

remuneration to senior executives consists of base

salary, annual “short-term” cash incentive bonus

and long-term equity and cash-based incentives.

Since the 2021 AGM, the Board has followed the

Guidelines for Remuneration for Key Employees

then approved by the AGM with respect to remu-

neration of the CEO and the executive ocers.

Bonus and variable pay

Bonus for 2020 was paid at 25 percent of target,

reflecting a challenging year, paid in March 2021.

Share incentive program

Share incentive cost in the above table is related

to options and Restricted Share Unit (RSU)/

Performance Share Unit (PSU) programs vested

and allocated during the year.

The 2018 Annual General Meeting approved

replacing the share option program with the RSU

and PSU program.

The share option program has been fulfilled and

no new grants will be awarded. As of 31 December

2020, the total number of outstanding options to

Management was nil.

The shares in the RSU program shall become

vested at vesting date and shares in the PSU

program shall become vested over three years.

New hire RSUs ‘cli vest” as did the RSUs granted

to Scoulios, Barclay and Hayter in December 2018

at the time of the Magseis acquisition of Fairfield

Geotechnologies. RSUs associated with special

incentives and the LTIP program vest 40 percent

one year following award, 40 percent the second

year and 20 percent the final year.

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Severance pay

• The Chief Executive Ocer is entitled to a

severance pay equivalent to 18 month’s salary,

commencing at the end of the notice period,

when the resignation is at the request from the

company.

• The Chief Financial Ocer is entitled to a sev-

erance pay equivalent to 12 months’ salary,

commencing at the end of the notice period, when

the resignation is at the request of the company.

• The Chief Operating Ocer is entitled to a

severance pay equivalent to 12 months’ salary,

commencing at the end of the notice period

when the resignation is at the request from the

company.

• The Chief Sales Ocer is entitled to a severance

pay equivalent to 6 months’ salary, commencing

at the end of the notice period when the resig-

nation is at the request from the company.

• The Chief Technology Ocer is entitled to a

severance pay equivalent to 3 month’s salary,

commencing at the end of the notice period,

when the resignation is at the request of the

company.

• The Chief HR Ocer is entitled to a severance

pay equivalent to 6 months’ salary commencing

at the end of the notice period, when the resig-

nation is at the request of the company.

• The General Counsel has a 6-month notice period.

• The EVP Business Development is entitled to a

severance pay equivalent to 3 months’ salary,

when the resignation is at the request of the

company.

Severance pay in table above is related to

severance pay for previous members of the

management team.

Magseis Fairfield has no outstanding loans or

guarantees to any employees, managers or

Directors.

Remuneration to the management in 2020

Variable remuneration

USD thousands

Name Position Base salary Earned STIP Earned LTIP

Share incentive

program Severance

Pension &

Other benefits Total remuneration

Carel Hooijkaas Chief Executive Ocer 584 191 - 313 - 11 1 099

Mark Ivin Chief Financial Ocer 322 71 - 133 - 10 536

Mark Zajac Chief Technology Ocer (from 1 Jun 2020) 170 25 - 5 - 3 203

Thomas E Scoulios Chief Operating Ocer 315 51 - 93 - 10 469

Simon Hayter Chief Sales Ocer 264 51 - 54 - 13 382

Ivar Gimse SVP Business development 212 34 - 15 - 12 273

Sharon Barclay Chief Human Resources Ocer (from 1 Feb 2020) 211 39 - 43 - 9 302

Laila Myksvoll General Counsel 202 38 - 7 - 10 257

Nils Halvor Heieren Chief Technology Ocer (1 Jan 2020-31 May 2020) 71 - - 8 212 5 296

Cathrin Bretzeg SVP HR (1 Jan 2020-31 Jan 2020) 13 - - - - 1 14

Eivind Frømyr Chief Geophysicist (1 Jan 2020-31 May 2020) 67 - - - 90 2 159

Total 2 431 500 - 671 302 88 3 990

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2021 Remuneration for Board and Committee Members

USD thousands

Name Position Board fees Audit & Risk comm. Comp. comm. Sub-total RSU value Total

Wenche Kjølås Chair of the Board/Chair of ARC 81 17 6 105 22 126

Anthony Dowd Board member/Chair of Comp. comm. 52 - 9 61 11 72

Luis Araujo Board member 52 - 6 58 11 69

Angela Durkin Board member 52 9 - 61 11 72

Roar Brekke Board member/Chair of Nom. Comm. To May 2021 41 9 - 49 9 58

Jan B Gateman Board member to Apr 2021 13 2 - 15 6 21

Jonathan Cudmore Board member (employee elected) to Aug 2021 3 - - 3 - 3

Janie Garcia Board member (employee elected) 5 - - 5 - 5

Johan Jungholm Board member (employee elected) to Sep 2021 1 - - 1 - 1

Nomination committee

Chris Sugahara Chair from Jun 2021 5 - - 5 - 5

Ryan Schedler Member 3 - - 3 - 3

Anders Farestveit Chair to Jun 2021 1 - - 1 - 1

Total 308 37 19 366 70 436

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2020 Remuneration for Board and Committee Members

USD thousands

Name Position Board fees Audit & Risk comm. Comp. comm. Sub-total RSU value Total

Wenche Kjølås Chair of the Board 74 16 6 96 7 103

Jan B Gateman Board member 50 6 - 56 5 61

Anthony Dowd Board member from 23 Apr 2020 36 - 6 42 5 47

Luis Araujo Board member 50 - 5 55 5 60

Angela Durkin Board member 50 6 - 56 5 61

Roar Bekker Nomination comm. / chairman - - - - - -

Anthony Dowd Nomination comm. - - - - - -

Anders Farestveit Nomination comm. - - - - - -

Jonathan Cudmore Board member (employee elected) as from August 2020 3 - - 3 - 3

Janie Garcia Board member (employee elected) as from May 2020 4 - - 4 - 4

Charles W. Davison Jr. Board member until 23 Apr 2020 19 - - 19 - 19

Bettina Bachmann Board member until 23 Apr 2020 15 2 - 17 - 17

Edvin Endresen Board member until 23 Apr 2020 15 2 - 17 - 17

Total 316 32 17 365 26 391

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Number of shares and share options held by the management and Board of Directors 2021

USD thousands

Name Position Comments Shares Options RSUs PSUs

Board of Directors

Wenche Kjølås

Chair of the Board 426 038 - 50 000 -

Anthony Dowd Board member 50 000 - 25 000 -

Luis A. Gomes Araujo Board member 95 000 - 25 000 -

Angela Durkin Board member 128 892 - 25 000 -

Roar Bekker Board member 20 000 - 25 000 -

Jan Gateman

Board member To April 2021 3 875 943 - - -

Janie Garcia Employee elected Board member 10 000 - 15 000 -

Jonathan Cudmore Employee elected Board member To August 2021 - - - -

Johan Jungholm Employee elected Board member To September 2021 31 300 - - -

Ciaran Moore Employee elected deputy Board member - - - -

Management

Carel Hooijkaas

Chief Executive Ocer 355 058 - 782 928 19 530

Mark Ivin

Chief Financial Ocer To November 2021 - - 268 090 19 530

Stig Hognestad Chief Financial Ocer From November 2021 25 000 - 125 000 -

Mark Zajac Chief Technology Ocer - - 125 000 -

Tom Scoulios Chief Operating Ocer 29 020 - 180 320 19 530

Simon Hayter Chief Sales Ocer 29 020 - 110 442 19 530

Ivar Gimse

SVP Business development 965 864 - 22 500 6 975

Sharon Barclay Chief Human Resources Ocer 19 020 - 85 878 19 530

Laila Myksvoll General Counsel 30 000 - 45 000 -

Total 6 090 155 - 1 910 158 104 625

Mrs. Kjølås holds 351 038 of her shares indirectly through Jawendel AS.

Mr. Gateman holds his shares in the Company indirectly through Geo Innova AS.

If share price is above target on vesting date 1 October 2022, RSUs as per above will be allocated. If share price is below target, amount of USD 750 000 is due for payment.

If share price is above target on vesting date 1 September 2022, RSUs as per above will be allocated. If share price is below target, minimum amount of USD 300 000 is due for payment. The RSU’s was settled in cash as a part of severance agreement.

Mr. Gimse also holds 930 380 shares indirectly through Gneis AS.

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Number of shares and share options held by the management and Board of Directors 2020

USD thousands

Name Position Shares Options RSUs PSUs

Board of Directors

Wenche Kjølås

Chair of the Board 351 038 - 75 000 -

Jan B Gateman

Board member 5 814 852 - 50 000 -

Anthony Dowd Board member - - 50 000 -

Luis A. Gomes Araujo Board member 45 000 - 50 000 -

Angela Durkin Board member 78 892 - 50 000 -

Jonathan Cudmore Employee elected Board member 2 000 - - -

Janie Garcia Employee elected Board member - - 58 314 -

Management

Carel Hooijkaas

Chief Executive Ocer 296 038 - 713 928 -

Mark Ivin

Chief Financial Ocer - - 259 090 -

Mark Zajac Chief Technology Ocer - - 125 000 -

Tom Scoulios Chief Operating Ocer - - 196 320 35 000

Simon Hayter Chief Sales Ocer - - 126 442 35 000

Ivar Gimse

SVP Business development 946 214 - 37 500 20 833

Sharon Barclay Chief Human Resources Ocer - - 91 878 35 000

Laila Myksvoll General Counsel - - 75 000 -

Total 7 534 034 - 1 958 472 125 833

Mrs. Kjølås holds 351 038 of her shares in the company indirectly through Jawendel AS.

Mr. Gateman holds his shares in the Company indirectly through Geo Innova AS.

If share price is above target on vesting date 1 October 2022, RSUs as per above will be allocated. If share price is below target, amount of USD 750 000 is due for payment.

If share price is above target on vesting date 1 September 2022, RSUs as per above will be allocated. If share price is below target, minimum amount of USD 300 000 is due for payment.

Mr. Gimse also holds shares in the company indirectly through Gneis AS.

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32. Legal claims

The company is involved in a patent lawsuit against Seabed Geosolutions for infringement of four of the

Group’s U.S. patents where the company demands compensation for monetary damages.

On the 11

of January 2022, Magseis Fairfield announced an ongoing mediation process between Magseis

Fairfield ASA and Fairfield Industries Inc. Preparatory discussions between the parties, ahead of the final

mediation meeting, have revealed that there is no common ground upon which to reach a mediated solution to

the contractual claims between the parties.

The final mediation hearing that was scheduled for March 2022 has been cancelled and the dispute between

the parties is thereby to be solved by arbitration in accordance with the parties’ contract. Magseis Fairfield will

provide further information about the arbitration process when relevant, including with respect to any material

developments in such process.

Magseis Fairfield’s claims relates to a project in the Middle East that represented a major part of Fairfield

Seismic Technologies’ project backlog at the time of the transaction.

33. IFRS issued but not yet effective

At the date of authorization of these financial statements, the Group has not applied the following new and

revised IFRS Standards that have been issued but are not yet eective:

• IFRS 17 Insurance Contracts I

• Amendments to IAS 1 Classification of Liabilities as Current or Non-current

• Amendments to IFRS 3 Reference to the Conceptual Framework

• Amendments to IAS 16 Property, Plant and Equipment—Proceeds before Intended Use

• Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract

• Annual Improvements to IFRS Standards 2018-2020 Cycle

• Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial

Instruments, IFRS 16 Leases

• Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies

• Amendment to IAS 8 regarding accounting estimates. The amendments are eective for annual periods

beginning on or after 1 January 2023

• Amendments IAS 12 regarding deferred tax related to assets and liabilities arising from a single transaction.

The amendments are eective for annual reporting periods beginning on or after 1 January 2023

It is not expected that the adoption of the Standards listed above will have a material impact on the financial

statements of the Group in future periods.

34. Events occurring after the reporting date

On 6 January 2022, Magseis Fairfield announced the conditional award of an Ocean Bottom Node (OBN)

survey from a repeat customer. Start-up is expected in Q3 2022, and the project will run for approximately

two months. On 21 January, it was announced that this conditional award was converted into a signed con-

tract.

On 11 January 2022, Magseis Fairfield ASA disclosed an ongoing mediation process between Magseis

Fairfield ASA and Fairfield Industries Inc. regarding certain contractual claims between the parties. On

30 October 2018 Magseis ASA entered into a transaction agreement for the purchase of all the shares in

Fairfield Industries International Limited and all membership interests in Fairfield Seismic Technologies LLC

from Fairfield Industries Inc. The transaction was completed on 18 December 2018. The mediation process

relates to a project in the Middle East that represented a major part of Fairfield Seismic Technologies’ project

backlog at the time of the transaction.

On 21 January 2022, Magseis Fairfield announced that a customer exercised an optional project in US GoM,

which is scheduled to start in Q2 2022 and run for approximately two months.

On 9 February 2022, Magseis Fairfield announced that preparatory discussions between Magseis Fairfield

ASA and Fairfield Industries Inc, ahead of the final mediation meeting, have revealed that there is no common

ground upon which to reach a mediated solution to the contractual claims between the parties. The final

mediation hearing that was scheduled for March 2022 has been cancelled and the dispute between the

parties is thereby to be solved by arbitration in accordance with the parties’ contract.

On 3 March 2022, Magseis Fairfield announced its acquisition of the node-on-a-rope handling systems from

Carbon Transition. This further consolidates the OBN market and gives the company further flexibility for

future growth.

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Parent company financial statements

Statement of comprehensive income

USD thousands Note 2021 2020

Revenues and other income

Revenues and other income 3 26 916 14 354

Operating expenses

Cost of sales 4 (11 078) (8 289)

General and administrative costs 5 (15 850) (15 365)

Depreciation 9 (9 362) (10 657)

Amortization 10 (38) -

Impairment 11 (6 233) (288)

Total operating expenses (42 560) (34 599)

Operating profit/(loss) (15 644) (20 246)

Finance income and costs

Finance income 6 2 073 5 568

Finance expenses 6 (2 596) (4 672)

Impairment of investments in subsidiaries 11 (31 426) (1 465)

Net finance income/(expenses) (31 949) (569)

Net profit/(loss) before tax (47 594) (20 815)

Income tax expense 7 150 -

Net profit/(loss) and total comprehensive income (47 444) (20 815)

CONTENTS

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BOARD OF DIRECTORS REPORT

GOVERNANCE

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APPENDIX

CONTENTS

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Financial statementsFinancial statements | Parent company financial statementsFinancial statements | Parent company financial statements

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Statement of financial position

USD thousands Note 2021 2020

Non-current assets

Other intangible assets 10, 11 1 167 864

Property, Plant and Equipment 9, 11 38 673 56 354

Intercompany loans 8 31 007 28 628

Investment in subsidiaries 1, 11 109 116 109 468

Total non-current assets 179 963 195 315

Current assets

Cash and cash equivalents 13 2 791 24 211

Trade receivables 15 4 235 1 175

Inventories 14 944 2 412

Other current assets 16 7 797 704

Intercompany receivables 8, 16 8 344 16 709

Derivatives 23, 26 519 -

Total current assets 24 629 45 211

Total assets 204 593 240 525

USD thousands Note 2021 2020

Equity

Share capital 2 1 584 1 578

Share premium 2 151 021 407 662

Other equity (3 969) (214 579)

Total shareholders' equity 148 635 194 660

Non-current liabilities

Interest bearing liabilities 17, 18 29 429 29 325

Non-interest-bearing liabilities 18 177 414

Lease liabilities 12, 17, 18 140 985

Total non-current liabilities 29 747 30 724

Current liabilities

Trade payables 23 1 561 896

Intercompany payables 8, 23 17 049 1 507

Current portion of lease liabilities 12, 18 560 275

Current tax payable 7 - 150

Other current liabilities 19 7 041 12 313

Total current liabilities 26 211 15 141

Total liabilities 55 958 45 865

Total equity and liabilities 204 593 240 525

Board of Directors and CEO of Magseis Fairfield ASA

Lysaker, 10 March 2022

Wenche Kjølås

Chair of the Board

Roar Bekker

Board member

Anthony J. Dowd

Board member

Luis Araujo

Board member

Angela Durkin

Board member

Janie Garcia

Board member

(employee elected)

Carel Hooijkaas

CEO

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Statement of changes in equity

USD thousands Share capital

Share premium

reserve

Share based

payments

reserve Other equity Total

Balance 1 January 2020 1 167 382 149 5 784 (201 162) 187 939

Share issuance tranche 1 199 13 301 - - 13 500

Expenses related to tranche 1 - (683) - - (683)

Share issuance tranche 2 212 14 249 - - 14 461

Expenses related to tranche 2 - (1 354) - - (1 354)

Share based payments - - 1 712 - 1 712

Other changes - - - (98) (98)

Profit/(Loss) for the period - - - (20 815) (20 815)

Balance 31 December 2020 1 578 407 662 7 496 (222 074) 194 660

Balance 1 January 2021 1 578 407 662 7 496 (222 074) 194 660

Share based payments 6 - 1 413 - 1 419

Other changes - - - (1) (1)

Allocation of retained deficit - (256 641) - 256 641 -

Profit/(Loss) for the period - - - (47 444) (47 444)

Balance 31 December 2021 1 584 151 621 8 909 (12 878) 148 635

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Statement of cash flows

USD thousands Note 2021 2020

Cash flows from operating activities

Profit / (loss) before tax (47 594) (20 815)

Income tax paid and WHT paid 7 - -

Depreciation, amortization and impairment 9, 10, 11 15 633 10 945

Share-based payments expense 26 1 413 1 712

Impairment of investment in subsidiaries 11 31 426 1 465

Finance expense 6 2 596 4 672

Finance income 6 (2 073) (5 568)

NBV sold and disposed assets 9 7 838 -

(Increase)/decrease in current assets (32 868) 60 064

Increase/(decrease) in current liabilities 10 935 (25 794)

Net cash from operating activities (12 693) 26 682

USD thousands Note 2021 2020

Cash flows from investing activities

Interest received 6 - 45

Acquisition of equipment 9 (1 711) (7 911)

Investment in subsidiaries 1 1 520 -

Investments in intangibles 10 (1 110) (864)

Loans to subsidiaries 8 (5 415) (28 628)

Net cash used in investing activities (6 715) (37 358)

Cash flows from financing activities

Down-payments of interest-bearing liabilities 17, 18 - (3 333)

Payment of lease liabilities 12, 18 (560) (515)

Proceeds from issue of shares 2 6 25 924

Interest paid 6 (1 457) (2 113)

Net cash from financing activities (2 011) 19 963

Net change in cash and cash equivalents 13 (21 420) 9 287

Cash and cash equivalents at period start 13 24 211 14 924

Cash and cash equivalents at period end 2 791 24 211

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Notes to the Parent company financial statements

1. General Information and basis of preparation

General Information

Magseis Fairfield ASA is a public limited company

incorporated in Norway. The Company’s registered

oce is at Strandveien 50, Lysaker, Norway.

Basis of preparation

Statement of compliance

The financial statements are prepared in accord-

ance with the simplified application of International

Financial Reporting Standards (Norwegian

Forenklet IFRS) in accordance with the Norwegian

accounting act

3-9 and the related directive.

The directive refers to the general recognition and

measurement requirements in IFRS as endorsed by

the European Union, but with certain exemptions.

The financial statements were authorized for issue

by the Board of Directors and the chief executive

ocer (CEO) on 10 March 2022. The finan-

cial statements will be presented to the Annual

General Meeting on 7 April 2022 for approval.

Until this date the Board of Directors has the

authority to amend the financial statements.

Financial reporting principles

Magseis Fairfield ASA prepared its financial state-

ments for 2021 in accordance with IFRS.

The relevant exemption applicable to Magseis

Fairfield relates to the recognition of Group con-

tributions (Norwegian “konsernbidrag”). Group

contributions and dividends under simplified IFRS

may be recognized in accordance with Norwegian

generally accepted accounting principles for the

distributing and receiving entity. This means that

the distributing entity may recognize a liability

when the contribution or dividend is proposed, but

before it has been approved. The receiving entity

may also recognize the dividend or contribution

receivable before it has been approved.

Disclosure requirements are in accordance with the

directive, which refers to disclosure requirements

in accordance with the Norwegian Accounting

Act chapter 7 and Norwegian generally accepted

accounting principles, with certain dierences.

If not included in the notes below, the Company’s

significant accounting policies are disclosed in

relevant sections in the consolidated financial

statement. These principles have been applied

consistently in all periods presented in the financial

statements, unless stated otherwise.

Basis of measurement

The financial statements are prepared in accord-

ance with the historical cost principle, with the

exemption of derivatives which are measured at

fair value.

Judgements and estimates

Preparation of financial statements in accordance

with simplified IFRS requires the use of esti-

mates. The application of Company’s accounting

principles further requires management to apply

judgement.

The main areas where significant judgements and

critical estimates have been made are described in

each of the following notes:

• Note 3 Revenue from customer contracts

• Note 9 Property, Plant and Equipment

• Note 11 Impairment of non-current assets

• Note 12 Leases

• Note 19 Other current liabilities

New Financial Reporting Standards

Certain new or revised standards, amendments or

interpretations of existing standards have been

implemented, please see note 2.9 in the consoli-

dated financial statement and note 12 Leases. For

standards issued but not yet eective, please see

note 32 in the consolidated financial statements.

Going concern

The financial results for the Group were charac-

terized by continued financial and operational

challenges in 2021, due to the COVID-19 pan-

demic and a volatile market environment and focus

from various stakeholders to focus on renewable

energy. The impact on the E&P industry has been

profound and Magseis Fairfield’s clients have

cut their capex and cancelled or postponed their

investment plans to preserve cash. However,

Magseis Fairfield has maintained a strong focus

on cost and capital expenditures to preserve cash

and safeguard business continuity.

The Group’s backlog for 2021 increased during the

fourth quarter 2021 and the first months of 2022,

oering increasing support for the 2022 budget

and forecasts. Magseis Fairfield forecast a market

growth in 2022 of 25% and new contracts are

being secured at increasing margins. This backlog

and tendering activity for 2022 provides a basis

for optimism, although the company acknowledges

the risks and uncertainties regarding future market

development.

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

The company ended the year with USD 29.7

million in cash and cash equivalents. Given the

current activity level and financial forecasts, it is

the Board of Directors’ view that the company will

have sucient liquidity through 2022. The liquidity

forecast is subject to certain risk factors, such as

project execution, timely collections from custom-

ers or changes in phasing and scope of projects.

Although there are uncertainties related to events

or conditions that might impact the future cash

flows, the Board and management are of the

opinion that the going concern assumption is

appropriate and the accounts are prepared under

this assumption.

Shares in subsidiaries

Year ended 31 December 2021

USD thousands Incorporation Total equity

Net income/

(loss) 2021 Carrying value

Magseis Operations AS Norway 36 236 15 262 18 982

Magseis Singapore Services Pte. Ltd. Singapore (857) (1 205) (857)

Magseis Technology AB Sweden 556 103 6

Magseis Malaysia Sdn. Bhd. Malaysia 391 (86) 391

Magseis FF AS Norway 72 277 (30 325) 72 284

Fairfield Industries International Ltd. UK 11 926 610 11 316

Magseis Brasil Ltda. Brazil 15 (193) 15

Magseis Renewables AS Norway 6 983 (1) 6 980

Total 127 526 (15 834) 109 116

The Company holds 100 percent of all shares and all voting rights for its subsidiaries.

2. Share information

Number of

Share capital

USD ‘000

Share premium

USD ‘000

Balance 1 January 2020 185 170 592 1 167 382 148

17 February 2020: Private placement 37 034 118 199 13 301

Transaction costs (683)

17 March 2020: Private placement 44 565 882 213 14 249

Transaction costs (1 354)

Balance 31 December 2020 266 770 592 1 578 407 662

RSU settlements 951 750 6 -

Allocation of retained deficit (256 641)

Balance 31 December 2021 267 722 342 1 584 151 021

Nominal value

The nominal value of the shares is NOK 0.05. The share capital is fully paid. Magseis Fairfield ASA has one

class of shares, ordinary shares, with equal rights for all shares. The holders of ordinary shares are entitled to

receive dividends and are entitled to one vote per share at general meetings.

Share based payments reserve

Share-based payments represent a cost charged to the income statement over the vesting period based

on the fair value measured at grant date for equity-settled share-based payments provided to employees,

including key management personnel, as part of their remuneration.

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The 20 largest shareholders as of 31 December 2021:

Number of

Ownership

interest

FAIRFIELD MS LLC 48 262 582 18.0%

MORGAN STANLEY & CO. LLC 37 847 255 14.1%

AS CLIPPER 11 283 402 4.2%

WESTCON GROUP AS 8 156 291 3.0%

BNP PARIBAS 7 520 000 2.8%

CACEIS BANK 7 203 200 2.7%

SEB CMU/SECFIN POOLED ACCOUNT 6 969 933 2.6%

ANFAR INVEST AS 6 546 391 2.4%

VERDIPAPIRFONDET KLP AKSJENORGE 6 446 448 2.4%

SOBER AS 6 159 205 2.3%

SBAKKEJORD AS 4 700 000 1.8%

MERRILL LYNCH PROFESSIONAL CLEARIN 3 900 000 1.5%

GEO INNOVA AS 3 875 943 1.4%

REDBACK AS 3 578 289 1.3%

J.P. MORGAN BANK LUXEMBOURG S.A. 3 530 339 1.3%

BARRUS CAPITAL AS 3 304 410 1.2%

VERDIPAPIRFONDET PARETO INVESTMENT 3 077 319 1.1%

REKSNES 2 002 000 0.7%

HERSETH AS 1 632 000 0.6%

ØRNES AS 1 413 635 0.5%

Total largest shareholders 177 408 642 66.3%

Other shareholders 90 313 700 33.7%

Total outstanding shareholders 267 722 342 100.0%

3. Revenue from customer contracts

Revenue from contracts with customers

Revenue from contracts with customers arise

primarily from the delivery of exclusive seismic

services, granting of licenses to the Company’s

Multi-Client survey data library, marine geo-

physical services and sales of nodes and other

equipment.

Revenue is recognized at the amount that the

Company expects to be entitled to and expects

to collect under the customer contracts. If a cus-

tomer contract consists of multiple performance

obligations, the consideration is allocated among

the performance obligations based on their esti-

mated relative fair values. Amounts received from

customers in advance of the Company satisfying

its performance obligations are recognized as a

contract liability. In the rare event the Company

has satisfied a performance obligation and is

otherwise entitled to compensation under the

contract but there is a significant uncertainty as

to ultimately collecting the compensation, revenue

recognition is deferred until such uncertainty no

longer exists. When the Company has satisfied

its performance obligations and has a right to the

agreed consideration, revenue is recognized.

The principles applied for each of the main types

of contracts with customers are described in more

detail below.

Proprietary acquisition projects/

Reservoir monitoring/Source

The Company performs ocean bottom seismic

services in accordance with customer specifica-

tions, and where the customer retain ownership

to the seismic data gathered. These contracts

are considered to contain one single performance

obligation, and the performance obligation is sat-

isfied over time since the Company performs the

service at the customer specification. The result-

ant seismic data is retained by the customer and

the Company has no alternative right to otherwise

utilize or benefit from the data.

The revenue is measured at the transaction

price agreed under the contract. In most cases,

the consideration is normally due based on the

contractually agreed payment plan when legal

title to the seismic data has been transferred.

While deferred payment terms may be agreed in

rare circumstances, the deferral never exceeds

12 months. The transaction price is therefore not

adjusted for the eects of a significant financing

component. The project is measured based on the

physical progression, and revenue is recognized

based on the ratio of the project’s progress to

date (percentage of completion), provided that

the performance obligation is satisfied. Revenue

recognition can be based on various parameters,

such as length of cable deployed, number of shots,

square kilometers of acquired data or time pro-

gressed.

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

Multi-client surveys

The Multi-Client library consists of seismic data

surveys which are licensed to customers on a

non-exclusive basis. Revenues generated from

Multi-Client surveys falls into two categories:

Pre-commitment arrangements – Comprise of

contracts where the Company obtains pre-funding

from customers before a seismic project is started,

or during the project period. These pre-commit-

ments cover specific areas or license blocks. In

return for the commitment, the customer obtains

early access to the data, favorable pricing com-

pared to late sales and a degree of influence

over the project scope. Any pre-funding amount

collected from customers prior to completion of

the project is recognized as contract liability as

revenue is recognized at the point in time when the

data access is transferred to the customer.

Late sales – Comprise of contracts where the

Company grants a license entitling non-exclusive

access to utilize a defined portion of the Multi-

Client data library in exchange for a fixed payment.

Revenue is recognized at the point in time when the

customer has been granted access to the data.

For Multi-Client library projects, Magseis Fairfield

may invest in the project with other parties and

has cooperation agreements whereby revenues

will be shared with other companies. These agree-

ments are initiated and agreed as joint operations

where both parties have rights to the assets and

share in the liabilities. Magseis Fairfield recognizes

its share of the investment in the Multi-Client

library, its share of revenues from the sale of

the Multi-Client survey, related amortization,

and expenses. When a partner holds the right

to market and sell the project and invoices and

collects from the customer, Magseis Fairfield rec-

ognizes its share of related accounts receivables.

Revenue from sale of nodes

The Company provides the sale of nodes to exter-

nal customers, where each sale is defined as a

customer contract. The sales contracts normally

include one performance obligation which is sat-

isfied upon the delivery of an agreed number of

nodes in accordance with the agreed specifications.

Revenue is recognized at the point in time when the

control of the goods is transferred to the customer,

which occurs when the products have been shipped

to a contractual agreed location, and the risks of

obsolescence and loss have been transferred to the

customer. The revenue is measured at the transac-

tion price as agreed under the contract.

Other services revenue

Customer contracts for other marine geophysical

services are similar in nature and terms to the pro-

prietary contract sales. Revenue is recognized over

time as the Company satisfies the performance

obligation and is entitled to the compensation

under the contract. Lease income is recognized on

a straight-line basis over the lease period.

Significant judgements

The deliveries in the customer contracts are

reviewed to identify distinct performance obliga-

tions, and this assessment may involve significant

judgement. For most of the identified performance

obligations for Proprietary acquisition projects,

control has been assessed to be transferred to the

customer over time as the performance obligation

is satisfied. Revenue is recognized over time using

either a cost-based progress method, or revenue

is recognized as physical progress of the project

represents the transfer of seismic data to the

customer. These methods are assessed to best

reflect the pattern of transfer of control of goods

and services to the customer.

Disaggregation of revenue

In accordance with IFRS 15 management analyses

the revenue contracts with customers and disag-

gregates the revenue into the following product

categories, which depict how the nature, amount,

timing and uncertainty of revenue and cash flows

are aected by economic factors:

• Proprietary acquisition projects

• Multi-client surveys

• Revenue from sale of nodes

• Other service revenues

Revenue from customers is disaggregated in the

table below by geographical location, by type of

product, and by the timing of the revenue.

Disaggregation of revenue from contracts with

customers:

2021

USD thousands

Multi-client

surveys

Revenue from

sale of nodes

Other

services

Intercompany

revenue 2021

Norway and Sweden - 253 3 866 4 119

USA - - - 3 973 3 973

UK - 264 264

Asia - 16 056 - 345 16 401

Revenue from contracts with customers - 16 056 253 8 449 24 758

Point in time revenue recognition

Revenue from sale of nodes - 16 056 - - 16 056

Point in time revenue recognition - 16 056 - - 16 056

Over time revenue recognition

Other services revenues - - 253 8 449 8 702

Total over time revenue recognition - - 253 8 449 8 702

Lease income (intercompany) - - - - 2 158

Total revenue and income - 16 056 253 8 449 26 916

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

2020

USD thousands

Multi-client

surveys

Revenue from

sale of nodes

Other

services

Intercompany

revenue 2020

Norway and Sweden - - - 5 682 5 682

USA - - - 3 3

UK 187 187

Asia - 5 353 - 433 5 786

Revenue from contracts with customers - 5 353 - 6 305 11 658

Point in time revenue recognition

Multi-client surveys - - - - -

Revenue from sale of nodes - 5 353 - - 5 353

Point in time revenue recognition - 5 353 - - 5 353

Over time revenue recognition

Other services revenues - - 721 6 305 7 026

Total over time revenue recognition - - 721 6 305 7 026

Lease income (intercompany) - - - 1 975 1 975

Total revenue and income - 5 353 721 8 280 14 354

Other services include revenue from seismic support services.

Assets and liabilities related to contracts with customers

Contract assets and contract liabilities from customers are disclosed below.

Contract assets

Contract assets are recognized whenever a performance obligation is satisfied before the point in time where

we have right of invoicing. This relates mainly to proprietary acquisition projects arrangements where the

timing of invoicing is decided by the customer contract.

Contract assets (unbilled revenue) of USD 7 million were recognized as of 31 December 2021. No contract

assets recognized as of 31 December 2020.

Contract liabilities (Advance payments from customers)

Advance payments from customers is recognized if the Company receives consideration or if it has the uncon-

ditional right to receive consideration in advance of performance. A portion of the Company’s customers

pay fees in advance, and these prepayments are recognized as non-financial debt and will be settled in the

Company’s services.

No contract liabilities were recognized as of 31 December 2021 or 2020.

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Magseis Fairfield ASA – Annual report 2021Magseis Fairfield ASA – Annual report 2021

4. Costs of sales

USD thousands 2021 2020

Charter hire and other vessel costs 314 200

Wages and other personnel costs 1 949 4 266

Other cost of sales 8 814 3 822

Total cost of sales 11 078 8 289

The increase in cost of sales is driven by nodes sale in 2021.

5. Other operating expenses

Financial Reporting Principles

Other operating expenses are recognized in the period in which the associated goods and services are deliv-

ered to the Company. Personnel expenses include wages, salaries, social security contributions, sick leave,

parental leave and other employee benefits. The benefits are recognized in the year in which the associated

services are rendered by the employees. At the end of 2021, the company had a total of 55 FTEs, with 47

employees and 8 contractors.

For the Norwegian employees, the Company are obliged to provide an employment pension plan. Magseis

Fairfield ASA has a defined contribution plan that meets this requirement. The expected contributions to be

paid in 2022 is in line with the contributions in 2021.

USD thousands 2021 2020

Wages and other personnel costs 9 266 7 690

Professional services 1 898 2 488

Other expenses 4 687 5 187

Total other operating expenses 15 850 15 365

Salary and social expenses are specified as such

Salary 5 968 4 033

Social security tax 846 1 000

Pension costs 334 278

Share-based payments 1 833 2 218

Other personnel cost 285 162

Total salary and social expenses 9 266 7 690

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The audit fee (exclusive of VAT) to Deloitte is specified in the table below:

USD thousands 2021 2020

Audit services

Audit of annual financial statements 146 100

Other services

Other assurance services 3 54

Total audit remuneration 149 154

Other assurance services in 2020 relates to tax services.

6. Financial income and expense

Interest income include eects from using the eective interest rate method where fees, interest paid, trans-

action costs and other premiums are deferred and amortized over the life of the instrument. Net eects from

fair value gains or losses on financial assets at fair value through profit or loss, and adjustments to the carry-

ing amount of financial liabilities at amortized cost are recognized in other financial items.

Foreign exchange gains and losses arise upon settlement of monetary assets and liabilities that are not

hedged. Foreign exchange gains and losses also include the eects from translating monetary assets and

liabilities denominated in foreign currencies at the balance sheet date.

Financial income includes interest income from financial assets held for cash management purposes, and

financial costs includes borrowing costs, interest expenses in respect of lease liabilities and exchange dier-

ences arising from foreign currency borrowings.

Financial income and expense:

USD thousands 2021 2020

Revaluation of warrants - -

Interest income 1 356 1 905

Foreign exchange gains (156) 3 663

Other financial items 873 -

Total finance income 2 073 5 568

Interest expense on loan facility (1 787) (2 017)

Interest expense on financial leases (43) (96)

Bank guarantees and other bank charges (1) (1)

Unrealised foreign exchange losses 5 (78)

Foreign exchange losses (396) (2 258)

Revaluation of warrants 221 -

Other financial expenses (595) (222)

Total finance costs (2 596) (4 672)

Net finance income/(expense) excl. impairment (523) 896

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7. Income tax

Financial Reporting Principles

Income tax consists of current tax, eect of change in deferred tax positions and withholding tax. Income tax

is recognized in the statement of profit or loss except to the extent that it relates to items recognized directly

in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax

rates enacted or substantially enacted at the reporting date that will be paid during the next 12 months.

Current tax also includes any adjustment of taxes from previous years.

Deferred tax is recognized for temporary dierences between the carrying amounts of assets and liabilities

for financial reporting and the amounts used for taxation purposes. Deferred tax is measured at the tax

rates expected to be applied to temporary dierences when they reverse, based on the laws that have been

enacted or substantively enacted by the reporting date. Deferred tax assets are recognized for unused tax

losses, tax credits and deductible temporary dierences.

Income tax expense specification:

USD thousands 2021 2020

Current tax:

Tax payable - -

Withholding taxes and Permanent Establishment taxes (150) -

Deferred tax:

Changes in deferred tax - -

Tax expense (150) -

A reconciliation of the eective rate of tax and the tax rate in parent’s country of registration:

USD thousands 2021 2020

Net profit/ (loss) before tax (47 594) (20 815)

Income taxes calculated at 22% (10 471) (4 579)

Changes in temporary dierences - -

Changes in unrecognized deferred tax asset 3 933 3 691

Non-deductible expenses 7 498 888

Use of withholding tax - -

Withholding taxes paid - -

Other (1 110) -

Tax expense (150) -

The Company has unutilized tax losses of USD 55 million in 2021 available to be oset against future taxable

income. The deductible temporary dierence and tax losses do not expire under current tax legislation. The

net deferred tax asset for the Company has not been recognized on the basis that it does not meet the cri-

teria for asset recognition as the Company currently cannot document that the future taxable income can be

utilized against available tax losses. The applicable Norwegian tax rate is 22 percent (22 percent in 2020).

Deferred tax assets and liabilities, of which none were recognized:

USD thousands 2021 2020

Non-current assets (291) 2 941

Non-current liability (41) (76)

Provision (799) (2 089)

Current liabilities - 94

Tax- losses carried forward (12 082) (10 150)

Total (assets)/liabilities (13 213) (9 280)

Not recognized deferred tax assets 13 213 9 280

Net recognized deferred (assets)/liabilities - -

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8. Related party and intercompany transactions

Financial Reporting Principles

Related parties’ relationships are defined to be entities outside the Company that are under control (either directly or indirectly), joint control or significant influence by the owners, Board of Directors or Management of Magseis

Fairfield ASA. Related parties are in a position to enter into transactions with the Company that would potentially not be undertaken between unrelated parties. The terms and conditions of the transactions with related parties

are considered to be on an arm’s length basis.

The aggregate value of transactions and outstanding receivables/payables with group companies were as follows:

2021

USD thousands

Income from

lease of

equipment

and seismic

services

Income for

manage-

ment fee

Interest

income

Seismic

equipment

& services

Net

receivable/

(liability)

Inter-

company

loans

Magseis Operations AS - 3 299 112 567 (12 661) -

Magseis Singapore Services Pte. Ltd - 345 - - 785 -

Magseis Malaysia SDN BHD - - - - -

Magseis Technology AB - - - - (43) -

Magseis FF AS - - 579 - - 6

Magseis Fairfield LLC - 1 759 662 2 143 2 965 31 001

WGP Group Ltd 228 - 108 248 -

Total - 5 631 1 354 2 818 (8 705) 31 007

2020

USD thousands

Income from

lease of

equipment

and seismic

services

Income for

manage-

ment fee

Interest

income

Seismic

equipment

& services

Net

receivable/

(liability)

Inter-

company

loans

Magseis Operations AS 1 584 3 488 157 391 13 157 447

Magseis Singapore Services Pte. Ltd - 235 - - 512 -

Magseis Malaysia SDN BHD - 198 - - 198 -

Magseis Technology AB - 219 - - 82 -

Magseis USA LLC 546 - - - - -

Magseis FF AS - - 753 - - 15 902

Magseis Fairfield LLC - 1 432 950 - 1 262 12 279

WGP Group Ltd 37 150 - - 143 -

Total 2 167 5 722 1 860 391 15 355 28 628

The aggregate value of transactions and outstanding receivables/payables with related parties were as follows:

Transaction value Trade payables

USD thousands 2021 2020 2021 2020

J B Gateman (Geo Innova AS) (shareholder) (I) 88 144 - -

Total 88 144 -

(I) J B Gateman was engaged as an independent consultant.

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9. Property, plant and equipment

Financial Reporting Principles

Property, plant and equipment (PPE) are stated at cost less accumulated depreciation and impairment losses.

Components of property, plant and equipment with dierent useful lives are accounted for separately. Assets

are normally depreciated on a straight-line basis over their expected economic lives as follows:

• Seismic equipment 3 - 7 years

• Fixtures and Fittings 3 years

• IT Equipment 3 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if

appropriate. Equipment under construction is classified as a non-current asset and recognized at the cost, it

is not depreciated until the non-current asset is ready for use.

Borrowing costs are capitalized as part of the cost of the asset when significant. The cost of self-constructed

assets includes the cost of materials, direct labor, production overheads and borrowing cost.

Impairment triggers are assessed quarterly, and impairment testing is performed when triggers have been

identified.

Judgement and Estimates

Judgement is involved when determining the depreciation period and when assessing impairment or reversal

of impairment. Impairment is assessed for individual assets and for cash generating units. The impairment

testing involves judgmental assumptions about future market development, cashflows, determination of

weighted average cost of capital (WACC), growth rate and other assumptions that may change over time.

As per annual review of the useful life, we have reassessed the useful life of nodes and backdeck deployment

systems from 5-8 years to 8 years.

USD thousands

Seismic

equipment

Asset under

construction

Furniture

fixtures etc.

Right-of-use

assets Total

Accumulated cost

Balance 1 January 2020 91 167 17 818 1 553 2 279 112 817

Additions 1 174 6 736 - - 7 911

Disposals/retirement (42 634) (423) (43 056)

Other 344 (13) (151) 181

Balance 31 December 2020 50 052 24 542 979 2 279 77 852

Additions - 1 711 - - 1 711

Disposals/retirement (13 623) (328) (67) - (14 018)

Reclass- asset under construction 7 324 (7 324) - - -

Reclassification to intangibles - (1 066) - - (1 066)

Inventory movements and other 203 2 929 - - 3 132

Balance 31 December 2021 43 956 20 463 912 2 279 67 610

Accumulated Depreciation and Impairment

Balance 1 January 2020 (51 502) - (997) (536) (53 035)

Depreciation (9 920) - (201) (536) (10 658)

Disposals/retirements 42 084 - 406 - 42 490

Other (1 806) 1 806 - (7) (7)

Impairment - - - (288) (288)

Balance 31 December 2020 (21 144) 1 806 (793) (1 367) (21 498)

Depreciation (8 824) - (131) (406) (9 362)

Disposals/retirements 6 117 - 63 - 6 180

Impairment (3 060) (1 336) - - (4 396)

Other 132 - - 7 139

Balance 31 December 2021 (26 780) 470 (861) (1 767) (28 937)

Net carrying amounts

Balance 31 December 2020 28 908 26 348 187 912 56 354

Balance 31 December 2021 17 176 20 933 52 512 38 673

Commitments

The Company has entered contractual commitments for the acquisition of seismic equipment in 2021

amounting to USD 1.5 million as of 31 December 2021.

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10. Other intangible assets

Financial Reporting Principles

Research and development costs are expensed as incurred until a program has completed the concept phase.

Development activities involve a plan or design to produce new or substantially improved products and pro-

cesses. Development costs are only capitalized if the product or process is technically and commercially

feasible and the business case shows a positive net present value. Capitalized development costs mainly

include internal labor costs in addition to materials for the development program. Any third-party funding is

presented as a reduction of the capitalized amount.

Capitalized development costs are amortized over three to six years on a straight-line basis.

Other intangible assets:

USD thousands Other intangibles

Accumulated investments

Balance 1 January 2021 8 237

Additions 1 110

Reclassification from PPE 1 066

Balance 31 December 2021 10 413

Accumulated amortization and impairment

Balance 1 January 2021 (7 373)

Amortization for the period (38)

Impairment for the period (1 836)

Balance 31 December 2021 (9 246)

Carrying amounts

Balance 1 January 2021 864

Balance 31 December 2021 1 167

11. Impairment of non-current assets

Impairment recognized

An impairment of USD 6.2 million was recognized in 2021 related to older equipment and R&D projects with

limited or no expected future use and value. In addition, investment in subsidiaries was impaired with USD 31.4

million.

USD thousands 2021 2020

Asset category

Shares in subsidiaries 31 426 1 465

Other Intangible assets 1 836 -

Right of use asset - Leases - 288

Property, plant and equipment 4 397 -

Total impairment of non-current assets 37 660 1 753

Impairment test of assets

Intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for

impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.

Other assets are tested for impairment whenever events or changes in circumstances indicate that the car-

rying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s

carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value

less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at

the lowest levels for which there are separately identifiable cash inflows which are largely independent of the

cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than

goodwill that suered an impairment are reviewed for possible reversal of the impairment at the end of each

reporting period.

Judgements and estimates applied in the impairment test

During 2021, several impairment indicators have been present; the outbreak and spreading of the coronavi-

rus have led to a reduction in the economic activity and a rapid and significant reduction in oil demand and

generated an oversupply situation with significantly lower and more volatile oil prices. The impact on the E&P

industry has been profound and Magseis Fairfield’s customers have cut their capex and cancelled or post-

poned their investment plans to preserve cash. Consequently, management has initiated impairment tests for

all quarters during the year.

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The impairment test is based on a value-in use calculation in accordance with IAS 36, where assumptions

about future market development, cashflows, the weighted average cost of capital (WACC), growth rate and

other factors are subject to management’s judgement.

Key assumptions when assessing the recoverable amounts as of 31 December 2021 were:

• Cash flow projections are based on continued growth into 2023 and beyond. We have applied an average

revenue growth rate of 6-8 percent for the period 2023-2025, with an estimation of terminal value in

subsequent periods.

• We have analyzed the historic and future OBS market and assessed our market share, which has been used

as a benchmark for the revenue scenario applied in the cash flow projections

• Terminal value reflects long term steady state revenue and margin levels based on a combination of historic

levels and judgements applied

• Capex levels are aligned with revenue assumptions

• Climate risk is assessed to be low and not significant, hence not reflected in the valuation model

• Weighted average cost of capital applied in the model is 11 percent.

The test suggests no impairment required, but it must be emphasized that the model is sensitive to its

assumptions, such as t market growth and project margins.