Management comment regarding the SDFI annual accounts
Purpose
Since its establishment in 2001, Petoro has served as the licensee for the state's participating interests in production licences, fields, pipelines and land-based facilities. Petoro is charged with managing the SDFI portfolio on the basis of sound business principles. As of the end of 2024, the portfolio consisted of 183 production licences, eight more than at the beginning of the year. Fifteen production licences were relinquished in 2024. In January 2025, the Ministry of Energy completed its awards in pre-defined areas (APA 2024), where an additional 13 production licences were awarded with SDFI participation.
Petoro's mandate was updated following the increased state ownership in key gas infrastructure in 2024. The company's updated by-laws establish that Petoro, in its management of this infrastructure, shall emphasise socio-economic profitability and sound management of petroleum resources. In its commercial assessments concerning this infrastructure, the company shall therefore take into account efficient operations and operating costs, and the lowest possible user costs over time, given a weighting toward regularity and flexibility, in addition to reasonable return on investments in light of the risk. In decisions associated with this infrastructure, the company shall not assign particular emphasis to the impact on the value of the state's participating interests in production licences.Confirmation
The annual accounts are presented in accordance with the Provisions on Financial Management in Central Government, circular R-115 from the Ministry of Finance, and requirements in the instructions on financial management of the SDFI in Petoro, with the exceptions granted for the SDFI. The board hereby confirms that the annual accounts, which comprise the appropriation and capital accounts prepared on a cash basis, provide a true and fair picture in accordance with the cash basis. The general ledger accounts report presents accounting figures for the SDFI as reported to the government accounts in accordance with the standard chart of accounts for state-owned undertakings.
The Board confirms that the company accounts have been prepared in accordance with the Accounting Act and Norwegian generally accepted accounting principles (NGAAP), and provide a true and fair picture of the SDFI's assets, obligations and financial results at 31 December 2024.Assessment of significant factors
Appropriation and capital accounts
In accordance with the supplemental allocation letter dated 20 December 2024, the SDFI's appropriation for investments1 totalled NOK 36.0 billion. An additional appropriation was also issued to purchase ownership interests2 in key gas infrastructure totalling NOK 11.9 billion. The appropriation for operating income3 totalled NOK 233.3 billion. The appropriation for interest on the state's capital4 totalled NOK 3.8 billion. Operating income in accordance with the cash basis is affected first and foremost by the price of oil and gas and the volume of the SDFI's production sold. Equinor handles marketing and sale of SDFI's products through the Marketing and Sale Instructions issued by the Ministry of Trade, Industry and Fisheries.
The general ledger accounts report on the cash basis shows net reported revenues totalling NOK 311.8 billion in 2024, compared with NOK 355.2 billion in 2023, excluding financial income. The revenues are greatly affected by lower gas prices in 2024. Expenses reported in the appropriation accounts comprise payments of NOK 48.5 billion as investments and NOK 43.5 billion as operating expenses. Payments in 2023 amounted to NOK 30.4 billion related to investments and NOK 53.3 billion related to operations. Payments to operations were primarily related to the operation of fields and facilities, processing and transport costs, as well as exploration and field development expenses. This is in addition to payments of financial expenses. Depreciation of fields and facilities amounted to NOK 29.6 billion in 2024, compared with NOK 27.2 billion the previous year.
1 Ch./item 2440.30
2 Ch./item 2440.31
3 Ch./item 5440.24
4 Ch./item 5440.80
The SDFI accounts include a number of significant estimates which are subject to uncertainties and rely on discretionary assessments. These e.g. include capitalised exploration costs, estimates of reserves as the basis for depreciation, decommissioning expenses based on estimates for costs to be incurred far into the future, and assessment of impairment charges on tangible fixed assets.
Net cash flow to the state from the SDFI at year-end amounted to NOK 220 billion, 57 billion lower than the previous year. This cash flow reduction was primarily caused by lower gas prices and higher investments. The decline was partly offset by increased gas sales and lower expenses for purchasing third-party gas. In spite of the significant reduction compared with 2023, the cash flow for the year is still the third-highest in Petoro's history.
Total production reached 1,063 thousand barrels of oil equivalent per day (kboed), an increase of 70 kboed compared with the previous year.
Gas production amounted to 113 million standard cubic metres (mill. scm) per day, an increase of eleven per cent compared with the year before. This increase was primarily caused by higher gas production from Troll following a capacity increase at Kollsnes, but also robust and stable production from fields such as Oseberg and Dvalin. The average realised gas price was NOK 4.50, compared with NOK 5.76 per scm the previous year. The reason for the lower gas prices is complex, but the primary cause was lower demand, high LNG imports and high storage levels in Europe.
Liquids production amounted to 354 kboed, a reduction of 1 kboed compared with the previous year. The reduction in liquids production was primarily caused by natural production decline and turnarounds on multiple mature fields. This effect was partly offset by new production from Breidablikk, which started up in 2023. The average realised oil price was USD 82, compared with USD 83 per barrel the previous year. Measured in Norwegian kroner (NOK), the oil price was 871, compared with NOK 876 per barrel the previous year. The marginal reduction in the oil price compared with the previous year was caused by growth in global oil production and lower growth in demand, but this effect was offset by voluntary production restrictions among OPEC+ members and higher geopolitical risk.
Investments came to NOK 49 billion, NOK 18 billion higher than the previous year. This increase was primarily caused by the acquisition of key gas infrastructure at a price of NOK 13 billion, as well as investment in an associated company totalling NOK 6 billion. Excluding the acquisition and investment in the associated company, investments were just under NOK 1 billion lower than the previous year. This reduction was caused by less production drilling on Troll, Visund and Statfjord Øst, as well as lower investment levels on Breidablikk and Dvalin after start-up. The decline was partly offset by high activity on multiple projects in the implementation phase, such as Troll phase 3, Snøhvit and Irpa. More production drilling has also taken place on fields like Haltenbanken Vest, Tyrving and Johan Castberg.
Total operating expenses amounted to NOK 72 billion, NOK 14 billion lower than the year before. This reduction was caused by lower costs related to purchasing third-party gas and a partial reversal of previous impairment. The decline was partly offset by increased production expenses.
Costs for purchasing third-party gas amounted to NOK 5 billion, NOK 10 billion lower than the previous year. This decline was mainly caused by lower gas prices in combination with reduced volumes. Parts of the decline were also caused by the implementation of a new LNG model under the Marketing and Sale Instructions, which entered into force on 1 January 2024. The new model entails that Petoro is no longer part of the third-party LNG transactions, with the exception of the Shell agreement, which was entered into in 2020 and expires in 2025.
Production costs amounted to NOK 24 billion, 1 billion higher than the previous year. The increase was caused by general growth in operating and maintenance expenses on multiple fields, partly offset by reduced costs for electricity and environmental taxes.
Transport costs came to NOK 11 billion, which is on par with the previous year.
In 2024, we reversed previous impairment on Martin Linge totalling NOK 2 billion, compared with a total impairment of NOK 5 billion in 2023. The primary reason for this reversal is an updated assessment of remaining reserves.
Total exploration expenses during the period came to just under NOK 3 billion, of which a net of NOK 1.4 billion has been recognised as capitalised exploration costs.
Net income after financial items came to NOK 232 billion, NOK 34 billion lower than the previous year. This reduction was mainly caused by lower revenues as a result of reduced gas prices. The decline was partly offset by increased gas sales, reduced costs for purchasing third-party gas, and partly by reversal of previous impairment.
The book value of assets at 31 December 2024 was NOK 298 billion. The assets mainly consist of fixed assets related to field installations, pipelines and onshore plants, as well as current debtors. Equity at year-end came to NOK 200 billion, which is an increase of NOK 12 billion compared with the year before. The increase was caused by the transfer to the state being 12 billion lower than the annual result for accounting purposes. Overall debt amounted to NOK 98 billion, while NOK 72 billion of this was related to estimated future removal obligations. Removal obligations declined by NOK 3 billion compared with 2023, primarily as a result of a higher discount rate.
The portfolio's estimated remaining reserves totalled 4,129 million boe at the end of the year, down by 346 million boe compared with the end of 2023. Reserve growth amounted to 43 million boe and mainly comes from Oseberg, Gullfaks and Martin Linge. With a production of 389 million boe, this yielded a reserve replacement rate of 11 per cent, compared with 16 per cent in 2023 and 49 per cent in 2022. Additional information
The Office of the Auditor General (OAG) is the external auditor, and approves the annual accounts for the SDFI. Upon completing its annual audit, the OAG issues an auditor's report which summarises the conclusion of its audit work. The result of the audit will be reported by 1 May 2025.
The Board has appointed PwC to conduct a financial audit of the SDFI accounts as part of Petoro's internal audit process. As internal auditor, PwC submits its audit report to the Petoro AS board regarding the annual accounts pursuant to the accounting principles on a cash basis and in accordance with international auditing standards. 
