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The company received an operating contribution from the Norwegian government totalling NOK 225 million excluding VAT in 2012. In addition, an extra appropriation of NOK 27 million excluding VAT was provided in connection with Johan Sverdrup, of which NOK 19.5 million was recorded as income in 2012. A contribution of NOK 1.6 million was also provided in connection with the operation and establishment of Petoro Iceland AS. The net loss after financial items was NOK 8.1 million. Other revenue primarily relates to invoicing of services provided to operators of joint ventures and other joint venture partners.
 

The change in deferred revenue recorded in the income statement comprises deferred revenue related to NOK 3.7 million in investment made during 2012 as well as NOK 3.3 million in depreciation of investments made during the year and in earlier years.

 

 

Payroll expenses (all figures in NOK 1 000)	2012	2011	2010
Pay	85 347	82 691	73 151
Payroll taxes	12 918	11 978	10 616
Pensions (note 10)	30 864	27 274	20 870
Other benefits	3 878	4 574	3 500
Total	133 007	126 517	108 136
Employees at 31 Dec	65	67	69
Employees with a signed contract who had not started work at 31 Dec	1	1	0
Average number of work-years employed	65	68	68

   
 

Remuneration of senior executives (all figures in NOK 1 000)	Pay	Other benefits	Total  benefit	Recorded pension
President, Kjell Pedersen	3 587	177	3 764	3 419
Rest of the management team:
Olav Boye Sivertsen	1 495	127	1 622	360
Marion Svihus	1 801	143	1 944	802
Tor Rasmus Skjærpe	2 488	142	2 630	1 634
Laurits Haga	2 013	137	2 150	1 068
Jan Rosnes	1 821	138	1 959	560
Grethe Kristin Moen	1 959	144	2 103	1 036
Roy Ruså	1 903	140	2 043	659

The president has chosen to retire on 11 June 2013.    

Recorded pension liabilities represent the current year’s estimated cost of the overall pension liability for the president plus the rest of the management team.

 

Breakdown of directors’ fees (all figures in NOK 1 000)	Directors’ fees
Gunnar Berge, chair	353
Hilde Myrberg, deputy chair	228
Nils-Henrik M von der Fehr, director	186
Per Arvid Schøyen, director	186
Mari Thjømøe, director	186
Line Geheb, director, elected by the employees, 1st half	97
Erik Aarrestad, director, elected by the employees, 1st half	97
Ragnar Sandvik, director, elected by the employees, 2nd half	92
Anniken Gravem, director, elected by the employees, 2nd half	92

 

The declaration on remuneration for the president and other senior executives is in line with the provisions of the Norwegian Act on Public Limited Companies and the guidelines for state ownership, including the revised guidelines on conditions of employment for executives in state-owned undertakings and companies of 1 April 2011. These replaced the earlier guidelines for state ownership – attitude to executive pay, which dated from 2006.

Guidelines on remuneration
Petoro’s remuneration guidelines are entrenched in the company’s vision, goals and values. The relationship between the level of performance, demonstrated leadership/collegiality and reward will be predictable, motivational, clear and easy to communicate. Petoro has an integrated pay policy and system for the whole company, and aims to pay a competitive rate without being a pacesetter on remuneration in relation to the relevant market for the petroleum industry.

Decision-making process
The board determines compensation arrangements for the president, who in turn determines the compensation arrangements for the other members of the company’s senior management. The board has appointed a compensation sub-committee comprising the deputy chair and another director. The vice president for strategy and organisation provides the secretariat function for this committee, which prepares proposals and recommendations for the board on compensation issues.

Main principles for remuneration in the coming fiscal year
The compensation package for the president and the other senior executives will reflect the responsibilities and complexity of the role in question, the company’s values and culture, the relevant executive’s behaviour and performance, and the need to attract and retain key personnel. The arrangements are transparent and accord with the principles for good corporate governance.

Basic pay is the main component in Petoro’s compensation scheme. Senior executives are also entitled to benefits on the same lines as others in the company, including car allowance as well as pension and insurance benefits, but with a somewhat wider entitlement to communication allowance. Members of the management team other than the president also have a loyalty scheme which comprises an annual payment determined by the board. This amount is currently NOK 70 000, and one-third of the credit balance is paid every fifth year. The accumulated sum is lost if the executive leaves the company. Petoro does not have a bonus programme. Share programmes, options and other option-like arrangements are not used by the company.

Pay levels in a reference market comprising relevant companies in the upstream and supplies industries for oil and gas provide the basic guidelines for the company’s remuneration profile. Basic pay is primarily fixed on the basis of the responsibilities and complexity of the position, as well as its holder’s behaviour and performance. Basic pay is subject to an annual assessment.

Petoro has a defined benefit pension scheme. The president’s retirement age is 62. He can choose to retire on a full pension upon reaching the age of 60. The president reached the age of 60 on 11 December 2012. He has notified the board that he wishes to retire on a pension from 11 June 2013. Two other members of the management team also have the opportunity to retire on a full pension upon reaching the age of 62. Three members of the management team can opt to retire upon reaching the age of 65 on a reduced pension. The remaining executives retire at 67. The pension benefit is calculated as about 66 per cent of the pension basis, less an estimated National Insurance benefit. For competitive reasons, Petoro has an unfunded defined benefit plan for personnel earning more than 12 times the National Insurance base rate (G). This pension agreement was established before the revised guidelines on employment terms for senior executives in state-owned undertakings and companies came into force. It embraces all employees of the company earning more than 12G, and is not confined to senior executives.

Work has begun in Petoro on an overall review of the company’s pension schemes, taking account of industry practice for companies comparable with Petoro. The second interim report from the banking law commission will occupy a key place in this work.

Remuneration principles and their implementation in the preceding year
The annual evaluation of the basic pay of the president and other senior executives is conducted with effect from 1 July. For 2012, this assessment was carried out in the second quarter. The president’s remuneration was considered and approved by the board during the third quarter.

 

 

All figures in NOK 1 000	Fixed fittings	Equipment, etc	ICT	Total
Purchase cost 1 Jan	4 021	8 825	27 990	40 836
Addition fixed assets	-	-	3 742	3 742
Disposal/obsolescence fixed assets	-	(1 385)	(7 914)	(9 299)
Purchase cost 31 Dec	4 021	7 440	23 818	35 279
	��
Accumulated depreciation 1 Jan	2 891	8 614	25 012	36 516
Reversed accumulated depreciation		(1 385)	(7 914)	(9 299)
Depreciation for the year	418	129	2 705	3 252
Accumulated depreciation 31 Dec	3 309	7 358	19 803	30 470
Book value at 31 Dec 12	713	82	4 015	4810
Economic life	Until lease expires in 2014	3-5 years	3 years
Depreciation plan	Linear	Linear	Linear

Operational leasing contracts include the hire of a car as well as office equipment and machines. The initial hire period is three-five years.

 

 

All figures in NOK 1 000	2012	2011	2010
Financial income
Interest income	3 474	3 373	2 843
Currency gain	37	333	188
Other financial income
Financial expenses
Interest expenses	190	308	297
Currency loss	164	266	244
Other financial expenses
Net financial items	3 156	3 133	2 490

 

 

Company	Acquisition date	Business office	Interest	Voting share	Equity 31 Dec	Profit 2012
Petoro Iceland AS	11 Dec 2012	Stavanger	100%	100%	NOK 2 mill	0

Petoro AS has received a contribution of NOK 2 million which is earmarked as share capital for Petoro Iceland AS. This contribution has been offset against the acquisition price of the shares. For that reason, investment in Petoro Iceland has been recorded as NOK 0 in the balance sheet.

 

Other debtors consist in their entirety of pre-paid costs relating primarily to rent, insurance, licences, subscriptions for market
information and VAT credits.

 

Bank deposits total NOK 154.7 million, including NOK 105 million in withheld tax and pension plan assets.

 

The share capital of the company at 31 December 2012 comprised 10 000 shares with a nominal value of NOK 1 000 each. All the shares are owned by the Ministry of Petroleum and Energy on behalf of the Norwegian government, and all have the same rights.

 

 

(All figures in NOK 1 000)	Share capital	Other equity	Total
Equity at 1 Jan	10 000	21 401	31 401
Change in equity for the year
Net income		(8 054)	(8 054)
Equity at 31 Dec	10 000	13 348	23 348

 

The company is legally obliged to have an occupational pension plan pursuant to the Act on Mandatory Occupational Pensions. The company’s pension plan complies with the requirements of this Act.

The company has pension plans covering all its employees, which give the right to defined future benefits. These depend primarily on the number of years of pensionable earnings, the level of pay at retirement and the size of national insurance benefits.

 

Net pension cost (all figures in NOK 1 000)	2012	2011	2010
Present value of benefits earned during the year	23 432	20 788	16 473
Interest expense on pension obligation	7 309	6 879	5 796
Return on pension plan assets	(4 155)	(3 899)	(3 524)
Recorded change in estimates	1 023	652	-198
Payroll tax	3 255	2 854	2 323
Net pension cost	30 864	27 274	20 870

 

Capitalised pension obligation	2012	2011	2010
Estimated pension obligation at 31 Dec	179 553	180 287	142 648
Pension plan assets (market value)	(88 545)	(80 484)	(67 940)
Net pension obligations before payroll tax	91 008	99 803	74 708
Unrecorded change in estimates	(9 585)	(32 028)	(20 875)
Payroll tax	11 481	9 683	7 591
Balanseført pensjonsforpliktelse	92 904	77 458	61 424

The following financial assumptions have been applied in calculating net pension cost and obligation:
 

	2012	2011	2010
Discount rate	4.2%	3.9%	4.6%
Expected return on plan assets	4.0%	4.8%	5.4%
Expected increase in pay	3.5%	4.0%	4.0%
Expected increase in pensions	0.2%	0.7%	1.3%
Expected change in NI base rate	3.25%	3.75%	3.75%

The actuarial assumptions are based on common assumptions made in the insurance business for demographic factors.
 

Other current liabilities relate almost entirely to provision for costs incurred, pay outstanding and holiday pay.


 

Erga Revisjon AS is the elected auditor of Petoro AS. Fees charged by Erga Revisjon to Petoro for external auditing in 2012 totalled NOK 0.2 million.

In accordance with the Act on Government Auditing of 7 May 2004, the Auditor General is the external auditor for the SDFI. Deloitte AS has also been engaged to conduct a financial audit of the SDFI as part of the company’s internal audit function. Deloitte charged NOK 1.5 million for this service in 2012. Deloitte has also executed internal audit projects and delivered services related to partner audits totalling NOK 2.2 million.

 

To ensure efficient resource utilisation with an organisation totalling 65 employees, Petoro sets priorities for its work commitments in and between the interests it manages in the various joint ventures. This prioritisation reflects the significance of each joint venture to the overall value of the portfolio and risk assessments related to the various phases in a joint venture (exploration, development and production). To permit such prioritisation, Petoro has concluded business management agreements with various licence partners. These agreements delegate daily administrative supervision of selected production licences in the portfolio. Petoro nevertheless retains the formal responsibility, including responsibility for on-going financial management of the interest in the production licence. The bulk of the business management agreements have been entered into with Statoil ASA.

 

The company entered into a lease with Smedvig Eiendom AS for office premises in the autumn of 2003. The remaining term of the lease is two years, with options for a further two periods of five years each. Rent for the year was NOK 8.2 million, which included all management and shared expenses.

 

Petoro has entered into an agreement with Upstream Accounting Excellence (Upax) on the delivery of accounting and associated ICT services related to the SDFI accounts. This five-year agreement was entered into in 2008, with delivery starting on 1 March 2009. Evry is the sub-contractor for ICT services. The recorded accounting fee for Upax in 2012 was NOK 15.2 million. Other services purchased from the contractor totalled NOK 0.2 million.
 
 

Statoil ASA and Petoro AS have the same owner in the Ministry of Petroleum and Energy, and are accordingly close associates. Petoro purchased services in 2012 relating to business management agreements, cost sharing for the audit of licence accounts, insurance services for the Norwegian Government Petroleum Insurance Fund and other minor services. NOK 5.5 million was recorded in 2012 for the purchase of services from Statoil ASA. These were purchased at market price on the basis of hours worked. NOK 1.3 million has been invoiced for services rendered to Statoil ASA under the arm’s-length principle, based on hours worked by Petoro personnel and contract staff.