ANNUAL REPORT
CONTENTS
Highlights
Key figures
About Prosafe
Main events in 2022
CEO letter
Corporate Governance
Directors’ report
Declaration by the Board of Directors and the CEO
Consolidated accounts
Parent company accounts
Independent auditor’s report
2
3
4
5
6
8
18
31
33
70
87
HIGHLIGHTS
Revenues
198.9
million USD
2021: 141.1
Fleet utilisation
70.6%
2021: 54.5%
EBITDA
61.4
million USD
2021: 24.9
Health
1.31%
sickness absence
2021: 0.27%
Employees
182
2021: 103
Biodiversity
0
spills
2021: 0
Safety
0
Lost Time Injury Incidents
2021: 0
Operations
1,738
operating days
2021: 1,407
KEY FIGURES
Note 2022 2021 2020 2019 2018
Profit
Operating revenues MUSD 198.9 141.1 56.7 225.4 330.8
EBITDA MUSD 1 61.4 24.9 (9.5) 97.1 166.6
Operating profit (loss) MUSD 31.9 (49.8) (864.3) (342.6) 53.0
Net profit (loss) MUSD 1.5 927.9 (950.1) (399.9) (114.5)
Earnings per share (fully diluted) USD 2 0.17 263.3 (10,798.2) (4,540.0) (1,300.0)
Balance sheet
Total assets MUSD 500.0 492.8 587.7 1,480.2 1,736.8
Interest-bearing debt MUSD 422.2 423.3 1,509.4 1,397.9 1,243.0
Net interest-bearing debt MUSD 3 330.6 349.4 1,349.1 1,199.8 1,102.7
Book equity MUSD 37.3 36.3 (948.5) 2.4 400.2
Book equity ratio % 4 7.5 7.4 (161.4) 0.2 23.0
Liquidity reserve MUSD 5 91.6 73.9 160.3 198.1 277.3
Net cash flow MUSD 17.7 (86.4) (37.8) 57.8 (91.6)
Net working capital MUSD 6 79.7 61.7 (1,279.3) (1,158.2) 58.7
Valuation
Market capitalisation at year-end MUSD 1,128.0 158.0 10.4 19.7 126.7
Share price NOK 7 128.2 158.4 1,080.0 2,110.0 13,400.0
Operations
Fleet utilisation rate % 70.6 54.5 20.4 50.9
47.3
Emplo
yees
Number of employees at year-end Employees in direct employment 182 103 99 150 417
HSSE
Lost time injuries Per million worked hours 0 0 0 0 1
Total recordable injury frequency Per million worked hours 0 0 1.81 0.82 2.54
Sick leave % of total working hours 1.31 0.27 0.46 2.26 2.07
Notes: 1. Operating profit before depreciation and impairment
2. Net profit / Average number of outstanding and potential shares.
3. Interest-bearing debt - Cash and deposits
4. (Book equity / Total assets) * 100
5. Cash and deposits
6. Currents Assets - Current Liabilities
7. On 27 January 2022, Prosafe completed a 1,000:1 reverse split of the company's shares. As a result, the calculation
of the earnings per share and share price for prior year presented/restated was based on the new number of shares
3
ABOUT PROSAFE
Prosafe is a leading owner and operator of semi-submersible
accommodation, safety and support vessels.
At year-end, Prosafe owned and/or operated six
semi-submersible accommodation, safety and
support vessels and one Tender Support Vessel
(TSV). In addition, the company has options to take
delivery of two new build vessels at the yard.
The company’s versatile fleet of five dynamically
positioned, two anchor moored and one passive
position moored vessels are capable of operating in
the most demanding offshore environments.
Prosafe’s vessels are serving energy
companies on various offshore
projects, primarily in global
offshore oil and gas areas,
but can also serve offshore
wind installations. Prosafe’s
operations are related to the
support of the lifecycle of offshore
installations such as maintenance
and modification of installations on
fields already in production, hook-up
and commissioning of new fields, tie-backs to
existing infrastructure and decommissioning.
The vessels are operated in dynamic positioning
(DP) mode by use of own engines and thrusters or
in a moored mode, while being gangway connected
via a telescopic gangway to the client’s installation
so that personnel can safely walk to work. The
vessels are normally provided on a time charter
basis where Prosafe mans and operates the vessels
directly.
Prosafe’s vessels have accommodation capacity
for up to 500 people and offer high quality welfare
and catering facilities, storage, workshops, offices,
a cinema, medical services, deck cranes and
lifesaving and firefighting equipment.
Prosafe has a long track record from
demanding operations world-
wide, with leading operational
performance and good safety
results. The company has extensive
experience from operating gangway
connected to fixed installations,
FPSOs, TLPs, Semis and Spars.
Prosafe has experience from operations
offshore Norway, United Kingdom, US and
Mexican Gulf of Mexico, Brazil, Australia,
South East Asia and West Africa.
Prosafe is listed on the Oslo Stock Exchange
with ticker code PRS.
Prosafe has
experience from
operations offshore Norway,
United Kingdom, US and
Mexican Gulf of Mexico, Brazil,
Australia, South East Asia
and West Africa.
Vision
To be a leading and innovative provider of
technology and services in selected niches of
the global offshore energy industry.
Mission
To provide customers with innovative and
cost-efficient solutions in order to maximize
shareholder value and to create a challenging
and motivating workplace.
Strategy
To be the preferred provider of high-end
accommodation vessels globally.
Values
Profitability, Respect, Innovation, Safety,
Ambition, Focus, the Environment
4
• Good health, safety and environmental results
with zero Lost Time Injuries and zero accidental
discharges to the natural environment.
• The fleet utilisation for the year was 70.6 per cent
(2021: 54.5 per cent), the highest utilisation rate
since 2014.
• Secured new contracts for Safe Concordia in
Trinidad and in the US Gulf of Mexico, and two
four-year contracts for Safe Notos, Safe Eurus and
a 650-day contract for Safe Zephyrus in Brazil.
• Certified to the ISO 50001 Energy Management
standard in January 2022.
• Further increased focus on energy management
and emissions reduction and established an Energy
Management team to drive the effort.
MAIN EVENTS
IN
55
CEO LETTER
– TAILWINDS FOR OFFSHORE ENERGY
2022 was a very busy year for Prosafe with the highest fleet
utilisation since 2014.
Global events turned the focus to security of energy supply
which may provide tailwinds for the offshore service
industry for the coming years.
The global energy agenda pivoted around February
2022 and changed direction with 180 degrees in 180
days - from focusing on leaving hydrocarbons in the
ground at COP26 in Glasgow in November 2021, to
ensuring security of energy supply from dependable
sources in the spring of 2022.
Although the energy transition is both inevitable and
desirable, 2022 was a stark reminder of the need for
a stable and dependable supply of energy to ensure
an orderly transition. This will likely create tailwinds
for the oil services industry in the years to come
and generally take time. It also demonstrates the
industry’s valuable contribution to the security and
economic well-being of our societies.
The society’s requirement to businesses to reduce
their environmental impact has further intensified
in 2022. We have done the same in Prosafe and will
play our part. The first important reduction steps
were taken in 2022 when a new engine configuration
reduced CO2 emissions by 15-20 % for a dynamically
positioned rig. To further improve, we have set
a target of 50% emission reduction by 2030 and
established an Energy Management team to drive the
effort. Meeting the target will require harnessing our
decades of competence with tomorrow’s technology
6
and ways of working, as well as support from our
customers. Our vessels are the main driver behind the
emission reduction targets.
The strategy in Prosafe stands on a number of
strategic pillars which aim at maximizing the value
of our existing assets and growing our fleet and
our business to remain the leading player within
our niche. We have included the organisation in
setting the strategic priorities and have improved
our performance management tools. Prosafe is
managed with the aim to create competitive
shareholder value, opportunities for our
employees and a positive impact on
our surroundings.
In 2022, we saw revenue grow
by 41% and EBITDA increase by
147%. We added almost 10 years
of contract backlog for our vessels
working for Petrobras in Brazil.
We had 6 of our 7 vessels working
for all or part of the year in Norway,
UK, Trinidad & Tobago and Brazil. We had
high operational and commercial activity, and
our co-workers have been very busy in 2022. Their
contribution has been vital to our ability to operate
safe and cost-efficiently. Thank you!
The focus on security of energy supply bodes well
for the activity in our core markets in the North Sea
and Brazil. In Brazil, the production infrastructure will
grow in the years to come with a number of new
FPSOs coming on stream. Our activities in Brazil
are mainly linked to the regular maintenance and
modification of the production infrastructure. In the
North Sea, 2022 has seen a record high number of
Plans for Development and Operation submitted in
Norway and many projects sanctioned in the UK.
High activity in the early parts of the value chain
traditionally translate into demand for our services /
vessels during implementation, although it is too
early to say when and where. We expect day rates to
continue to further improve and deem it likely that
situations of scarce supply of our services may
occur in the coming years as activity looks
to be increasing with supply remaining
stable or declining.
Health and safety lies at the heart
of what we do and we promote a
zero-mindset philosophy which
means that no accidents or incidents
are acceptable. Our health and safety
statistics in 2022 are very good and
include zero Lost Time Incidents (LTI)
and sick leave of just 1.31%. The key is the
continued daily focus on the activities which form
the basis for achieving and maintaining excellence in
health and safety.
We continued our increasingly more important
ESG work in 2022. Main projects were the ongoing
emission reduction project, a climate risk review in
accordance with the Task Force on Climate-related
Financial Disclosures, a reassessment of our material
impact, the implementation of required actions to
comply with the Norwegian Transparency Act and
an adaptation of our Environmental, Social and
Governance (ESG) reporting to comply with the
Sustainability Accounting Standards Board reporting
standard. Overall, both the quality and transparency
of our ESG efforts have increased.
The year 2022 has also been characterized by
inflationary cost pressure, longer lead times on
equipment and increasing interest rates. Prosafe
is not immune to these effects. Our lean operating
model and flexible cost structure provide some
cushion against the inflationary cost pressures.
We remain unhedged on our interest expenses.
The outlook for 2023 is somewhat mixed. We will
have three vessels on contract with Petrobras in Brazil
for most of the year and one vessel commencing
working in the USA. The outlook for the North Sea
following a year with very high activity is more
uncertain and may only pick up from 2024 when we
have 2-3 vessel available for hire.
Finally, I would like to thank our shareholders and
lenders for their confidence in and continued support
of Prosafe. We are confident in our ability to benefit
from the tailwind in the industry and thereby protect
and create value for our stakeholders in the years
ahead.
Stay safe,
Jesper Kragh Andresen, CEO
7
In 2022, we saw
revenue grow by 41%
and EBIDTA increase by 147%.
We added almost 10 years of
contract backlog for our
vessels working for
Petrobras in Brazil.
CORPORATE
GOVERNANCE
Stock Exchange. The corporate governance framework forms the basis for a
transparent business model with a clear segregation of roles, responsibilities
and accountabilities between shareholders, the Board of Directors and executive
management. Corporate governance in the company follows the principles
contained in the Norwegian Code of Practice for Corporate Governance in its latest
version of 14 October 2021 (the “Code of Practice”).
. IMPLEMENTATION AND REPORTING
ON CORPORATE GOVERNANCE
This report on Corporate Governance accounts for the company’s corporate
governance principles and practices as required by the Accounting Act Section
3-3b and how Prosafe complies with the Code of Practice. Application of the Code
of Practice is based on the “comply or explain” principle, which stipulates that any
deviations from the Code should be explained. In the company’s own assessment,
Prosafe did not deviate from any sections of the Code of Practice at year-end 2022.
The Code of Practice covers 15 topics which are designed to ensure that the
division of roles between shareholders, the Board of Directors (“the Board”) and the
company’s executive management is regulated in a way that strengthens confidence
among shareholders, employees, the capital market and other interested parties
to ensure control and compliance, equal treatment of shareholders and maximum
value creation over time.
The company’s Corporate Governance Report covers every section of the Code of
Practice and is included in the annual report and published on Prosafe’s website at
https://www.prosafe.com/investor-information/corporate-governance/
GOVERNANCE STRUCTURE
Prosafe’s governance structure is set out below.
. THE BUSINESS
Prosafe’s business is defined in Article 3 of the company’s Articles of Association:
Prosafe SE shall own and operate vessels and other offshore tonnage, related to oil
and gas activities, as well as conduct any activity related to ownership and operation
related to this. Prosafe SE may invest in companies within the same or other sectors.
The Board of Directors has established objectives, strategies, and a risk profile
for the business within the scope of the definition of its business to create
value for its shareholders in a sustainable manner, considering economic, social
and environmental considerations. The company’s objectives, strategies and
the greatest possible value creation over time in the best interests of shareholders, employees and other
stakeholders.
SHAREHOLDERS
BOARD OF DIRECTORS
MANAGEMENT
Nomination Committee
Audit Committee
Ethics Committee
External Auditor
Compensation Committee
9
risk profile are subject to at least an annual review by the Board. The reviews
are supplemented by ongoing dialogue between the Board and executive
management, monthly reporting and ad hoc weekly reporting and updates of all
significant matters.
. EQUITY AND DIVIDENDS
Equity and capital structure
Prosafe’s consolidated shareholders’ equity as at 31 December 2022 amounted to
USD 37.3 million (2021: USD 36.3 million), equivalent to 7.5 per cent (2021: 7.4 per
cent) of the Group’s total assets.
Dividend policy
Prosafe’s longer term ambition is that its shareholders receive a competitive
return on their investment in the company through a combination of share price
appreciation and a direct return in the form of dividends.
The company has not paid dividends since 2015. Under the latest amended and
restated loan agreements, following the restructuring in December 2021, dividends
may only be paid after obtaining prior written consent of two-thirds of the lenders.
Board authorisations
Mandates and authorities for different purposes such as increase
of share capital or share buy-backs are considered separately
at each annual general meeting (“AGM”) and are generally
limited in time and valid to the date of the next AGM. As at
31 December 2022, the Board held no mandates for share
capital increases or share buy-backs.
In January 2022, the company executed a reverse
share split whereby 1,000 shares became
1 share. No equity buy-backs or share
issues were executed during the year.
. EQUAL TREATMENT OF SHAREHOLDERS
Pre-emption rights to subscribe
Should the Board wish to propose that the AGM departs from the pre-emptive
right of existing shareholders relating to any capital increase, such a proposal will
be justified by the common interest of the company and the shareholders, and
the reasons for the proposal will be presented in the notice of the AGM as well
as publicly disclosed in a separate stock exchange announcement.
Trading in own shares
In the event of a share buy-back programme, the Board of Directors will aim to
ensure that all transactions are carried out either through the trading system or
at prevailing prices at the Oslo Stock Exchange. In the event of such programme,
the Board of Directors will take the company's and shareholders' interests into
consideration and aim to maintain transparency and equal treatment of all
shareholders. If there is limited liquidity in the company’s shares, the company
shall consider other ways to ensure equal treatment of all shareholders.
. SHARES AND NEGOTIABILITY
Prosafe has one class of shares in issue and all shares are equal in all respects. The
shares are freely transferrable on the Oslo Stock Exchange. The company’s Articles
of Association place no limitations on voting or restrictions or on any party’s ability
to own, trade of vote for shares in the company.
. GENERAL MEETINGS
The Board of Directors will make its best effort to facilitate that as many
shareholders as possible may attend and exercise their right to speak and vote at
general meetings, thereby making the general meeting an effective forum for the
views of shareholders and the Board. Shareholders holding at least 5 per cent of the
issued and voting shares are entitled to submit matters for inclusion on the agenda
of a general meeting. An extraordinary general meeting (EGM) can be called by the
Board of Directors if deemed necessary or be requested by the company’s auditor or
shareholders representing at least 5% of the company’s share capital.
Written notice of an AGM and a meeting calling for adoption of a special resolution
is sent out not later than twenty-one days before the scheduled meeting unless
special notice is required by law. The resolutions and supporting information
are sufficiently detailed, comprehensive and specific to allow shareholders to
form a view on all matters to be considered at the meeting. Both these and any
recommendations of the Nomination Committee enabling shareholders to take
an informed position on all matters to be discussed are made available within the
relevant timeframe on the company’s website.
Shareholders wishing to attend the general meeting, either in person or online,
must notify the company of this intention before the deadline stipulated in the
notice. The Board aims to facilitate the attendance of as many shareholders as
possible. As stipulated in Prosafe’s Articles of Association, shareholders intending
to participate in the general meeting shall notify the company of this no later than
two days prior to the general meeting.
11
The Chairman (or in exceptional circumstances, another member of the Board), the
auditor and the Chairman of the Nomination Committee attend the AGM. Prosafe
wishes to facilitate a dialogue with shareholders at the general meeting, and
therefore encourages all Board members to attend. The Chairman normally chairs
the general meetings and the Board ensures that the general meeting is able to
appoint an independent chairman.
Prosafe prepares proxy forms and conducts the voting arrangements at the
meeting in a form and manner which allows shareholders to vote separately
on each matter to be considered by the meeting and for each of the candidates
nominated for election.
The 2022 AGM was held on 11 May 2022 with 59.22 per cent of the share capital
represented.
. NOMINATION COMMITTEE
The Nomination Committee is governed by the Articles of Association’s section 8.
The AGM on 11 May 2022, re-elected the following two members for the
Nomination Committee for a period of one year: Thomas Raaschou (Chair) and
Annette Malm Justad. The committee members are independent of the Board of
Directors and executive management.
The general meeting stipulates the guidelines for the duties of the committee and
determines the committees’ remuneration. The current instructions were revised in
2019 and approved by the AGM.
The Nomination Committee submits its recommendations to the general meeting
for election of and compensation to members of the Board of Directors, in addition
to members of the Nomination Committee. Each proposal is justified on an
individual basis. All shareholders may nominate candidates to the Board. Relevant
deadlines for submitting proposals for candidates to be appointed to the Board or
the Nomination Committee are published on the company’s website in due time
before the AGM takes place.
The Nomination Committee held twelve meetings in 2022. Average meeting
attendance was 100 per cent.
12
Name Role
Date
first time
appointed
Date
due for
re-election
Meeting
attendance
(%)
Thomas Raaschou Chair May 2011 May 2023 100
Annette Malm Justad Member May 2016 May 2023 100
Name Role
Date
first time
appointed
Date
due for
re-election
Meeting
attendance
(%)
Glen Ole Rødland Chairman March 2016 May 2023 100
Alf C. Thorkildsen
Deputy
Chairman* May 2020 May 2023 100
Birgit Aagaard-Svendsen Director March 2017 May 2023 93.3
Nina Udnes Tronstad Director May 2019 May 2023 100
Halvard Idland Director May 2022 May 2023 100
. BOARD OF DIRECTORS:
COMPOSITION AND INDEPENDENCE
Pursuant to the articles of association section 5, the company's Board of Directors
shall consist of three to seven members. On 31 December 2022, the Board
consisted of five members as described in the table below. The directors are
appointed for one year and all directors may be re-elected in 2023. The general
meeting appoints the Chairman of the Board. At the AGM on 11 May 2022, Halvard
Idland was elected as a new member of the Board. The remaining four members
were re-elected.
The Board held 15 Board meetings in 2022. Average meeting attendance was 98.5
per cent.
The Board members are independent of the company’s executive personnel and
material business contacts and save for Alf C. Thorkildsen also independent of the
company's main shareholders.
The directors have been appointed to ensure that a broad base of appropriate
expertise, capacity and diversity is reflected on the Board. Working constructively
together with its committees’ and the company’s administration, the Board
oversees the strategic direction, targets, reporting, management and control of the
company.
Directors are encouraged to own shares in the company. Information about each
director, their experience and shareholding is available on Prosafe’s website.
*Alf C. Thorkildsen was appointed Deputy Chairman in February 2022
. THE WORK OF THE BOARD
OF DIRECTORS (“THE BOARD”)
The duties of the Board
The Board of Directors is responsible for the overall management of the company
and supervision of day-to-day management and the company’s business activities,
including organisation, strategy, planning, reporting, and establishing of control
systems. This includes regulation of the duties of the Board of Directors and
the Chief Executive Officer (CEO), the division of work between the Board of
Directors and the CEO, the annual plan for the Board of Directors, notices of Board
proceedings, administrative procedures, minutes, Board committees, transactions
between the company and the shareholders and confidentiality. The Board of
Directors has an annual plan for its work which is revised at regular intervals.
Agreements with related parties
Any transactions, agreements or arrangements between the company's
shareholders, members of the Board, members of the executive management
team or close associates of any such parties may only be entered into as part
of the ordinary course of business and on arm's length market terms. All such
transactions shall, where relevant, comply with the procedures set out in the
Norwegian Public Limited Liability Companies Act and the Norwegian Code of
Practice for Corporate Governance.
13
The Board shall arrange for a valuation to be obtained from an independent
third party for transactions with related parties, including agreements that
are considered immaterial. The Board's annual directors' report shall provide
information about any transactions with related parties. The Board will when
required or otherwise deemed appropriate arrange for a valuation to be obtained
from an independent third party.
Board members shall immediately notify the Board and members of the executive
management team shall immediately notify the CEO (who, where relevant,
will notify the Board) if they have any material direct or indirect interest in any
transaction entered into by the company. For information regarding related party
transactions, see note 21 of the consolidated accounts.
Instructions for the Board
Prosafe’s Board Instructions give an overview of function, duties and responsibility
of the Board, including procedures for Board meetings. The Board shall determine
the vision, values and long-term objectives of the company. The Board shall also
contribute with external expertise and experience to the company's management.
The Board has adopted instructions for management specifying their respective
duties, authority and responsibilities in relation to the business. The CEO has a
particular responsibility for ensuring that the Board receives precise, relevant and
timely information enabling it to discharge its duties.
Scheduled Board meetings are normally held six to eight times a year, but the
work schedule is flexible and otherwise adaptable to take into account relevant
commercial, operational and strategic circumstances. Internal segregation of
responsibilities and duties between the Board and management is established in
several corporate documents including corporate policies and procedures, approval
matrices and delegated authorities, Board approvals for budgets and forecasts
and specific investments, and the grant of specific powers of attorney in respect of
particular transactions.
The Chairman has a particular responsibility for ensuring that the Board’s work is
well organised and efficiently conducted. The Chairman of the Board encourages an
open and constructive debate within the Board and with management.
The Board’s evaluation of its own work
The Board undertakes an annual assessment of its own performance and expertise,
working methods, composition and the manner in which the directors function,
both individually and collectively, in relation to the goals set for their work. In
this context, the Board also assesses itself in relation to corporate governance.
The assessment is made available to the Nomination Committee as a tool for
continuous improvement.
Conflicts of interest and disqualification
The Board has implemented various policies and procedures to avoid conflicts of
interest between directors, executive management, their close associates and
external third parties with whom the company collaborates.
Members of the Board and executive management cannot consider items in which
they have a special and prominent interest, cf. the rules on disqualification in the
Public Companies Act.
Directors and executive personnel must notify the Board if they have any material
direct or indirect personal interest in any agreement concluded by the group.
Neither the Board members nor the CEO shall participate in the preparation,
deliberation, or resolution by the Board of any matters that are of such special
importance to themselves or any of their related parties that the person in question
is deemed to have a prominent personal or financial interest in these matters. The
relevant Board member or the CEO shall raise the issue of his or her independence
whenever there may be cause to question it and is the primary responsible for
adopting the correct decision as to whether he or she should step down from
participating in the discussion of the matter at hand.
Throughout the year, no potential conflicts of interest have been declared by any
members of the Board or of Executive Management. In the event of any potential
conflict of interest, appropriate action will be taken to protect against such
potential conflicts which includes for example the individual not participating
in the relevant part of the Board meeting and/or abstaining from voting on the
relevant matter.
Audit Committee
The Audit Committee is a sub-committee of the Board of Directors, and acts as a
preparatory body in connection with the Board's supervisory roles with respect to
financial reporting and the effectiveness of the company's internal control system.
It also attends to other tasks assigned to it in accordance with the instructions for
the Audit Committee adopted by the Board of Directors. At 31 December 2022, the
Audit Committee comprised Board members Birgit Aagaard-Svendsen (Chair) and
Halvard Idland. Both are considered independent of the company and have relevant
skills and experience within accounting or auditing.
The Committee operates based on a generic annual plan and undertakes
an examination and evaluation of the adequacy and effectiveness of the
organisation’s governance, risk management and internal controls, monitors the
financial reporting process and prepares the Board’s follow up on such issues.
The Audit Committee is tasked from time to time with the carrying out of special
investigations designed to assess the overall risk management system within the
Group.
The Audit Committee meets six to eight times a year and holds closed sessions
with the appointed auditor on at least an annual basis without the company’s
management being present. The appointed auditor participates at all Audit
Committee meetings.
The Audit Committee reports and makes recommendations to the Board of
Directors, but the Board of Directors retains responsibility for implementing such
recommendations.
The Audit Committee held six meetings in 2022. Average meeting attendance was
100 per cent.
Compensation Committee
The Compensation Committee is a sub-committee of the Board and its objective
is to act as a preparatory body for the Board’s work relating to employment
terms and performance review for the CEO as well as strategy and principles for
remuneration of executive management. The Compensation Committee operates
based on a generic annual plan. At 31 December 2022, the committee comprised of
Board members Nina Udnes Tronstad (chair) and Alf C. Thorkildsen, who are both
independent of the company’s executive management.
The Compensation Committee held six meetings in 2022. Average meeting
attendance was 100 per cent.
14
Name Role
Date
first time
appointed
Date
due for
re-election
Meeting
attendance
(%)
Birgit Aagaard-Svendsen Chair May 2017 May 2022 100
Glen O. Rødland Member May 2020
Resigned
May 2022 100
Halvard Idland Member May 2022 May 2023 100
Name Role
Date
first time
appointed
Date
due for
re-election
Meeting
attendance
(%)
Nina Udnes Tronstad Chair May 2019 May 2023 100
Alf C. Thorkildsen Member May 2020 May 2023 100
. RISK MANAGEMENT
AND INTERNAL CONTROL
The Board is responsible for ensuring that sound internal control and risk
management systems, that are appropriate for the extent and nature of the
company’s activities, are in place. The Board conducts an annual review of all risk
areas and the internal control procedures.
Prosafe categorises its primary risks under the following headings: strategic,
commercial, operational, compliance and legal, financial, climate and IT/Cyber-
security related. The Board and senior officers manage these risks through
continuous assessments, reporting and periodic reviews in management and
Board meetings, and as part of the rolling strategy and planning processes. These
risks and associated sensitivities as well as internal control measures are described
in more detail at https://www.prosafe.com/investor-information/corporate-
governance/risk-management/ and in a separate Risk Management Policy.
The risk management methodology applied by management and the Board is in
accordance with industry and market practices generally and as implemented in
Prosafe over several years.
The Audit Committee assesses the integrity of Prosafe’s accounts and follows up
on behalf of the Board on issues related to financial review and external audit of
Prosafe’s accounts. Furthermore, the Board and the Audit Committee supervise and
verify that effective internal control systems are in place, including systems for risk
management and financial reporting, and satisfactory routines for following up
adherence to the company’s ethical guidelines.
Management maintains a risk and opportunity register that includes all risks
of material significance for the company. This register is reviewed regularly in
Board meetings and is followed up by management and the Board in the form of
strategies and mitigating actions. The Board conducts also an annual review of all
risk areas and the internal control system.
15
All significant tenders and projects are reviewed by the company’s Bid Committee.
The scope of the reviews includes all aspects which may impact the financial results
and good reputation of Prosafe. The Bid Committee acts to safeguard and support
tender processes to ensure client tenders have an acceptable balance between risk
and reward, and that awarded projects are driving risk mitigating measures in order
to meet quality, delivery and financial targets. The committee has an advisory role
towards the tender and subsequent project teams within authorities provided by
the Board.
. REMUNERATION OF THE BOARD
The AGM resolves directors’ fees based on the recommendation from the
Nomination Committee. The remuneration of the Board reflects its responsibilities,
expertise, time commitment and the complexity of the business.
The remuneration of the Board is not linked to the company’s performance
and none of the current Board directors have a pension scheme or agreement
concerning pay after termination of their office nor have they received any share
options.
In addition, a fee of USD 1,500 is payable to directors, Board Committee members
and Board representatives to the Nomination Committee attending Board or
Committee meetings held away from their home country.
Information relating to the total remuneration to the Board for 2022 is set out in
note 6 of the consolidated accounts.
Chair Deputy Chair Directors
Board USD 110,000 USD 84,000 USD 68,000
The fees payable to the members of the Board Committees are as follows:
Committee Chair
Members
and Board
representatives Other
Nomination Committee USD 7,500 USD 5,000
Additional USD
850 per meeting
Compensation Committee USD 15,000 USD 10,000 N/A
Audit Committee USD 20,000 USD 10,000 N/A
Based on the need for directors to be independent of the company’s executive
personnel, none of the directors has any specific assignments for Prosafe beyond
their role as director.
. REMUNERATION OF
EXECUTIVE PERSONNEL
The Board determines the terms of employment of the CEO and executive
management and has prepared guidelines for salary and other remuneration which
are clear and easily understandable and contributes to the company’s commercial
strategy, long-term interest and financial viability.
Remuneration for executive management comprises three principal elements, base
pay, variable pay and other benefits such as pension to ensure convergence of the
interests of executive management and shareholders. Prosafe aims to provide a
competitive total remuneration to attract and retain senior executives with the
desired skills and experience.
The variable pay of executive management is performance related and cannot
exceed the executive’s gross annual salary for the same calendar year. The amount
paid to an executive under the short-term incentive program and long-term
incentive program combined cannot exceed five times his/her annual fixed cash
remuneration in the relevant year. The variable pay is linked to the operations
and development of the company and aligned with the Prosafe’s strategy, ethical
guidelines and values to support sustainable value creation for shareholders.
The Executive Remuneration Policy and the Board’s Report on Executive
Remuneration were presented to and adopted by the AGM in 2022. The report
was presented for a consultative vote, except for the part regarding guidelines for
share-based remuneration or remuneration linked to the company’s share price
development which were subject to a separate vote. For further details relating
to remuneration paid to executive management, see note 6 of the consolidated
accounts and the Executive Remuneration Policy and the Board’s Report on
Executive Remuneration attached to the 2022 AGM notice.
. INFORMATION AND COMMUNICATION
Prosafe has adopted an investor relations policy which covers guidelines for the
company’s contact with shareholders and the financial community. In order
to ensure equal treatment of shareholders for the purpose of creating a good basis
for a fair and correct pricing of the company’s financial instruments, Prosafe aims
to provide clear, up-to-date and timely financial and other information about
the company’s operations to the financial market. This shall take place through
the timely distribution of price-sensitive information to the market, at all times
handled in compliance with applicable market rules and practices.
Prosafe publishes interim reports and presentations on a quarterly basis. Investor
presentations in the form of audiocast or webcast are held in connection with
the reporting of annual and interim results to give an overview of operational
and financial developments. An ongoing dialogue is otherwise maintained with
analysts and investors. All information distributed to the company’s shareholders is
published in English on the company’s website at the same time as it is sent to the
Oslo Stock Exchange and www.newsweb.no.
. TAKE-OVERS
There are no defence mechanisms against take-over bids in Prosafe’s Articles
of Association, nor have any other measures been implemented to specifically
hinder acquisitions of shares in the company. The Board has not established
written guiding principles for how it will act in the event of a take-over bid, as such
situations normally are specific and one-off by nature, which make a guideline
challenging to prepare.
16
If an offer is made for the company’s shares, the Board will ensure that all
shareholders are treated equally and seek to ensure that the company’s activities
are not unnecessarily interrupted. The Board will act in the best interest of
shareholders and ensure that they have sufficient information and time to assess
the offer. The Board will prior to the expiry of the offer period, issue a statement
evaluating the offer and make a recommendation as to whether shareholders
should or should not accept the offer. In such a situation, Prosafe will act in
accordance with the applicable principles for good corporate governance.
. AUDITOR
The company’s external auditor is KPMG AS. The auditor is appointed by the general
meeting and is independent of Prosafe SE.
Each year, the auditor presents the audit plan for the company to the Audit
Committee. The auditor also meets with the full Board at least once a year in
connection with the preparation of the annual financial statements and a review
of the financial reporting and internal control procedures, including weaknesses
identified by the auditor and proposals for improvement. At least once a year, the
independent auditor meets with the Board without the presence of any member of
executive management.
The Audit Committee supports the Board in the administration and exercise of
its responsibility for supervision of the auditor’s work, who shall keep the Board
informed of all aspects of its work for Prosafe.
The auditor attends all Audit Committee meetings.
17
Company policies govern the use of the auditor’s services. Use of the auditor for
services other than the audit of Prosafe requires approval by the Audit Committee.
The renumeration of the auditor is approved by the AGM. Fees for audit work and
other services are reported by the Board to the General Meeting. For more details,
see note 7 of the consolidated accounts.
28 March 2023
The Board of Directors of Prosafe SE
(original signed)
Glen Ole Rødland Alf C. Thorkildsen
Non-executive Chairman Non-executive Deputy Chairman
Birgit Aagaard-Svendsen Nina Udnes Tronstad
Non-executive Director Non-executive Director
Halvard Idland Jesper K. Andresen
Non-executive Director Chief Executive Officer
17
DIRECTORS’ REPORT
The directors present their annual report of Prosafe SE (the “Company” or the “Parent Company”) and its
subsidiaries (the company and its subsidiaries referred to as the “Group” or “Prosafe”) together with the
Group’s and the Parent Company’s audited financial statements for the year ended 31 December 2022.
INTRODUCTION
The Parent Company, Prosafe SE, is legally domiciled
in Norway and is the ultimate owner of all Group
companies.
In December 2021, the company concluded a financial
restructuring and established a more sustainable
capital structure. The restructuring followed the
general downturn in oil and gas activity as well as
structural changes to the industry. Prosafe used the
downturn to adapt its operating model, rightsize its
organisation and enhance its fleet while continuing
safe and efficient operations.
During 2022, Prosafe experienced high fleet activity,
increased order backlog and improved financial results
from its operations. This was driven by a strong oil
price as well as increased maintenance activity by
operators.
STRATEGY
Prosafe’s strategy is to be the preferred supplier
of high-end offshore accommodation vessels
globally. Prosafe expects continued demand for
accommodation vessels and services in the coming
years amid a gradual energy transition. Prosafe
believes sector returns will improve on the back of
increased oil and gas activity and a reduced supply of
accommodation rigs globally.
OPERATIONS AND PROJECTS
As at year-end, the fleet comprised seven fully owned
vessels, plus options for two new builds, the Safe Nova
and the Safe Vega, at yard in China. During 2022, a
typhoon damaged the new builds and the yard has
initiated repairs.
Specifications for each of the vessels and details of
the current contracts can be found on the company’s
website https://www.prosafe.com/fleet/vessels/
Safe Zephyrus operated for bp at ETAP in the UK
North Sea from 22 January until 21 December 2022.
On 8 December 2022, Petrobras chartered the Safe
Zephyrus to provide gangway connected operations
in Brazil from 1 May 2023. The contract has a firm
period commitment of 650 days with a contract value
of approximately USD 73 million (equivalent to USD
112,500 per day). Certain contract and regulatory
compliance scopes must be performed to ensure
contract commencement in May 2023.
Safe Boreas completed a contract on the Norwegian
Continental Shelf between 1 May 2022 and 29 July
2022. A UK client chartered the Safe Boreas to provide
gangway connected operations to support a platform
in the UK North Sea from 22 September 2022 to 1
November 2022. The vessel is now in lay-up in Norway
pending future work.
The Safe Caledonia remained in-field and on a
stand-by day rate until early March 2022. On 7
March 2022, Safe Caledonia re-started operations
for TotalEnergies at the Elgin platform in the UK. The
contract was successfully completed on 2 December
2022 and the vessel is currently laid up in the UK
pending future work.
19
Safe Eurus has been providing safety and maintenance
support to Petrobras in Brazil since November 2019
on a contract with a firm duration until February
2023. On 25 May 2022, Safe Eurus was awarded a
four-year contract with Petrobras which commenced
on 17 February 2023, following from the expiry of
the last contract. The total value of the contract
is approximately USD 126 million. Safe Eurus was
originally expected to be off-hire for approximately
35 days in April/May 2023 for Petrobras contract
compliance works and hull cleaning. The off-hire
period has now been moved to Q1 2024. Prosafe will
in parallel execute the vessel’s next Special Periodic
Survey (SPS) which is due in Q2 2024.
Safe Notos has been operating for Petrobras in Brazil
since December 2016. Safe Notos commenced a new
four-year contract with Petrobras on 18 July 2022, in
direct continuation of the previous contract. The total
value of the new contract is approximately USD 110
million. Safe Notos is expected to be off-hire in May
2023 during which Petrobras contract modification
and hull cleaning will be conducted.
Safe Concordia commenced a contract in Trinidad
and Tobago in July 2021. The contract was initially
scheduled to complete in mid-March 2022. BP
chartered the vessel in direct continuation of the
previous contract and Safe Concordia continued
operations in Trinidad until 30 September 2022. In
October, Prosafe announced a contract with a major
operator to provide accommodation support in the
US Gulf of Mexico. The firm duration of the contract,
commencing within a window of July through
September 2023, is 330 days with up to 6 months of
options. The value of the firm period is approximately
USD 33 million. A standby rate of USD 28,000 per day
has been agreed for the period from 1 August 2023
until commencement. Safe Concordia is laid up in
Curaçao where ramp-up and mobilization works have
started for the upcoming project in the US Gulf of
Mexico.
Safe Scandinavia is laid up in Norway and is being
marketed broadly.
Prosafe is focused on the efficient execution of
mobilization and preparations for the contracts in
Brazil and the US Gulf of Mexico with commencement
in 2023. These will require investments and working
capital during the first half of 2023. In addition, the
company is preparing for potential contracts in 2024.
Prosafe is increasing its efforts within Environmental,
Social and Governance (ESG) related factors including
energy management to reduce energy consumption
and emissions and to comply with laws and
regulations. Prosafe does not undertake specific
Research & Development activities. However,
the company has established an Energy
Management team to focus on energy
management to adapt to the global
ambition to achieve energy efficiency,
reduce emissions and assure
compliance with ISO 50001.
Prosafe received formal
ISO 50001 certification
in January 2022.
20
ORDER BACKLOG
The total order backlog
1)
on 31 December 2022
amounted to USD 357 million (USD 152 million)
of which USD 332 million relates to firm contracts
and USD 25 million relates to options. Secured
utilisation for 2023 is currently 41.6 per cent, while
secured utilisation for 2024 is 49.8 per cent.
CORPORATE SOCIAL
RESPONSIBILITY
AND ESG REPORTING
Prosafe views Corporate Social Responsibility
(CSR) as an integral part of being an efficient and
value-generative business. Prosafe is committed to
maintaining high ethical, social, environmental and
governance standards, identifying, addressing and
reporting its ESG impact, and creating sustainable
values for the benefit of its stakeholders and the
society at large wherever the company operates.
The company uses internationally recognised
standards for identifying (GRI) and reporting
(Sustainability Accounting Standards Board) material
ESG topics. In 2022, Prosafe completed several
significant ESG projects: a materiality review of
material ESG topics using GRI 3 Materiality Standard,
a climate risk review that covered the risk categories
described in the TCFD framework, an independent
GHG emissions accounting (including scope 3
emissions where data available), and an ESG reporting
upgrade including SASB Marine Transportation and Oil
and Gas Services Standards.
In 2022, Prosafe reviewed its responsible supply chain
process and initiated a number of actions as part of
the implementation of the Norwegian Transparency
Act.
A full Norwegian Transparency Act Statement will
be published on Prosafe’s website together with this
annual report.
MARKETS
North Sea: Norway and UK
The North Sea (UK and Norway) remains a key market
for semi-submersible accommodation vessels. In 2023,
the company has two vessels idle and available for
charter in the North Sea. Beyond 2023, the company
expects higher activity levels due to increased demand
for accommodation to meet project requirements
in both Norway and the UK. Future accommodation
vessel demand will likely be driven by the continued
need for oil and gas throughout the energy transition
21
1)
Order backlog = amount of contracted revenue not yet recognised in the income statement
and high energy prices which drive investments
in field development and maintenance as well as
investments in offshore renewable energy generation.
Brazil
The main demand driver in Brazil is maintenance and
modification work on the large and growing fleet
of FPSOs. Semi-submersibles remain the preferred
design for long term charter contracts with Petrobras
as units for maintenance and safety (UMS). Prosafe
classifies the region as a core market. Demand for
large accommodation vessels fell from its peak of
nine vessels in 2015 to five vessels in mid-2018. It is
forecasted that there will be a long-term requirement
for seven to ten vessels in Brazil.
The most recent awards by Petrobras in 2022 reflect
day rates increasing from approximately USD 75,000
to USD 112,500. In addition, other international
operators have required accommodation vessels to
support both newer installations and aging assets
owned and/or leased by Equinor, Shell, Modec and
SBM. UMS demand is expected to increase with the
planned installation of a large number of new FPSOs
in Brazil the coming the years, and Prosafe expects
further tenders in 2023 and beyond.
Rest of the world
Demand for semi-submersible offshore accom-
modation units in geographical markets outside the
North Sea and Brazil is characterized by low visibility.
Opportunities are monitored and pursued on an
opportunistic basis. In the US Gulf of Mexico, semi-
submersible accommodation vessels have operated on
occasions. In 2022, the company secured a contract for
2023 in the US Gulf of Mexico.
Accommodation supply
The supply side has developed positively since 2016
with a reduction in the number of available units,
largely supported by Prosafe which has sold eight
vessels for recycling while renewing its fleet. Over the
same time period, two competitors have sold one unit
each for recycling.
Globally, there are approximately 20 to 25 offshore
accommodation vessels available for operation. The
company expects a bifurcation of the market where
the high-end modern DP3 vessels will show better
performance/cashflow over time. The fleet of high-end
vessels is currently estimated at 12 to 15 vessels.
Prosafe remains the market leader with seven vessels
including a Tender Support Vessel (TSV) currently in
cold lay-up. The company has options for two high-end
semi-submersible vessels currently stacked with Cosco
in China. Prosafe’s main competitor has five vessels
while the remaining fleet is generally distributed
amongst various owners. Prosafe maintains that the
industry would benefit from further consolidation and
vessel recycling and anticipates that this will occur in
the years ahead.
Energy transition
Prosafe supports the transition to renewable energy
to prevent further global warming and due to the
finite nature of fossil fuels. The transition process will
be complex and require substantial resources over
time. This includes development of new solutions
for carbon capture, energy management, alternative
fuels, electrification and new ways of working. Prosafe
expects continued high activity in the oil and gas
industry in the foreseeable future, with a parallel focus
on investments in energy management and efforts to
reduce carbon intensity and emissions. These efforts
are over time expected to provide the company with
new business opportunities.
HEALTH, SAFETY, SECURITY
AND THE ENVIRONMENT
(HSSE)
Robust HSSE performance is fundamental to all
of Prosafe’s operations and is therefore reflected
in its core values. Prosafe works proactively and
systematically to reduce incidents, injuries and
absence.
22
Prosafe operates a zero-accident mindset philosophy
which means that no accidents or serious incidents
are acceptable. A number of initiatives have been
implemented over the years in order to further
strengthen the safety culture. These and new
initiatives will be continuously developed in order to
improve safety performance further.
In 2022, Prosafe recorded zero incidents classified
as a Lost Time Injury (LTI) (2021: 0), i.e. those injuries
resulting in an employee being absent from the next
work shift due to the injury. Sick leave was 1.31 per
cent in 2022, an increase from 0.27 per cent in 2021.
Prosafe had no accidental discharges to the natural
environment in 2022 and continues to actively reduce
emissions by modernizing and adapting its fleet and
operating procedures and practices. In 2022, Prosafe
continued its focus on the energy management
side of environmental management. The company
was accredited according to ISO 50001 Energy
Management in January 2022.
The impact to the external environment from
Prosafe’s operations is reported in detail in the ESG
report which is published together with this annual
report and available on the company’s website.
HUMAN RESOURCES
AND DIVERSITY
Due to the nature of the company’s business which is
characterised by both long- and short-term contracts
with international mobilisations, the offshore
headcount will increase and decrease depending on
the nature of the contract. The offshore crews in
certain geographical locations consist partly of agency
personnel engaged short-term for specific contracts.
Prosafe had 182 employees at the end of 2022
(average 192), compared with 103 in the previous year
(average 97). This increase is largely a result of the
nationalization of crew in Brazil where the company
has long-term contracts.
The voluntary employee turnover in the Group
was 20.6 per cent in 2022, compared with 11.2 per
cent in 2021. This increase is mainly due to short
term contracts during the period. Upon concluding
the contracts, the employed crew sourced other
employment resulting in an increase in voluntary
turnover.
Prosafe operates an equal opportunity policy
including gender equality. Men have, however,
traditionally made up a greater proportion of the
recruitment base for offshore operations, and this
is reflected in Prosafe’s gender breakdown. Prosafe
aims to offer the same opportunities to all and there
is no discrimination with respect to recruitment,
remuneration or promotion, age, disability, gender,
marriage and civil partnership, pregnancy and
23
maternity, nationality, religion or belief, and sexual
orientation. More detailed information can be found
in the ESG report published together with this annual
report.
CORPORATE GOVERNANCE
Corporate governance in the Group is based on
the principles contained in the Norwegian Code of
Practice for Corporate Governance of 14 October
2021. There are no deviations from Code of Practice in
2022. The Group’s full corporate governance report is
available in a separate section in this annual report.
Sound corporate governance is a priority for
maintaining and strengthening confidence in Prosafe
among shareholders, capital market and other
stakeholders. Corporate governance helps to ensure
maximum value creation over time in the best interest
of shareholders, employees and other stakeholders.
At the Annual General Meeting held on 11 May
2022, all members of the Board were re-elected,
with Halvard Idland elected as a new member to the
Board. Hereafter, the Board of Directors consists of
five non-executive Directors. Glen Ole Rødland was
re-elected as chairman. The remuneration of the
members of the Board is disclosed in note 6 to the
consolidated accounts.
The company has a Directors & Officers liability
insurance that covers Directors and executive
management. The total limit of the coverage is
USD 40 million.
As at 31 December 2022, Birgit Aagaard-Svendsen
owned 3 shares in Prosafe and Nina Udnes Tronstad
owned 6,000 shares. Glen Ole Rødland controls
100,000 shares through the investment company
Gross Management AS, and has an indirect ownership
interest in Prosafe through his ownership interest in
North Sea Strategic Investments. Alf C. Thorkildsen
has an indirect ownership interest in Prosafe through
his ownership interest in North Sea Strategic
Investments and HitecVision VI Invest Sierra.
FINANCIAL RESULTS,
FINANCING AND FINANCIAL
POSITION OF THE GROUP
(The figures in brackets correspond to the 2021
comparatives)
INCOME STATEMENT
Operating revenues totalled USD 198.9 million in
2022 (2021: USD 141.1 million), with fleet utilisation
2)
increasing to 70.6 per cent (54.5 per cent). The
increase in utilisation reflects a combination of
execution of contracts deferred from previous years,
as well as new contracts and extensions.
Operating expenses increased to USD 137.5 million
(USD 116.2 million), mainly due to higher activity.
Depreciation, amortization and impairment
amounted to USD 29.5 million (USD 74.7 million).
The prior year included a non-recurring impairment
of USD 40.6 million following the judgement in the
Westcon dispute legal appeal case.
The operating profit was USD 31.9 million (loss of
USD 49.8 million).
Interest expenses totalled USD 18.7 million (USD 37.9
million). Lower interest expenses were mainly the
result of reduced debt following the completion of
financial restructuring in December 2021. For further
24
2)
Utilisation = actual vessel days in operation in the period / possible vessel days in the period x 100
25
information, refer to note 10 and note 14 of the 2022
consolidated accounts.
Financial items other than interest expenses
amounted to negative USD 3.4 million (positive USD
1,018.7million). The prior year was impacted by a
one-off financial gain of USD 1,030.5 million, arising
from the completion of the financial restructuring
in December 2021. Refer to note 9, 10 and 14 of the
consolidated accounts for more details.
Taxes for 2022 in the amount of USD 8.3 million (USD
3.1 million) were mainly related to operations in
Trinidad and Tobago (USD 6.6 million), Brazil and UK.
Net profit amounted to USD 1.5 million (net profit
of USD 927.9 million), resulting in earnings per share
of USD 0.17 (USD 263.27). Fully diluted earnings
per share were USD 0.17 (USD 263.27). In January
2022, Prosafe completed a 1,000:1 reverse split
of the company's shares to satisfy the minimum
requirement to market value of the issuer’s shares
for listed companies. In May 2022, the company
reduced the nominal value of its shares from EUR
50 to EUR 1.25 per share. As a result, there was a
reduction in share capital of USD 485.1 million and a
corresponding increase in retained earnings.
FINANCIAL POSITION
Total assets amounted to 500.0 million (USD 492.8
million) at the end of 2022. Investments in tangible
assets totalled USD 10.2 million (USD 17.3 million).
The investments in 2022 mainly relate to vessel
upgrades and maintenance to comply with contract
requirements.
At year-end 2022, the Group had a total liquidity
reserve in the form of liquid assets (cash and deposits)
of USD 91.6 million (USD 73.9 million). Total restricted
cash at year-end 2022 was USD 2.2 million (USD 2.4
million).
Total shareholders’ equity amounted to USD 37.3
million positive (USD 36.3 million), resulting in an
equity ratio of 7.5 per cent (7.4 per cent).
Interest-bearing debt was to USD 422.2 million (USD
423.3 million) at year-end.
The interest-bearing debt agreements are subject to
termination, repayment or buy back clauses in the
event of a change of control of the Group (as control
is defined in the relevant agreements). The Group was
in compliance with the only financial covenant of USD
18 million minimum cash at year-end 2022.
3)
Please
refer to note 14 of the 2022 consolidated accounts for
further information.
Net cash flow in 2022 was positive USD 17.7 million
(USD 86.4 million negative). Improved net cash
flow in 2022 was mainly due to improved cashflow
from operating activities in 2022, as well as lower
repayments to lenders, as a result of the financial
restructuring in December 2021. Net cash flow from
operating activities amounted to USD 49.2 million
(USD 23.4 million). The improvement in operational
cashflow was mainly driven by increased vessel
utilisation. Total cash investment in tangible assets
was mostly related to compliance works and contract
requirements and amounted to USD 10.2 million
(USD 17.3 million).
FINANCIAL RESULTS AND FINANCIAL
POSITION OF THE PARENT COMPANY
The net loss for the year amounted to USD 13.0 million
(profit of USD 803.9 million, mainly arising from
the completion of the financial restructuring). Net
financial gain amounted to USD 21.0 million
(USD 944.0 million gain).
Total net assets for the year amounted to USD 0.1
million (USD 12.3 million).
DIVIDENDS
Prosafe's long-term objective is to provide
shareholders with a competitive, risk-adjusted yield
on their shares through a combination of share price
appreciation and direct return in the form of dividend.
Under the latest amended and restated facility
agreements following the restructuring in December
2021, dividends may only be paid after obtaining prior
written consent of two thirds of the lenders.
As the company has resolved to reduce the share
capital for coverage of loss that cannot be covered
otherwise without notice to the creditors, a resolution
3)
The Minimum Liquidity is calculated on each quarter date and excludes cash balance held under the New Group (Safe Eurus Singapore Pte. Ltd., Axis Nova Singapore Pte. Ltd. and Axis Vega Singapore Pte. Ltd).
As of end December 2022, the New Group’s cash position was USD 10.7 million.
to distribute dividends may not be adopted until
three years have elapsed from the registration in
the Norwegian Register of Business Enterprises in
May 2022 unless the share capital subsequently has
been increased by an amount at least equal to the
reduction.
GOING CONCERN
The Board of Directors confirms that the accounts
have been prepared under the assumption that
the company is a going concern. A slow North Sea
market in 2023 combined with working capital and
investments required for new contracts is expected to
have a significant negative impact on liquidity in 2023.
Based on the Group's 12 month cashflow forecast, the
company foresees a possible breach of the minimum
liquidity covenant of USD 23 million from the second
half of 2023. As a result, the USD 250 million and
USD 93 million credit facilities may become due and
payable. Refer to Note 14 for information on the
minimum liquidity covenant. This results in material
uncertainty related to Group’s ability to continue as
a going concern and therefore whether the Group
will realise its assets and settle its liabilities in the
ordinary course of business in the next twelve months.
In response to the situation, management and the
board are pursuing various options, including further
working capital management, cost savings, potential
minor asset disposals and fund raising to ensure
sufficient liquidity. The company may also request a
waiver of any potential breach of covenants which will
require the consent of 2/3 of the lenders. Although it is
too early to conclude what the outcome will be, the
board has determined that the actions taken and
options available are sufficient to mitigate the
uncertainty and has therefore prepared the financial
reporting on a going concern basis. For more infor-
mation refer to note 2 of the consolidated accounts.
SHAREHOLDERS
AND SHARE CAPITAL
According to the shareholder register as at 31
December 2022, the 20 largest shareholders held a
total of 77.8 per cent of the issued shares. The number
of shareholders was 4,834.
Significant shareholdings as at 31 December 2022 are
presented in note 13 to the consolidated accounts and
are updated bi-weekly on the company’s website
26
at https://www.prosafe.com/investor-information/
shareholder-information/largest-stakeholders/
As at 31 December 2022, Prosafe had an issued share
capital of 8,798,699 ordinary shares, all at a nominal
value of EUR 1.25 each.
Selected employees have been offered share options
to the company’s shares as an element of employee
renumeration. If the company has own shares, the
company may allot own shares instead of issuing new
shares when share options are exercised. All share
options are offered at strike prices that reflect the
market price of the shares at the time of allotment of
the rights.
The company’s loan agreements include change of
control clauses as well as restrictions on mergers,
acquisitions, investments, additional financial
indebtedness and dividends. The loan agreements
also include a cash sweep provision and a quarterly
minimum liquidity covenant. Lender consent under
the loan agreements requires two-thirds lender
approval. More information is provided in note 14 to
the consolidated accounts.
Further information on the share capital and changes
are described in note 13 to the consolidated accounts.
RISK
Prosafe categorises its primary risks under the
following headings: strategic, commercial, operational,
compliance and legal, financial, climate and cyber-
security related. The Group’s Board of Directors and
executives
manage these
risk factors through
continuous risk assessments,
reporting and periodic reviews in
management and Board meetings, and as part
of the rolling strategy and planning processes.
The Group aims to create shareholder value by
allocating capital and resources to the business
opportunities that yield the best return relative to the
risk involved within its specified strategic direction.
Prosafe seeks to reduce its exposure to operational,
financial and compliance related risk through proper
operating routines, the use of financial instruments
and insurance policies. Following the restructuring
completed in December 2021, the company has not
utilised any financial instruments or entered into any
hedging agreements. The company has no hedging
facilities available post the restructuring.
Commercial risk comprises macro factors such as
oil price and industry specific factors such as the
supply/demand balance, competitive position, new
development solutions, climatic conditions, and new
ways of executing offshore projects.
Demand for accommodation units is among others
sensitive to oil price fluctuations and changes in
exploration and production spending. Demand is also
sensitive to impacts from the energy transition which
may pose both opportunities and threats. In addition,
the demand for accommodation units is sensitive to
other incidents that may impact the general state of
the world economy, general activity and spend levels,
27
28
and demand for natural resources. Global incidents
like pandemics and conflicts with a material impact
on capital markets and the oil price may negatively
impact activity in the oil and gas industry, and thereby
also demand for accommodation services.
The Group is exposed to financial risks such as
currency risk, interest rate risk, financing and liquidity
risk, credit risk and counterparty risk.
Prosafe maintains an active overview of and relations
with lenders, capital market participants and investors
to secure the best possible access to capital markets if
and when needed.
Prosafe is exposed to liquidity risk, which is the risk
that Prosafe will not be able to meet its financial
obligations when they become due. Liquidity risk
sources include, but are not limited to, contract
cancellations, customers not paying charter rates
under contracts and low demand for accommodation
vessels in the future. Prosafe manages liquidity at
the Group level as per the Board approved Finance
Policy. The Group monitors the liquidity development
and the risk of insufficient capital by rolling cash flow
forecasts. Liquidity is managed on a low risk and highly
liquid basis, primarily in deposits with its main lending
banks.
Prosafe reports in USD and generates income primarily
in USD, whereas a large part of its operating costs are
in other currencies such as GBP, Euro, Brazilian Real and
Norwegian Krone. The currency mix will, however, vary
with areas of operation. This exposure as identified
based in rolling forecasts may be hedged according
to the Group’s Finance Policy. The interest rate risk
and currency risk is unhedged following the financial
restructuring that was completed in December 2021.
The Group carries out credit checks on clients as part
of its tendering processes and has a history of minimal
loss from debtors. There are no material overdue
receivables as at year-end.
Prosafe is committed to ensuring the highest
standards of data security and privacy for its
employees, stakeholders and clients. To achieve this,
the company complies with GDPR regulations and best
practices, and has in place a number of procedural
and organizational controls and protective measures.
This includes continuous evaluation of new options to
improve cyber-security measures, including control of
remote access to IT and OT systems, and mail security.
Prosafe also runs security awareness campaigns to
educate its employees on best practices for working
from home and maintaining data security vigilance.
Climate risks and opportunities are likely to impact the
business, its strategy and financial planning. Prosafe
has in 2022 undertaken a climate risk review with
support from an independent expert. The company
is exposed to the following risk categories described
in the TCFD framework: physical, regulatory, market,
technology and reputation risks (and opportunities).
Prosafe has a structured approach to monitoring
the development of the accommodation support
market and opportunities created by the transition to
renewable energy sources globally. Using information
from these sources and its ongoing monitoring of
GHG emission performance across the fleet, Prosafe
believes it is well positioned to absorb, mitigate or
adapt to climate-related risks; and, in some cases may
exploit available opportunities.
The Group has no direct exposure to the war in
Ukraine. The recent macroeconomic and geopolitical
developments have supported higher energy prices
amid concerns for regional energy shortages. At
the same time, the same factors have contributed
to global supply chain and logistics challenges,
inflationary pressures and higher interest rates.
Further information on financial risk management is
provided in note 18 to the consolidated accounts.
The main features of Prosafe’s risk management
process are available on the website at https://www.
prosafe.com
INTERNAL CONTROLS
Internal control is ensured in accordance with Prosafe’s
policies and procedures which aim to ensure the
effectiveness and efficiency of its operations, reliability
of its financial reporting and compliance with
applicable laws and regulations. These policies and
procedures are designed, inter alia, to safeguard assets
and protect from accidental loss or fraud.
In addition, the policies and procedures are
reinforced by the organisation and the competence
of its personnel, segregation of duties, regular risk
assessments and internal reporting, management
meetings, Board meetings and the Audit Committee,
together with external audit and public reporting and
communication.
In respect of internal controls relating to the
preparation of financial statements, the Board
demonstrates independence from management
and exercises oversight of the development and
performance of internal controls. Management
establishes, with Board oversight, structures, reporting
lines, and appropriate authorities and responsibilities.
In addition to the ongoing reviews by executive
management, annual reviews and assessments are
carried out which are approved by the Board in respect
of risk management and internal controls.
The Group carries out regular reviews to ascertain
whether the internal controls are present and
functioning, and evaluates and communicates any
internal control deficiencies in a timely manner to
those parties responsible for taking corrective action,
including senior management and the Board, as
appropriate. Audits carried out by external parties
like the financial auditor, clients and regulatory
authorities and the reporting and follow-up of these
are important elements to ensure continuous focus on
and improvement of internal controls.
29
28 March 2023
The Board of Directors of Prosafe SE
(original signed)
Glen Ole Rødland Alf C. Thorkildsen
Non-executive Chairman Non-executive Deputy Chairman
Birgit Aagaard-Svendsen Nina Udnes Tronstad
Non-executive Director Non-executive Director
Halvard Idland Jesper K. Andresen
Non-executive Director Chief Executive Officer
30
OUTLOOK
The market for offshore accommodation vessels
is driven by maintenance, modification and life
extension of existing oil and gas infrastructure as
well as the hook-up and installation of platforms and
FPSOs. Investments in oil and gas activity are expected
to increase significantly in the coming years, which
is expected to lead to higher offshore activity and
demand for accommodation vessels. The transition
to new energy sources, particularly offshore wind and
carbon capture, may in the future also lead to future
opportunities for the accommodation rig market.
Scrapping of legacy vessels has reduced the fleet by
21 per cent since the peak in 2016, improving the
market balance. The segment for high specification
accommodation vessels consist of only 12-15 vessels.
Prosafe has a strong position on the supply side,
owning four high-specification vessels and having
options for two stacked newbuilds at yard in China.
During 2022, accommodation market activity
increased and the utilisation of high specification
vessels reached 80 per cent for the first time since
2015. This reflects what Prosafe considers to be
the early phase of a new long-term oil and gas
investment cycle. For 2023, the company maintains
a focus on capturing relevant market opportunities
and on the efficient execution of mobilization and
preparations for the new contracts in Brazil and the
US Gulf of Mexico. Given the significant investments
needed to prepare for the new contracts in 2023
combined with an expected slow North Sea market,
there is uncertainty as to whether Prosafe will be in
compliance with the minimum liquidity covenant
from the second half of 2023. In response, Prosafe is
pursuing various options, including further working
capital management, cost savings, potential asset
disposals and fund raising to ensure sufficient
liquidity. The company may also request a waiver of
any potential breach of covenants which will require
the consent of 2/3 of the lenders. Although it is too
early to conclude what the outcome will be, the board
has determined that the actions taken and options
available are sufficient to mitigate the uncertainty
and has therefore prepared the financial reporting on
a going concern basis. For more information refer to
note 2 of the consolidated accounts.
Prosafe expects continued demand growth in Brazil
for accommodation, maintenance and safety vessels
driven by an increasing number of FPSOs and new oil
and gas operators. This has already resulted in high
contracting activity in Brazil.
In the North Sea, the company expects higher
maintenance and tie-back activity in the UK and
hook-up operations in Norway from 2024-2025
onwards on the back of increased oil and gas activity
and a record number of new projects planned in
Norway. The activity in the North Sea for 2023 is
expected to be at a record low due to a lack of mature
projects both for maintenance and installation. With a
reduced fleet of accommodation rigs available globally
and increasing demand, Prosafe expects increasing day
rates and activity from 2024 onwards.
The company continues to follow its strategy in a
disciplined manner, which is to increase utilization at
satisfactory day rates in an improving market. As such,
the company has some vessels on long-term contracts,
predominately in Brazil, and others available for short-
term opportunities, mainly in the North Sea.
The company will seek to play an active role in any
future consolidation of the offshore accommodation
market. The company may also consider adjacent
business development opportunities within energy
sector niches as well as other ocean industries where
Prosafe can on a sustainable basis create shareholder
value.
DECLARATION BY THE
BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
28 March 2023
The Board of Directors of Prosafe SE
(original signed)
Glen Ole Rødland Alf C. Thorkildsen
Non-executive Chairman Non-executive Deputy Chairman
Birgit Aagaard-Svendsen Nina Udnes Tronstad
Non-executive Director Non-executive Director
Halvard Idland Jesper K. Andresen
Non-executive Director Chief Executive Officer
The Board of Directors and the Chief Executive Officer have today considered and approved the annual report
and financial statements for the Prosafe Group and its parent company Prosafe SE for the 2022 calendar year
ended on 31 December 2022.
This declaration is based on reports and statements from the Chief Executive Officer, Chief Financial Officer
and on the results of the Group’s business as well as other essential information provided to the Board of
Directors to assess the position of the parent company and the Group.
TO THE BEST OF OUR KNOWLEDGE:
The 2022 financial statements for the parent company and the Group have been prepared in accordance
with all applicable accounting standards.
The information provided in the financial statements gives a true and fair portrayal of the parent company’s
and the Group’s assets, liabilities, financial position and results taken as a whole as at 31 December 2022.
The Board of directors’ report for the parent company and the Group provides a true and fair overview of the
development, performance, outlook and financial position of the parent company and the Group taken as a
whole, and the most significant risks and uncertainties facing the parent company and the Group.
32
CONSOLIDATED ACCOUNTS
CONSOLIDATED INCOME STATEMENT
(USD million) Note 2022 2021
Charter revenues 4 169.3 121.8
Other operating revenues 4, 5 29.6 19.3
Operating revenues 198.9 141.1
Employee benefits 6 (59.2 ) (50.6 )
Other operating expenses 7 (78.3 ) (65.6 )
Operating profit before depreciation
and impairment 61.4 24.9
Depreciation 8 (29.5 ) (33.0 )
Impairment 8 0.0 (41.7 )
Operating profit/(loss) 31.9 (49.8 )
Interest income 0.7 1.0
Interest expenses 10 (18.7 ) (37.9 )
Other financial income 9 0.6 1,051.8
Other financial expenses 9 (4.7 ) (34.1 )
Net financial items 10 (22.1 ) 980.8
Profit before taxes 9.8 931.0
Taxes 11 (8.3 ) (3.1 )
Net profit 1.5 927.9
Attributable to equity holders of the parent 1.5 927.9
Earnings per share (USD) 12 0.17 263.3
Diluted earnings per share (USD) 12 0.17 263.3
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(USD million) 2022 2021
Net profit for the year 1.5 927.9
Other comprehensive income
Items to be reclassified to profit or loss
in subsequent periods:
Foreign currency translation (1.3 ) (2.3 )
Items that will not be reclassified to profit or loss
in subsequent periods:
Pension remeasurement (0.1 ) (0.1 )
Other comprehensive loss for the year, net of tax (1.4 ) (2.4 )
Total comprehensive income for the year
attributable to equity holders of the parent 0.1 925.5
34
35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(USD million) Note
Share
capital
Convertible
bonds
Other
equity
Foreign currency
translation
Total
equity
Equity at 31 December 2020 9.1 18.8 (1,007.8 ) 31.4 (948.5 )
Net profit 0.0 0.0 927.9 0.0 927.9
Other comprehensive loss 0.0 0.0 (0.1 ) (2.3 ) (2.4 )
Total comprehensive income 0.0 0.0 927.8 (2.3 ) 925.5
Conversion of convertible bonds 13 0.6 (18.8 ) 18.2 0.0 0.0
Share issuance through debt conversion 13 492.6 0.0 (433.3 ) 0.0 59.3
Share capital reduction 13 (4.8 ) 0.0 4.8 0.0 0.0
Equity at 31 December 2021 497.5 0.0 (490.3 ) 29.1 36.3
Net profit 0.0 0.0 1.5 0.0 1.5
Other comprehensive loss 0.0 0.0 (0.1 ) (1.3 ) (1.4 )
Total comprehensive income 0.0 0.0 1.4 (1.3 ) 0.1
Share based payment 6 0.0 0.0 0.9 0.0 0.9
Share capital reduction 13 (485.1 ) 0.0 485.1 0.0 0.0
Equity at 31 December 2022 12.4 0.0 (2.9 ) 27.8 37.3
The legal form of the share capital and the share premium accounts are reflected in the statement of changes in equity of the accompanying parent financial statements.
Other equity includes share premium reserve, capital reduction reserve, share-based payment reserve and retained earnings.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(USD million) Note 31.12.22 31.12.21
ASSETS
Vessels 8, 16 376.8 397.0
Other tangible assets 8 1.2 2.2
Total non-current assets 378.0 399.2
Cash and deposits 17, 19 91.6 73.9
Debtors 17, 18 20.6 14.1
Other current assets 20 9.8 5.6
Total current assets 122.0 93.6
Total assets 500.0 492.8
EQUITY AND LIABILITIES
Share capital 13 12.4 497.5
Other equity 24.9 (461.2 )
Total equity 37.3 36.3
Interest-bearing non-current liabilities 14, 17, 18 418.5 422.4
Other non-current liabilities 17 1.9 2.2
Total non-current liabilities 420.4 424.6
Interest-bearing current debt 14, 17, 18 3.7 0.9
Accounts payable 17 3.1 1.8
Taxes payable 11 18.0 10.7
Other current liabilities 15, 17 17.5 18.5
Total current liabilities 42.3 31.9
Total equity and liabilities 500.0 492.8
On 28 March 2023, the Board of Directors of Prosafe SE approved
and authorised these financial statements for issue.
Glen Ole Rødland Alf C. Thorkildsen
Non-executive Chairman Non-executive Deputy Chairman
Birgit Aagaard-Svendsen Nina Udnes Tronstad
Non-executive Director Non-executive Director
Halvard Idland Jesper K. Andresen
Non-executive Director Chief Executive Officer
36
37
CONSOLIDATED CASH FLOW STATEMENT
(USD million) Note 2022 2021
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxes 9.8 931.0
Net gain from extinguishment of debt 14 0.0 (1,030.5 )
Loss/(Gain) on sale of non-current assets 0.5 (1.0 )
Depreciation and impairment 8 29.5 74.7
Interest income (0.7 ) (1.0 )
Interest expenses 14 18.7 37.9
Taxes paid (1.0 ) (1.3 )
Share-based payment 0.9 0.0
Change in working capital (10.4 ) 14.6
Other items from/(used in) operating activities 1.9 (1.0 )
Net cash provided by operating activities 49.2 23.4
CASH FLOW FROM INVESTING ACTIVITIES
Net proceeds from disposal of tangible assets 0.0 1.6
Acquisition of tangible assets 8 (10.2 ) (17.3 )
Interest received 0.7 1.0
Net cash used in investing activities (9.5 ) (14.7 )
CASH FLOW FROM FINANCING ACTIVITIES
Repayments of interest-bearing debt (4.4 ) (77.6 )
Interests paid (14.1 ) 0.0
Refinancing costs (3.5 ) (17.5 )
Net cash used in financing activities 14 (22.0 ) (95.1 )
Net cash flow 17.7 (86.4 )
Cash and deposits at 1 January 73.9 160.3
Cash and deposits at 31 December 19 91.6 73.9
38
39
40
41
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
PARENT COMPANY
ACCOUNTS
INCOME STATEMENT - PROSAFE SE
(USD 1 000) Note 2022 2021
Income from investments in subsidiaries 20,000 0
Impairment of shares in subsidiaries 6 (48,264) (135,888)
Results of investing activities (28,264) (135,888)
Operating expenses 2 (5,732) (4,210)
Operating loss (33,996) (140,098)
Interest income 4 7,643 8,152
Interest expenses 4 (14,798) (34,134)
Other financial income 3 51,766 1,047,899
Other financial expenses 3 (23,608) (77,899)
Net financial items 4 21,003 944,018
(Loss)/Profit before taxes (12,993) 803,920
Taxes 5 (18) 0
Net (loss)/profit (13,011) 803,920
Attributable to equity holders of the company (13,011) 803,920
STATEMENT OF COMPREHENSIVE INCOME - PROSAFE SE
(USD 1 000) 2022 2021
Net (loss)/profit (13,011) 803,920
Other comprehensive loss that will not be reclassified
to profit or loss in subsequent periods
Pension remeasurement (109) (145)
Total comprehensive (loss)/income for the year, net of tax (13,120) 803,775
Attributable to equity holders of the company (13,120) 803,775
71
72
STATEMENT OF FINANCIAL POSITION - PROSAFE SE
(USD 1 000) Note 2022 2021
ASSETS
Shares in subsidiaries 6 308,997 276,348
Intra-group receivables 11, 13 18,294 21,646
Total non-current assets 327,291 297,994
Cash and deposits 13 19,909 19,382
Other current assets 7, 11,13 426 42,485
Total current assets 20,335 61,867
Total assets 347,626 359,861
EQUITY AND LIABILITIES
Share capital 12,438 497,505
Share premium reserve 624,154 624,154
Share capital reduction reserve 71,846 71,846
Total paid-in equity 8 708,438 1,193,505
Retained earnings (709,258) (1,181,205)
Share-based payments reserve 886 0
Total equity 66 12,300
Interest-bearing long-term debt 9, 13,14 343,000 343,000
Interest-free long-term liabilities 13 1,877 2,182
Total long-term liabilities 344,877 345,182
Interest-bearing current debt 9,13 1,177 438
Accounts payable 13,14 65 637
Intra-group current liabilities 11,13,14 516 67
Other interest-free current liabilities 10, 13,14 925 1,237
Total current liabilities 2,683 2,379
Total equity and liabilities 347,626 359,861
On 28 March 2023, the Board of Directors of Prosafe SE approved
and authorised these financial statements for issue.
Glen Ole Rødland Alf C. Thorkildsen
Non-executive Chairman Non-executive Deputy Chairman
Birgit Aagaard-Svendsen Nina Udnes Tronstad
Non-executive Director Non-executive Director
Halvard Idland Jesper K. Andresen
Non-executive Director Chief Executive Officer
CASH FLOW STATEMENT - PROSAFE SE
(USD 1 000) Note 2022 2021
Cash flow from operating activities
(Loss)/Profit before taxes (12,993) 803,920
Gain from extinguishment of debt 9 0 (1,030,532)
Unrealised currency loss on long-term debt 9,851 3,216
Expected credit loss, net (42,631) 56,869
Impairment shares in subsidiaries 48,264 135,888
Interest income (7,643) (8,152)
Interest expenses 14,798 34,134
Share-based payment expense 517 0
Change in working capital (99) (8,864)
Taxes paid (18) 0
Other items from operating activities 3,097 311
Net cash flow provided by/(used in) operating activities 13,143 (13,210)
Cash flow from investing activities
Increase of shares in subsidiaries (400) 0
Reduction of shares in subsidiary 1,969 0
Change in intra-group balances 3,275 43,628
Interest received 110 8,152
Net cash flow provided by investing activities 4,954 51,780
Cash flow from financing activities
Repayment of interest-bearing debt 0 (75,517)
Refinancing costs (3,511) (17,367)
Interest paid (14,059) 0
Net cash flow used in financing activities 9 (17,570) (92,884)
Net cash flow 527 (54,314)
Cash and deposits at 1 January 19,382 73,696
Cash and deposits at 31 December 13 19,909 19,382
73
74
STATEMENT OF CHANGES IN EQUITY - PROSAFE SE
(USD 1 000) Note
Share
capital
Share
premium
Capital
reduction
reserve
Retained
earnings
Share-based
payments
reserve
Convertible
bonds
Total
equity
Equity at 31 December 2020 9,097 1,039,317 71,846 (1,989,827) 0 18,769 (850,798)
Net profit 0 0 0 803,920 0 0 803,920
Other comprehensive loss 0 0 0 (145) 0 0 (145)
Total comprehensive income
1)
0 0 0 803,775 0 0 803,775
Conversion of convertible bonds 597 18,172 0 0 0 (18,769) 0
Share issuance through debt conversion
2)
492,658 (433,335) 0 0 0 0 59,323
Share capital reduction 8 (4,847) 0 0 4,847 0 0 0
Equity at 31 December 2021 497,505 624,154 71,846 (1,181,205) 0 0 12,300
Net loss 0 0 0 (13,011) 0 0 (13,011)
Other comprehensive loss 0 0 0 (109) 0 0 (109)
Total comprehensive loss
1)
0 0 0 (13,120) 0 0 (13,120)
0 0 0 0 886 0 886
Share capital reduction 8 (485,067) 0 0 485,067 0 0 0
Equity at 31 December 2022 12,438 624,154 71,846 (709,258) 886 0 66
1)
Total comprehensive income/(loss) is attributable to the owners of the company
2)
See note 14 of the consolidated accounts for details.
Nature and purpose of reserves
Share premium: The difference between the issue price of the shares and their nominal value.
Share based payment
NOTES - PROSAFE SE
All figures in USD 1 000 unless otherwise stated.
NOTE 1: ACCOUNTING POLICIES
The financial statements have been prepared in accordance with the International
Financial Reporting Standards (IFRS) endorsed by the European Union (EU) and the
requirements of the Norwegian Accounting Act. The accounting policies applied to
the consolidated accounts have also been applied to the parent company, Prosafe
SE. The accounting policies adopted are consistent with those in the previous
financial years. The parent company financial statements should be read in
conjunction with the consolidated accounts. The notes of the consolidated accounts
provide additional information to the parent company's accounts which is not
presented here separately. The Company's functional currency is US dollars (USD),
and the financial statements are presented in USD. Investments in subsidiaries are
measured at historic cost, unless there is any indication of impairment. In case of
impairment, an investment is written down to recoverable amount.
75
NOTE 2: OPERATING EXPENSES
2022 2021
Services from subsidiaries 1,526 871
Directors’ fees 441 375
Salaries and management bonus 1,221 1,451
Other remuneration 88 41
Share-based payment expense
a)
517 0
Payroll taxes 167 192
Pension expenses 100 95
Auditors' audit fees 153 212
Auditors' other fees 5 90
Legal and consultancy fees 584 316
Office insurance 368 259
Other operating expenses 562 308
Total operating expenses 5,732 4,210
a)
See note 6 of the consolidated financial accounts for details
Board of directors Year Board fees
Glen Ole Rødland (Chairman) 2022 115
Alf C. Thorkildsen (Deputy Chairman) 2022 94
Birgit Aagaard-Svendsen 2022 95
Nina Udnes Tronstad 2022 85
Halvard Idland (from May 2022) 2022 52
Total fees
1)
441
1)
If applicable, figures include compensation from the audit committee and
compensation committee.
Number of employees
The average number of employees in the Company for 2022 was 2 (2021: 2).
Glen Ole Rødland (Chairman) 2021 122
Birgit Aagaard-Svendsen 2021 91
Nina Udnes Tronstad 2021 84
Alf C. Thorkildsen 2021 78
Total fees
1)
375
76
NOTE 4: FINANCIAL ITEMS
Year ended 31 December 2022
Financial assets
measured at
amortised cost
Financial liabilities
measured at
amortised cost Total
Interest income
(a)
7,643 0 7,643
Reversal of expected credit loss 51,766 0 51,766
Total other financial income
(b)
51,766 0 51,766
Interest expenses 0 (14,798) (14,798)
Total interest expenses
(c)
0 (14,798) (14,798)
Expected credit loss (9,135) 0 (9,135)
Other financial expenses
1)
0 0 (4,563)
Currency loss
1)
0 0 (9,910)
Total other financial expenses
(d)
(9,135) 0 (23,608)
Net financial items
(a)+(b)+(c)+(d)
50,274 (14,798) 21,003
1)
Excluded from the category breakdown but added to the total for net effect.
NOTE 3: OTHER FINANCIAL ITEMS
2022 2021
Gain from extinguishment of debt
1)
0 1,047,899
Reversal of expected credit loss
2)
51,766 0
Total other financial income 51,766 1,047,899
Fair value adjustment interest rate swaps 0 (169)
Currency loss (9,910) (3,217)
Expected credit loss
2)
(9,135) (56,869)
Other financial expenses
3)
(4,563) (17,644)
Total other financial expenses (23,608) (77,899)
1)
In 2021, there was a gain from extinguishment of debt as a result of the completion of the financial restructuring
process. For further information, see note 14 of the consolidated accounts.
2)
For further information, see note 11 relating to allowance of expected credit loss of receivables from subsidiaries.
3)
In 2022, the financial expenses largely relates to Cosco global deed settlement as part of the refinancing restructuring
process. (2021: largely arose from costs relating to the financial restructuring process. For further information, see note
14 of the consolidated accounts.)
Year ended 31 December 2021
Financial assets
measured at
amortised cost
Fair value
through profit
and loss
Financial liabilities
measured at
amortised cost Total
Interest income
(a)
8,152 0 0 8,152
Gain from extinguishment of debt 0 0 1,047,899 1,047,899
Total other financial income
(b)
0 0 1,047,899 1,047,899
Interest expenses 0 0 (31,611) (31,611)
Amortisation of borrowing costs 0 0 (5,426) (5,426)
Amortisation of amortised cost 0 0 2,903 2,903
Total interest expenses
(c)
0 0 (34,134) (34,134)
Fair value adjustment interest rate swaps 0 (169) 0 (169)
Expected credit loss (56,869) 0 0 (56,869)
Other financial expenses
1)
0 0 (276) (17,644)
Currency loss
2)
0 0 0 (3,217)
Total other financial expenses
(d)
(56,869) (169) (276) (77,899)
Net financial items
(a)+(b)+(c)+(d)
(48,717) (169) 1,013,489 944,018
1)
USD 17.4 million of refinancing costs were excluded from the category breakdown but added to the total for net effect.
2)
Excluded from the category breakdown but added to the total for net effect.
77
78
NOTE 5: TAXES
2022 2021
Taxes 18 0
Total taxes in income statement 18 0
Temporary differences:
Loss carried forward (405,989) (310,502)
Basis for deferred tax liability (+)/benefit (-) (405,989) (310,502)
Deferred tax liability (+)/benefit (-) 0 0
Taxes payable at 31 December 0 0
The corporate tax rate in Norway for 2022 was 22% (2021: 22%).
The value of the deferred tax assets is not recognised in the accounts as the probability of
having sufficient future taxable profit to utilise the deferred tax assets as tax deductions cannot
be established.
Reconciliation of effective tax rate (IAS 12.81)
2022 2021
Tax rate 22.0 % 22.0 %
(Loss)/Profit before taxes (12,993) 803,920
Tax based on applicable tax rate (2,858) 176,862
Tax effect of non-deductible expenses 13,901 43,670
Tax on income not taxable in determining taxable profit (13,779) (226,673)
Tax effect due to unrecognized deferred tax assets 2,754 6,141
Tax charge (18) 0
NOTE 6: SHARES IN SUBSIDIARIES
(Carrying value and total equity in 1 000)
Companies
2022 Ownership
& Voting Share
Number
of Shares
Investment
carrying value
at 31 December
2022
Total
Equity at
31 December
2022
Investment
carrying value
at 31 December
2021
Prosafe AS
1)
100 % 100 1,000 4,738 0
Prosafe (UK) Holdings Ltd.
2)
100 % 2,000,000 34 34 9,826
Prosafe Offshore Pte. Ltd.
3)
100 % 646,050,000 7,441 16,381 1,400
Prosafe Rigs Pte. Ltd.
3)
100 % 2,821,040,000 300,122 298,496 265,122
Prosafe Offshore Holdings Pte. Ltd.
3)
100 % 25,599,000 400 940 0
Prosafe Offshore Ltd.
2)
100 % 2 0 12,779 0
Prosafe Rigs Ltd.
2)
100 % 2 0 (14) 0
Total 308,997 276,348
The registered addresses of the subsidiaries and associated company are as follows:
1)
Forusparken 2, N-4031 Stavanger, Norway
2)
1st Floor, 10 Temple Back Bristol BS1 6FL, United Kingdom
3)
1 International Business Park, #09-03 The Synergy, Singapore 609917
2022
1) The Company has increased the investment in Prosafe AS by offsetting the
amount due from Prosafe AS of USD 42.5 million
2) Prosafe (UK) Holdings Limited has returned USD 2.0 million to the Company as a
reduction in capital.
3) The Company has increased the investment in Prosafe Rigs Pte. Ltd. by offsetting
the amount due from Prosafe Rigs Pte. Ltd. of USD 40 million.
4) The Company has increased the investment in Prosafe Offshore Holdings Pte.
Ltd by USD 0.4 million.
5) Prosafe (UK) Holdings Limited transferred 100% of shares in Prosafe Offshore
Limited and Prosafe Rigs Limited to the Company as part of the group
restructuring process.
79
Based on management's assessment of impairment indicators, there were
triggers which indicated that the expected recoverable amount was less than
the investment carrying value of the following subsidiaries. The expected
recoverable amount was estimated based on the fair value of the subsidiaries.
The determination of vessels valuation (as disclosed in note 8 of the consolidated
accounts) has a direct impact on the fair value of the Company's shares in
particular for subsidiaries holding offshore contracts and vessels. As a result, the
following impairment charges/(reversal) were made:
2022 2021
Prosafe Rigs Pte. Ltd. 5,000 76,700
Prosafe Offshore Pte. Limited (6,041) 0
Prosafe (UK) Holdings Limited 7,823 0
Prosafe AS 41,482 59,188
Total 48,264 135,888
There are mortgages on the shares in Prosafe Rigs Pte. Ltd. and Prosafe Offshore
Pte. Limited.
NOTE 7: OTHER CURRENT ASSETS
2022 2021
Current receivables due from subsidiaries 78 41,352
Other current assets 348 1,133
Total other current assets 426 42,485
NOTE 8: SHARE CAPITAL, CONVERTIBLE BONDS, WARRANTS
AND SHARE BASED-PAYMENTS RESERVES
2022 2021
Issued and paid up number of ordinary shares
at 31 December
1)
8,798,699 8,798,699,789
Total authorised number of shares
at 31 December 8,798,699 8,798,699,789
Nominal value at 31 December
2) 3) 4)
EUR 1.25 EUR 0.05
Number of shareholders at 31 December 4,834 4,850
1)
In 2021, the financial restructuring process was fully implemented and
completed. As a result of conversion of convertible bonds in 2021 and
equitisation of debts, the outstanding number of shares increased by 5,522,786
and 8,710,712,791 respectively. See note 14 of the consolidated account for
details on the financial restructuring.
2)
In 2021, the Company reduced the nominal value of its shares from EUR 0.10 to
EUR 0.05 per share. As a result, there was a reduction in share capital by USD 4.8
million and a corresponding increase in other equity.
3)
On 27 January 2022, the Company completed a 1,000:1 reverse split of the
Company's shares to satisfy the minimum requirement to market value of the
issuer's shares for listed companies. After the reverse share split, 1,000 shares
with a nominal value of EUR 0.05 give 1 new share with a nominal value of
EUR 50.00. The number of outstanding shares in the Company after the reverse
split is 8,798,699.
4)
At the AGM on 11 May 2022, the shareholders approved to reduce the share
capital by reducing the nominal value of the shares from EUR 50.00 to EUR 1.25.
As a result, the Company recorded a reduction in share capital by USD 485.1
million and a corresponding increase in other equity.
80
81
Ordinary shares 2022 2021
In issue at 1 January 8,798,699,789 82,464,212
Issued in connection with conversion of
convertible bonds 0 5,522,786
Issued in connection with the debt conversion 0 8,710,712,791
Reverse share split (8,789,901,090) 0
In issue at 31 December fully paid up 8,798,699 8,798,699,789
Convertible bonds & warrants
There are no outstanding bonds and warrants as at 31 December 2022 and 2021.
In 2021, the bonds and warrants were converted/cancelled as part of the financial
restructuring. For further information, see note 14 of the consolidated accounts
relating to financial restructuring in 2021.
Share-based payments reserve
Share-based payments reserve comprises the cumulative value of services received
from employees recorded on grant of equity-settled share options, The expense for
service received is recognised over the vesting period. The amount in the share-
based payments reserve is retained when the options are exercised or expire. See
note 6 of the consolidated financial accounts for details.
NOTE 9: INTEREST-BEARING DEBT
2022 2021
Credit facilities - face value 344,177 343,438
Total interest-bearing debt 344,177 343,438
Current interest-bearing debt 1,177 438
Non current interest-bearing debt 343,000 343,000
Total interest-bearing debt 344,177 343,438
For further information, see note 14 of the consolidated accounts relating to
financial restructuring in 2021.
Reconciliation of movements of
interest-bearing debt to cash flows
arising from financing activities 2022 2021
At 1 January 343,438 1,413,130
Changes from financing cash flows
- Repayments of interest-bearing debt 0 (75,517)
- Interest paid (14,059) 0
- Refinancing costs (3,511) (17,367)
Total changes from financing cash flows (17,570) (92,884)
Other liability-changes
- Non-cash movement in interest bearing debt 0 286
- Debts transferred from a subsidiary 0 75,206
- Refinancing costs 3,511 0
- Extinguishment of debt 0 (1,030,532)
- Debts equitized for shares 0 (59,323)
- Interests unpaid 0 32,855
- Interest expenses 14,798 0
- Swaps termination
1)
0 4,700
Total liability-related changes 18,309 (976,808)
At 31 December 344,177 343,438
1)
Interest rate swaps which were terminated by the swap banks during 2021 were
included as part of interest-bearing debt.
NOTE 10: OTHER INTEREST-FREE CURRENT LIABILITIES
2022 2021
Current payables due to subsidiaries 516 67
Other current liabilities 925 1,237
Total other interest-free current liabilities 1,441 1,304
NOTE 11: INTRA-GROUP BALANCES
Year-end long-term balances 2022 2021
NOK loan to Prosafe AS 0 52,300
USD loan to Prosafe Offshore Holdings Pte. Ltd. 0 70,328
USD loan to Safe Eurus Singapore Pte. Ltd. 130,319 124,343
Less: Allowance for credit loss (112,025) (225,325)
Intra-group long-term receivables 18,294 21,646
Loan agreements with subsidiaries are based on market prices using 3M NIBOR
(NOK loan) and 3M LIBOR (USD loan) interest rates plus a margin of 2.15% (2021:
2.15%) and 2.43-3.70% (2021: 2.43-3.70%) per annum respectively. Outstanding
balances at year-end are unsecured, and settlement normally occurs in cash or via
share capital injection.
The Company has assessed the recoverability of its receivables from subsidiaries
and has an allowance for credit loss of USD 112,025,000 (2021: USD 225,325,000)
based on assessments of their projected future cashflows.
In 2022, the Company entered into conversion of debt agreement with Prosafe AS
by converting the NOK loan to Prosafe AS amount of USD 42.5 million into equity
capital, which resulted in a reversal of credit loss of USD 42,631,000.
In 2022, the Company entered into waiver of receivable agreement with Prosafe
Offshore Holdings Pte. Ltd. by waiving the USD loan to Prosafe Offshore Holdings
Pte. Ltd. amount of USD 70.7 million. As the amount was fully provided in prior year,
there is no impact to profit or loss account.
82
Year-end current balances 2022 2021
Current receivables due from subsidiaries 78 41,352
Current payables due to subsidiaries (516) (67)
In 2022 and 2021, the current receivables and payables were not subject to any
interest calculation.
In 2022, the Company entered into conversion of debt agreement with Prosafe Rigs
Pte. Ltd. by converting the current receivables due from Prosafe Rigs Pte. Ltd. for the
amount of USD 40.0 million into equity capital.
Transactions with related parties 2022 2021
Transactions
Transfer of third party debts from Prosafe Rigs
Pte. Ltd. as part of debt conversion 0 (75,206)
Administrative expenses due to Prosafe AS (1,526) (871)
Interest income 7,533 8,150
Interest expenses 0 (464)
Share-based payment expense 517 0
Dividends from subsidiaries 20,000 0
Prosafe AS are performing services on behalf of Prosafe SE relating to management,
corporate activities, investor relations, financing and insurance. The services are
invoiced on a quarterly basis and paid on market terms. Please refer to note 6 to the
consolidated accounts for disclosure of remuneration to directors.
In 2021, the Company has entered into an agreement with OMP Management AS
for the purpose of providing advice and support in regards to industry analysis and
potential M&A transactions. OMP Management AS is a Norwegian company that is
controlled by HitecVision VI Invest Sierra, which together with another HitecVision
fund (North Sea Strategic Investments) are major shareholders in the Company.
The fee payable by the Company is USD 17,500 per month up to September
2022 and USD 10,000 per month from October to December 2022 and a success
fee if a transaction, as defined in the engagement letter, should occur with the
involvement of OMP Management AS. The success fee shall be calculated on the
basis of the enterprise value of the company or asset(s) acquired and be between
0.75%-1.25% of the total enterprise value, depending on the size of the transaction.
The success fee shall furthermore in all circumstances be capped at USD 3.5 million
in any single transaction. In 2022, the transacted amount was USD 187,500 (2021:
USD 218,500) and the outstanding balance of USD 3,125 (2021: USD 21,875) were
due and payable under normal payment terms. The agreement was terminated in
January 2023.
NOTE 12: MORTGAGES AND GUARANTEES
2022
As at 31 December 2022, the Company’s interest-bearing debt secured by
mortgages totalled USD 344.2 million. The debt was secured by mortgages on the
accommodation/service vessels Safe Caledonia, Safe Concordia, Safe Scandinavia,
Safe Boreas, Safe Zephyrus and Safe Notos (net carrying value USD 283.5 million).
Negative pledge clauses apply on shares in the vessel owning subsidiaries. Earnings
accounts are pledged as security for the credit facilities, but cash will only be
restricted if a continuing event of default occurs and the bank sends notice on that.
As at 31 December 2022, the Company had issued parent company guarantees to
clients on behalf of its subsidiaries in connection with the award and performance
of contracts and Cosco (Qidong) Co., Ltd approximately USD 35 million and USD
60 million respectively. The amounts specified with regard to parent company
guarantees reflect the sum of the estimated capped liability under the relevant
agreements.
2021
As at 31 December 2021, the Company’s interest-bearing debt secured by
mortgages totalled USD 343.4 million. The debt was secured by mortgages on the
accommodation/service vessels Safe Caledonia, Safe Concordia, Safe Scandinavia,
Safe Boreas, Safe Zephyrus and Safe Notos (net carrying value USD 298.2 million).
Negative pledge clauses apply on shares in the vessel owning subsidiaries. Earnings
accounts are pledged as security for the credit facilities, but cash will only be
restricted if a continuing event of default occurs and the bank sends notice on that.
As at 31 December 2021, the Company had issued parent company guarantees to
clients on behalf of its subsidiaries in connection with the award and performance
of Cosco (Qidong) Co., Ltd approximately USD 94.3 million and USD 79.7 million
respectively. The amounts specified with regard to parent company guarantees
reflect the sum of the estimated capped liability under the relevant agreements.
83
NOTE 13: FINANCIAL ASSETS AND LIABILITIES
Year ended 31 Dec 2022
Financial
assets
measured at
amortised
cost
Financial
liabilities
measured at
amortised
cost
Carrying
value
Intra-group long-term receivables 18,294 0 18,294
Cash and deposits
1)
19,909 0 19,909
Other current assets 426 0 426
Total financial assets 38,629 0 38,629
Interest-bearing debt
2)
344,177 344,177
Accounts payable 65 65
Interest-free long-term liabilities 1,877 1,877
Intra-group current liabilities 516 516
Other interest free current liabilities 925 925
Total financial liabilities 347,560 347,560
1)
Included in cash and deposits were USD 1.9 million of restricted cash deposits.
2)
Refer to note 14 of the consolidated accounts for details on fair value of the
interest-bearing debt.
84
Year ended 31 Dec 2021
Financial
assets
measured at
amortised
cost
Financial
liabilities
measured at
amortised
cost
Carrying
value
Intra-group long-term receivables 21,646 0 21,646
Cash and deposits
1)
19,382 0 19,382
Other current assets 42,485 0 42,485
Total financial assets 83,513 0 83,513
Interest-bearing debt
2)
343,438 343,438
Accounts payable 637 637
Interest-free long-term liabilities 2,182 2,182
Intra-group current liabilities 67 67
Other interest free current liabilities 1,237 1,237
Total financial liabilities 347,561 347,561
1)
Included in cash and deposits were USD 2.1 million of restricted cash deposits.
2)
Refer to note 14 of the consolidated accounts for details on fair value of the
interest-bearing debt.
NOTE 14: MATURITY PROFILE LIABILITIES
Year ended 31 December 2022 2023 2024
2025
onwards
Interest-bearing debt (repayments)
1)
0 0 343,000
Interests on interest bearing debts 25,999 21,839 18,865
Intra-group current liabilities 516 0 0
Accounts payable 65 0 0
Other interest-free current liabilities 925 0 0
Total 27,505 21,839 361,865
1)
The interest-bearing debt matures in 2025.
Year ended 31 December 2021 2022
2023-
2024
2025
onwards
Interest-bearing debt (repayments)
1)
0 0 343,000
Interests on interest bearing debts 10,000 28,000 16,000
Intra-group current liabilities 67 0 0
Accounts payable 637 0 0
Other interest-free current liabilities 1,237 0 0
Total 11,941 28,000 359,000
1)
The interest-bearing debt matures in 2025.
NOTE 15: FINANCIAL RISKS
Interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. Fair value
interest rate risk is that the fair value of a financial instrument will fluctuate due to
changes in market interest rates.
The Company's interest rate risks arise primarily from its variable rate credit facilities.
As at 31 December 2022, the Company has not entered into arrangements to hedge
the floating interest rate (As at 31 December 2021, interest on debt is in principle
floating but had been partially hedged to reduce the variability of cash flows in
the interest payments through the use of interest rate cap and interest rate swap
agreements). The interest rate swaps were terminated in 2021 and the interest rate
cap has matured in February 2022.
The Company evaluates the hedge profile in relation to the repayment schedule of
its loans. Due to current unfavourable pricing of the interest rate swap and short
maturity of the interest bearing debt, the Company has decided not to hedge the
floating interest rate. After restructuring in 2021, there are no credit lines available
for hedging of financial risks and consequently such risks remained unhedged in 2022.
Interest rate caps
As at 31 December 2021, the Company had interest rate caps with notional amount
of USD 120 million, capped rate of 3.0000% and mature in February 2022. The fair
value of these interest rate caps amounted to less than USD 1,000 and was not
material for further disclosure in 2021.
Interest rate swaps
The interest rate swaps were terminated in 2021. The terminated amount was not
paid to the counterparties as part of the financial restructuring agreement. The
terminated amount was reclassified to the interest-bearing debt.
Notional amount Fixed rate Maturity Swap type
Terminated
value
2021
USD 120 million 1.5330 % 2022 Bullet (4,700)
Interest rate risk - sensitivity
The sensitivity analysis is based on a reasonably possible change in the relevant
interest rate and reflects the main effects on profit or loss and equity assuming
that the change had occurred at the balance sheet date. In 2021, a forward curve
shift of ±50bps was applied in the sensitivity analysis and there is no material
impact to the outstanding interest rate cap. A ±50bps change in interest rate will
have the following effects in 2022.
Pre-tax effects on income statement 2022
US LIBOR +50bps
Interest expense on credit facilities 1.715
US LIBOR -50bps
Interest expense on credit facilities (1.715)
Managing interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken
globally, including the replacement of some interbank offered rates (IBORs) with
alternative nearly risk-free rates (referred to as ‘IBOR reform’). As at 31 December
2022, the Group’s IBOR exposure is indexed to US dollar LIBOR. The alternative
reference rate for US dollar LIBOR is the Secured Overnight Financing Rate (SOFR).
The Company has entered into fallback clauses for the Company's US dollar LIBOR
indexed exposures. These clauses switch the instrument from USD LIBOR to
SOFR on 31 March 2023 with credit adjustment spread of 0.26161% published by
Bloomberg Index Services Limited on 5 March 2021.
Management monitors and manages the transition to alternative risk-free rates.
85
Management evaluates whether the contracts which are referenced to IBORs
will need to be amended as a result of IBOR reform and how to manage such
communication with the counterparties.
Non-derivative financial liabilities
The Company’s IBOR exposures to non-derivative financial liabilities as at 31
December 2022 included USD 343 million credit facility indexed to USD LIBOR. The
transition from USD LIBOR to SOFR will take place on 31 March 2023 with credit
adjustment spread of 0.26161% published by Bloomberg Index Services Limited on 5
March 2021.
Total amounts of unreformed contracts, including those with an appropriate fallback
clause
The Company monitors the progress of transition from IBORs to new benchmark
rates by reviewing the total amounts of contracts that have yet to transition to
an alternative benchmark rate and the amounts of such contracts that include
an appropriate fallback clause. The Company considers that a contract is not yet
transitioned to an alternative benchmark rate when interest under the contract is
indexed to a benchmark rate that is still subject to IBOR reform, even if it includes a
fallback clause that deals with the cessation of the existing IBOR (referred to as an
‘unreformed contract’).
The below table shows the total carrying amounts of unreformed contracts and those
with appropriate fallback clauses at 31 December 2022 and at 1 January 2022.
USD LIBOR
Pre-tax effects on income statement
Total amount
of unreformed
contracts
Amount with
appropriate
fallback clause
31 December 2022
Financial liabilities
Credit facilities - face value 344,177 344,177
1 January 2022
Financial liabilities
Credit facilities - face value 343,438 343,438
86
Currency risk
The Company's operating expenses are primarily denominated in NOK and GBP, and
the operating result is therefore exposed to currency risk relating to fluctuations
in the NOK and GBP exchange rates versus the USD. The Company is exposed to
currencies other than USD associated with interest-bearing debt (denominated in
NOK) , cash and deposits (denominated in USD, GBP and NOK).
Currency risk - sensitivity
The sensitivity analysis is based on a reasonably possible change in the relevant
exchange rates and reflects the main effects on profit or loss and equity assuming
that the change had occurred at the balance sheet date. A 10% strengthening/
weakening of the USD against NOK, EUR and GBP will have the following effects.
Exposures to foreign currency changes for all other currencies are not material.
Pre-tax effects on income statement 2022 2021
USD +10%
Re-valuation cash and deposits 373 368
Re-valuation NOK Loan to Prosafe AS 0 5,230
Total 373 5,598
USD -10%
Re-valuation cash and deposits (373) (368)
Re-valuation NOK Loan to Prosafe AS 0 (5,230)
Total (373) (5,598)
Credit risk
The Company is exposed to credit risk in relation to the inter-company loan to
a subsidiary, Safe Eurus Singapore Pte. Ltd (2021: three subsidiaries, Prosafe AS,
Prosafe Offshore Holdings Pte. Ltd. and Safe Eurus Singapore Pte. Ltd.). See note 11
for details about the intra-group loan.
Liquidity risk
The Company is exposed to liquidity risk in a scenario when the Company’s cash
flow from operations is insufficient to cover payments of financial liabilities. The
Company manages liquidity and funding on a group level. In order to mitigate
the liquidity risk, the Group monitors the liquidity development and the risk of
insufficient capital by rolling cash flow forecasts to determine whether the Group's
liquidity position is above the minimum cash covenant as per the loan agreements.
Given the significant investments needed to prepare for the new contracts in
2023 for the Group, there is uncertainty as to whether the Company will be in
compliance with the minimum liquidity covenant from late 2023. Management is
pursuing different initiatives to mitigate a potential shortfall and with the objective
to remain in compliance as described in note 2 of the consolidated accounts
and the Board of Directors has a reasonable expectation that the Company has
adequate resources to mitigate the uncertainty.
Capital management
The primary objective of the Company's capital management is to ensure that
it maintains a healthy capital structure in line with economic conditions. This is
managed on a group level as disclosed in note 18 of the consolidated accounts.
INDEPENDENT
AUDITOR'S REPORT
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
We have audited the financial statements of Prosafe SE, which comprise:
• the financial statements of the parent company Prosafe SE (the Company),
which comprise the statement of financial position as at 31 December 2022, the
income statement, statement of comprehensive income, statement of changes
in equity and cash flow statement for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies, and
• the consolidated financial statements of Prosafe SE and its subsidiaries (the
Group), which comprise the consolidated statement of financial position as at
31 December 2022, the consolidated income statement, consolidated statement
of comprehensive income, consolidated statement of changes in equity and
consolidated cash flow statement for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies.
In our opinion:
• the financial statements comply with applicable statutory requirements,
• the financial statements give a true and fair view of the financial position of
the Company as at 31 December 2022, and its financial performance and its
cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the EU, and
• the consolidated financial statements give a true and fair view of the financial
position of the Group as at 31 December 2022, and its financial performance and
its cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the EU.
Our opinion is consistent with our additional report to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(ISAs). Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Financial Statements section of our
report. We are independent of the Company and the Group as required by relevant
laws and regulations in Norway and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including
International Independence Standards) (IESBA Code), and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
To the best of our knowledge and belief, no prohibited non-audit services referred
to in the Audit Regulation (537/2014) Article 5.1 have been provided.
We have been the auditor of the Company for 4 years from the election by the
general meeting of the shareholders on 8 May 2019 for the accounting year 2019.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 and Note 14 in the financial statements, which
indicate that the Group may breach the minimum liquidity covenant of USD 23
million from the second half of 2023. The Group’s ability to continue as a going
concern may be dependent on raising additional funds. As stated in Note 2, these
events or conditions, indicate that a material uncertainty exists that may cast
significant doubt on the Group’s and the Parent Company’s ability to continue as
a going concern. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In addition to the matter described in the
Material Uncertainty Related to Going Concern section, we have determined the
matters described below to be the key audit matters to be communicated in our
report.
Valuation of accommodation vessel fleet and possible reversal of impairment
Reference is made to Note 2 Statement of Compliance and basis of preparation
paragraph “Impairment / Reversal of impairment of non-financial assets” and
Note 8 Tangible assets.
To the General Meeting of Prosafe SE
88
The key audit matter How the matter was addressed in our audit
The Group's fleet of accommodation vessels have a book value of USD 376,8
million and represents a significant portion of total assets. The Group recorded
significant impairment charges in previous years, including both in 2019 and
2020. All the vessels owned by the Group are previously impaired in accordance
with IAS 36
The Group regularly reviews whether there are any indicators of impairment and
impairment reversal and tests the individual assets for impairment (reversal) if an
indicator is identified.
The market for offshore accommodation vessels improved in 2022 with
utilization levels for the Group and the industry as a whole significantly higher
than the preceding years.
Assessing whether an indicator for impairment reversal exists, involves significant
judgment from management, as to whether significant changes have occurred
in the market for accommodation vessels, which could significantly impact the
expected future cash flow from the asset. This judgement includes assessing
observable changes in day rates and the likelihood of redeployment of the vessel
to new contracts either from lay-up or when the current contract period expires.
This uncertainty is mainly applicable to those vessels that are nearing the end of
the fixed contract period and those that are currently not on contract.
The judgments described above have a direct impact on the valuation of the
Company’s significant investment in subsidiaries and the expected credit loss on
receivables from subsidiaries.
For all vessels in the Group’s fleet per 31 December 2022, a qualitative
assessment of impairment (reversal) indicators did not require further
quantitative impairment testing.
We obtained an understanding of the process for identifying impairment reversal
indicators and tested the design and implementation of selected controls over
management’s assessment.
We evaluated whether all vessels in the fleet were identified by management
and assessed for impairment reversal indicators. For each vessel we assessed
the key considerations applied by management in the impairment reversal
trigger assessment. For those vessels where an error could result in a material
misstatement and where management did not identify an impairment reversal
trigger, we assessed the appropriateness and reliability of qualitative factors and
challenged management considering:
• utilisation levels for the fleet in 2022
• status of tender activity
• supply-side constraints and market expectations in the short and medium term
We inspected external information sources, comparing to management updates
and communication with the Board of Directors of the Group to assess the
consistency of the current year increase in activity for the sector.
We assessed the impact on impairment reversal for shares in subsidiaries and
reversal of expected credit loss for receivables from subsidiaries, considering the
vessel indicators assessments as well as the net assets of the subsidiaries.
We assessed the adequacy of disclosure related to impairment indicators
89
Other information
The Board of Directors and the Managing Director (management) are responsible
for the information in the Board of Directors’ report and the other information
accompanying the financial statements. The other information comprises
information in the annual report, but does not include the financial statements
and our auditor’s report thereon. Our opinion on the financial statements does not
cover the information in the Board of Directors’ report nor the other information
accompanying the financial statements.
In connection with our audit of the financial statements, our responsibility is to
read the Board of Directors’ report and the other information accompanying the
financial statements. The purpose is to consider if there is material inconsistency
between the Board of Directors’ report and the other information accompanying
the financial statements and the financial statements or our knowledge obtained
in the audit, or whether the Board of Directors’ report and the other information
accompanying the financial statements otherwise appear to be materially
misstated. We are required to report if there is a material misstatement in the
Board of Directors’ report or the other information accompanying the financial
statements. We have nothing to report in this regard.
Based on our knowledge obtained in the audit, it is our opinion that the Board of
Directors’ report
• is consistent with the financial statements and
• contains the information required by applicable statutory requirements.
Our opinion on the Board of Director’s report applies correspondingly to the
statements on Corporate Governance and Environmental, Social and Governance
report.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation of financial statements that give a
true and fair view in accordance with International Financial Reporting Standards
as adopted by the EU, and for such internal control as management determines
is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing
the Company’s and the Group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and
maintain professional scepticism throughout the audit. We also:
• identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error. We design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company's and
the Group's internal control.
• evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
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• conclude on the appropriateness of management’s use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast
significant doubt on the Company's and the Group's ability to continue as
a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause the
Company and the Group to cease to continue as a going concern.
• evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events in a manner that achieves a
true and fair view.
• obtain sufficient appropriate audit evidence regarding the financial information
of the entities or business activities within the Group to express an opinion
on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible
for our audit opinion.
We communicate with the Board of Directors regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied
with relevant ethical requirements regarding independence, and to communicate
with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we determine those
matters that were of most significance in the audit of the financial statements
of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
Report on Compliance with Requirement on European Single Electronic Format
(ESEF)
Opinion
As part of the audit of the financial statements of Prosafe SE we have performed
an assurance engagement to obtain reasonable assurance about whether
the financial statements included in the annual report, with the file name
“2138001LK2Z2HSER4U15-2022-12-31-en”, have been prepared, in all material
respects, in compliance with the requirements of the Commission Delegated
Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF
Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities
Trading Act, which includes requirements related to the preparation of the
annual report in XHTML format, and iXBRL tagging of the consolidated financial
statements.
In our opinion, the financial statements, included in the annual report, have been
prepared, in all material respects, in compliance with the ESEF regulation.
Management’s Responsibilities
Management is responsible for the preparation of the annual report in compliance
with the ESEF regulation. This responsibility comprises an adequate process and
such internal control as management determines is necessary.
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Auditor’s Responsibilities
Our responsibility, based on audit evidence obtained, is to express an opinion on
whether, in all material respects, the financial statements included in the annual
report have been prepared in compliance with ESEF. We conduct our work in
compliance with the International Standard for Assurance Engagements (ISAE)
3000 – “Assurance engagements other than audits or reviews of historical financial
information”. The standard requires us to plan and perform procedures to obtain
reasonable assurance about whether the financial statements included in the
annual report have been prepared in compliance with the ESEF Regulation.
As part of our work, we have performed procedures to obtain an understanding
of the Company’s processes for preparing the financial statements in compliance
with the ESEF Regulation. We examine whether the financial statements are
presented in XHTML-format. We evaluate the completeness and accuracy of the
iXBRL tagging of the consolidated financial statements and assess management’s
use of judgement. Our procedures include reconciliation of the iXBRL tagged data
with the audited financial statements in human-readable format. We believe that
the evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Stavanger, 28 March 2023
KPMG AS
Anfinn Fardal
State Authorised Public Accountant
(This document is signed electronically)
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www.prosafe.com
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