PETROLIA SE - ANNUAL REPORT 2021
ANNUAL REPORT 21
PETROLIA SE
20
21
ANNUAL REPORT 2021 PETROLIA SE
CONTENT
STATEMENT OF DIRECTORS AND RESPONSIBILITY STATEMENT 05
MANAGEMENT REPORT 07
CORPORATE SOCIAL RESPONSIBILITY 10
FINANCIAL STATEMENTS – GROUP
Consolidated Income Statement 12
Consolidated Statement of Comprehensive Income 13
Consolidated Statement of Financial Position – Assets 14
Consolidated Statement of Financial Position – Equity and Liabilities 15
Consolidated Statement of Changes in Equity 16
Consolidated Statement of Cash Flows 17
Notes to the consolidated financial statements 18
FINANCIAL STATEMENTS – PARENT COMPANY
Statement of profit or loss and other Comprehensive Income 55
Statement of Financial Position 56
Statement of Changes in Equity 57
Statement of Cash Flows 58
Notes to the financial statements 59
AUDITOR’S REPORT 77
CORPORATE GOVERNANCE REPORT 83
4
RESPONSIBILITY
STATE
MENT
04
ANNUAL REPORT 2021 PETROLIA SE
05
STATE
MENT
RESPONSIBILITY STATEMENT
STATEMENT OF THE MEMBERS OF THE
BOARD OF DIRECTORS AND OTHER
RESPONSIBLE PERSONS OF PETROLIA
SE FOR THE FINANCIAL STATEMENTS
IN THE ANNUAL REPORT FOR THE YEAR
ENDING 31 DECEMBER 2021
In accordance with Article 9, sections (3)
(c) and (7) of the Cyprus Transparency
Requirements (Securities for Trading on
Regulated Market) Law of 2007 (“Law”),
we, the members of the Board of Directors
and the other responsible persons for the
consolidated and separate financial state-
ments of Petrolia SE for the year ended 31
December 2021, confirm that, to the best of
our knowledge:
(a) the annual consolidated and separate
financial statements that are presented on
pages 12 to 75:
•
(i) were prepared in accordance with
the International Financial Reporting
Standards as adopted by the European
Union, and in accordance with the pro-
visions of Article 9, section (4), of the
Law; and
•
(ii) give a true and fair view of the assets
and liabilities, the financial position and
the profit or losses of Petrolia SE and the
undertakings included in the consolidated
accounts taken as a whole; and
(b) the Management Report gives a fair review
of the developments and performance of
the business and the financial position of
Petrolia SE and the undertakings included in
the consolidated accounts taken as a whole
together with a description of the principal
risks and uncertainties that they are facing.
RESPONSIBILITY
STATEMENT
Limassol, 28th of April 2022
Berge Gerdt Larsen
Chairman of the Board
Polycarpos Protopapas
Board member
Managing director
Sjur Storaas
Board member
Sølve Nilsen
Finance manager
George Hadjineophytou
Board member
6
MANAGEMENT
06
REPORT
ANNUAL REPORT 2021 PETROLIA SE
07
MANAGEMENT REPORT
INTRODUCTION AND STRATEGY
Petrolia SE Group, which comprises Petrolia
SE (“Petrolia” or the "Company”) and its
subsidiaries (together referred to as the
“Group”) has two business divisions: Energy
and Energy Service. Petrolia SE is listed on
the Oslo Stock Exchange under the ticker
code PSE.
Energy division
The Energy division focuses primarily on
exploration for and production of oil and gas,
and recently on green energy like Hydrogen
and Ammonia production.
The Petrolia Group is the largest shareholder
(49.9%) of Petrolia NOCO AS, an independent
E&P company on the Norwegian Continental
Shelf (NCS). The company is registered on
NOTC (PNO). PNO has various licence shares,
has made one commercial discovery, has
some small production and is also qualified
as a Licence Operator.
Energy service division
The Energy Service division has from 2007
primarily focused on well services for oil
and gas drilling, mainly through the global
Independent Oil Tools AS Group (IOT). Well
Services are also provided for thermo and
salt drilling.
The Group owns two landrigs, of which one
is operational, and drills and performs work-
over on land wells as a drilling contractor
with these rigs and hired in rigs whenever
drilling contracts are secured.
Through CO2 Management AS, the division
is involved with managing CO2 reduction
projects as well Carbon Capture, Utilization
and Storage (CCUS) activities.
The Subsurface competence of PNO may be
used for CO2 Storage Wells on NCS.
ANALYSIS OF THE FINANCIAL STATEMENTS
Petrolia SE presents its financial informa-
tion in USD.
Financial information, Group
Total revenue amounted to USD 51.0 million
for the fiscal year 2021 (2020: USD 43.6
million), mainly related to the Energy Service
segment.
Operating profit for the Group in 2021
amounted to USD 4.8 million, aer deduc-
tion of depreciation of USD 7.6 million and
impairment of fixed assets of USD 0.9 mil
-
lion. Operating profit for the Group in 2020
amounted to USD 1.5 million, aer deduction
of depreciation of USD 7.9 million and impair-
ment of fixed assets of USD 0.5 million.
Loss aer tax for the Group amounted to
USD 1.2 million in 2021 (2020: Loss of USD
210 thousand).
As at 31 December 2021, the total assets
of the Group amounted to USD 69.3 million.
Total assets of the Group amounted to USD
71.4 million as at 31 December 2020.
Total equity of the Group amounted to USD
39.3 million as at 31 December 2021, includ-
ing a minority interest of USD 1.9 million.
Total equity of the Group amounted to USD
40.9 million as at 31 December 2020, includ-
ing a minority interest of USD 1.5 million.
As at 31 December 2021, the total number
of shares outstanding in Petrolia SE was
59,133,786 with par value USD 0.10 each.
Cash flows from operations was USD 10.3
million in 2021 (2020: USD 11.6 million).
Cash flows from investments was USD -5.7
million in 2021 (2020: USD 48 thousand).
Cash flows from financing activities in 2021
was USD -4.6 million (2020: USD -3.3 million)
mainly related to interest on bond loan and
lease interests and installments.
Total cash position at 31 December 2021 was
USD 16.1 million (2020: USD 16.2 million).
Financial information, Parent
Total revenues amounting to USD 134 thou-
sand for 2021 (2020: USD 152 thousand),
related mainly to management (USD 9 thou-
sand) and consultancy (USD 125 thousand)
fees for the rendering of services to the
Group by the branch.
Operating loss for the parent company
amounted to USD 1.3 million (2020: USD
1.2 million).
Profit aer tax for the parent amounted to
USD 2.1 million (2020: profit of USD 10.7
million).
As at 31 December 2021, the total assets of
the Parent amounted to USD 53.6 million of
which investments in subsidiaries were USD
44.1 million, loan assets was USD 6.6 million,
cash at bank was USD 1.9 million, investment
in associates was USD 0.3 million and USD
0.5 million in trade and other receivables.
Total equity of the Parent amounted to USD
46.1 million as at 31 December 2021 (2020:
USD 40.2 million).
As at 31 December 2021, the total number
of shares outstanding in Petrolia SE was
59,133,786, with par value USD 0.10 each.
Cash flows from operations were USD 8.5
million in 2021 (2020: USD 0.1 million). Cash
flows from investing were USD -6.4 million
(2020: nil). Cash flows from financing were
USD -0.2 million (2020: USD -0.3 million).
Total cash position at 31 December 2021
was USD 2.0 million (2020: USD 0.1 million).
FINANCIAL AND LIQUIDITY RISK
As at 31 December 2021, the Group had a
cash balance of USD 16.1 million.
The Group’s long-term financing is mainly
financial lease of equipment and Right of
Use Asset totalling USD 13.1 million, while
the bond loan amounting to USD 4.6 million
is due for repayment on 21 July 2022.
Additional information on liquidity risk is pre-
sented in Note 23.
GOING CONCERN
Management has conducted a review of the
going concern assumption considering all
relevant information available up to the date
the consolidated and separate parent financial
statements are issued and taking into account
all available information about the future, for
MANAGEMENT REPORT
ANNUAL REPORT 2021 PETROLIA SE
08
MANAGEMENT REPORT
at least 12 months from the reporting date.
The forecast cash flows from the Energy
Service division provide sucient cash flows
and the Group expects to be in a position to
serve its working capital needs, the repay-
ment of the Bond Loan and other obligations
as and when they fall due. These forecasts
have been made based on past experiences
and detailed knowledge of the local markets.
The Group’s management expects an improved
environment for the Energy Service segment
in 2022 and remains confident in the Group’s
ability to adapt cost levels to the activity and
to maintain sucient financial resources to
enable it to continue as a going concern for
the foreseeable future.
Following its review, management confirms
that the requirements of the going concern
assumption are met and that these financial
statements have been prepared on that basis.
WORKING ENVIRONMENT AND PERSONNEL
Petrolia SE has four employees, two men
and two women.
In total, the Group had 229 highly competent
employees worldwide as at 31 December
2021. The Group is an equal opportunity
employer and will not tolerate discrimina-
tion. Recruitment, promotion and reward
are based entirely on merit.
There have not been any serious accidents
reported in the Group in 2021.
Petrolia’s Board of Directors consisted of 4
men as at 31 December 2021.
ENVIRONMENT REPORTING
The Group’s objective is that all of its activi-
ties are carried out without risk to people
or damage to the surroundings. The Group’s
activities during 2021 did not cause any pol-
lution of the environment and have conformed
with the demands of the prevailing authorities
in its worldwide operations.
CORPORATE GOVERNANCE STATEMENT
The Board believes it is important that the
Group is run and managed on sound principles
of Corporate Governance. Reference is made
to the section on Corporate Governance in
this report.
As Petrolia is listed on the Oslo Stock
Exchange, it follows the Norwegian Code of
Practice for Corporate Governance of 14
October 2021.
Significant shareholders are presented in note
17 to the consolidated financial statements.
As at 31 December 2021 and as at 26 April
2022, the directors who held shares in the
Company are shown in note 17.
There are no restrictions in voting rights
or special control rights in relation to the
shares of the Company.
Any amendment or addition to the Articles
of Association of the Company is only valid if
approved by a special resolution at a share-
holders’ meeting.
The rules governing the composition of the
Board of Directors, appointment and re-
placement of its members and holding of
Company’s shares are set out in Section 8 of
the Corporate Governance Report for 2021.
The powers of the Board of Directors and
its Audit and Remuneration Committees are
also set out in the Corporate Governance
Report in section 9.
The Company, through internal controls imple-
mented by management and supervised by
the Audit Committee, implemented eective
procedures for the composition and prepa-
ration of financial statements and periodic
information, as provided by the Laws and
Regulations of listed companies. In addi-
tion to the above, the main features of these
procedures, are as follows:
•
The financial statements of the Group
companies and the consolidated financial
statements are prepared with the respon-
sibility of the Chief Financial Ocer and
reviewed by the Audit Committee.
•
The periodic announcements of the Company
and the detailed explanatory notes are
prepared by the Chief Financial Ocer and
reviewed by the Audit Committee.
•
The financial statements and the periodic
announcements are approved by the Board
of Directors prior to their publication.
EXISTENCE OF BRANCHES
To facilitate its operations, the Company has
established a branch in Norway.
CHANGES IN SHARE CAPITAL
There have been no changes to the share
capital during 2021.
BOARD OF DIRECTORS
The members of the Company’s Board of
Directors as at 31 December 2021 and at the
date of this report are Berge Gerdt Larsen,
Sjur Storaas, George Hadjineophytou and
Polycarpos Protopapas.
The General Meeting on 27 May 2021 re-
elected Mr Berge Gerdt Larsen, Mr Sjur
Storaas, Mr George Hadjineophytou and
Mr Polycarpos Protopapas as directors of
the Board.
In accordance with the Company’s Articles of
Association, all Directors who are presently
members of the Board will continue in oce
until the next Annual General Meeting and
are eligible for re-election.
The Directors’ interests in shares of the
Company is disclosed in note 17 of the
financial statements.
INDEPENDENT AUDITOR
The independent auditors of the Company,
Ernst & Young Cyprus Limited, have expressed
their willingness to continue in oce. A reso-
lution proposing the firm’s re-appointment
and authorising the Directors to set the remu-
neration for audit services will be proposed at
ANNUAL REPORT 2021 PETROLIA SE
the Annual General Meeting of the Company.
EVENTS AFTER THE REPORTING PERIOD
Please refer to note 29.
09
MANAGEMENT REPORT
Limassol, 28th of April 2022
Berge Gerdt Larsen
Chairman of the Board
Polycarpos Protopapas
Board member
Managing director
Sjur Storaas
Board member
Sølve Nilsen
Finance manager
George Hadjineophytou
Board member
10
ANNUAL REPORT 2021 PETROLIA SE
THE BOARD OF DIRECTORS'
REPORT ON CORPORATE SOCIAL
RESPONSIBILITY
In this report, we disclose information relating
to our CORPORATE SOCIAL RESPONSIBILITY
(‘CSR’) policy and performance of this policy
in 2021. This report relates to the period
1 January 2021 to 31 December 2021 and
should be read as part of the Company's
Annual Report for 2021. During 2021, the
Group had operational activities in Norway,
The Netherlands, the UK, Romania, Australia,
New Zealand, Iraq, Malaysia, Papua New
Guinea and UAE, therefore the majority of
the information in this CSR report relates to
the Group’s operations in these countries.
Our approach to CSR focuses on the way in
which we conduct relationships with all of
our stakeholders and the wider impact that
we can have on society and the environment.
In this context, we continuously address the
following key aspects of our business:
HEALTH & SAFETY
The safety of our employees, contractors,
partners and all of our stakeholders is of
utmost importance to the Group. We aim to
employ high Health & Safety standards to
our operations everywhere. All our employ-
ees and contractors have the responsibility
and the authority to stop unsafe work. Our
contracts include health and safety require-
ments consistent with our code of conduct.
Our main objective is that all of our activities
are carried out without risk to people or
damage to the environment and our safety
and operational risk team works together to
achieve this objective. Incidents and near
misses are required to be reported and in-
vestigated. We are pleased to report that
during 2021, no incident of pollution to the
environment was reported and the Group
conformed with the safety and environmental
demands of the prevailing authorities in its
worldwide operations. We continued to have
an excellent health and safety record with no
major injuries or fatalities in 2021.
ENVIRONMENT & SUSTAINABILITY
We recognise the potential to damage the
environment through our operations and
our responsibility to implement eective
management to safeguard the environment
by minimising such an impact and we have
capable people to manage such risks at every
stage. CO2 emissions from our activities
receive the greatest attention. We are commit-
ted to making a positive contribution to global
sustainability and to protect the environment.
We aim to operate to the highest international
social, environmental and safety standards
within the industry and believe that it is im-
portant to make a positive contribution to all
of the geographical areas where we operate.
Climate change and the transition to a lower
carbon economy has been identified as a pos-
sible risk. Our subsidiary, CO2 Management
AS aims to mitigate this risk by taking steps
to reduce the Group’s carbon footprint and
in addition, will make investments aimed at
reducing CO2 emissions, including Carbon
Capture & Storage (CCS) and Hydrogen
Production technologies in Norway.
EMPLOYEES
Our ability to create sustainable shareholder
value is linked to our ability to recruit, moti-
vate and retain highly competent employees.
People are our most important asset. The
Group is an equal opportunities employer
and will not tolerate discrimination in re-
cruitment, advancement and remuneration in
the workplace. We have a shared commitment
with employees to create a safe working en-
vironment where there is respect for others
and we are responsive to employee needs.
Employees are encouraged to speak up if
they have any concerns through our Whistle
Blowing Policy. Recruitment, promotion and
reward are entirely based on merit. We believe
in shared prosperity and wherever possible,
we employ nationals of our host countries.
COMMUNITY AND HUMAN RIGHTS
Our continuous presence in a number of dif-
ferent territories brings challenges, which we
meet through the application of our existing
approach and policies. We aim to have a pos-
itive and enduring impact on the communities
in which we operate and contribute to their
development. We invest in our relationships
with the local communities and ensure that all
of our activities are conducted with absolute
respect to these communities. We contribute
to these communities by employing local sta
and cooperating with local suppliers. We re-
spect internationally recognised human rights
and we set our commitments in our human
rights policy and our Code of Conduct. All
of our initiatives during 2021 were focused
on health and social involvement across our
operating regions.
BUSINESS CONDUCT
CSR encompasses the Company’s manage-
ment of relationships with shareholders,
employees, contractors, partners and the
local communities where we work, together
with the impact it has on society and the
environment. In this respect, we have a re-
sponsibility to ensure that we deliver our
business objectives in a way that benefits
all of our stakeholders. In recognition of
this responsibility, we have robust policies
and systems in place, which are continuously
reviewed. We aim for the highest standards of
business conduct across all of our worldwide
operations. Our CSR policy aims to ensure
a responsible and transparent performance
of our business in all of the areas in which
we operate. It reflects our commitment to
generate and sustain long-term value growth
for the Company whilst creating long last-
ing legacies in local communities. Operating
to high international social, environmental
and safety standards and maintaining high
standards of corporate governance is a key
requirement of our policy. Our Code of Conduct
ensures that we compete fairly and explicitly
prohibits engaging in any form of bribery or
corruption whilst our Integrity Due Diligence
procedures ensure that we select our busi-
ness partners carefully and do not expose
the Group to any reputational risk with zero
tolerance for unethical business practices.
We also prohibit the use of funds to support
political parties.
CORPORATE GOVERNANCE
We continue to operate with high stand-
ards of corporate governance, which helps
us deliver our strategic objectives. We are
committed to protecting the interests of all
of our stakeholders through complete and
absolute compliance with the relevant legal
and regulatory environments and through
the eective management of risk.
Every eort has been made to ensure that in-
formation contained in this report is accurate.
FINANCIAL
STATEMENTS
ANNUAL REPORT 2021 PETROLIA SE
11
FINANCIAL
STATEMENTS
GROUP
12
ANNUAL REPORT 2021 PETROLIA SE
FINANCIAL STATEMENTS
Petrolia SE – Group
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2021
(Amounts in USD 1,000)
Note 2021 2020
Revenue from contracts with customers 5 50,976 43,596
Wages cost 6 -13,520 -10,855
Other operating expenses 7 -24,118 -22,855
Operating result before depreciation and impairments 13,338 9,886
Depreciation 11 -7,640 -7,888
Net impairment of fixed assets 11 -934 -470
Operating result 4,764 1,528
Result from associated companies 12 -3,636 -1,532
Interest income 8 472 588
Financial income 8 55 1,160
Interest expenses 8 -1,009 -808
Financial expenses 8 -937 -146
Result before income taxes -291 790
Income tax 9 -879 -1,000
Result for the year -1,170 -210
Attributable to:
Equity holders of the parent -1,193 611
Non-controlling interests 23 -821
-1,170 -210
Attributable to the equity holders (USD per share)
Earnings per share (Basic, from continuing operations) 10 -0.02 0.01
FINANCIAL STATEMENTS / GROUP
13
ANNUAL REPORT 2021 PETROLIA SE
FINANCIAL STATEMENTS / GROUP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2021
(Amounts in USD 1,000) Note 2021 2020
Result for the year -1,170 -210
Other comprehensive income:
Other comprehensive income to be reclassified to profit or loss in subsequent periods
(net of tax):
Exchange dierences on translation of foreign operations -392 -332
Total comprehensive loss for the year, net of tax -1,562 -542
Attributable to:
Equity holders of the parent -1,866 -23
Non-controlling interests 304 -519
Total comprehensive loss for the year -1,562 -542
14
ANNUAL REPORT 2021 PETROLIA SE
ASSETS (Amounts in USD 1,000) Note 2021 2020
Non-current assets
Goodwill 28 249 0
Right of use assets 11 13,152 12,047
Land and buildings 11 1,820 2,696
OilService and other equipment 11 12,820 14,771
Land rigs 11 1,741 1,902
Investment in associated companies 12 1,087 2,491
Other financial assets 13 7,001 6,417
Deferred tax assets 9 169 424
Restricted cash 16 3 29
Total non-current assets 38,042 40,777
Current assets
Inventory 26 1,933 1,870
Trade receivables 14 10,225 10,325
Other current receivables 14 2,803 2,135
Financial assets at fair value through profit or loss 15 162 110
Free cash 16 15,908 15,942
Restricted cash 16 222 200
Total current assets 31,253 30,582
TOTAL ASSETS 69,295 71,359
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2021
FINANCIAL STATEMENTS / GROUP
15
ANNUAL REPORT 2021 PETROLIA SE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2021
FINANCIAL STATEMENTS / GROUP
EQUITY AND LIABILITIES (Amounts in USD 1,000)
Note 2021 2020
Equity
Share capital 17 5,913 5,913
Share premium 12,222 12,222
Other reserves 19,306 21,172
Equity attributable to equity holders of the parent 37,441 39,307
Non-controlling interests 1,851 1,547
Total equity 39,292 40,854
Liabilities
Non-current liabilities
Bond loans 18 0 4,620
Lease liabilities 19 9,404 9,338
Bank loan 21 304 438
Other non-current liabilities 110 93
9,818 14,489
Current liabilities
Bond loans 18 4,620 0
Lease liabilities 19 3,653 3,084
Trade payables 20 5,354 7,161
Other payables 20 5,884 4,591
Bank loan and overdra 21 106 104
Income tax payable 568 1,076
20,185 16,016
Total liabilities 30,003 30,505
TOTAL EQUITY AND LIABILITIES 69,295 71,359
Limassol, 28th of April 2022
Berge Gerdt Larsen
Chairman of the Board
Polycarpos Protopapas
Board member
Managing director
Sjur Storaas
Board member
Sølve Nilsen
Finance manager
George Hadjineophytou
Board member
16
ANNUAL REPORT 2021 PETROLIA SE
Attributable to equity holders of the parent
(Amounts in USD 1,000)
Share
capital
Share
premium
Reorganisa-
tion reserve
Retained
earnings
Currency
translation
Subtotal Non-
controlling
interests
Total equity
Equity 1 January 2020 5,913 12,222 -15,075 33,540 2,730 39,330 2,066 41,396
Profit/(loss) for the year 0 0 0 611 0 611 -821 -210
Other comprehensive income
Exchange dierences
on translation of foreign
operations
0 0 0 0 -634 -634 302 -332
Total comprehensive income/
(loss)
0 0 0 611 -634 -23 -519 -542
Equity 31 December 2020 5,913 12,222 -15,075 34,151 2,096 39,307 1,547 40,854
Profit/(loss) for the year 0 0 0 -1,193 0 -1,193 23 -1,170
Other comprehensive income
Exchange dierences
on translation of foreign
operations
0 0 0 0 -673 -673 281 -392
Total comprehensive income/
(loss)
0 0 0 -1,193 -673 -1,866 304 -1,562
Equity 31 December 2021 5,913 12,222 -15,075 32,958 1,423 37,441 1,851 39,292
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2021
Equity attributable to the Company's shareholders. Refer also to note 17.
FINANCIAL STATEMENTS / GROUP
17
ANNUAL REPORT 2021 PETROLIA SE
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2021
FINANCIAL STATEMENTS / GROUP
(Amounts in USD 1,000) Note 2021 2020
Operating activities
(Loss)/profit before taxes -291 790
Allowance of expected credit losses 7 924 1,976
Loss/(profit) on disposal of property, plant and equipment 42 -113
Depreciation of property, plant and equipment and right of use assets 11 7,640 7,888
Impairment of property, plant, equipment 11 934 470
Interest income 8 -472 -588
Change in financial assets at fair value through profit or loss 8 -52 70
Interest expense on lease liabilities 8 709 504
Interest expense on bonds 8 277 277
Other interest expenses 8 23 27
Change in inventory -63 -395
Change in trade receivables -824 3,515
Change in other current receivables -338 908
Change in trade payables -1,807 -1,176
Change in other payables 2,517 -1,662
Change in other non-current liabilities -1,207 2
Result from investment in associated companies 12 3,636 1,532
Income tax paid -493 -839
Other, incl unrealised foreign currency loss/gain -853 -1,544
Net cash generated from operating activities 10,302 11,642
Investing activities
Purchase of fixed assets 11 -3,475 -3,411
Disposal of equipment 204 602
Repayment of loans granted 13 8,271 4,563
Loan granted 13 -8,414 0
Investment in associates 12 -2,456 -2,294
Acquisition of a subsidiary, net of cash acquired 28 -350 0
Interest received 472 588
Net cash (used in) / generated from investing activities -5,748 48
Financing activities
Increase/release of restricted cash 4 -52
Leasing instalments (capital) 23 -3,552 -2,881
Interest paid on bond loans (net) 8 -277 -277
Other interest paid 8 -23 -27
Interest paid on lease liabilities 19 -709 -504
Bank loan, draw down 23 0 527
Bank loan, repaid 23 -31 -119
Net cash used in financing activities -4,588 -3,333
Net cash flow of the period -34 8,357
Free cash and cash equivalents at the beginning of the period 16 15,942 7,585
Free cash and cash equivalents balance at 31 December 16 15,908 15,942
18
ANNUAL REPORT 2021 PETROLIA SE
2.1 BASIS OF PREPARATION
The consolidated financial statements of
Petrolia SE have been prepared in compli-
ance with International Financial Reporting
Standards (IFRSs) as endorsed by the EU and
the requirements of the Cyprus Companies
Law, Cap.113.
The consolidated financial statements have
been prepared under the historical cost
convention with the following modification:
Financial assets recognised at fair value
through profit or loss.
The preparation of financial statements in
conformity with IFRS requires the use of
certain critical accounting estimates. It also
requires management to exercise its judge-
ment in the process of applying the Group’s
accounting policies. The areas involving a
higher degree of judgement or complexity,
or areas where assumptions and estimates
are significant to the consolidated financial
statements are discussed in note 3 below.
The consolidated financial statements are
presented in United States Dollars (USD)
and all values are rounded to the nearest
thousand (USD 1,000), except when other-
wise indicated.
The accounting year follows the calendar year.
FAIR VALUE MEASUREMENT
Fair value is the price that would be received
from the sale of an asset or paid to transfer
a liability in an orderly transaction between
market participants at the measurement date.
The fair value measurement is based on the
presumption that the transaction whereby
an asset is sold or a liability is transferred
takes place either in the principal market for
the asset or liability or in the absence of a
principal market, in the most advantageous
market for the asset or liability.
The principal or the most advantageous
market must be accessible by the Group.
The fair value of an asset or a liability is
measured using the assumptions that market
participants would use when pricing the asset
or liability, assuming that market participants
act in their economic best interest. A fair
value measurement of a non-financial asset
takes into account a market participant's
ability to generate economic benefits by using
the asset in its highest and best use or by
selling it to another market participant that
would use the asset in its highest and best
NOTE 1 GENERAL INFORMATION
NOTES - GROUP
to the consolidated financial statements
Petrolia SE (the "Company") is a European
public limited company organised under the
laws of Cyprus. The Company's registered
oce is at 205 Christodoulou Chatzipavlou
Street, Loulloupis Court, 4th floor, oce 401,
3036 Limassol, Cyprus. The Company also has
a Norwegian branch with registered oce at
Haakon VIIs gate 1 (2. etg.), Oslo, Norway.
The main activity of the Group is the sale and
rental of drilling equipment and land rig rental
to the global oil industry.
The annual financial statements were adopted
by the Board of Directors on the 28th of April
2022 and will be passed to the Annual General
Meeting for approval.
Petrolia SE was established on the 26th of
October 2012 as a result of the merger be-
tween Petrolia ASA (established on the 13th
of March, 1997) and Petrolia E&P Holdings
Plc. The consolidated financial statements for
the financial year 2021 comprise the Company
and its subsidiaries and the Group’s share of
associated companies. The Company is listed
on the Oslo Stock Exchange with ticker "PSE"
and ISIN "CY 010 263 0916".
The table below presents general ESEF data.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENTS / GROUP / NOTES
Domicile of entity Limassol Principal place of business Cyprus
Legal form of entity European public limited company
Description of nature of entity's
operations and principal activities
The main activity of the Group
is the sale and rental of energy
service equipment to the global
energy industry
Country of incorporation Cyprus Name of parent entity Petrolia SE
Address of entity's registered
oce
205 Christodoulou Chatzipavlou Street,
Loulloupis Court
Name of ultimate parent of group Petrolia SE
19
ANNUAL REPORT 2021 PETROLIA SE
use. The Group uses valuation techniques
that are appropriate in the circumstances
and for which sucient data are available
to measure fair value, maximising the use of
relevant observable inputs and minimising the
use of unobservable inputs. All assets and
liabilities for which fair value is measured
or disclosed in the consolidated financial
statements are categorised within the fair
value hierarchy, described in note 23.
GOING CONCERN
Management has conducted a review of the
going concern assumption considering all
relevant information available up to the date
the consolidated and separate parent financial
statements are issued and taking into account
all available information about the future, for
at least 12 months from the reporting date.
The forecast cash flows from the Energy
Service division provide sucient cash flows
and the Group expects to be in a position to
serve its working capital needs, the repay-
ment of the Bond Loan and other obligations
as and when they fall due. These forecasts
have been made based on past experiences
and detailed knowledge of the local markets.
The Group’s management expects an improved
environment for the Energy Service segment
in 2022 and remains confident in the Group’s
ability to adapt cost levels to the activity and
to maintain sucient financial resources to
enable it to continue as a going concern for
the foreseeable future.
Following its review, management confirms
that the requirements of the going concern
assumption are met and that these financial
statements have been prepared on that basis.
2.2 BASIS OF CONSOLIDATION
The consolidated financial statements com-
prise the financial statements of the Company
and its subsidiaries as at 31 December 2021.
Control is achieved when the Group is ex-
posed, or has rights, to variable returns
from its involvement with the investee and
has the ability to aect those returns through
its power over the investee. Specifically, the
Group controls an investee if, and only if,
the Group has:
•
power over the investee (i.e., existing
rights that give it the current ability
to direct the relevant activities of the
investee)
•
exposure, or rights, to variable returns
from its involvement with the investee
• ability to use its power over the investee
to aect its returns
Generally, there is a presumption that a
majority of voting rights results in control.
To support this presumption and when the
Group has less than a majority of the voting
or similar rights of an investee, the Group
considers all relevant facts and circumstances
in assessing whether it has power over an
investee, including:
• the contractual arrangement(s) with the
other vote holders of the investee
•
rights arising from other contractual
arrangements
•
the Group’s voting rights and potential
voting rights
The Group re-assesses whether or not it
controls an investee if facts and circum-
stances indicate that there are changes to
one or more of the three elements of control.
Consolidation of a subsidiary begins when the
Group obtains control over the subsidiary
and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income
and expenses of a subsidiary acquired or
disposed of during the year are included in
the consolidated financial statements from the
date the Group gains control until the date
the Group ceases to control the subsidiary.
Profit or loss and each component of other
comprehensive income (OCI) are attributed
to the equity holders of the parent of the
Group and to the non-controlling interests,
even if this results in the non-controlling
interests having a deficit balance. When nec-
essary, adjustments are made to the financial
statements of subsidiaries to bring their
accounting policies in line with the Group’s
accounting policies. All intra-group assets
and liabilities, equity, income, expenses and
cash flows relating to transactions between
members of the Group are eliminated, in full,
on consolidation.
A change in the ownership interest of a
subsidiary, without a loss of control, is ac-
counted for as an equity transaction.
If the Group loses control over a subsidiary,
it derecognises the related assets (including
goodwill), liabilities, non-controlling interest
and other components of equity, while any
resultant gain or loss is recognised in profit
or loss. Any investment retained is recognised
at fair value.
2.3 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The principal accounting policies applied in
the preparation of these consolidated financial
statements are set out below. These policies
have been consistently applied to all the
years presented, unless otherwise stated.
BUSINESS COMBINATIONS AND GOODWILL
a) Business combinations and goodwill
Business combinations are accounted for
using the acquisition method. The cost of an
acquisition is measured as the aggregate of
the consideration transferred measured at
acquisition date fair value and the amount of
any non-controlling interest in the acquiree.
For each business combination, the Group
elects whether to measure the non-controlling
interest in the acquiree at fair value or at
the proportionate share of the acquiree’s
identifiable net assets. Acquisition-related
costs are expensed as incurred and included
in administrative expenses.
When the Group acquires a business, it as-
sesses the financial assets and liabilities
assumed for appropriate classification and
designation in accordance with the contrac-
tual terms, economic circumstances and
pertinent conditions as at the acquisition date.
This includes the separation of embedded
derivatives in host contracts by the acquiree.
Any contingent consideration to be trans-
ferred by the acquirer will be recognised at
fair value at the acquisition date. Contingent
consideration classified as equity is not
remeasured and its subsequent settlement
is accounted for within equity. Contingent
consideration classified as an asset or liability
that is a financial instrument and within the
scope of IFRS 9 Financial Instruments, is
FINANCIAL STATEMENTS / GROUP / NOTES
20
ANNUAL REPORT 2021 PETROLIA SE
measured at fair value with the changes in
fair value recognised in the statement of profit
or loss in accordance with IFRS 9. Other
contingent consideration that is not within
the scope of IFRS 9 is measured at fair value
at each reporting date with changes in fair
value recognised in profit or loss.
Goodwill is initially measured at cost, being the
excess of the aggregate of the consideration
transferred and the amount recognised for
non-controlling interest over the net identifi-
able assets acquired and liabilities assumed.
If the fair value of the net assets acquired
is in excess of the aggregate consideration
transferred, the gain is recognised in profit
or loss.
Aer initial recognition, goodwill is measured
at cost less any accumulated impairment
losses. For the purpose of impairment testing,
goodwill acquired in a business combination
is, from the acquisition date, allocated to
each of the Group’s cash-generating units
that are expected to benefit from the combi-
nation, irrespective of whether other assets
or liabilities of the acquiree are assigned to
those units. Where goodwill has been allo-
cated to a cash-generating unit and part of
the operation within that unit is disposed of,
the goodwill associated with the disposed
operation is included in the carrying amount
of the operation when determining the gain
or loss on disposal. Goodwill disposed of in
these circumstances is measured based on
the relative values of the disposed operation
and the portion of the cash-generating unit
retained.
b) Investment in associates
The Group’s investment in associated en-
tities, in which the Group has significant
influence, is accounted for using the eq-
uity method. Under the equity method, the
investment in the associate is initially rec-
ognised at cost. The carrying amount of the
investment is adjusted to recognise chang-
es in the Group’s share of net assets of the
associate since the acquisition date. Good-
will relating to the associate is included in
the carrying amount of the investment and
is neither amortised nor individually tested
for impairment.
The income statement reflects the Group’s
share of the results of operations of the as-
sociate. When there has been a change rec-
ognised directly in the equity of the associ-
ate, the Group recognises its share of any
changes, when applicable, in the statement
of changes in equity. Unrealised gains and
losses resulting from transactions between
the Group and the associate are eliminat-
ed to the extent of the interest in the as-
sociate. The Group’s share of profit or loss
of an associate is shown on the face of the
income statement and represents profit or
loss aer tax and non-controlling interests
in the subsidiaries of the associate.
The financial statements of the associate
are prepared for the same reporting period
as the Group. When necessary, adjustments
are made to bring the accounting policies in
line with those of the Group.
Aer application of the equity method, the
Group determines whether it is necessary
to recognise an impairment loss on its in-
vestment in associates. At each reporting
date, the Group determines whether there
is objective evidence that the investment in
the associates is impaired. If there is such
evidence, the Group calculates the amount
of impairment as the dierence between
the recoverable amount of the associate
and its carrying value, then recognises the
loss as ‘Share of losses of an associate’ in
the income statement.
Upon loss of significant influence over the
associate, the Group measures and rec-
ognises any retained investment at its fair
value. Any dierence between the carrying
amount of the associate upon loss of sig-
nificant influence and the fair value of the
retained investment and proceeds from
disposal is recognised in the income state-
ment.
FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
Items included in the financial statements of
each of the Group’s entities are measured
using the currency of the primary economic
environment in which the entity operates
(‘the functional currency’). The consolidated
financial statements are presented in USD.
The functional and presentation currency of
the parent company is USD.
Converting from a functional currency other
than USD will normally result in conversion
dierences in the consolidated financial
statements.
Transactions and balances
Foreign currency transactions are trans
-
lated into the functional currency using the
exchange rates prevailing at the dates of
the transactions or valuation where items
are remeasured. Foreign exchange gains
and losses resulting from the settlement of
such transactions and from the translation at
year-end exchange rates of monetary assets
and liabilities denominated in foreign curren-
cies are recognised in the income statement
under financial income / financial expenses.
Non-monetary items that are measured in terms
of historical cost in a foreign currency are
translated using the exchange rates at the dates
of the initial transactions. Non-monetary items
measured at fair value in a foreign currency
are translated using the exchange rates at the
date when the fair value is determined. The gain
or loss arising on translation of non-monetary
items measured at fair value is treated in line
with the recognition of the gain or loss on the
change in fair value of the item (i.e., translation
dierences on items whose fair value gain
or loss is recognised in OCI or profit or loss
are also recognised in OCI or profit or loss,
respectively).
Group companies
The results and financial position of all the
Group entities that have a functional currency
dierent from the presentation currency are
translated into the presentation currency
as follows:
•
assets and liabilities in each statement of
financial position presented are translated
at the closing rate;
•
income and expenses in each income
statement are translated at the average
exchange rates for the period;
•
all resulting exchange dierences are rec-
ognised in the statement of comprehensive
FINANCIAL STATEMENTS / GROUP / NOTES
21
ANNUAL REPORT 2021 PETROLIA SE
income and as a separate item of equity.
Currency translation dierences on net in-
vestment in foreign operations and financial
instruments designated as hedges of such
investments are recorded as part of the com-
prehensive income and as a separate item in
equity. Goodwill and fair value adjustments
arising on the acquisition of a foreign entity
are treated as assets and liabilities of the for-
eign entity and translated at the closing rate.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Rental of equipment – Service transferred
over time:
The primary business function of the Group
is the rental of equipment for upstream ex-
ploration & production activity, as such, the
primary source of revenue is based on rental
of equipment. The performance obligation
is satisfied over time as the customer si-
multaneously receives and consumes the
benefits provided by the Group. This perfor-
mance obligation has two alternative payment
options. The rental projects that continue
throughout the month (more than 30 days)
are invoiced in bulk at the end of each month,
whereas the projects that terminate prior to
the months end are invoiced ad hoc as the
customer has confirmed the final rental day.
The payment terms vary depending on the
individual contract with customers, but due
dates normally range from 30 to 90 days from
the invoice date.
On projects where the Group does not own
the required equipment, there are contracts
with customers to acquire, on their behalf, the
required equipment from external suppliers.
The Group is acting as principal in these
arrangements.
Services:
Service and repairs:
All equipment returned from rental assign-
ments are subject to inspection where it is
determined whether service and/or repair
is required. This performance obligation is
satisfied upon completion of service and pay-
ment is generally due 30 to 90 days upon
completion and acceptance by the customer.
Hire of personnel:
Personnel services comprise casing & tubing
running, drilling and make & brake services.
These services have fixed daily rates in ac-
cordance with individual contracts. The
performance obligation is satisfied over time,
as the customer simultaneously receives
and consumes the benefits provided. This
performance obligation has two alternative
payment options. The projects that continue
throughout the month (more than 30 days)
are invoiced in bulk at the end of each month,
whereas the projects that terminate prior to
the month's end are invoiced ad hoc upon
completion of service. The payment terms
vary, depending on individual contract with
customers but due dates normally range from
30 to 90 days from the invoice date.
Sales of goods – Goods transferred at a point
in time:
Procurement services:
There are contracts with customers to
acquire, on their behalf, goods from ex-
ternal suppliers. The Group is acting
as principal in these arrangements be-
cause it typically controls the goods
before transferring them to the customer.
The performance obligation is satisfied and
payment is generally due 30 to 90 days upon
receipt of the goods by the customer.
Sales of equipment:
The Group distinguishes between two types
of sales: equipment sold directly to custom-
ers and equipment on rental projects sold to
customers when lost in hole. For direct sales,
the performance obligation is satisfied at
delivery and payment is generally due 30 to
90 days upon this date. For lost equipment,
the performance obligation is satisfied at the
point in time when the equipment is finally
considered lost, and payment is generally
due 30 to 90 days from this date.
INTEREST INCOME
Interest income is recognised using the
eective interest method. When a loan or
receivable is impaired, the Group reduces the
carrying amount to its recoverable amount.
The recoverable amount is the estimated
future cash flow discounted at the original
eective interest rate. Interest income on
impaired loans is recognised using the original
eective interest rate.
TAXES
The tax expense for the period comprises
current and deferred tax. Tax is recognised
in the income statement, except to the extent
that it relates to items recognised in other
comprehensive income or directly in equity.
In this case, the tax is also recognised in
other comprehensive income or directly in
equity, respectively.
Current income tax
The current income tax charge is calculated
on the basis of the tax laws enacted or sub-
stantively enacted at the balance sheet date
in the countries where the Company’s subsid-
iaries and associates operate and generate
taxable income. Management periodically
evaluates positions taken in tax returns with
respect to situations in which applicable tax
regulation is subject to interpretation. It
establishes provisions, where appropriate,
on the basis of amounts expected to be paid
to the tax authorities.
Deferred income tax
Deferred income tax is recognised, using the
liability method, on temporary dierences
arising between the tax bases of assets and
liabilities and their carrying amounts in the
consolidated financial statements. However,
the deferred income tax is not accounted
for if it arises from initial recognition of an
asset or liability in a transaction other than a
business combination that at the time of the
transaction aects neither accounting nor
taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that
have been enacted or substantially enacted
at the balance sheet date and are expected
to apply when the related deferred income
tax asset is realised or the deferred income
tax liability is settled.
Deferred income tax assets are recognised
only to the extent that it is probable that future
taxable profit will be available against which
the temporary dierences can be utilised.
Deferred income tax is provided on tempo-
rary dierences arising on investments in
subsidiaries and associates, except where
the timing of the reversal of the temporary
dierence is controlled by the Group and it
is probable that the temporary dierence
will not reverse in the foreseeable future.
FINANCIAL STATEMENTS / GROUP / NOTES
22
ANNUAL REPORT 2021 PETROLIA SE
Deferred income tax assets and liabilities are
oset when there is a legally enforceable right
to oset current tax assets against current
tax liabilities and when the deferred income
tax assets and liabilities relate to income
tax levied by the same taxation authority on
either the taxable entity or dierent taxable
entities where there is an intention to settle
the balances on a net basis.
Sales tax
Expenses and assets are recognised net of
the amount of sales tax, except:
•
when the sales tax incurred on a purchase
of assets or services is not recoverable
from the taxation authority, in which case
the sales tax is recognised as part of the
cost of acquisition of the asset or as part
of the expense item, as applicable,
•
when receivables and payables are stated
with the amount of sales tax included.
The net amount of sales tax recoverable from,
or payable to, the taxation authority is includ-
ed as part of receivables or payables in the
statement of financial position.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated
at historical cost less depreciation and im-
pairment. Historical cost includes expenditure
that is directly attributable to the acquisition
of the items.
Subsequent costs are included in the asset’s
carrying amount or recognised as a separate
asset, as appropriate, only when it is proba-
ble that future economic benefits associated
with the item will flow to the Group and the
cost of the item can be measured reliably.
The carrying amount of the replaced part is
derecognised. Other repairs and maintenance
are charged to the income statement during
the financial period in which they are incurred.
Depreciation on property, plant and equipment
is calculated using the straight-line method
to allocate their cost or revalued amounts
to their residual values over their estimated
useful lives.
The assets’ residual values and useful lives
are reviewed and adjusted if appropriate, at
each reporting date.
An asset’s carrying amount is written down
immediately to its recoverable amount if the
asset’s carrying amount is greater than its
estimated recoverable amount.
Gains on sales of OilService equipment lost
in hole or damaged by customers are deter-
mined by comparing the proceeds with the
carrying amount and are recognised gross
within ‘revenue’ in the income statement.
All other gains and losses are recognised
as profit/loss on disposal of property, plant
and equipment included in other operating
expenses.
LEASES
The determination of whether an arrange-
ment is, or contains, a lease is based on
the substance of the arrangement at the
inception date. The arrangement is assessed
for whether fulfilment of the arrangement is
dependent on the use of a specific asset or
assets or the arrangement conveys a right
to use the asset or assets, even if that right
is not explicitly specified in an arrangement.
Group as a lessee
The Group applies a single recognition and
measurement approach for all leases, except
for short-term leases and leases of low-value
assets. The Group recognises lease liabilities
to make lease payments and right-of-use
assets representing the right to use the un-
derlying assets.
i) Right-of-use assets
The Group recognises right-of-use assets
at the commencement date of the lease (i.e.,
the date the underlying asset is available
for use). Right-of-use assets are measured
at cost, less any accumulated depreciation
and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount
of lease liabilities recognised, initial direct
costs incurred and lease payments made at or
before the commencement date less any lease
incentives received. Right-of-use assets are
depreciated on a straight-line basis over the
shorter of the lease term and the estimated
useful lives of the assets, as follows:
• OilService and other equipment, 7 years
• Land and buildings, 1 to 10 years
If ownership of the leased asset transfers
to the Group at the end of the lease term or
the cost reflects the exercise of a purchase
option, depreciation is calculated using the
estimated useful life of the asset.
The right-of-use assets are also subject to
impairment. Refer to the accounting policies in
section Impairment of non-financial assets.
ii) Lease liabilities
At the commencement date of the lease, the
Group recognises lease liabilities measured
at the present value of lease payments to be
made over the lease term. The lease payments
include fixed payments (including in-substance
fixed payments) less any lease incentives re-
ceivable, variable lease payments that depend
on an index or a rate and amounts expected
to be paid under residual value guarantees.
The lease payments also include the exercise
price of a purchase option reasonably certain
to be exercised by the Group and payments
of penalties for terminating the lease, if the
lease term reflects the Group exercising the
option to terminate. Variable lease payments
that do not depend on an index or a rate
are recognised as expenses (unless they
are incurred to produce inventories) in the
period in which the event or condition that
triggers the payment occurs. In calculating
the present value of lease payments, the
Group uses its incremental borrowing rate
at the lease commencement date because the
interest rate implicit in the lease is not readily
determinable. Aer the commencement date,
the amount of lease liabilities is increased to
reflect the accretion of interest and reduced
for the lease payments made. In addition, the
carrying amount of lease liabilities is remeas-
ured if there is a modification, a change in the
lease term, a change in the lease payments
(e.g., changes to future payments resulting
from a change in an index or rate used to
determine such lease payments) or a change
in the assessment of an option to purchase
the underlying asset.
iii) Short-term leases and leases of low-value
assets
The Group applies the short-term lease rec-
ognition exemption to its short-term leases of
machinery and equipment (i.e., those leases
FINANCIAL STATEMENTS / GROUP / NOTES
23
ANNUAL REPORT 2021 PETROLIA SE
that have a lease term of 12 months or less
from the commencement date and do not
contain a purchase option). It also applies
the lease of low value assets recognition
exemption to leases of oce equipment that
are considered to be low value. Lease pay-
ments on short-term leases and leases of
low value assets are recognised as expense
on a straight-line basis over the lease term.
Group as a lessor
Leases in which the Group does not transfer
substantially all the risks and benefits of
ownership of an asset are classified as op-
erating leases. Initial direct costs incurred in
negotiating an operating lease are added to
the carrying amount of the leased asset and
recognised over the lease term on the same
basis as rental income. Contingent rents are
recognised as revenue in the period in which
they are earned. The Group also gets into
sub-lease agreements for its ROU assets.
These sub-leases are short term and treated
as operating leases.
FINANCIAL INSTRUMENTS – INITIAL RECOG-
NITION AND SUBSEQUENT MEASUREMENT
A financial instrument is any contract that
gives rise to a financial asset of one entity
and a financial liability or equity instrument
of another entity.
i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recog-
nition, as subsequently measured at amortised
cost, fair value through OCI and fair value
through the income statement.
The classification of financial assets at initial
recognition depends on the financial asset’s
contractual cash flow characteristics and the
Group’s business model for managing them.
With the exception of trade receivables that
do not contain a significant financing com-
ponent or for which the Group has applied
the practical expedient, the Group initially
measures a financial asset at its fair value
plus, in the case of a financial asset not at
fair value through the income statement,
transaction costs. Trade receivables that do
not contain a significant financing compo-
nent are measured at the transaction price
determined under IFRS 15.
In order for a financial asset to be classified
and measured at amortised cost or fair value
through OCI, it needs to give rise to cash
flows that are ‘solely payments of principal
and interest (SPPI)’ on the principal amount
outstanding. This assessment is referred
to as the SPPI test and is performed at an
instrument level.
The Group’s business model for managing
financial assets refers to how it manages
its financial assets in order to generate
cash flows. The business model determines
whether cash flows will result from collecting
contractual cash flows, selling the financial
assets, or both.
Purchases or sales of financial assets that
require delivery of assets within a time frame
established by regulation or convention in the
market place (regular way trades) are rec-
ognised on the trade date, i.e., the date that
the Group commits to purchase or sell the
asset.
Subsequent measurement
For purposes of subsequent measure-
ment, financial assets are classified in four
categories:
•
financial assets at amortised cost (debt
instruments);
•
financial assets at fair value through OCI
with recycling of cumulative gains and
losses (debt instruments);
•
financial assets designated at fair value
through OCI with no recycling of cumula-
tive gains and losses upon derecognition
(equity instruments);
• financial assets at fair value through the
income statement.
Financial assets at amortised cost (debt
instruments)
This category is the most relevant to the
Group. The Group measures financial assets
at amortised cost if both of the following
conditions are met:
•
the financial asset is held within a business
model with the objective to hold financial
assets in order to collect contractual cash
flows; and
•
the contractual terms of the financial
asset give rise on specified dates to
cash flows that are solely payments of
principal and interest on the principal
amount outstanding.
Financial assets at amortised cost are subse-
quently measured using the eective interest
rate (EIR) method and are subject to im-
pairment. Gains and losses are recognised
in the income statement when the asset is
derecognised, modified or impaired.
The Group’s financial assets at amortised
cost includes trade receivables and loan to
an associate.
Financial assets at fair value through OCI (debt
instruments)
The Group measures debt instruments at
fair value through OCI if both of the following
conditions are met:
•
the financial asset is held within a business
model with the objective of both hold-
ing to collect contractual cash flows and
selling; and
•
the contractual terms of the financial
asset give rise on specified dates to cash
flows that are solely payments of princi-
pal and interest on the principal amount
outstanding.
Debt instruments at fair value through OCI,
interest income, foreign exchange revaluation
and impairment losses or reversals are rec-
ognised in the income statement and computed
in the same manner as for financial assets
measured at amortised cost. The remaining
fair value changes are recognised in OCI.
Upon derecognition, the cumulative fair value
change recognised in OCI is recycled to the
income statement.
The Group does not have any debt instruments
at fair value through OCI.
Financial assets designated at fair value through
OCI (equity instruments)
Upon initial recognition, the Group can elect
to classify irrevocably its equity investments
as equity instruments designated at fair value
through OCI when they meet the definition of
equity under IAS 32 Financial Instruments
Presentation and are not held for trading.
The classification is determined on an in-
strument-by- instrument basis.
Gains and losses on these financial assets
are never recycled to the income statement.
Dividends are recognised as other income
FINANCIAL STATEMENTS / GROUP / NOTES
24
ANNUAL REPORT 2021 PETROLIA SE
in the income statement when the right of
payment has been established, except when
the Group benefits from such proceeds as a
recovery of part of the cost of the financial
asset, in which case, such gains are record-
ed in OCI. Equity instruments designated at
fair value through OCI are not subject to
impairment assessment.
The Group's equity instruments designated at
fair value through OCI are shown in note 13.
Financial assets at fair value through the income
statement
Financial assets at fair value through the
income statement include financial assets
held for trading, financial assets designated
upon initial recognition at fair value through
the income statement, or financial assets
mandatorily required to be measured at
fair value. Financial assets are classified as
held for trading if they are acquired for the
purpose of selling or repurchasing in the
near term. Derivatives, including separated
embedded derivatives, are also classified as
held for trading unless they are designated
as eective hedging instruments. Financial
assets with cash flows that are not solely
payments of principal and interest are clas-
sified and measured at fair value through the
income statement, irrespective of the business
model. Notwithstanding the criteria for debt
instruments to be classified at amortised cost
or at fair value through OCI, as described
above, debt instruments may be designated
at fair value through the income statement
on initial recognition if doing so eliminates, or
significantly reduces, an accounting mismatch.
Financial assets at fair value through the
income statement are carried in the state-
ment of financial position at fair value with
net changes in fair value recognised in the
income statement.
This category includes listed equity invest-
ments which the Group had not irrevocably
elected to classify at fair value through OCI.
Dividends on listed equity investments are
also recognised as other financial income
in the consolidated income statement when
the right of payment has been established.
Derecognition
A financial asset (or, where applicable, a
part of a financial asset or part of a group of
similar financial assets) is primarily derec-
ognised (i.e., removed from the Group’s
consolidated statement of financial posi-
tion) when:
• the rights to receive cash flows from the
asset have expired; or
•
the Group has transferred its rights to
receive cash flows from the asset or has
assumed an obligation to pay the received
cash flows in full without material delay
to a third party under a ‘pass-through’
arrangement; and either (a) the Group has
transferred substantially all the risks and
rewards of the asset, or (b) the Group has
neither transferred nor retained substan-
tially all the risks and rewards of the asset,
but has transferred control of the asset.
Impairment of financial assets
Further disclosures relating to impairment
of financial assets are also provided in the
following notes:
•
Critical accounting judgements, estimates
and assumptions (Note 3);
• Financial risk management, Credit risk
(Note 23).
The Group recognises an allowance for
expected credit losses (ECLs) for all debt
instruments not held at fair value through
the income statement. ECLs are based on
the dierence between the contractual cash
flows due in accordance with the contract
and all the cash flows that the Group expects
to receive, discounted at an approximation
of the original eective interest rate. The
expected cash flows will include cash flows
from the sale of collateral held or other credit
enhancements that are integral to the con-
tractual terms.
ECLs are recognised in two stages. For credit
exposures for which there has not been a
significant increase in credit risk since initial
recognition, ECLs are provided for credit
losses that result from default events that
are possible within the next 12 months (a 12-
month ECL). For those credit exposures for
which there has been a significant increase
in credit risk since initial recognition, a loss
allowance is required for credit losses ex-
pected over the remaining life of the exposure,
irrespective of the timing of the default (a
lifetime ECL).
For trade receivables, the Group applies
a simplified approach in calculating ECLs.
Therefore, the Group does not track changes
in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each
reporting date. The Group has established
a provision matrix that is based on its his-
torical credit loss experience, adjusted for
forward-looking factors specific to the debt-
ors and the economic environment as well
as adjusted for individual ECL assessments
against particular customers.
The Group considers a financial asset in
default when contractual payments are 90
days past due. However, in certain cases, the
Group may also consider a financial asset
to be in default when internal or external
information indicates that the Group is un-
likely to receive the outstanding contractual
amounts in full before taking into account
any credit enhancements held by the Group.
A financial asset is written o when there is
no reasonable expectation of recovering the
contractual cash flows.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair
value through the income statement, loans
and borrowings, payables or as derivatives
designated as hedging instruments in an
eective hedge, as appropriate.
All financial liabilities are recognised ini-
tially at fair value and, in the case of loans
and borrowings and payables, net of directly
attributable transaction costs.
The Group’s financial liabilities include trade
and other payables, loans and borrowings
including bank overdras.
Subsequent measurement
The measurement of financial liabilities de-
pends on their classification, as described
below:
Financial liabilities at fair value through the
income statement
Financial liabilities at fair value through the
income statement include financial liabili
-
ties held for trading and financial liabilities
FINANCIAL STATEMENTS / GROUP / NOTES
25
ANNUAL REPORT 2021 PETROLIA SE
designated upon initial recognition as at fair
value through the income statement.
Financial liabilities are classified as held for
trading if they are incurred for the purpose
of repurchasing in the near term.
Gains or losses on liabilities held for trading
are recognised in the income statement.
Financial liabilities designated upon initial
recognition at fair value through the income
statement are designated at the initial date of
recognition, and only if the criteria in IFRS 9
are satisfied. The Group has not designated
any financial liability at fair value through the
income statement.
Financial liabilities at amortised cost
This is the category most relevant to the
Group. Aer initial recognition, interest-bear-
ing loans are subsequently measured at
amortised cost using the EIR method. Gains
and losses are recognised in the income state-
ment when the liabilities are derecognised as
well as through the EIR amortisation process.
Amortised cost is calculated by taking into
account any discount or premium on acqui-
sition and fees or costs that are an integral
part of the EIR. The EIR amortisation is in-
cluded as finance costs in the statement of
the income statement.
This category mainly applies to bonds and
bank loan. For more information, refer to
Notes 18 and 21.
Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged
or cancelled or expires. When an existing
financial liability is replaced by another from
the same lender on substantially dierent
terms, or the terms of an existing liability are
substantially modified, such an exchange or
modification is treated as the derecognition
of the original liability and the recognition of
a new liability. The dierence in the respec-
tive carrying amounts is recognised in the
statement of profit or loss.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are
oset and the net amount is reported in the
consolidated statement of financial position
if there is a currently enforceable legal right
to oset the recognised amounts and there
is an intention to settle on a net basis, to
realise the assets and settle the liabilities
simultaneously.
INVENTORIES
Inventories are valued at the lower of cost
and net realisable value. Costs incurred in
bringing each product to its present location
and condition are accounted for as follows:
•
raw materials: purchase cost on a first
in, first out basis.
•
finished goods and work in progress:
cost of direct materials and labour and a
proportion of manufacturing overheads
based on the normal operating capacity,
but excluding borrowing costs.
Initial cost of inventories includes the transfer
of gains and losses on qualifying cash flow
hedges, recognised in other comprehensive
income, in respect of the purchases of raw
materials.
Net realisable value is the estimated selling
price in the ordinary course of business,
less estimated costs of completion and the
estimated costs necessary to make the sale.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life are
not subject to amortisation and are tested
annually for impairment. Assets that are subject
to amortisation are reviewed for impairment
whenever events or changes in circumstances
indicate that the carrying amount may not be
recoverable. An impairment loss is recognised
at the amount by which the asset’s carrying
amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s
fair value, less selling costs and value in use.
For the purposes of assessing impairment,
assets are grouped at the lowest levels for
which there are separately identifiable cash
flows (cash-generating units). Non financial
assets, other than goodwill that suered im-
pairment, are reviewed for possible reversal
of the impairment at each reporting date.
CASH AND SHORT TERM DEPOSITS
Cash and cash equivalents in the statement
of financial position comprise cash at banks
and at hand and short term deposits with
an original maturity of three months or less
but exclude any restricted cash which is not
available for use by the Group.
For the purpose of the consolidated statement
of cash flows, cash and cash equivalents con-
sist of cash and cash equivalents, as defined
above, net of outstanding bank overdras.
SHARE CAPITAL AND PREMIUM
Ordinary shares are classified as equity.
Incremental costs directly attributable to the
issue of new shares or options are shown
in equity as a deduction, net of tax, from the
proceeds.
Where any Group company purchases the
Company’s equity share capital (treasury
shares), the consideration paid, including
any directly attributable incremental costs
(net of income taxes), is deducted from equity
attributable to the Company’s equity holders
until the shares are cancelled or reissued.
Where such shares are subsequently reis-
sued, any consideration received, net of any
directly attributable transaction costs and the
related income tax eects, is included in equity
attributable to the Company’s equity holders.
PROVISIONS
The Group recognises provisions when it has
a present legal or constructive obligation as
a result of past events, it is probable that
an outflow of resources will be required to
settle the obligation, and the amount has
been reliably estimated.
Contingent liabilities and allocations are
reassessed at each balance sheet date and
the size of the recognised provision reflects
best estimate of the obligation.
SEGMENT REPORTING
Operating segments are reported in a manner
consistent with the internal reporting provided
to the management. The Company’s manage-
ment, who are responsible for allocating
resources and assessing performance of the
operating segments, has been identified as
General Managers and the Board of Directors.
FINANCIAL STATEMENTS / GROUP / NOTES
26
ANNUAL REPORT 2021 PETROLIA SE
RELATED-PARTY TRANSACTIONS
Agreements, transactions and outstanding
accounts with related parties are always at
arm's length pricing at market conditions.
CASH FLOW STATEMENT
The cash flow statement has been prepared
by the indirect method. The indirect method
involves reporting gross cash flow from in-
vestment and financing activities, while the
accounting result is reconciled against net
cash flow from operational activities. Cash
and cash equivalents comprise bank deposits
and other current, liquid investments which
immediately and at insignificant exchange
rate risk can be converted into known cash
amounts and with due dates of less than
three months from purchase date.
EARNINGS PER SHARE
Earnings per share are calculated by dividing
the result of the Group attributable to the
shareholders of the parent with the weighted
average number of ordinary shares of the
period.
EVENTS AFTER THE REPORTING DATE
New information about the position of the
Group existing at the reporting date regarding
the accounting period have been taken into
account in the financial statements according
to standard estimation principles. Events aer
the reporting date are referred to in note 29.
2.4 ADOPTION OF NEW AND REVISED
INTERNATIONAL FINANCIAL REPORTING
STANDARDS
Amendments to IFRSs and the new
Interpretations that are mandatorily ef-
fective for the current period
In the current period, the Group has
adopted all of the revised Standards and
Interpretations issued by the IASB and
the International Financial Reporting
Interpretations Committee (IFRIC) of the
IASB and adopted by the European Union that
are relevant to its operations and eective
for annual accounting periods beginning on
1 January 2021. The nature and the impact
of each amendment is described below.
IFRS 7 (“Financial Instruments: Disclosures”),
FINANCIAL STATEMENTS / GROUP / NOTES
IFRS 9 (“Financial Instruments”), IAS
39 (“Financial Instruments: Recognition
and Measurement”), IFRS 4 (“Insurance
contracts”) and IFRS 16 (“Leases”) –
“Amendments regarding replacement issues
in the context of the IBOR reform – Phase 2”.
The amendments address issues that aect
financial reporting as a result of the reform
of an interest rate benchmark, including the
eects of changes to contractual cash flows
or hedging relationships arising from the re-
placement of an interest rate benchmark with
an alternative benchmark rate. The amend-
ments provide practical relief from certain
requirements in IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16 relating to: changes in
the basis for determining contractual cash
flows of financial assets, financial liabilities
and lease liabilities; and hedge accounting.
These amendments do not have a significant
impact on the Group’s consolidated financial
statements as the Group does not have any
derivative financial instruments and the bank
loans are not significant and carry interest
at fixed rates.
Covid-19-Related Rent Concessions beyond
30 June 2021 Amendments to IFRS 16
On 28 May 2020, the IASB issued Covid-19-
Related Rent Concessions - amendment to
IFRS 16 Leases.
The amendments provide relief to lessees
from applying IFRS 16 guidance on lease
modification accounting for rent conces-
sions arising as a direct consequence of the
Covid-19 pandemic. As a practical expedient,
a lessee may elect not to assess whether a
Covid-19 related rent concession from a
lessor is a lease modification. A lessee that
makes this election accounts for any change
in lease payments resulting from the Covid-
19 related rent concession the same way it
would account for the change under IFRS 16,
if the change were not a lease modification.
The amendment was intended to apply until 30
June 2021, but as the impact of the Covid-19
pandemic is continuing, on 31 March 2021,
the IASB extended the period of application
of the practical expedient to 30 June 2022.
The amendment applies to annual reporting
periods beginning on or aer 1 April 2021.
The Group has not received significant Covid-
19-related rent concessions.
New and revised IFRS in issue but not yet
eective
The following Standards and Interpretations
which are relevant to the Group’s operations
are in issue but not yet eective. The Group
does not intend to adopt any standard, in-
terpretation or amendment that has been
issued but is not yet eective before their
eective date.
Management anticipates that the adoption of
all other Standards and Interpretations in
future periods will have no significant impact
on the results and financial position presented
in these consolidated financial statements.
(i) Issued by the IASB and adopted by the
European Union
IFRS 3 (‘‘Business Combinations”) –
“Amendments updating a reference to the
Conceptual Framework” (eective for annual
periods beginning on or aer 1 January
2022). The amendments are intended to re-
place a reference to the Framework for the
Preparation and Presentation of Financial
Statements, issued in 1989, with a reference
to the Conceptual Framework for Financial
Reporting issued in March 2018 without
significantly changing its requirements. The
Board also added an exception to the recog-
nition principle of IFRS 3 to avoid the issue
of potential ‘day 2’ gains or losses arising
for liabilities and contingent liabilities that
would be within the scope of IAS 37 or IFRIC
21 Levies, if incurred separately. Also, the
Board decided to clarify existing guidance
in IFRS 3 for contingent assets that would
not be aected by replacing the reference
to the framework for the preparation and
presentation of financial statements. Since
the amendments apply prospectively to trans-
actions or other events aer the date of first
application, they will not have an impact on
the Group’s consolidated financial statements
on the date of transition.
IAS 16 (“Property, Plant and equipment”)
– “Amendments prohibiting a company from
deducting from the cost of property, plant
27
ANNUAL REPORT 2021 PETROLIA SE
and equipment amounts received from selling
items produced while the company is prepar-
ing the asset for its intended use” (eective
for annual periods beginning on or aer 1
January 2022). These amendments are not
expected to have an impact on the Group’s
consolidated financial statements.
IAS 37 (“Provisions, Contingent Liabilities
and Contingent Assets”) – “Amendments
regarding the costs to include when assessing
whether a contract is onerous” (eective
for annual periods beginning on or aer 1
January 2022). These amendments are not
expected to have a material impact on the
Group’s consolidated financial statements.
IAS 1 (“Presentation of Financial
Statements”) and IFRS Practice Statement
2 – “Amendments regarding the disclosure of
accounting policies” (eective for annual pe-
riods beginning on or aer 1 January 2023).
The amendments to IAS 1 require companies
to disclose their material accounting policy
information rather than their significant ac-
counting policies. The amendments to IFRS
Practice Statement 2 provide guidance on
how to apply the concept of materiality to
accounting policy disclosures. These amend-
ments are not expected to have a material
impact on the Group’s consolidated financial
statements.
IAS 8 (“Accounting Policies, Changes
in Accounting Estimates and Errors”) –
“Amendments regarding the definition of
accounting estimates” (eective for annual
periods beginning on or aer 1 January
2023). These amendments clarify how compa-
nies should distinguish changes in accounting
policies from changes in accounting estimates.
That distinction is important because changes
in accounting estimates are applied prospec-
tively only to future transactions and other
future events, but changes in accounting poli-
cies are generally also applied retrospectively
to past transactions and other past events.
The amendments are not expected to have a
material impact on the Group’s consolidated
financial statements.
FINANCIAL STATEMENTS / GROUP / NOTES
Annual Improvements to IFRS Standards
2018–2020
The “May 2020 Annual Improvements to
IFRSs” is a collection of amendment to IFRSs
in response to four standards. These improve-
ments are eective from 1 January 2022. It
includes the following amendments, which
are not expected to have an impact on the
Group’s consolidated financial statements:
•
IFRS 1 – First-time Adoption of
International Financial Reporting
Standards (simplifies the application
of IFRS 1 for a subsidiary that becomes
a first-time adopter of IFRS Standards
later than its parent);
•
IFRS 9 – Financial Instruments (clarifies
the fees to be included for the purpose
of performing the ‘10 per cent test’ for
derecognition of financial liabilities); and
•
IAS 41 – Agriculture (removes the
requirement to exclude cash flows for
taxation when measuring fair value,
thereby aligning the fair value measure-
ment requirements in IAS 41 with those
in IFRS 13 “Fair Value Measurement”).
(ii) Issued by the IASB but not yet adopt-
ed by the European Union
IFRS 10 (“Consolidated Financial
Statements”) and IAS 28 (“Investments in
Associates and Joint Ventures”) – “Sale or
Contribution of Assets between an Investor
and its Associate or Joint Venture”. The
amendments address the conflict between
IFRS 10 and IAS 28 in dealing with the loss
of control of a subsidiary that is sold or con-
tributed to an associate or joint venture. The
amendments clarify that the gain or loss
resulting from the sale or contribution of
assets that constitute a business, as defined
in IFRS 3, between an investor and its as-
sociate or joint venture, is recognised in full.
Any gain or loss resulting from the sale or
contribution of assets that do not constitute
a business, however, is recognised only to
the extent of unrelated investors’ interests in
the associate or joint venture. The IASB has
deferred the eective date of these amend-
ments indefinitely, but an entity that early
adopts the amendments must apply them
prospectively. These amendments are not
expected to have an impact on the Group’s
consolidated financial statements.
IAS 1 (‘‘Presentation of Financial
Statements”) – “Amendments regarding
the classification of liabilities as current or
non-current” (eective for annual periods
beginning on or aer 1 January 2023). The
IASB proposed to defer the eective date
to not earlier than 1 January 2024. These
amendments are not expected to have an
impact on the Group’s consolidated financial
statements as the Group already applies the
criteria set by the amendments.
IAS 12 (“Income Taxes”) – “Amendments
regarding deferred tax on leases and decom-
missioning obligations” (eective for annual
periods beginning on or aer 1 January
2023). These amendments are not expected
to have a material impact on the Group’s
consolidated financial statements.
IFRS 17 (“Insurance Contracts”),
Amendments to IFRS 17 and Amendments
to IFRS 17: Initial Application of IFRS 17
and IFRS 9 – Comparative Information – “A
comprehensive new accounting standard for
insurance contracts covering recognition and
measurement, presentation and disclosure”
(eective for annual periods beginning on or
aer 1 January 2023). Once eective, IFRS
17 will replace IFRS 4 Insurance Contracts.
IFRS 17 applies to all types of insurance
contracts (i.e., life, non-life, direct insurance
and re-insurance), regardless of the type of
entities that issue them, as well as to certain
guarantees and financial instruments with
discretionary participation features. A few
scope exceptions will apply. The new account-
ing standard and its amendments are not
expected to have a significant impact on the
Group’s consolidated financial statements.
28
ANNUAL REPORT 2021 PETROLIA SE
NOTE 3 CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS
Estimates and judgements are continually
evaluated and are based on historical experi-
ence and other factors, including expectations
of future events that are believed to be rea-
sonable under the circumstances.
The Group makes estimates and assumptions
concerning the future. The resulting account-
ing estimates will, by definition, seldom equal
the related actual results. The estimates and
assumptions that have a significant risk of
causing a material adjustment to the carry-
ing amounts of assets and liabilities within
the next financial year are addressed below.
i) Impairment of property, plant and equipment
Refer also to note 11.
The Group tests annually whether the drilling
equipment, land rigs and land and buildings
have suered any impairment. An impairment
loss is recognised for the amount by which
the asset’s carrying amount exceeds its re-
coverable amount. The recoverable amount is
the higher of an asset’s fair value less costs
of disposal and value in use.
The value in use calculations are based on a
discounted cash flow model. The cash flows
are derived from the business plan for the
next five years. The recoverable amount is
sensitive to the discount rate used for the
discounted cash flow model as well as the
expected future cash inflows and the growth
rate used for extrapolation purposes.
ii) Provision for expected credit losses of
trade receivables
The Group uses a provision matrix at each
location it operates to calculate ECLs for trade
receivables. The provision rates are based
on days past due for groupings of various
customer segments that have similar loss
patterns.
The provision matrix is initially based on the
Group’s historical observed default rates.
The Group will calibrate the matrix to adjust
the historical credit loss experience with
forward-looking information. For instance,
if the oil prices are expected to decrease
over the next year, which can lead to an in-
creased number of defaults in the energy
service sector, the historical default rates
are adjusted. At every reporting date, the
historical observed default rates are updated
and changes in the forward-looking estimates
are analysed.
As the number of customers at each location
is small, in addition to the collective ECL as-
sessment using the portfolio matrix approach
as adjusted by forward looking information,
the Group also performs individual ECL as-
sessments against the biggest customers
with significant long outstanding balances.
The individual assessments are taking into
account various information known locally
for each customer, such as history of credit
losses, financial performance, settlement
arrangements agreed, etc. The information
about the ECLs on the Group’s trade receiv-
ables is disclosed in Note 14.
iii) Determining the lease term of contracts
with renewal options when the Group acts
as a lessee
The Group determines the lease term as the
non-cancellable term of the lease, together
with any periods covered by an option to
extend the lease if it is reasonably certain to
be exercised, or any periods covered by an
option to terminate the lease, if it is reason-
ably certain not to be exercised.
The Group has the option, under some of
its leases to lease the assets for additional
periods. The Group applies judgement in
evaluating whether it is reasonably certain
to exercise the option to renew. All relevant
factors including economic incentive fac-
tors, are considered to exercise the renewal.
Local teams are responsible for managing
their leases and, accordingly, lease terms
are negotiated on an individual basis and
contain a wide range of dierent terms and
conditions. Extension and termination options
are included, when possible, to provide local
management with greater flexibility to align its
need for access to equipment and warehouses
with the fulfilment of customer contracts and
oce rentals. The individual terms and condi-
tions used vary across the Group.
The majority of extension and termination
options held are exercisable only by Lessee
and not by the respective lessors. In cases in
which Lessee is not reasonably certain to use
an optional extended lease term, payments
associated with the optional period are not
included within lease liabilities.
During 2021, the financial eect of revising
lease terms to reflect the eect of exercising
extension and termination options was an
increase in recognised lease liabilities of USD
1.1 million (2020: USD 4.1 million). In almost
all of the cases, the local teams assumes
that the options to extend a lease will not be
exercised, as on initial recognition it is not
reasonable certain what will be the market
conditions when the Group will need to decide
whether to exercise an option to extend the
lease. Aer the commencement date, the
Group reassesses the lease term, at each
reporting date, if there is a significant event
or change in circumstances that is within its
control and aects its ability to exercise (or
not to exercise) the option to renew.
FINANCIAL STATEMENTS / GROUP / NOTES
29
ANNUAL REPORT 2021 PETROLIA SE
NOTE 4 ORGANISATION
Summary of the companies of the Group:
As at 31.12.2021 the following companies are presented in the consolidated financial statements:
Company Business office , activity, objective % owned
Subsidiaries (fully consolidated)
Petrolia AS Norway. Energy Service.. 100
Petrolia Invest AS Norway. Investment company. 100
Petrolia Rigs AS Norway. Investment company. 100
Oil Tools Supplier AS Norway. Energy Service. 100
Independent Oil Tools AS Norway. Energy Service. 100
Independent Tool Pool AS Norway. Energy Service. 100
IOT Group Australia Pty Ltd Australia. Energy Service. 100
Independent Oil Tools BV Netherlands. Energy Service. 100
Independent Oil Tools Dosco BV Netherlands. Energy Service. 70
Independent Oil Tools Srl Romania. Energy Service. 100
IOT Group Limited New Zealand. Energy Service. 100
Venture Drilling AS Norway. Energy Service. 100
Independent Tool Pool DMCC Jebel Ali Free Zone (Dubai). Energy Service. 100
Petrolia Tool Pool AS Norway. Energy Service. 100
Petrolia Rigs II AS Norway. Energy Service. 100
Catch Holding BV Netherlands. Energy Service. 90
Catch Fishing Services BV Netherlands. Energy Service. 90
IO&R Ltd Dubai. Energy Service 100
Independent Oil Tools International (Cyprus) Ltd Cyprus. Energy Service. 100
Independent Oil Tools Iraq for General Trading Co. Ltd Iraq. Energy Service. 61
Tubulars Energy Services (M) Sdn Bhd Malaysia. Energy Service. 100
Independent Oil Tools (Pvt) Ltd Pakistan. Energy Service. 83.33
IOT Energy Services Limited UK. Energy Service. 90
CO2 Management AS Norway. Energy Service. 100
Hydrogen & CCS AS Norway. Energy Service. 100
Ammonia Energy Solutions AS Norway. Energy Service 100
Associated companies (equity method) (refer to note 12)
Petrolia Noco AS Norway. Exploring for oil and gas on the Norwegian Con-
tinental Shelf.
49.90
FINANCIAL STATEMENTS / GROUP / NOTES
30
ANNUAL REPORT 2021 PETROLIA SE
The Group has two strategic segments: Energy and Energy Service (including land rigs).
Energy activities are presently carried out through an investment in an associate company. Operating activities are carried out from one seg-
ment: Energy Service. Energy Service activities are described in the accounting policy "Revenue from contracts".
NOTE 5 SEGMENT INFORMATION
Revenue
The major part of the Group's revenues derive
from short term rental of drilling equipment
such as drill pipes and test tubings. There
are no material contract asset balances.
Geographic allocation
Geographic allocation is primarily based on
where the companies are domiciled. Some
asset owning subsidiaries are allocated as tool
pools, because they only rent their equipment
to companies in the Group.
Major customers
The end customers are oil companies, drilling
contractors or oil service companies. No
THE GROUP’S ENERGY SERVICE SEGMENT OPERATES IN THE FOLLOWING MAIN GEOGRAPHICAL AREAS:
2021 Revenue from Energy Service segment
(amounts in USD 1,000)
Rental of equipment Services Sales of equipment
and consumables
Total
Norway 11,448 3,488 515 15,451
Europe outside Norway 6,866 2,845 5,171 14,882
Asia and Australia 12,239 6,469 1,935 20,643
Total 30,553 12,802 7,621 50,976
Result for the year from energy service segment 2,466
2020 Revenue from Energy Service segment
(amounts in USD 1,000)
Rental of equipment Services Sales of equipment
and consumables
Total
Norway 9,326 2,954 971 13,251
Europe outside Norway 3,879 4,105 7,041 15,025
Asia and Australia 7,283 5,918 2,119 15,320
Total 20,488 12,977 10,131 43,596
Result for the year from energy service segment 1,322
Non-current tangible assets (amounts in USD 1,000)
2021 2020
Norway 2,901 2,917
Europe outside Norway 5,126 7,022
Asia and Australia 5,906 7,081
Tool pools 2,449 5,620
Total 16,382 22,640
FINANCIAL STATEMENTS / GROUP / NOTES
single customer represents a significant part
of total revenues.
Petrolia Noco AS (Note 12)
The associate company, Petrolia Noco AS,
operates in the Energy segment. The in-
terest income from the Energy segment is
shown in note 8 and the share of result in
note 12.
31
ANNUAL REPORT 2021 PETROLIA SE
(amounts in USD 1,000)
2021 2020
Wages and salaries 11,223 8,981
Social security 915 825
Pension costs 698 607
Other contributions 684 442
Total 13,520 10,855
The Group had 229 employees as at the end of 2021 (2020: 206 employees).
Average number of employees was 218 in 2021 (2020: 252).
Remuneration and benefits General Manager and Finance Manager (amounts in USD 1,000)
2021 2020
Polycarpos Protopapas (27 November 2019 -), Managing director, Cyprus 64 57
Demos Demou (14 September 2012 - 1 June 2020), Finance manager, Cyprus 0 24
Sølve Nilsen (1 October 2010 -), General manager of the Branch, Norway 192 185
Total 256 266
The following fee has been paid to the members of the board (amounts in USD 1,000) :
2021 2020
Berge Gerdt Larsen- Chairman of the board, Remuneration committee (re-elected on 28 May 2020) 0 0
George Hadjineophytou - Board member, Audit & Remuneration committees (re-elected on 28 May
2020)
44 42
Sjur Storaas - Board member, Audit & Remuneration committees (re-elected on 28 May 2020) 44 38
Polycarpos Protopapas - Board member (re-elected on 28 May 2020) 0 0
Judith Parry - Board member, Audit & Remuneration committees (resigned on 28 May 2020) 0 18
Total 88 98
NOTE 6 WAGES COST
FINANCIAL STATEMENTS / GROUP / NOTES
32
ANNUAL REPORT 2021 PETROLIA SE
FINANCIAL STATEMENTS / GROUP / NOTES
NOTE 7 SPECIFICATION OF OTHER OPERATING EXPENSES
The amounts are exclusive of value added tax.
Other operating expenses comprise the following main items
(amounts in USD 1,000) :
2021 2020
Fees to external advisors, lawyers, auditors 1,192 1,001
Cost of goods sold 18,876 17,019
Allowance of expected credit losses (Note 14) 924 1,976
Expenses relating to short-term leases 61 84
Expenses relating to leases of low value 6 4
Other operating expenses 3,059 2,771
Total other operating expenses 24,118 22,855
AUDITORS FEE
Recognised fee for auditors of the group and other auditors (amounts in USD 1,000) :
2021 2020
Statutory audit 398 351
Tax services 101 99
Other non-audit services 33 11
Total auditor’s fee 532 461
FINANCIAL STATEMENTS / GROUP / NOTES
33
ANNUAL REPORT 2021 PETROLIA SE
NOTE 8 SPECIFICATION OF FINANCIAL ITEMS
FINANCIAL STATEMENTS / GROUP / NOTES
(amounts in USD 1,000) 2021 2020
Interest income
Interest income from current bank deposits 6 11
Interest income from associate (refer to note 13) 466 577
472 588
Financial income
Foreign exchange gain - net 0 1,159
Dividend 3 0
Profit on shares at fair value through profit and loss (refer to note 15) 52 0
Other financial income 0 1
55 1,160
Interest expenses
Interest expense on bonds 277 277
Other interest expense 23 27
Interest expense on lease liabilities (refer to note 19) 709 504
1,009 808
Financial expenses
Foreign exchange loss - net 795 0
Loss on shares at fair value through profit or loss (refer to note 15) 0 70
Other financial expenses 142 76
937 146
Net finance (cost) / income -1,419 794
34
ANNUAL REPORT 2021 PETROLIA SE
NOTE 9 INCOME TAX
For the Norwegian companies the tax
obligation is nominated and calculated in NOK,
and then converted to USD.
The Group expects to utilise tax losses carried
forward at a rate of 15%, for its Dutch sub-
sidiaries, of USD 1.34 million (2020: USD 2.0
million) against future taxable profits.
The Group has deductible temporary dierenc-
es, for its Norwegian subsidiaries, related to
non-current assets of USD 13.7 million (2020:
USD 15.1 million) with a tax value of USD 3.0
million (2020: USD 3.3 million) that are not
carried as deferred tax assets since it is un-
certain that these can be utilised.
No deferred tax asset or liability was rec-
ognised for the subsidiaries registered in
other jurisdictions.
The tax on the Group's results before tax differs from the theoretical amount that would arise
using the applicable tax rates as follows: (amounts in USD 1,000)
2021 2020
Result before tax charges -291 790
Tax calculated at domestic tax rates applicable to profits in respective countries
(12.5% for parent company)
-624 -715
Change in deferred tax asset -255 -285
Tax on result -879 -1,000
Change in deferred tax assets represent USD -145 thousand from tax losses (2020: USD -141 thousand) and USD -110 thousand from
temporary dierences (2020: USD -144 thousand). In Cyprus there is a time limit of 5 years for the use of carry-forward tax losses. There
is no time limit for the use of carry-forward tax losses in Norway.
Calculation of deferred tax asset (amounts in USD 1,000)
2021 2020
Non-current assets 5,454 5,213
Current assets -5,360 -5,764
Net temporary dierences 94 -551
Carry forward loss -1,423 -2,045
Basis for deferred tax asset -1,329 -2,596
Deferred tax asset at nominal tax rates 169 424
Carried tax asset 169 424
Carried tax liability 0 0
FINANCIAL STATEMENTS / GROUP / NOTES
35
ANNUAL REPORT 2021 PETROLIA SE
(amounts in USD 1,000, with the exception of earnings per share) 2021 2020
Result attributable to the equity holders of the parent
Weighted average no. of shares
-1,193
59,133,786
611
59,133,786
No. of shares at period end 59,133,786 59,133,786
Basic earnings per average no. of shares
From continuing operations -0.02 0.01
Basic (loss) / earnings per share (USD per share) -0.02 0.01
NOTE 10 EARNINGS PER SHARE
The Company has no outstanding or authorised
stock options, or warrants. As at 31 December
2021, the Company held no treasury shares.
FINANCIAL STATEMENTS / GROUP / NOTES
36
ANNUAL REPORT 2021 PETROLIA SE
NOTE 11 PROPERTY, PLANT AND EQUIPMENT
Impairment of property, plant and equipment
The Group performs impairment tests when
there are indicators for impairment in accor-
dance with the relevant accounting policy. The
Group compares the carrying amount of fixed
assets with the recoverable amount, being
the higher of the fair value less costs to sell
and the value in use calculation. Management
estimates the fair value less costs to sell by
obtaining either third party professional valu-
ations or by reference to recent transactions
of similar items.
In 2020, equipment at each location was tested
for impairment as one cash generating unit
and was impaired by USD 0.5 million based on
value in use calculations. The main inputs and
assumptions used by management in performing
the value in use calculations as of 31 December
2020 are the Group's budgets discounted from
10.7% to 16.9% depending on the location.
The main input used in the budgets were the
expected trend in turnover, operating expenses
and capital expenditure.
In 2021, equipment, land and buildings at each
location was tested for impairment as one cash
generating unit and equipment was impaired by
USD 0.3 million based on value in use calcula-
tions. Land with a carrying of USD 0.6 million
was fully impaired due to a dispute relating to
its legal ownership. The Group continues to
have access to the land through a long term
lease agreement concluded in 2022. The main
inputs and assumptions used by management
in performing the value in use calculations as
of 31 December 2021 are the Group's budgets
discounted from 11,5% to 12% depending on
the location. The main input used in the budgets
were the expected trend in turnover, operating
expenses and capital expenditure.
OilService and other equipment include fixed
assets for own use of USD 3.5 million (2020:
USD 4.1 million).
In 2021, the group had a loss from disposal
of assets of USD 42 thousand (2020: profit of
USD 113 thousand). The amount is included
under other operating expenses.
FINANCIAL STATEMENTS / GROUP / NOTES
(amounts in USD 1,000) OilService
and other
equipment
Land and
buildings
Land rigs Total
Per 31 December 2019
Acquisition cost 288,774 4,142 14,271 307,187
Accumulated impairment -26,649 -59 -7,656 -34,364
Accumulated depreciation -247,777 -639 -3,887 -252,303
Book value 31.12.19 14,348 3,444 2,728 20,520
Accounting year 2020
Book value 01.01.20 14,348 3,444 2,728 20,520
Transferred cost from Right of use
assets
2,926 0 0 2,926
Transferred depreciation from Right
of use assets
-1,964 0 0 -1,964
Currency dierences 1,159 -605 0 554
Additions 3,382 29 0 3,411
Disposal -992 0 0 -992
Depreciation of the year -4,266 -173 -826 -5,265
Impairment charge -470 0 0 -470
Accumulated depreciation of assets
disposed
648 1 0 649
Book value 31.12.20 14,771 2,696 1,902 19,369
Per 31 December 2020
Acquisition cost 295,249 3,566 14,271 313,086
Accumulated impairment -27,119 -59 -7,656 -34,834
Accumulated depreciation -253,359 -811 -4,713 -258,883
Book value 31.12.20 14,771 2,696 1,902 19,369
Accounting year 2021
Book value 01.01.21 14,771 2,696 1,902 19,369
Currency dierences -475 -89 0 -564
Additions 3,420 55 0 3,475
Disposal -1,303 0 0 -1,303
Depreciation of the year -4,370 -232 -161 -4,763
Impairment charge -324 -610 0 -934
Accumulated depreciation of assets
disposed
1,095 0 0 1,095
Accumulated impairment of assets
disposed
6 0 0 6
Book value 31.12.21 12,820 1,820 1,741 16,381
Per 31 December 2021
Acquisition cost 296,891 3,532 14,271 314,694
Accumulated impairment -27,437 -669 -7,656 -35,762
Accumulated depreciation -256,634 -1,043 -4,874 -262,551
Book value 31.12.21 12,820 1,820 1,741 16,381
Depreciation period 7-12 year 33 year* 12 year
Residual value 0 0 0
*) Land is not depreciated
37
ANNUAL REPORT 2021 PETROLIA SE
As at 31 December 2021, management carried
out an assessment of whether there is any
indication that right of use assets may have
suered an impairment loss in accordance
with the Group’s policy and concluded that
there is no such indication.
OilService and other equipment primarily
include rental equipment. Land and build-
ings represent storage facilities and oces.
In 2021 lease modifications were added
with USD 1.2 million (2020: USD 4.1 mil-
lion) connected to lease extensions of land
and buildings.
(amounts in USD 1,000) OilService and
other equipment
Land and
buildings
Total
Per 1 January 2020
Acquisition cost 11,087 7,852 18,939
Accumulated impairment -18 0 -18
Accumulated depreciation -7,747 -1,844 -9,591
Book value 01.01.20 3,322 6,008 9,330
Additions 2,212 0 2,212
Modifications 0 4,096 4,096
Disposal of cost -620 0 -620
Disposal of depreciation 356 0 356
Transferred cost to Property, Plant and
Equipment
-2,926 0 -2,926
Transferred depreciation to Property,
Plant and Equipment
1,964 0 1,964
Depreciation of the year -761 -1,862 -2,623
Translation dierences 46 212 258
Book value 31.12.20 3,593 8,454 12,047
Per 31 December 2020
Acquisition cost 9,800 12,159 21,959
Accumulated impairment -18 0 -18
Accumulated depreciation -6,188 -3,705 -9,894
Book value 31.12.20 3,593 8,454 12,047
Additions 3,032 175 3,207
Modifications 0 1,196 1,196
Disposal of cost -113 0 -113
Disposal of depreciation 30 0 30
Depreciation of the year -795 -2,082 -2,877
Translation dierences -89 -249 -338
Book value 31.12.21 5,658 7,494 13,152
Per 31 December 2021
Acquisition cost 12,630 13,281 25,911
Accumulated impairment -18 0 -18
Accumulated depreciation -6,953 -5,787 -12,741
Book value 31.12.21 5,658 7,494 13,152
FINANCIAL STATEMENTS / GROUP / NOTES
Refer also to note 19.
RIGHT OF USE ASSETS
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
38
ANNUAL REPORT 2021 PETROLIA SE
NOTE 12 ASSOCIATED COMPANIES
The Group's interest in associated entities is accounted for using the equity method.
PETROLIA NOCO AS
The company is an oil company exploring the Norwegian Continental Shelf for oil and gas and its shares are registered with ticker “PNO”
on the NOTC (www.notc.no), a market place for unlisted shares. The company holds interests in 13 licences, two of which as an operator.
Exploration activities are capital intensive, especially in the short term when drilling wells. The tax value of the expenses are refunded with
71.8% in the following tax year and an additional 6.2% will reduce payable taxes on any profits from sale of hydrocarbons. Thus in the long
run, 22% of losses has to be funded by equity.Petrolia participate in capital issues to maintain its 49.9% ownership and has been the primary
source of equity and debt funding since PNO was incorporated in 2011. Following a private placement in PNO in 2015 directed towards the
largest shareholders of the Group, the Group’s largest shareholders are now assisting in the funding of PNO.
CO2 MANAGEMENT AS
The company was incorporated on 29 March 2019 with an objective of contributing to reduced CO emissions. The company was a 28.46%
owned associated company. On 9 March 2021 the outstanding 71.5% shares were purchased for NOK 3.7 million (USD 439 thousand), making
the company a fully owned subsidiary. Refer also to note 28.
Petrolia Noco AS CO2 Management AS Tota l
(amounts in USD 1,000)
Book value per 31.12.2019 1,544 44 1,588
Share issue 2,194 100 2,294
Translation dierence 141 0 141
Share of result of the year -1,442 -90 -1,532
Book value per 31.12.2020 2,437 54 2,491
Share issue 2,456 0 2,456
Translation dierence -170 0 -170
Share of result of the year -3,636 0 -3,636
Moved to subsidiary 0 -54 -54
Book value per 31.12.2021 1,087 0 1,087
KEY NUMBERS FROM THE ACCOUNTS
Company Incorpo-
rated in
Current
assets
Non-cur-
rent assets
Total
assets
Current
liabilities
Non-cur-
rent
liabilities
Total
liabilities
Revenue Profit /
(Loss)
Shareholding
Petrolia Noco
AS
Bergen,
Norway
2021 16,478 19,174 35,652 10,773 22,702 33,475 455 -7,286 49.90%
2020 10,512 9,585 20,097 3,976 11,237 15,213 456 -2,889 49.90%
CO2 Manage-
ment AS
Bergen,
Norway
2020 108 168 276 88 0 88 16 -317 28.46%
FINANCIAL STATEMENTS / GROUP / NOTES
The associated companies had no contingent liabilities as at 31 December 2021 or 2020.
Petrolia Noco AS will participate in 1 carried well in 2022. No indicators of impairment were identified during the year.
39
ANNUAL REPORT 2021 PETROLIA SE
UNSECURED LOAN (6%) AND EXPLORA-
TION LOAN (10%) TO PETROLIA NOCO AS
(ASSOCIATE)
The 6% loan is denominated in NOK and car-
ried an annual interest of 6% in 2021 and
2020. The loan was repaid in 2021.
The 10% loan is denominated in NOK and
carried an annual interest of 10% in 2021.
The loan matures on 10 December 2023.
There is no history of credit losses. The as-
sociate company has positive equity (note
12) and there is very little risk regarding
ZEG POWER AS
ZEG delivers solutions for clean hydrogen
production from gas, through its novel ZEG
ICC™ Technology with integrated carbon
capture.
The Group owns 1.6% of the shares and the
investment is carried at fair value through
OCI (level 2).
NOTE 13 OTHER FINANCIAL ASSETS
Loan Shares Total
(amounts in USD 1,000) 6% unsecured 10% unsecured Petrolia Noco AS Zeg Power AS
Book value per 31.12.2019 10,791 0 10,791 0 6,417
Interest income 577 0 577 0 577
Interest received -577 0 -577 0 -577
Repayment -4,563 0 -4,563 0 -4,563
Translation dierence 189 0 189 0 189
Book value per 31.12.2020 6,417 0 6,417 0 6,417
Interest income 216 250 466 0 466
Interest received -216 -90 -306 0 -306
Addition 188 8,226 8,414 221 8,635
Consolidation eect 0 0 0 178 178
Repayment -6,494 -1,777 -8,271 0 -8,271
Translation dierence -111 -7 -118 0 -118
Book value per 31.12.2021 0 6,602 6,602 399 7,001
recoverability of its assets, hence ECL is
not significant. The assets of the company
normally consist primarily of tax receivable
and working capital in licenses. To the extent
exploration costs are carried, in line with
accounting principles, a tax liability of 78%
is also carried reducing the net to 22%. For
discoveries there will normally be values that
are not carried. The shareholders of the
associate company are also supportive by
contributing additional equity when needed
to support the exploration programme of
the associate, including meeting its financial
obligations.
FINANCIAL STATEMENTS / GROUP / NOTES
40
ANNUAL REPORT 2021 PETROLIA SE
Movement of accumulated expected credit losses on trade receivables
(amounts in USD 1,000) 2021 2020
Opening balance 12,655 14,067
Charge for the year 924 1,976
Written o -266 -3,388
Closing balance 13,313 12,655
FINANCIAL STATEMENTS / GROUP / NOTES
Ageing of trade receivables as at 31
December 2020
Not due 1-30 days 31-60 days 61-90 days 90+ days Tot al
Trade receivables 6,758 998 831 235 14,158 22,980
Total, gross 6,758 998 831 235 14,158 22,980
Expected credit loss rate 0.92% 2.40% 6.14% 13.62% 88.19% 55.07%
Expected credit loss 62 24 51 32 12,486 12,655
Total, net 6,696 974 780 203 1,672 10,325
(amounts in USD 1,000) 2021 2020
Trade receivables 10,225 10,325
Other current receivables 2,803 2,135
Total 13,028 12,460
Ageing of trade as at 31 December
2021
Not due 1-30 days 31-60 days 61-90 days 90+ days Tot al
Trade receivables 8,000 1,862 1,032 278 12,366 23,538
Total, gross 8,000 1,862 1,032 278 12,366 23,538
Expected credit loss rate 10.06% 9.94% 28.59% 88.13% 95.29% 56.56%
Expected credit loss 805 185 295 245 11,783 13,313
Total, net 7,195 1,677 737 33 583 10,225
NOTE 14 TRADE AND OTHER CURRENT RECEIVABLES
41
ANNUAL REPORT 2021 PETROLIA SE
During 2021 and 2020 Petrolia Invest AS has invested liquid reserves in shares listed on the Oslo Stock Exchange. The table below presents details
for shares in DNO International ASA, ticker DNO. The change of fair value amounting to a profit of USD 52 thousand (2020: loss of USD 70 thousand)
is shown in note 8.
NOTE 15 FINANCIAL ASSETS AT FAIR VALUE
THROUGH PROFIT OR LOSS
(amounts in USD 1,000) 2021 2020
DNO, shares 136,254 136,254
DNO, total shares 975,432,746 975,432,746
DNO, % owned 0.01% 0.01%
DNO, market value (NOK 10.455 / USD 1.185) (NOK 6.87 / USD 0.8049) 162 110
Fair Value / Carried value (Level 1) 162 110
NOTE 16 CASH AND CASH EQUIVALENTS
(amounts in USD 1,000) 2021 2020
Bank deposits 16,133 16,171
Hereof deposits restricted
Other 3 29
Sum non-current 3 29
Other 14 13
Employees’ tax deduction 208 187
Sum current 222 200
Total restricted capital 225 229
Free cash 15,908 15,942
Cash and bank deposits per currency (amounts in USD 1,000)
Cash and bank deposits in NOK 5,513 7,757
Cash and bank deposits in USD 7,018 4,486
Cash and bank deposits in AED 8 9
Cash and bank deposits in GBP 69 209
Cash and bank deposits in EUR 1,519 2,683
Cash and bank deposits in NZD 262 133
Cash and bank deposits in RON 1,352 299
Cash and bank deposits in MYR 64 110
Cash and bank deposits in AUD 308 439
Cash and bank deposits in PGK 20 46
Total 16,133 16.171
Restricted cash -225 -229
Total as per cash flow statement 15,908 15.942
FINANCIAL STATEMENTS / GROUP / NOTES
42
ANNUAL REPORT 2021 PETROLIA SE
Shareholders 31 December 2021 No. of shares Shareholding
1 INDEPENDENT OIL & RESOURCES PLC 27,182,571 45.97%
2 LARSEN OIL & GAS AS 12,410,177 20.99%
3 TIME CRITICAL PETROLEUM RESOURCES AS 3,789,897 6.41%
4 NOCO (UK) Ltd 3,709,888 6.27%
5 INCREASED OIL RECOVERY AS 3,446,624 5.83%
6 Ø. H. HOLDING AS 693,304 1.17%
7 TOKALA AS 666,764 1.13%
8 TROMMESTAD, OLE 324,582 0.55%
9 ELEKTROLAND NORGE AS 240,713 0.41%
10 OLSEN, ROLF ARILD 200,007 0.34%
11 SPECTER INVEST AS 195,000 0.33%
12 SERIOUS AS 194,971 0.33%
13 MIDDELBORG INVEST AS 159,878 0.27%
14 TOSKA, KETIL 150,000 0.25%
15 UBS Switzerland AG 129,492 0.22%
16 REPPEN, JON CHARLES 117,054 0.20%
17 ØRNES AS 115,000 0.19%
18 MONG, ØYVIND 100,014 0.17%
19 STANDARD ELEKTRO AS 100,000 0.17%
20 ONYX AS 85,000 0.14%
Others 5,122,850 8.66%
Total no. of shares before treasury shares 59,133,786 100.00%
Treasury shares 0 0.00%
Total no. of shares 59,133,786 100.00%
CHANGES TO SHARE CAPITAL
There have been no changes to the share
capital in 2021 or 2020.
LIST OF THE MAJOR SHAREHOLDERS
Petrolia SE had a total of 2,880 shareholders
as at 31 December 2021. The tables below
shows the Company’s 20 largest sharehold-
ers as at 31 December 2021 and as at 26
April 2022 according to the VPS (shares with
nominal value USD 0.10):
NOTE 17 SHARE CAPITAL
FINANCIAL STATEMENTS / GROUP / NOTES
Share capital of Petrolia SE
(amounts in USD 1,000)
Authorised
shares
Issued
shares
Nominal value Book value
2021
Book value
2020
Shares 272,358,670 59,133,786 USD 0.10 USD 5,913 USD 5,913
43
ANNUAL REPORT 2021 PETROLIA SE
Name Shares Shares
Members of the board and management as at: 31 December 2021 26 April 2022
Berge Gerdt Larsen, Chair of the Board
1)
3,789,897 3,789,897
Sølve Nilsen, General manager (Norway) 202,971 202,971
Total 3,992,868 3,992,868
1) Berge Gerdt Larsen owns 44.95% of Increased Oil Recovery AS and his son owns the remaining 55.05%. Larsen Oil & Gas AS is a
100% owned subsidiary of Increased Oil Recovery AS. Together the two companies hold 26.82% of the shares. Increased Oil Recovery AS
is a 49.58% shareholder in Independent Oil & Resources Plc, which holds 45.97% of the shares in Petrolia SE. Berge Gerdt Larsen also
controls Time Critical Petroleum Resources AS which holds 6.41% of the shares in Petrolia SE and 19.68% in shares in Independent Oil &
Resources Plc. Independent Oil & Resources Plc is a 38.75% indirect shareholder in NOCO (UK) Ltd. Increased Oil Recovery AS indirectly
owns 38.42% in NOCO (UK) Ltd.
SHARES OWNED BY MEMBERS OF THE BOARD AND OTHER PRIMARY INSIDERS
The table below shows shareholding of members of the board and key management and other related parties (shares with nominal value
USD 0.10)
Shareholders 26 April 2022 No. of shares Shareholding
1 INDEPENDENT OIL & RESOURCES PLC
1)
27,182,571 45.97%
2 LARSEN OIL & GAS AS
1)
12,410,177 20.99%
3 TIME CRITICAL PETROLEUM RESOURCES AS
1)
3,789,897 6.41%
4 NOCO (UK) Ltd
1)
3,709,888 6.27%
5 INCREASED OIL RECOVERY AS
1)
3,446,624 5.83%
6 TOKALA AS 666,764 1.13%
7 Ø. H. HOLDING AS 539,466 0.91%
8 TROMMESTAD, OLE 505,000 0.85%
9 ELEKTROLAND NORGE AS 240,713 0.41%
10 OLSEN, ROLF ARILD 205,007 0.35%
11 SPECTER INVEST AS 200,000 0.34%
12 SERIOUS AS 194,971 0.33%
13 TOSKA, KETIL 150,000 0.25%
14 REPPEN, JON CHARLES 117,054 0.20%
15 ØRNES AS 115,000 0.19%
16 SILVERCOIN INDUSTRIES AS 109,241 0.18%
17 NORDNET LIVSFORSIKRING AS 106,883 0.18%
18 STANDARD ELEKTRO AS 100,000 0.17%
19 ONYX AS 82,914 0.14%
20 HALVORSEN, TORBEN 80,816 0.14%
Others 5,277,499 8.76%
Total no. of shares before treasury shares 59,133,786 100.00%
Treasury shares 0 0.00%
Total no. of shares 59,133,786 100.00%
FINANCIAL STATEMENTS / GROUP / NOTES
44
ANNUAL REPORT 2021 PETROLIA SE
AS AT 31 DECEMBER THE GROUP HAD THE FOLLOWING BOND LOANS:
Average in-
terest rate
Eective
interest rate
2021 2020
(amounts in USD 1,000)
Gross outstanding ISIN: NO 001075576.2 6.00% 6.00% 4,620 19,507
Of which Group owns 0 14,887
Book value 31.12. 4,620 4,620
Split between long term and short term portion of bond loan 31.12.2021: Long term portion Short term portion Total bond loan
ISIN: NO 001075576.2 0 4,620 4,620
Book value 31.12. 0 4,620 4,620
Split between long term and short term portion of bond loan 31.12.2020: Long term portion Short term portion Total bond loan
ISIN: NO 001075576.2 4,620 0 4,620
Book value 31.12. 4,620 0 4,620
There are no pledges or securities on the bonds.
The bond, ISIN: NO 001075576.2, is not listed.
On 22 December 2021 all 14,886,947 bonds owned by the company ("Borrower's Bonds") were deleted.
NOTE 18 BOND LOANS
FINANCIAL STATEMENTS / GROUP / NOTES
Bond borrowing is recognised at amortised
cost. According to the borrowing agree-
ment Petrolia SE cannot incur mortgage debt,
encumbrances, guarantees, right of retention
or any other type of mortgage for present
or future assets or give any guarantee or
compensation, exemptions may, however, be
made provided it is in compliance with normal
market practice.
Covenants
Petrolia SE cannot, according to the borrow-
ing agreement, pay dividends, purchase own
shares or make payment to the shareholders
beyond 30% of the Group’s profit aer taxes
for the preceding year, without approval from
the lenders. Nor can the Company without
approval dispose of or close down a signifi-
cant part of the enterprise or change the
character of its operations.
In addition Petrolia must ensure that the
Group maintains an equity ratio (ratio of total
equity to total assets) of 40% or higher on
each Balance Sheet Reporting Date, which
is every half hear ("financial covenant").
The covenant has been met during 2021 and
as at 31 December 2021 and is also met as
at 28 April 2022.
The outstanding bond of usd 4,620,353 and
interest will be repaid upon maturity 21 July
2022 from existing cash. The Bond covenants
will thereby no longer be applicable.. The
Company will be free to pay dividends, pur-
chase own shares .
45
ANNUAL REPORT 2021 PETROLIA SE
(amounts in USD 1,000) 2021 2020
Lease liability
As at 1 January 12,422 9,158
Additions 3,311 2,212
Modifications 1,092 4,096
Interest 709 504
Translation dierence -216 -161
Payments -4,261 -3,387
As at 31 December 13,057 12,422
Current 3,653 3,084
Non-current 9,404 9,338
FINANCIAL STATEMENTS / GROUP / NOTES
NOTE 19 LEASES
Set out below are the carrying amounts of lease liabilities and the movements during the period:
GROUP AS LESSEE
The Group has lease contracts in respect of equipment and land & buildings. The leases expire between 1 and 4 years for equipment and
between 1 and 7 years for land & buildings. Various extension options are attached.
Set out below are the carrying amounts of lease liabilities per currency:
(amounts in USD 1,000) 2021 2020
NOK 7,300 6,335
EUR 1,286 776
NZD 120 16
AUD 3,706 4,715
RON 84 23
MYR 193 138
GBP 368 419
As at 31 December 13,057 12,422
A carrying amount of USD 4.6 million (2020:
USD 3.2 million) relates to equipment, and
there are no options to extend or terminate.
The Group has the option to purchase most
of these equipment on maturity of the lease
term. The purchase price of option is not
included in the lease calculations due to low
value, normally one month's lease. The lease
term varies from 1 to 4 years and the average
discount rate used in the lease calculations
is 5% (2020: 5%).
A carrying amount of USD 8.4 million (2020:
USD 9.2 million) relates to rental of oces. In
most of the rental agreements there are op-
tions to extend. The lease term varies from 1
to 7 years and the average discount rate used
in the lease calculations is 5% (2020: 5%).
For the contracts with options to extend, if the
options are assumed to be exercised for the
lease term to be until the end of 2026, then
the lease liability would have increased by
USD 2 million with a corresponding increase
in Right of use asset as well.
46
ANNUAL REPORT 2021 PETROLIA SE
NOTE 20 TRADE AND OTHER PAYABLES
(amounts in USD 1,000) 2021 2020
Trade payables 5,354 7,161
Total trade payables 5,354 7,161
Other payables
Accrued bond interests 124 124
Other current liabilities 5,760 4,467
Total other payables 5,884 4,591
Total trade and other payables 11,238 11,752
FINANCIAL STATEMENTS / GROUP / NOTES
NOTE 21 BANK LOAN AND OVERDRAFT
Current liabilities
(amounts in USD 1,000)
Interest Maturity Security Eective interest rate 2021 2020
Bank loan GBP 50,000 Fixed 0% first year,
thereaer 2.5%
June 2026 1.78% 7 0
Bank loan AUD 680,000 Fixed 3.04% June 2025 Equipment 3.08% 99 104
Total 106 104
Non-current liabilities
(amounts in USD 1,000)
Interest Maturity Security Eective interest rate 2021 2020
Bank loan GBP 50,000 Fixed 0% first year,
thereaer 2.5%
June 2026 1.78% 57 68
Bank loan AUD 680,000 Fixed 3.04% June 2025 Equipment 3.08% 247 370
Total 304 438
47
ANNUAL REPORT 2021 PETROLIA SE
CAPITAL STRUCTURE AND EQUITY
For the purpose of the Group's capital man-
agement, capital includes issued capital, share
premium and all the equity reserves attribut-
able to the equity holders of the parent. The
main objectives of the Group when monitoring
capital are to safeguard the Group’s ability
to maintain favourable loan terms from the
lenders in accordance with the Group’s op-
erations. By maintaining a satisfactory debt
ratio and meeting its loan covenants, the
Group is supporting the current operations
and maximising the Group’s value accordingly.
The Group is managing the capital structure
and making necessary adjustments based on a
continuous assessment of the financial condi-
tions that the enterprise is subject to and the
present short and medium term prospects.
The capital structure is managed through
purchase of treasury shares, reduction of
share capital, issuing new shares or through
dividend policy.
NOTE 22 CAPITAL MANAGEMENT
Financial risk factors and categories of financial
instruments
The Group uses financial instruments such
as bond loans, bank overdras, financial
lease and borrowing from related parties.
The purpose of these financial instruments
is to provide capital for investments neces-
sary for the Group’s activities. In addition
the Group has financial instruments like
trade receivables and trade payables which
are directly connected to the current op-
erations of the Group. The Group has no
derivative financial instruments, neither for
hedging nor trading purposes. Except from
the financial assets at fair value, all the
financial assets are categorised as loans,
receivables and cash and cash equivalent
and are measured at amortised cost. In
2021 and 2020 the Group has invested in
shares listed on the Oslo Stock Exchange.
Profit and loss eects from financial in-
struments measured at fair value through
profit and loss are disclosed in note 15.
Impairment on financial instruments con-
cerns mainly loans to associated company
and trade receivables and are disclosed
in notes 13 and 14 respectively and under
Credit risk below. The Group’s activities
expose it to a variety of financial risks: credit
risk, interest risk, liquidity risk and currency
risk. The Group’s overall risk management
programme focuses on the unpredictability
of financial markets and seeks to minimise
potential adverse eects on the Group’s
financial performance.
The Group’s management is currently moni-
toring the risk related to credit, interest
rate, liquidity and foreign exchange. The
Group is subject to a balanced exposure
through income and expenses in USD and
NOK and financing in USD and NOK. The
Group has a fixed rate on the major part of
interest bearing liabilities, which limits the
cash flow interest rate risk. The credit risk
which the Group is exposed to is acceptable.
Credit risk
The Group is primarily exposed to credit risk
related to trade receivables, other receiv-
ables, loans receivable and cash at bank.
The maximum risk exposure is represented
by the carrying value of trade receivables
and other receivables referred to in note 14,
loan receivable shown in note 13 and cash
at bank in note 16.
The Group’s revenues arise from a limited
number of transactions and customers and
therefore credit risk is transparent.
Management has assessed the collectability
of receivables and do not expect losses other
than the expected credit allowance already
provided in line with the accounting policy.
No expected credit loss was provided for
the loan receivable as the associate is in
net asset position financially supported by
NOTE 23 FINANCIAL RISK MANAGEMENT
(amounts in USD 1,000) 2021 2020
Equity of majority 37,441 39,307
Bank loan 410 542
Bond loan 4,620 4,620
Leases 13,057 12,422
Trade payables 5,354 7,161
Other payables 5,994 4,684
Less free cash -15,908 -15,942
Net debt 13,527 13,487
Equity and net debt 50,968 52,794
Debt ratio 27% 26%
FINANCIAL STATEMENTS / GROUP / NOTES
48
ANNUAL REPORT 2021 PETROLIA SE
Liquidity risk
Liquidity risk is the risk that the Group may
not be able to meet its financial liabilities as
they fall due. The Group’s strategy of handling
Sensitivity for changes in interest rate level (amounts in USD 1,000) Changes in interest rate
level in basic items
Impact on result
before tax
Impact on
equity
2021 +50 16 13
2020 +50 5 4
Further information regarding the interest rate conditions of the Group’s financing is given in notes 13, 18, 19 and 21.
As at 31st of December 2021 < 1 year 1-5 years > 5 years Total
Trade payables 5,354 0 0 5,354
Bond loans (incl interest) 4,782 0 0 4,782
Leasing (incl interest) 4,034 10,800 389 15,223
Bank loan (incl interests) 118 336 0 454
Other liabilities 5,760 110 0 5,870
Total 20,048 11,246 389 31,683
As at 31st of December 2020 < 1 year 1-5 years > 5 years Total
Trade payables 7,161 0 0 7,161
Bond loans (incl interest) 277 4,782 0 5,059
Leasing (incl interest) 3,306 10,377 162 13,845
Bank loan (incl interests) 119 497 0 616
Other liabilities 4,591 93 0 4,684
Total 15,454 15,749 162 31,365
FINANCIAL STATEMENTS / GROUP / NOTES
its shareholders to enable it to continue its
exploration and production activity and ECL
was estimated to be insignificant. Refer also
to note 14.
The Group does not hold any collateral as
security for its receivables.
The Group assesses, on an individual basis,
its exposure to credit risk arising from other
receivables. A VAT receivable of USD 1.4
million disputed by the Rumanian authorities
was fully impaired in 2017. The case is still
in the courts. Management estimated the
impairment loss at 31 December 2021 of
other receivables to be immaterial.
The Group assesses, on an individual basis,
its exposure to credit risk arising from cash at
bank. This assessment takes into account, rat-
ings from external credit rating institutions.
Management applies the IFRS 9 general
approach. Bank balances were assessed
as performing (Stage 1). The ECL on bank
accounts is considered to be immaterial, as
the cash at bank are held with banks with
investment grade rating. Management esti-
mated the impairment loss at 31 December
2021 to be immaterial.
Interest rate risk
The Group is exposed to interest rate risk
through its financing activities (refer to notes
18, 19 and 21). Part of the interest-bearing
liabilities is based on floating rates which
imply that the Group is exposed to changes
in the interest rate level.
The Group’s interest rate risk management
aims at reducing the interest expenses and
at the same time the volatility of future in-
terest payments is kept within acceptable
frames. As at 31.12.2021 the Group’s bond
and bank loans have fixed interest, while
the lease obligations are subject to floating
rates of interest.
liquidity risk is to have sucient liquidity at
all times to pay any liability on maturity, in
both normal and extraordinary circumstances.
The table below states the maturity profile
of the financial liabilities recognised as at
31.12.2021 and 31.12.2020.
49
ANNUAL REPORT 2021 PETROLIA SE
Foreign exchange risk
The Group operates internationally and is
exposed to foreign exchange risk arising
from various currency exposures, primarily
with respect to the NOK. Foreign exchange
risk arises from future commercial transac-
tions and recognised assets and liabilities.
Foreign exchange risk arises when future
commercial transactions or recognised assets
or liabilities are denominated in a currency
that is not the entity’s functional currency. The
Group is exposed to exchange rate fluctua-
tions connected to the value of NOK relative
to USD due to the fact that the Group has
mainly income and operating expenses in USD
while parts of the financing and some assets
are denominated in NOK.
The Group has certain investments in foreign
operations, whose net assets are exposed to
foreign currency translation risk.
The table below illustrates the Group’s
sensitivity related to reasonable changes in
the currency rate between USD and NOK.
The Group's main exposure to NOK is from
the loan receivable amounting to USD 6.6
million (2020: USD 6.4 million) as shown in
note 13, cash at bank amounting to USD 7
million (2020: USD 7.8 million) and lease li-
abilities amounting to USD 7.3 million (2020:
USD 6.3 million) as shown in note 19.
Changes in other currencies will not have
material impact on the profit & loss.
FAIR VALUE
Except financial assets at fair value through
profit or loss and financial assets through
OCI, all financial instruments are measured
at amortised cost. Fair values of bonds and
loans receivable are based on management's
estimates by reference to other listed bonds
and loans with similar characteristics. The
table on the next page shows a comparison
of book values and fair values of the bond .
The carrying amount of loan receivable ap-
proximates its fair value. The carrying value
of cash and cash equivalents approximate the
fair value owing to the fact that these instru-
ments have short maturity. Correspondingly,
the carrying value of the trade receivables
and trade payables approximate the fair value
as they are established at normal terms and
doubtful receivables are impaired by record-
ing impairment loss. The carrying value of
financial leases approximate their fair value
as they made with third parties and carried
interest at floating rates.
FAIR VALUE HIERARCHY
The Group uses the following hierarchy for
determining and disclosing the fair value of
financial instruments by valuation technique:
•
Level 1: Quoted (unadjusted) prices in
active markets for identical assets or
liabilities.
•
2: Other techniques for which all inputs
which have a significant eect on the re-
corded fair value are observable, either
directly or indirectly.
•
Level 3: Techniques which use inputs which
have a significant eect on the recorded
fair value that are not based on observable
market data.
For assets and liabilities that are recognised
Changes in the exchange rate of NOK Impact on result before taxes Impact on equity
2021 5 % 397 310
-10 % -795 -620
2020 5 % 588 460
-10 % -1,178 -919
in the consolidated financial statements on a
recurring basis, the Group determines wheth-
er transfers have occurred between levels
in the hierarchy by re-assessing categorisa-
tion (based on the lowest level input that is
significant to the fair value measurement as
a whole) at the end of each reporting period.
The Group uses fair value through profit
and loss only on listed shares. Fair value
is determined by the quoted (unadjusted)
prices in the market (Level 1). The car-
rying amount per 31st of December 2021
was USD 162 thousand. The fair value of
financial asset through OCI was determined
by the prices of recent transactions with
3rd parties (level 2).
FINANCIAL STATEMENTS / GROUP / NOTES
2021 1 January 2021 Instalment Translation
difference
New lease/
draw down
Interest 31 December
2021
Current / Non-current Bond loan 4,620 0 0 0 0 4,620
Non-current Bank loan 438 -31 -103 0 0 304
Lease liabilities 12,422 -4,261 -216 4,403 709 13,057
Total 17,480 -4,292 -319 4,403 709 17,981
CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
2020 1 January 2020 Instalment Translation
difference
New lease/
draw down
Interest 31 December
2020
Non-current Bond loan 4,620 0 0 0 0 4,620
Non-current Bank loan 0 -119 30 527 0 438
Lease liabilities 9,158 -3,387 -161 6,308 504 12,422
Total 13,778 -3,506 -131 6,835 504 17,480
50
ANNUAL REPORT 2021 PETROLIA SE
Bond loan - fair value (Note 18) 2021 2020
Net outstanding, USD 1,000
Book value 4,620 4,620
Fair value (Level 3) 4,528 4,343
98% 94%
LARSEN OIL & GAS AS (LOG AS) AND IN-
CREASED OIL RECOVERY AS (IOR AS) AND
KVER AS
IOR AS is the 100% owner of LOG AS and
Kver AS. Mr. Berge Gerdt Larsen, Chairman
of the Board has economic interest of 44.95%
in IOR AS and is the Chairman of the board
in IOR AS and LOG AS.
The Company has an oce support agree-
ment with LOG AS. The annual cost coverage
was NOK 1.3 million (USD 151,261) in 2021.
The Company has an oce lease agreement
with Kver AS. Annual oce rent is NOK 0.6
million (USD 75,927). In 2021 shared costs
amounted to NOK 0.2 million (USD 27,884).
PETROLIA NOCO AS
The Group has granted loans to Petrolia
NOCO AS (owned 49.9%). The loans are
denominated in NOK and carried an interest
rate of 6% and 10% in 2021. The 6% loan
was fully repaid in 2021. The 10% loan has
maturity date on 10 December 2023 (Note
13). The investment in the associated company
is shown in note 12.
MOUNTWEST PETROLEUM LTD.
The group has an oce lease agreement with
Mountwest Petroleum Ltd. Annual oce rent
is GBP 51,700 (USD 71,159). Mr. Berge Gerdt
Larsen, Chairman of the Board has economic
interest in Mountwest Petroleum Ltd.
DIRECTOR FEES
Director fees are shown in note 6.
TIME CRITICAL PETROLEUM AS, INCREASED
OIL RECOVERY AS AND INDEPENDENT OIL AND
RESOURCES PLC
Refer to note 28 regarding the purchase of
the remaining shares in CO2 Management
AS. Mr. Berge Gerdt Larsen, Chairman of the
Board has economic interest in the companies
that sold their shares in CO2 Management AS.
NOTE 24 RELATED PARTIES
FINANCIAL STATEMENTS / GROUP / NOTES
COMPARISON OF CARRYING AMOUNTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS OTHER THAN THOSE WITH CARRYING AMOUNTS THAT
ARE REASONABLE APPROXIMATIONS OF FAIR VALUES:
51
ANNUAL REPORT 2021 PETROLIA SE
NOTE 25 MATERIAL PARTLY OWNED SUBSIDIARIES
The summarised financial information of these subsidiaries are provided below. This information is based on amounts before
inter-company eliminations.
FINANCIAL STATEMENTS / GROUP / NOTES
Independent Oil Tools
DOSCO BV
The Netherlands
Independent Oil Tools Iraq
for General Trading Co. Ltd
Iraq
Catch Fishing Services BV
The Netherlands
2021 2020 2021 2020 2021 2020
Proportion of equity interest held by non-
controlling interest
30% 30% 39% 39% 10% 15%
Accumulated balances of material non-con-
trolling interest
1,712 1,590 448 518 60 8
Profit/(loss) allocated to material non-con-
trolling interest
107 91 -70 -454 57 75
Comprehensive income/(loss) allocated to
material non-controlling interest
-36 -74 -70 -454 54 75
Summarised statement of profit or loss 2021 2020 2021 2020 2021 2020
Revenue 7,717 8,996 12,350 7,363 2,391 2,863
Cost of sales -5,518 -6,670 -7,712 -4,310 -628 -685
Administrative expenses -1,594 -1,898 -3,270 -3,407 -1,189 -1,423
Depreciation -341 -480 -931 -771 0 0
Finance income /(costs) 150 -195 94 -38 -3 -9
Profit before tax 413 -247 -78 -1,164 571 745
Income tax 0 -482 -100 0 0 0
Profit for the year 357 -729 -178 -1,164 571 745
Exchange dierences -475 483 0 0 -27 0
Total comprehensive income -119 -246 -178 -1,164 544
Attributable to non-controlling interest -36 -74 -70 -454 54 75
Dividends paid to non-controlling interest 0 0 0 0 0 0
Summarised statement of financial position 2021 2020 2021 2020 2021 2020
Current assets 4,302 3,792 5,172 4,986 1,235 1,137
Non-current assets 1,026 1,108 5,385 5,949 0 0
Current liabilities -379 -398 9,407 9,607 637 1,084
Non-current liabilities 0 0 0 0 0 0
Total equity 5,708 5,298 1,150 1,328 597 53
Attributable to:
- Equity holders of parent 3,996 3,708 701 811 537 45
- Non-controlling interest 1,712 1,590 448 518 60 8
52
ANNUAL REPORT 2021 PETROLIA SE
Finished goods represent OilService equip-
ment held for sale.
NOTE 26 INVENTORIES
(Amounts in USD 1,000)
2021 2020
Spare parts (at lower of cost and net realisable value) 99 149
Finished goods (at lower of cost and net realisable value) 1,834 1,721
Total inventories 1,933 1,870
NOTE 27 OPERATING ENVIRONMENT OF THE GROUP
The activity of the group is closely correlated
to the oil price and events aecting supply
and/or demand, and thus price, will aect the
Group’s activity level.
53
ANNUAL REPORT 2021 PETROLIA SE
The geopolitical situation in Eastern Europe
intensified on 24 February 2022 with the com-
mencement of the conflict between Russia and
Ukraine. As at the date of authorising these
financial statements for issue, the conflict con-
tinues to evolve as military activity proceeds. In
addition to the impact of the events on entities
that have operations in Russia, Ukraine, or
Belarus or that conduct business with their
counterparties, the conflict is increasingly af-
fecting economies and financial markets globally
and exacerbating ongoing economic challenges.
The United Nations, European Union as well
as United States of America, Switzerland,
United Kingdom and other countries imposed
a series of restrictive measures (sanctions)
against the Russian and Belarus government,
various companies, and certain individuals.
The sanctions imposed include an asset freeze
and a prohibition from making funds available
to the sanctioned individuals and entities. In
addition, travel bans applicable to the sanc-
tioned individuals prevents them from entering
or transiting through the relevant territories.
The Republic of Cyprus has adopted the United
Nations and European Union measures. The
rapid deterioration of the conflict in Ukraine
may as well lead to the possibility of further
sanctions in the future.
Emerging uncertainty regarding global supply of
commodities due to the conflict between Russia
and Ukraine conflict may also disrupt certain
global trade flows and place significant upwards
pressure on commodity prices and input costs
as seen through early March 2022. Challenges
for companies may include availability of funding
to ensure access to raw materials, ability to
finance margin payments and heightened risk
of contractual non-performance.
The impact on the Group largely depends on the
nature and duration of uncertain and unpre-
dictable events, such as further military action,
additional sanctions, and reactions to ongoing
developments by global financial markets.
The financial eect of the current crisis on the
global economy and overall business activities
cannot be estimated with reasonable certainty
at this stage, due to the pace at which the
FINANCIAL STATEMENTS / GROUP / NOTES
NOTE 29 EVENTS AFTER THE REPORTING PERIOD
Petrolia SE has acquired outstanding 71.5% of
associated company CO2 Management AS. The
company is the primary vehicle for developing
new business opportunities under Petrolia’s
Decarbonisation Strategy.
The purchase price was identical to the
price in the latest capital increase in CO2
MANAGEMENT AS in March 2020. Total con-
sideration was NOK 3.7 million (USD 439
thousand). The sellers were related parties
NOTE 28 BUSINESS COMBINATIONS
Time Critical Petroleum AS (26.2%), Increased
Oil Recovery AS (26.2%) and Independent Oil
and Resources PLC (19.2%).
conflict prevails and the high level of uncer-
tainties arising from the inability to reliably
predict the outcome.
The event did not exist in the reporting period
and is therefore not reflected in the recognition
and measurement of the assets and liabilities
in the financial statements as at 31 December
2021 as it is considered as a non-adjusting
event.
Management has considered the unique circum-
stances and the risk exposures of the Company
and has concluded that there is no significant
impact in the Group's profitability position. The
event is not expected to have an immediate
negative material impact on the business op-
erations. Management will continue to monitor
the situation closely.
There have been no other significant events
aer the balance sheet date.
ASSETS (Amounts in USD 1,000) Fair value recognised
on acquisition
OilService and other equipment 8
Other financial assets 178
Deferred tax assets 143
Other current receivables 2
Free cash 89
Restricted cash 15
TOTAL ASSETS 435
Other current liabilities -170
Total identifiable net assets at fair value 265
Non-controlling interest measured at fair value 190
Purchase consideration transferred 439
Goodwill arising on acquisition 249
54
ANNUAL REPORT 2021 PETROLIA SE
PARENT
55
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
31 December 2021
2021
2020
Note
USD 000
USD 000
Revenue from contracts with customers
7
134
152
Administration expenses
(1.396)
(1.376)
Operating loss
8
(1.262)
(1.224)
Finance income
10
250
8
Finance costs
10
(558)
(282)
Reversal of impairment on investments in subsidiaries companies - net
12
3.902
11.993
(Impairment charge)/reversal of impairment on investments in associates
13
(389)
199
Reversal of expected credit loss on receivables from related parties
15
100
-
Profit before tax
2.043
10.694
Tax
11
-
-
Net profit for the year
2.043
10.694
Total comprehensive income for the year
2.043
10.694
FINANCIAL STATEMENTS
Petrolia SE - Parent Company - 31 December 2021
FINANCIAL STATEMENTS / PARENT
56
ANNUAL REPORT 2021 PETROLIA SE
FINANCIAL STATEMENTS / PARENT
Polycarpos Protopapas
Board member
Managing director
Sjur Storaas
Board member
Sølve Nilsen
Finance manager
George Hadjineophytou
Board member
PETROLIA SE
STATEMENT OF FINANCIAL POSITION
31 December 2021
2021
2020
Note
USD 000
USD 000
ASSETS
Non-current assets
Right-of-use assets
17
129
187
Investments in subsidiaries
12
44.058
40.156
Investments in associates
13
271
660
Restricted cash
16
36
43
Loan receivable from associate
14
6.595
-
51.089
41.046
Current assets
Trade and other receivables
15
526
4.400
Cash at bank
18
1.929
86
2.455
4.486
Total assets
53.544
45.532
EQUITY AND LIABILITIES
Equity
Share capital
19
5.913
5.913
Share premium
12.222
12.222
Merger reserve
67.093
67.093
Accumulated losses
(39.170)
(45.024)
Total equity
46.058
40.204
Non-current liabilities
Borrowings
20
-
4.620
Lease liabilities
17
69
125
69
4.745
Current liabilities
Trade and other payables
21
2.611
397
Borrowings
20
4.744
124
Lease liabilities
17
62
62
7.417
583
Total liabilities
7.486
5.328
Total equity and liabilities
53.544
45.532
On 28 April 2022, the Board of Directors of Petrolia SE authorised these financial statements for issue.
Berge Gerdt Larsen
Chairman of the Board
57
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
STATEMENT OF FINANCIAL POSITION
31 December 2021
2021
2020
Note
USD 000
USD 000
ASSETS
Non-current assets
Right-of-use assets
17
129
187
Investments in subsidiaries
12
44.058
40.156
Investments in associates
13
271
660
Restricted cash
16
36
43
Loan receivable from associate
14
6.595
-
51.089
41.046
Current assets
Trade and other receivables
15
526
4.400
Cash at bank
18
1.929
86
2.455
4.486
Total assets
53.544
45.532
EQUITY AND LIABILITIES
Equity
Share capital
19
5.913
5.913
Share premium
12.222
12.222
Merger reserve
67.093
67.093
Accumulated losses
(39.170)
(45.024)
Total equity
46.058
40.204
Non-current liabilities
Borrowings
20
-
4.620
Lease liabilities
17
69
125
69
4.745
Current liabilities
Trade and other payables
21
2.611
397
Borrowings
20
4.744
124
Lease liabilities
17
62
62
7.417
583
Total liabilities
7.486
5.328
Total equity and liabilities
53.544
45.532
On 28 April 2022, the Board of Directors of Petrolia SE authorised these financial statements for issue.
PETROLIA SE
STATEMENT OF CHANGES IN EQUITY
31 December 2021
Share
capital
Share
premium
Merger
reserve
Accumulated
losses
Total
USD 000
USD 000
USD 000
USD 000
USD 000
Balance at 1 January 2020
5.913
12.222
67.093
(55.718)
29.510
Comprehensive income
Profit for the year / Total
comprehensive income for the year
-
-
-
10.694
10.694
Balance at 31 December 2020/ 1
January 2021
5.913
12.222
67.093
(45.024)
40.204
Comprehensive income
Profit for the year / Total
comprehensive income for the year
-
-
-
2.043
2.043
5.913
12.222
67.093
(42.981)
42.247
Transactions with owners
Effect of tax contributions with Group
subsidiaries in Norway
-
-
-
3.811
3.811
Balance at 31 December 2021
5.913
12.222
67.093
(39.170)
46.058
FINANCIAL STATEMENTS / PARENT
58
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
STATEMENT OF CASH FLOWS
31 December 2021
2021
2020
Note
USD 000
USD 000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
2.043
10.694
Adjustments for:
Depreciation of right-of-use assets
17
61
-
Net exchange loss/(gain)
10
269
(7)
Reversal of impairment - investments in subsidiaries
12
(3.902)
(11.993)
Impairment charge/(reversal of impairment) - investments in associates
13
389
(199)
Reversal of expected credit loss on receivables from related parties
15
(100)
-
Interest income
10
(250)
(1)
Interest expense
10
285
277
(1.205)
(1.229)
Changes in working capital:
Decrease in trade and other receivables
7.523
1.233
Increase in trade and other payables
2.215
58
9.738
1.291
Net cash generated from operating activities
8.533
62
CASH FLOWS FROM INVESTING ACTIVITIES
Loans granted
14
(8.226)
-
Loans repayments received
14
1.784
-
Interest received
89
1
Net cash (used in)/generated from investing activities
(6.353)
1
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of leases liabilities
(59)
-
Decrease in restricted cash
7
-
Interest paid
(285)
(277)
Net cash used in financing activities
(337)
(277)
Net increase/(decrease) in cash and cash equivalents
1.843
(214)
Cash and cash equivalents at beginning of the year
86
300
Cash and cash equivalents at end of the year
18
1.929
86
FINANCIAL STATEMENTS / PARENT
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
1. Incorporation and principal activities
Country of incorporation
Petrolia SE (the ''Company'') was incorporated in Cyprus on 9 August 2011 as a limited liability company under the
Cyprus Companies Law, Cap. 113. Its registered office is at Christodoulou Chatzipavlou 205, Louloupis court, 4th
Floor, Office 401, 3036, Limassol, Cyprus.
Change of Company name
On 17 November 2011, the Company changed its name from Petrolia E&P Holdings Limited to Petrolia E&P Holdings
Plc. Following a shareholders’ plan to re-domicile to Cyprus that was approved on 30 December 2011, Petrolia ASA
merged (“cross-border merger”) with Petrolia E&P Holdings Plc (“surviving entity”) and the latter was at the same
time converted into a European public company limited by shares (“Societas Europaea” or “SE”) in accordance with
Article 2 no. 1 of the European Council Regulation no. 2157/2001 (the “SE Regulation”) and Section 5 of the
Norwegian Act on European Companies of 1 April 2005 (the “SE Act”).
Following the completion of the cross-border merger on 26 October 2012 and the creation of Petrolia E&P Holdings
SE, the Company on 28 January 2013 changed its name to Petrolia SE.
The Company’s shares are listed on the Oslo Stock Exchange (Ticker: “PSE”). On 21 September 2018, the Company
changed its ticker name from ''PDR'' to ''PSE''.
Principal activities
The principal activities of the Company, which are unchanged from prior year, are the financing of group companies
and the holding of investments in subsidiaries and associates engaged in two business segments: Energy and Energy
Service. The core activities include a subsidiary company, a well-established international oil service company.
2. Basis of preparation
These parent company financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113.
The financial statements have been prepared under the historical cost convention. The notes to the consolidated
financial statements provide additional information to the parent company financial statements. The accounting
policies applied to the Group accounts have also been applied to the parent company, Petrolia SE. The parent
company financial statements should be read in conjunction with the consolidated financial statements. Investments
in subsidiaries and associates are carried at cost less impairment in these separate financial statements. In case of
impairment, the investment is written down to its recoverable amount. The Company’s functional currency is US
dollars (USD) and the financial statements are presented in USD, rounded to the nearest thousand.
3. Adoption of new or revised standards and interpretations
During the current year the Company adopted all the new and revised International Financial Reporting Standards
(IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2021. This
adoption did not have a material effect on the accounting policies of the Company.
4. Significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all years presented in these financial statements unless otherwise stated.
Subsidiary companies
Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognised as
an expense in the period in which the impairment is identified.
59
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
1. Incorporation and principal activities
Country of incorporation
Petrolia SE (the ''Company'') was incorporated in Cyprus on 9 August 2011 as a limited liability company under the
Cyprus Companies Law, Cap. 113.
Its registered office is at Christodoulou Chatzipavlou 205, Louloupis court, 4th
Floor, Office 401, 3036, Limassol, Cyprus.
Change of Company name
On 17 November 2011, the Company changed its name from Petrolia E&P Holdings Limited to Petrolia E&P Holdings
Plc. Following a shareholders’ plan to re
-domicile to Cyprus that was approved on 30 December 2011, Petroli
a ASA
merged (“cross
-
border merger”) with Petrolia E&P Holdings Plc (“surviving entity”) and the latter was at the same
time converted into a European public company limited by shares (“Societas Europaea” or “SE”) in accordance with
Article 2 no. 1 of the European Council Regulation no. 2157/2001 (the “SE Regulation”) and Section 5 of the
Norwegian Act on European Companies of 1 April 2005 (the “SE Act”).
Following the completion of the cross
-border merger on 26 October 2012 and the creation of Petrolia E
&P Holdings
SE, the Company on 28 January 2013 changed its name to Petrolia SE.
The Company’s shares are listed on the Oslo Stock Exchange (Ticker: “PSE”). On 21 September 2018, the Company
changed its ticker name from ''PDR'' to ''PSE''.
Principal activities
The principal activities of the Company
, which are unchanged from prior year,
are the financing of group companies
and the holding of investments in subsidiaries and associates engaged in two business segments: Energy and Energy
Service. The core activities include a subsidiary company, a well-established international oil service company.
2. Basis of preparation
These parent company financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113.
The financial statements have been prepared under the historical cost convention. The notes to the consolidated
financial statements provide additional information to the parent company financial statements. The accounting
policies applied to the Group accounts have also been applied to the parent company, Petrolia SE. The parent
company financial statements should be read in conjunction with the consolidated financial statements. Investments
in subsidiaries and associates are carried at cost less impairment in these separate financial statements. In case of
impairment, the investment is written down to its recoverable amount. The Company’s functional currency is US
dollars (USD) and the financial statements are presented in USD, rounded to the nearest thousand.
3. Adoption of new or revised standards and interpretations
During the current year the Company adopted all the new and revised International Financial Reporting Standards
(IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2021. This
adoption did not have a material effect on the accounting policies of the Company.
4. Significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all years presented in these financial statements unless otherwise stated.
Subsidiary companies
Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognised as
an expense in the period in which the impairment is identified.
FINANCIAL STATEMENTS / PARENT
60
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
4. Significant accounting policies (continued)
Associates
Associates are all entities over which the Company has significant influence but not control, generally accompanying
a shareholding of between 20% and 50% of the voting rights.
Investments in associated undertakings are stated at
cost less provision for impairment in value, which is recognised as an expense in the period in which the impairment
is identified.
An associate is an entity over which the investor has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee without the power to control or jointly
control those policies.
Revenue
Recognition and measurement
Revenue shall be recognised in such a way to depict the transfer of services to customers and reflect the
consideration that the entity expects to be entitled to in exchange for transferring those services to the customer;
the transaction price. The Company includes in the transaction price an amount of variable consideration as a result
of rebates/discounts only to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is
subsequently resolved. Estimations for rebates and discounts are based on the Company's experience with similar
contracts and forecasted sales to the customer.
Revenue from contracts with customers (in writing, orally or in accordance with other customary business practices)
is recognised when control of the services
are
transferred to the customer at an amount that reflects the
consideration to which the Company expects to be entitled in exchange for those services.
The Company bases its estimates on historical results, taking into consideration the type of customer, the type of
transaction and the specifics of each arrangement. In evaluating whether collectability of an amount of consideration
is probable, the Company considers only the customer's ability and intention to pay that amount of consideration
when it is due.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any
resulting increases or decreases in estimates are reflected in the statement of profit or loss and other comprehensive
income in the period in which the circumstances that give rise to the revision become known by Management.
Identification of performance obligations
The Company assesses whether contracts that involve the provision of a range of services contain one or more
performance obligations (that is, distinct promises to provide a service) and allocates the transaction price to each
performance obligation identified on
the basis of its stand-
alone selling price. A service that is promised to a
customer is distinct if the customer can benefit from the service, either on its own or together with other resources
that are readily available to the customer (that is the service is capable of being distinct) and the Company's promise
to transfer the service to the customer is separately identifiable from other promises in the contract (that is, the
service is distinct within the context of the contract).
Management and consultancy fees
Revenue from rendering of services is recognised over time while the Company satisfies its performance
obligation by transferring control over the promised service to the customer in the accounting period in
which the services are rendered. F
or fixed price contracts, revenue is recognised based on the actual service
provided to the end of the reporting period as a proportion of the total services to be provided because the
customer receives and uses the benefits simultaneously. This is determi
ned based on the annual or monthly
fee based on the contract and the period for which the Company has provided services to subsidiaries,
group subsidiaries and associate company.
FINANCIAL STATEMENTS / PARENT
61
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
4. Significant accounting policies (continued)
Dividend income
Dividends are received from investments in subsidiaries and associates. Dividends are recognised as dividend income
in profit or loss when the right to receive payment is established.
Employee benefits
The Company and its employees contribute to the Government Social Insurance Fund based on employees' salaries.
The Company's contributions are expensed as incurred and are included in staff costs. The Company has no legal or
constructive obligations to pay further contributions if the scheme does not hold sufficient assets to pay all
employees benefits relating to employee service in the current and prior periods.
Finance income
Interest income is recognised on a time-proportion basis using the effective method.
Finance costs
Interest expense and other borrowing costs are charged to profit or loss as incurred.
Foreign currency translation
(1)
Functional and presentation currency
Items included in the Company's financial statements are measured using the currency of the primary
economic environment in which the entity operates ('the functional currency'). The financial statements are
presented in United States Dollars (USD 000), which is the Company's functional and presentation currency.
(2)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year
-
end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
Tax
Current tax liabilities and assets are measured at the amount expected to be paid to or recovered from the taxation
authorities, using the tax rates and laws that have been enacted, or substantively enacted, by the reporting date.
Leasing
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as lessee
The Company applies a single recognition and measurement approach for all leases, except for short term leases
and leases of low value assets. The Company recognises lease liabilities to make lease payments and right of use
assets representing the right to use the underlying assets.
Right of use assets
The Company recognises right of use assets at the commencement date of the lease (i.e. the date the underlying
asset is available for use). Right of use assets are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right of use assets includes
the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received.
FINANCIAL STATEMENTS / PARENT
62
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
4. Significant accounting policies (continued)
Leasing (continued)
Right of use assets are depreciated on a straight
-line basis over the
shorter of the lease term and the estimated
useful lives of the assets, in accordance with the depreciation accounting policy on property, plant and equipment.
The estimated useful lives of buildings is 33 years from the date of construction. If ownership of the leased asset
transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase obligation or a
purchase option, depreciation is calculated using the estimated useful life of the asset. The right of use assets are
also subject to impairment testing in the same manner as other non financial assets.
Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of
lease payments to be made over the le
ase term i.e. the non-
cancellable period of the lease including reasonably
certain to exercise extension or termination options. The lease payments include fixed payments (including in
substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or
a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the
exercise price of a purchase option, reasonably certain to be exercised by the Company, and payments of
penalties
for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease
payments that do not depend on an index or a rate are recognised as expense in the period on which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a
change
in the lease term, a change in the in substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Short term leases and leases of low value assets
The Company applies the short
-term lease recognition exemption (i.e. th
ose leases that have a lease term of 12
months or less from the commencement date and do not contain a purchase option). It also applies the low value
lease recognition exemption in respect of miscellaneous assets. Lease payments on short term and low value leases
are recognised as expense on a straight-line basis over the lease term.
The Company does not act as a lessor in any transaction.
Financial instruments
Financial assets and financial liabilities are recognised in the Company's statement of financial position when the
Company has become a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in
profit or loss.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and of
allocating the interest over the relevant period. The effective interest rate ("EIR") is the rate that exactly discounts
estimated future cash flows through the expected life of the financial instrument, or, where appropriate, a shorter
period to its net carrying amount.
FINANCIAL STATEMENTS / PARENT
63
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
4. Significant accounting policies (continued)
(i) Financial assets
Initial recognition and measurement
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the Company’s business model for managing them. With the exception of trade receivables that
do not contain a significant financing component or for which the Company has applied the practical expedient, the
Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component are
measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to
give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount
outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The Company’s business model for managing financial assets refers to how it manages its financial assets in order to
generate cash flows. The business model determines whether cash flows will result from collecting contractual cash
flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or
convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the
Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
Financial assets at amortised cost (debt instruments)
Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
Financial assets designated at fair value through OCI with no recycling of cumulative
gains and losses upon
derecognition (equity instruments)
Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Company. The Company measures financial assets at amortised cost if both
of the following conditions are met:
The financial asset is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows
And
The contractual terms of the financia
l asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are
subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or
impaired.
The Company’s financial assets at amortised cost includes trade and other receivables, cash at bank and loans
receivable.
FINANCIAL STATEMENTS / PARENT
64
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
4. Significant accounting policies (continued)
Financial assets (continued)
Financial assets - Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is
primarily derecognised (i.e., removed from the Company’s consolidated statement of financial position) when:
The rights to receive cash flows from the asset have expired or
The
Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay to a third party under a ‘pass-through’
arrangement
and either (a) the Company has transferre
d substantially all the risks and rewards of the asset, or (b) the
Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset
Financial assets - Impairment - credit loss allowance for ECL
The Company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair
value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance
with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the
original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or
other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit
risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible
within the next 12
-months (a 12-
month ECL). For those credit exposures for which there has been a significant
increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
The Company applies the simplified approach for trade and other receivables and general approach for bank
deposits in relation to the calculation of ECLs. In particular for trade and other receivables that are due within twelve
months, the 12 month ECLs are the same as the lifetime ECLs. By using the simplified approach, the Company does
not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting
date. In relation to trade and other receivables, in order to measure the expected credit losses, the Company
measured the historical loss rates based on the payment profiles of revenue, the historical loss rates are adjusted to
reflect forward looking factors specific to the receivables and the economic environment affecting the ability of the
customers to settle the receivables.
In relation to the loans due from related parties and amounts receivable from related parties, management has
completed some high level analysis, which considers both historical and forward looking qualitative and quantitative
information, to determine if a related party loan and balance is low credit risk at 31 December 2021. Management
has considered the financial performance and financial position as
well as the remaining term of the loans, and
whether the related parties will have sufficient cash throughout that period to meet all of their working capital and
other obligations, including repayment of the related party balances. Management does not expect that there will be
adverse changes in economic and business conditions during that period. Consequently, management has
determined that the loans and amounts receivable from related parties, are low credit risk, falls within ‘stage 1’ of
IFRS 9’s impairment model, and 12 month expected credit losses can be calculated.
The Company considers a financial asset in default when contractual payments are 90 days past due. However, in
certain cases, the Company may also consider a financial asset to be in default when internal or external information
indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into
account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows.
FINANCIAL STATEMENTS / PARENT
65
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
4. Significant accounting policies (continued)
Financial assets (continued)
Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise cash at bank. Cash and cash
equivalents are carried at amortised cost because: (i) they are held for collection of contractual cash flows and those
cash flows represent SPPI, and (ii) they are not designated at FVTPL.
(ii) Financial liabilities - measurement categories
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net
of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables and borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near
term.
Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial
date of recognition, and only if
the criteria in IFRS 9 are satisfied. The Company has not designated any financial
liability as at fair value through profit or loss.
Borrowings
Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the
redemption value is recognised in profit or loss over the period of the borrowings using the effective interest
method.
Trade payables
Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the
effective interest rate method.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying
amounts is recognised in the statement of profit or loss.
FINANCIAL STATEMENTS / PARENT
66
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
4. Significant accounting policies (continued)
(iii) Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of
financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the asset and settle the liability simultaneously.
Share capital
Ordinary shares are classified as equity. The difference between the fair value of the consideration received by the
Company and the nominal value of the share capital being issued is taken to the share premium account.
Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of
the amount can be made. Where the Company expects a provision to be reimbursed, for example under an
insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is
virtually certain.
Impairment of non-financial assets
Assets that have
an indefinite useful life are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised at the amount by which
the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair
value, less selling costs and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows (cash
-generating units). Non-
financial assets,
other than goodwill that suffered impairment, are reviewed for possible reversal of the impairment at each reporting
date.
Non-current liabilities
Non-current liabilities represent amounts that are due more than twelve months from the reporting date.
5. New accounting pronouncements
At the date of approval of these financial statements, standards and
interpretations were issued by the International
Accounting Standards Board which were not yet effective. Some of them were adopted by the European Union and
others not yet. The Board of Directors expects that the adoption of these accounting standards in
future periods will
not have a material effect on the financial statements of the Company.
6. Critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting
estimates and requires Management to exercise its judgment in the process of applying the Company's accounting
policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these estimates are based on Management's best
knowledge of current events and actions, actual results may ultimately differ from those estimates.
Estimates and judgments are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
FINANCIAL STATEMENTS / PARENT
67
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
6. Critical accounting estimates and judgments (continued)
Judgments
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below:
Impairment of investments in subsidiaries
The Company per
iodically evaluates the recoverability of investments in subsidiaries whenever indicators of
impairment are present. Indicators of impairment include such items as declines in revenues, earnings or
cash flows or material adverse changes in the economic or
political stability of a particular country, which
may indicate that the carrying amount of an asset is not recoverable. If facts and circumstances indicate
that an investment may be impaired, the estimated recoverable amounts of these investments would be
compared to their carrying amounts to determine if a write-down to a recoverable amount is necessary.
Impairment of financial assets - allowance for credit losses on loan receivable and amounts
receivable from related parties
The loss allowances for
financial assets are based on assumptions about risk of default and expected loss
rates. In relation to the loans and amounts due from related parties, in order to calculate the ECL, the
Company applied the 12 month ECL model and the general approach. In d
etermining the recoverability of
the loans and amounts due from related parties, the Company considered the historic repayments made in
conjunction with the parties’ financial position at year end and their ability to make future repayments based
on their current and expected future trading activities.
7. Revenue from contracts with customers
The Company derives its revenue from contracts with customers for the transfer of services over time as follows:
Disaggregation of revenue
2021
2020
USD 000
USD 000
Management fees (Note 22.2)
9
7
Consultancy fees (Note 22.3)
125
145
134
152
8. Operating loss
2021
2020
USD 000
USD 000
Operating loss is stated after charging the following items:
Depreciation of right-of-use assets (Note 17)
61
-
Directors' fees (Note 22.1)
92
106
Staff costs (Note 9)
590
660
Auditors' remuneration - current year
163
152
Auditors’ remuneration for other non-audit services
3
8
Auditors' remuneration - prior years under provision
3
12
Legal and professional
3
34
FINANCIAL STATEMENTS / PARENT
68
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
9. Staff costs
2021
2020
USD 000
USD 000
Salaries
536
638
Wages
50
13
Social security costs
4
9
590
660
The average number of employees during the year was 4 (2020: 4).
10. Finance income/(costs)
2021
2020
USD 000
USD 000
Loan interest income (Note 14)
249
-
Other interest income
1
1
Net foreign exchange gains
-
7
Finance income
250
8
Net foreign exchange losses
(269)
-
Interest expense on lease liabilities (Note 17)
(8)
-
Interest expense on borrowings
(277)
(277)
Sundry finance expenses
(4)
(5)
Finance costs
(558)
(282)
Net finance costs
(308)
(274)
11. Tax
The tax on the Company's results before tax differs from theoretical amount that would arise using the applicable tax
rates as follows:
2021
2020
USD 000
USD 000
Profit before tax
2.043
10.694
Tax calculated at the applicable tax rates
256
1.337
Tax effect of expenses not deductible for tax purposes
74
44
Tax effect of allowances and income not subject to tax
(497)
(1.527)
Tax effect of tax loss for the year
57
67
Tax effect of loss from branch
110
79
Tax charge
-
-
The Company is resident in Cyprus for tax purposes.
Interest income is subject to Income Tax at the standard rate of 12,5% if the interest is considered to be generated
in the ordinary carrying on of a business or closely connected to it. If the interest income is neither generated in the
ordinary carrying on of a business nor closely connected to it, it is subject to Defence Tax at a rate of 30% (15% up
to 28 April 2013).
Dividends received from a non
-
resident (foreign) company are exempt from Defence Tax if the dividend paying
company derives more than 50% of its income directly or indirectly from activities which do not lead to investment
income or the foreign tax burden on the profit to be distributed as dividend has not been substantially lower than
the Cypriot tax rate at the level of the dividend paying company.
FINANCIAL STATEMENTS / PARENT
69
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
11. Tax (continued)
Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two
years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits.
Special contribution for defence at 17% will be payable on such deemed dividends distribution. Profits and to the
extent that these are attributable to shareholders, who are not tax resident of Cyprus and own shares in the
Company either directly and/or indirectly at the end of two years from the end of the tax year to which the profits
relate, are exempted. The amount of deemed distribution is reduced by any actual dividends paid out of the profits
of the relevant year at any time. This special contribution for defence is payable by the Company for the account of
the shareholders.
The Company’s Branch in Norway (the “Branch”) is subject to income tax at the rate of 22% (2020: 22%) on the tax
profits realized in Norway. The Branch under current legislation may carry forward the balance of tax losses
indefinitely in the future.
The Company’s tax losses in Cyprus amounts to USD 2.831 and can be carried forward for
5 years. No deferred tax asset has been recognised as it is not expected that future taxable profits will be available
to be utilised.
12. Investments in subsidiaries
2021
2020
USD 000
USD 000
Balance at 1 January
40.156
28.766
Reversal of impairment - net
3.902
11.993
Group contribution impact
-
(603)
Balance at 31 December
44.058
40.156
The details of the subsidiaries are as follows:
Name
Country of
incorporation
Principal
activities
2021
Holding
%
2020
Holding
%
2021
USD 000
2020
USD 000
Petrolia AS (1)
Norway
Holding company
of IOT Group
- oil
service
100
100
43.577
39.593
Petrolia Tool Pool AS
Norway
Holding company
100
100
17
17
Venture Drilling AS (2)
Norway
Oil Service
100
100
199
199
Independent Oil Tools International
(Cyprus) Ltd (3)
Cyprus
Dormant
100
100
265
347
44.058
40.156
The Company performs an impairment assessment of its subsidiaries when there are indicators for impairment or
reversal of impairment in accordance with the relevant accounting standard.
(1)
As at 31 December 2021 a reversal of impairment of USD 3.984 thousand was recognized (2020:
reversal of
impairment
USD 14.299 thousand). The accumulated impairment as at 31 December 2021 is USD 81.234
thousand
(2020: USD 85.21
8 thousand). Petrolia AS is the holding company of the oil service sub-
group. Management notes
that following the uncertainty of Covid
-
19 and low oil prices, the market conditions are now more favourable,
internal reporting indica
tes that the economic performance of the oil service sub-group has been improved
in 2021
and
will be further
improved compared to prior years and net assets of the investee is higher compared to the
carrying amount. All the above, are indicators of reversal of impairment and therefore the Company compared the
carrying amount with the recoverable amount. The reversal of impairment was estimated by using the discounted
cash flow model for a period of 5 years with an exit price. The discounted cash flow calculations included the
following main inputs and assumptions:
EBIDTA for 2022 as per the investee’s approved budget, followed by annual increase of 2,5%
Capital expenditure is based on historic averages
Exit price using an EV/EBITDA multiple of 12,3 based on publicly industry available information
FINANCIAL STATEMENTS / PARENT
70
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
12. Investments in subsidiaries (continued)
Discount rate of 10,6%
The following sensitivity analysis has been performed by management as at the year-end:
A decrease in projected EBITDA rates of 10% would result in USD 6.681 thousand impairment
whereas an
increase in projected EBITDA rates of 5% would result in USD 9.315 thousand reversal of impairment
A decrease of the EV/EBITDA multiple to 11,3 would result in USD 3.200 thousand
less reversal of impairment;
and
An increase in the discount rate of 1% would result in USD 2.327 thousand less reversal of impairment.
(
2) During 2021, the Company did not identify any
impairment indicators on Venture Drilling AS. In prior year, the
Company
recognised an impairment charge of
USD 1.552 thousand. The accumulated impairment as at 31
December 2021 is USD 48.0
10 thousand (2020: USD 48.010
thousand). Venture Drilling AS is the holding company
of the land rigs owned by the Group.
Management has based its impairment assessment on the net assets
and
financial performance
of the investee and concluded that there is not impa
irment indicators based on net assets and
no indicators for reversal of impairment based on the financial performance of the investee.
(
3) As at 31 December 2021, im
pairment of USD 82 thousand (2020: USD 696 thousand) was recognised. The
accumulated impairment as at 31 December 2021 is USD 13.334 thousand (2020: USD 13.252 thousand). The
company is dormant, and management has based its impairment assessment on the net
assets of the investee
which considered to be a closed approximation of its fair value less cost to disposal.
Total net
reversal of impairment for the year amounted to USD 3.902 thousand (2020: net reversal of impairment
USD
11.993 thousand). Total accumulated impairment as at 31 December 2021 amounted to USD162.627
thousand
(2020: USD166.529 thousand).
13. Investments in associates
The details of the investment are as follows:
2021
2020
USD 000
USD 000
Balance at 1 January
660
461
(Impairment charge)/reversal of impairment
(389)
199
Balance at 31 December
271
660
The details of the investment are as follows:
Name
Country of
incorporation
Principal
activities
2021
Holding
%
2020
Holding
%
2021
USD 000
2020
USD 000
Petrolia Noco
AS
Norway
Oil & Gas
12,44
13,53
271
660
271
660
FINANCIAL STATEMENTS / PARENT
71
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
13. Investments in associates (continued)
During the year 2020, the investment in Petrolia Noco AS has increased its capital by the issuance of additional
share capital. The associate has completed a share rights issue where 11.812.928 shares have been issued at a price
of NOK 3
,50 per share. Petrolia SE
has not participated in the purchase of additional shares but 5.894.651 shares
were allocated to Petrolia AS, a 100% subsidiary of Petrolia SE and therefore its shareholding decreased from
14.84% to 13.53%. However, it has exercised significant influence through participating in the financial and
operating policy decision of the investee (Petrolia Noco AS) through its common director Berge Gerdt Larsen and
Sjur Storaas who remain on the board of directors of both companies, the Parent (Petrolia SE) and associate
(Petrolia Noco AS).
During 2021, the investment in Petrolia Noco AS has increased its capital by the issuance of additional share capital.
The associate has completed a private placement issue where 11.700.000 have been issued at a price of NOK 3,70
per share.
Petrolia SE
has not participated in the purchase of additional shares therefore Petrolia SE shareholding
decre
ased from 13,53% to 12,44%.
The Company compared the carrying amount
of the investment
with the recoverable amount and estimated
impairment. The impairment was estimated to USD 3
89
thousand (2020: reversal of impairment of USD 199
thousand) by reference to the net assets of the associate. The accumulated impairment as at 31 December 2021
amounted to USD 25.387 thousand (2020: USD24.998 thousand).
Through its subsidiaries the Company controls 49,9% (2020: 49,9%) of the shares of Petrolia NOCO AS.
14. Loan receivable from associate
2021
2020
USD 000
USD 000
Balance at 1 January
-
-
Loans granted
8.226
-
Principal repayments
(1.784)
-
Interest income (Note 10)
249
-
Interest received
(89)
-
Exchange differences
(7)
-
Balance at 31 December
6.595
-
On 14 May 2020, Petrolia Noco AS (borrower) and Independent Oil & Resources Plc (lender and security agent) have
signed a new loan agreement. According to the loan agreement, the borrower can enter into any additional loans
with any additional lender by entering into an accession letter, provided that 10 days prior notice is given to the
lender and the security agent. During 2021, Petrolia SE through its branch Petrolia NUF (additional lender) has
provided a loan to Petrolia Noco AS amounting in NOK
71.750
.000 (USD 8.225.838). The loan bears interest of 10
% p.a. and is repayable by 10 December 20
23. The loan was provided to the borrower into three instalments
on 20
July 2021, on 8 October 2021 and on 22 October 2021 respectively. On 1 November 2021, Petrolia Noco AS has
repaid the amount of NOK
15.000.000 (USD 1.783.860) to the lender. Total interest income for the year amounted
to NOK 2.154.452 (USD 248.813).
The loan is repayable as follows:
2021
2020
USD 000
USD 000
Between one and five years
6.595
-
Loan is denominated in NOK.
Refer also to Note 13 to the consolidated financial statements.
FINANCIAL STATEMENTS / PARENT
72
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
15. Trade and other receivables
2021
2020
USD 000
USD 000
Trade receivables
5
61
Receivables from related parties (Note 22.4)
131
3.967
Deposits and prepayments
11
8
VAT refundable
379
364
526
4.400
For
the amounts receivable from related parties, the Company has applied the
12 month ECL model and the general
approach
and recognized a reversal of the expected credit loss on the receivables related balance of USD100
thousand
(Note 22.4).
The fair values of trade and other receivables due within one
year approximate to their carrying amounts as
presented above.
16. Restricted cash
2021
2020
USD 000
USD 000
Bank deposits
36
43
Less non-current portion
(36)
(43)
Current portion
-
-
Refer also to Note 16 to the consolidated financial statements.
17. Leases
The Company has an office rental agreement with a lease term until 31 December 2023, with options to extend.
Management exercises judgement in determining whether it is reasonably certain to continue to use the premises for
additional periods
and concluded that it is not reasonably certain to extend the lease term at this stage.
Therefore
m
anagement has not taken into account any additional optional periods in the lease calculations.
The incremental
borrowing rate used in the calculation was 5%.
The addition of one more year in the lease calculations w
ill result in
an increase in Right of use asset and lease liability by USD 59 thousand whereas the addition of two years USD 115
thousand. Any decrease or increase in the incremental borrowing rate would not have any significant impact on the
carrying amounts of right of use asset and lease liability.
Set out below are the carrying amounts of right of use assets recognised and the movements during the year:
Right of Use Asset:
2021
2020
USD 000
USD 000
Balance at 1 January
187
-
Additions in the year
-
187
Depreciation charged for the year (Note 8)
(61)
-
Exchange differences
3
-
Balance at 31 December
129
187
Set out below are the carrying amounts of lease liabilities and the movements during the year:
FINANCIAL STATEMENTS / PARENT
73
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
17. Leases (continued)
Lease liability
2021
2020
USD 000
USD 000
Balance at 1 January
187
-
Additions in the year
-
187
Repayments
(67)
-
Interest expense (Note 10)
8
-
Exchange differences
3
-
Balance at 31 December
131
187
Less current portion
(62)
(62)
Non
-current portion
69
125
18. Cash at bank
Cash balances are analysed as follows:
2021
2020
USD 000
USD 000
Cash at bank
1.929
86
1.929
86
19. Share capital
2021
2021
2020
2020
Number of
shares
USD 000
Number of
shares
USD 000
Authorised
Ordinary shares of USD1 each
272.358.670
27.236
272.358.670
27.236
Issued and fully paid
Balance at 1 January
59.133.786
5.913
59.133.786
5.913
Balance at 31 December 2021
59.133.786
5.913
59.133.786
5.913
Refer also to Note 17 to the consolidated financial statements.
20. Borrowings
2021
2020
USD 000
USD 000
Current borrowings
6% Callable bond loan - principal and interest due, not yet paid
4.744
124
Non-current borrowings
6% Callable bond loan - principal
-
4.620
Total
4.744
4.744
FINANCIAL STATEMENTS / PARENT
74
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
20. Borrowings (continued)
Maturity of borrowings:
2021
2020
USD 000
USD 000
Within one year
4.744
124
Between one and five years
-
4.620
4.744
4.744
Refer also to Note 18 to the consolidated financial statements.
21. Trade and other payables
2021
2020
USD 000
USD 000
Trade payables
56
44
Social insurance and other taxes
86
96
Accruals
155
105
Payables to own subsidiaries (Note 22.5)
146
152
Payables to related parties or subsidiaries (Note 22.5)
2.168
-
2.611
397
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented
above.
22. Related party transactions
The following transactions were carried out with related parties:
22.1 Directors' remuneration (Note 8)
The remuneration of Directors was as follows:
2021
2020
USD 000
USD 000
Directors' fees
92
106
92
106
22.2 Management fees charged to related parties (Note 7)
2021
2020
Nature of transactions
USD 000
USD 000
Subsidiaries and sub-subsdiaries
Trade
9
7
9
7
22.3 Consultancy fees charged to related parties (Note 7)
2021
2020
Nature of transactions
USD 000
USD 000
Petrolia Noco AS
Trade
125
145
125
145
FINANCIAL STATEMENTS / PARENT
75
ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE
NOTES TO THE FINANCIAL STATEMENTS
31 December 2021
22. Related party transactions (continued)
22.4 Receivables from related parties (Note 15)
2021
2020
Name
Nature of transactions
USD 000
USD 000
IO & R Ltd
Finance
9
8
Venture Drilling AS
Finance
-
3.387
Petrolia Invest AS
Finance
122
572
131
3.967
The receivables from related parties are interest free, and there have no specified repayment date.
The accumulated ECL provisions were made in accordance with the relevant accounting policy. During the year the
company reversed ECL from receivables from related parties of USD
100 thousand
. The accumulated ECL for the
year amounted to USD 1.392 thousand (2020: USD 1.492 thousand).
Movement of Accumulated Impairment:
2021
2020
USD 000
USD 000
Balance at 1 January
1.492
1.492
Reversal of impairment for the year
(100)
-
Balance at 31 December
1.392
1.492
22.5 Payables to related parties (Note 21)
2021
2020
Name
Nature of transactions
USD 000
USD 000
Independent Oil Tools International (Cyprus)
Ltd
Finance
146
152
Petrolia Drilling Limited
Finance
2.168
-
2.314
152
The payables to related parties are provided interest free, and have no specified repayment date.
23. Contingent liabilities
The Company had no contingent liabilities as at 31 December 2021.
24. Commitments
The Company had no capital or other commitments as at 31 December 2021.
25. Events after the reporting period
Refer also to Note 29 to the Consolidated financial statements.
There were no other material events after the reporting period, which have a bearing on the understanding of the
financial statements.
76
ANNUAL REPORT 2021 PETROLIA SE
AUDITOR'S
REPORT
77
ANNUAL REPORT 2021 PETROLIA SE
AUDITORS REPORT
Independent Auditor's Report
To the Members of Petrolia SE
Report on the Audit of the Consolidated Financial Statements and the Separate Financial Statements of
Petrolia SE
Opinion
We have audited the accompanying consolidated financial statements of Petrolia SE and its subsidiaries (the ''Group''),
and the separate financial statements of Petrolia SE (the ''Company''), which comprise the consolidated statement of
financial position and the statement of financial position of the Company as at 31 December 2021, and the consolidated
statements of comprehensive income, changes in equity and cash flows and the statements of profit or loss and other
comprehensive income, changes in equity and cash flows of the Company for the year then ended, and notes to the
consolidated and the separate financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements and the separate financial statements give a true
and fair view of the financial position of the Group and the Company as at 31 December 2021, and of their financial
performance and their cash flows for the year then ended in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113.
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 consolidated and separate financial
statements section of our report. We are independent of the Group and the Company in accordance with the
International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA Code) together with the ethical requirements that are
relevant to our audit of the consolidated and separate financial statements in Cyprus, and we have fulfilled our other
ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters incorporating the most significant risks of material misstatements, including assessed
risk of material misstatements due to fraud
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated and separate financial statements of the current period. These matters were addressed in the context of
our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated and
Separate Financial Statements section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material misstatement
of the consolidated and separate financial statements. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated
and separate financial statements.
Ernst & Young Cyprus Ltd
Jean Nouvel Tower
6 Stasinou Avenue
1060 Nicosia
P.O. Box 21656
1511 Nicosia, Cyprus
Tel: +357 22209999
Fax: +357 22209998
ey.com
Ernst & Young Cyprus Ltd is a member firm of Ernst & Young Global Ltd.
Ernst & Young Cyprus Ltd is a limited liability company incorporated in Cyprus with registration number HE 222520. A list of the directors’ names is available at the company’s
registered office, Jean Nouvel Tower, 6 Stasinou Avenue, 1060 Nicosia, Cyprus.
Offices: Nicosia, Limassol.
REPORT
78
ANNUAL REPORT 2021 PETROLIA SE
AUDITORS REPORT
Recoverability of investments in subsidiaries, impairment of oil service and other equipment and
recoverability of trade receivables
Recoverability of investments in subsidiaries (Parent Company only)
The key audit matter
Investments in subsidiaries represent 82% of the Company’s total assets. An analysis of the investments in subsidiaries
is presented in note 12 to the Company’s separate financial statements. The most significant subsidiaries operate in
the energy service industry, an industry which during 2020 due to the Covid-19 pandemic witnessed a severe impact,
with decrease in crude oil demand due to lower consumption in various parts of the world, thus forcing several
companies to either suspend or reduce investment in projects. Although the energy industry has shown signs of
recovery since the end of 2020 and continued within 2021, the industry still faces significant challenges from the
volatility of oil prices, the geopolitical developments and several other factors. Changes in market conditions and the
financial performance of investees may trigger indications for impairment or reversal of impairment previously
recognized. Management's assessment of the recoverable amount of investments in subsidiaries requires estimation
and judgement around assumptions used. Changes to assumptions could lead to material changes in the estimated
recoverable amount, impacting both potential impairment charges and potential reversals of impairment recorded in
prior years.
Due to the significant balances of the investments in subsidiaries and the estimation uncertainty involved in the
assessment of their recoverable amount, we have considered this area as a key audit matter.
How the matter was addressed in our audit
In this area, among others, we considered management's identification of indicators of impairment or reversal of
impairment. We also assessed the methodology used by management to estimate the recoverable amount of each
investment and considered its consistency with International Financial Reporting Standards. We analyzed the key
assumptions used in management's estimates of the recoverable amount of each subsidiary, such as its profitability
and financial position, future cash flows and discount rates and we assessed whether the recoverable amount is within
an acceptable range. In doing so, in certain cases, we involved our internal valuation specialists. We also performed
sensitivity analysis by stressing the key assumptions used in the management’s financial model and we checked the
mathematical accuracy in the relevant calculations. We finally evaluated the relevance of the Company’s disclosures
regarding the impairment assessment of its investments in subsidiaries and their recoverability.
Impairment of oil service and other equipment (consolidated financial statements only)
The key audit matter
Oil service and other equipment represent 19% of the Group’s total assets. The history of recent losses, the different
locations in which the Group operates and the volatility of oil prices during the year has resulted in an indication of
impairment of oil service and other equipment. On the other hand, following a challenging year, there was an increase
in the oil prices during the year 2021 which continues as of the date of our report. For these reasons, the Group
subjected the various cash-generating units to which oil service and other equipment belong, to an impairment test.
The latter involves estimating the recoverable amount by calculating assets’ value in use based on discounted cash
flow model.
These impairment tests were significant for our audit, since the recoverable amount estimation process is complex and
highly subjective and is based on various assumptions. The Group provides details on the impairment tests in note 11
to the consolidated financial statements.
How the matter was addressed in our audit
Our audit procedures included, among others, an assessment of the assumptions and methods used in the impairment
testing of oil service and other equipment at subsidiary level. In doing so, in certain cases, we involved our internal
valuation specialists. Our evaluation was focused on the principal assumptions used, such as the discount rate, the
expected trend in turnover, operating expenses and capital expenditure and compared them against available external
market and industry data, historical data and internal budgets. We also considered the identification of cash generating
units subjected to impairment testing in respect of their oil service and other equipment. In addition, we have tested
the mathematical accuracy of the impairment charge recognized in the year. Further, we assessed the adequacy and
completeness of the Group's disclosures as regards the impairment testing.
79
ANNUAL REPORT 2021 PETROLIA SE
AUDITORS REPORT
Recoverability of trade receivables (consolidated financial statements only)
The key audit matter
Trade receivables represent 15% of the total Group assets and as at 31 December 2021 the accumulated allowance
for expected credit losses (“ECLs”) amounted to US$13.3m. The collectability of trade receivables is a key element of
the Group’s working capital management, which is managed on an ongoing basis by both Group and local management.
The determination as to whether a trade receivable is collectable involves management judgement. Key judgements
and estimates in respect of the timing and measurement of ECLs include:
• The use of provision matrix to calculate ECLs, determining the provision rates based on days past due;
• The use by management of this information to determine whether an additional loss allowance for ECL is
required for an individual customer balance;
• Adjusting historical credit loss experience with forward-looking information, mainly taking into account the
projected oil prices.
We focused on this area because it requires a high level of management judgement and due to the materiality of the
amounts involved. The accounting policy for provisions for ECLs of trade receivables is described in Note 2.3 and
further analyzed in Notes 3, 14 and 23 to the consolidated financial statements.
How the matter was addressed in our audit
We focused on an assessment of the assumptions used to calculate the allowance of credit losses on trade receivables,
notably through detailed analyses of the provision matrix for the collective assessment and the individual customer
balances determined to be assessed individually, evaluating the reasonability of ECL rates and loss patterns, including
forward-looking information, combined with comparing to supporting documentation and where applicable to third
party evidence. We also performed recalculations of ECLs. In our trade receivable ECLs evaluation, we also considered
the results from other audit procedures such as the testing of a sample of sales transactions to supporting documents,
obtaining trade receivable confirmations and performing subsequent receipts testing of bank payments by customers.
Furthermore, we assessed the appropriateness and completeness of the presentation and disclosures of trade
receivables and related ECLs in line with the requirements of IFRS 9.
Reporting on other information
The Board of Directors is responsible for the other information. The other information comprises the information
included in the Responsibility Statement, Management Report, the Board of Directors’ report on Corporate Social
Responsibility and the Board of Directors’ report on Corporate Governance, but does not include the consolidated and
separate financial statements and our auditor’s report thereon.
Our opinion on the consolidated and the separate financial statements does not cover the other information and we
do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially inconsistent
with the consolidated and separate financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors and those charged with governance for the Consolidated and
Separate Financial Statements
The Board of Directors is responsible for the preparation of consolidated and separate financial statements that give
a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union
and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors
determines is necessary to enable the preparation of consolidated and separate financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the Board of Directors is responsible for assessing
the Company'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 the Board of Directors either intends to liquidate the Group or to
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ANNUAL REPORT 2021 PETROLIA SE
AUDITORS REPORT
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated and Separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated and separate 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 the 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 judgement and maintain professional scepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated and separate financial statements,
whether due to fraud or error, 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 Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the Board of Directors.
• Conclude on the appropriateness of the Board of Directors' 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 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 consolidated and separate 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 to cease to continue
as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated and separate financial
statements, including the disclosures, and whether the consolidated and separate 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 those charged with governance 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 those charged with governance 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, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated and separate financial statements of the current period and are therefore
the key audit matters.
AUDITORS REPORT
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ANNUAL REPORT 2021 PETROLIA SE
AUDITORS REPORT
Report on Other Legal and Regulatory Requirements
European Single Electronic Format
We have examined the digital files of the European Single Electronic Format (ESEF) of Petrolia SE for the year ended
31 December 2021 comprising the XHTML file which includes the consolidated and separate financial statements for
the year then ended and XBRL files with the marking up carried out by the entity on the consolidated statement of
financial position at 31 December 2021, and the consolidated statements of income, comprehensive income, changes
in equity and cash flows for the year then ended, and all disclosures made in the consolidated financial statements
or made by reference to other parts of the annual financial report for the year ended 31 December 2021 corresponding
to the items in Table 1 of Annex II (the “digital files”) of the EU Delegation Regulation 2019/815 of 17 December
2018 of the European Commission, as amended from time to time (the "ESEF Regulation").
The Board of Directors of Petrolia SE is responsible for preparing and submitting the consolidated and separate
financial statements for the year ended 31 December 2021 in accordance with the requirements set out in the ESEF
Regulation.
Our responsibility is to examine the digital files prepared by the Board of Directors of Petrolia SE in accordance with
the Audit Guidelines issued by the Institute of Certified Public Accountants of Cyprus (the “Audit Guidelines”). These
Audit Guidelines require us to plan and perform our audit procedures in order to examine whether the content of the
consolidated and separate financial statements included in the digital files correspond to the consolidated and
separate financial statements we have audited, and whether the digital file for the separate financial statements and
the format and marking up of the consolidated financial statements included in the digital files, have been prepared
in all material respects, in accordance with the requirements of the ESEF Regulation.
In our opinion, the digital files examined correspond to the consolidated and separate financial statements, and the
consolidated and separate financial statements included in the digital files are presented, and the consolidated financial
statements are marked-up, in all material respects, in accordance with the requirements of the ESEF Regulation.
Pursuant to the requirements of Article 10(2) of the EU Regulation 537/2014 we provide the following information in
our Independent Auditor’s Report, which is required in addition to the requirements of International Standards on
Auditing.
Appointment of the Auditor and Period of Engagement
We were first appointed as auditors of the Group on 30 November 2012 by the Board of Directors. Our appointment
has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement
appointment of 10 years.
Consistency of the Additional Report to the Audit Committee
We confirm that our audit opinion on the consolidated and separate financial statements expressed in this report is
consistent with the additional report to the Audit Committee of the Company, which we issued on 20 April 2022 in
accordance with Article 11 of the EU Regulation 537/2014.
Provision of Non-audit Services
We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation 537/2014 and Section
72 of the Auditors Law of 2017 were provided. In addition, there are no non-audit services which were provided by
us to the Group and which have not been disclosed in the consolidated and separate financial statements or the
management report.
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ANNUAL REPORT 2021 PETROLIA SE
Other Legal Requirements
Pursuant to the additional requirements of the Auditors Law of 2017, we report the following:
• In our opinion, based on the work undertaken in the course of our audit, the management report has been
prepared in accordance with the requirements of the Cyprus Companies Law, Cap. 113, and the information
given is consistent with the consolidated and separate financial statements.
• In light of the knowledge and understanding of the Group and its environment obtained in the course of the
audit, we are required to report if we have identified material misstatements in the management report. We
have nothing to report in this respect.
• In our opinion, based on the work undertaken in the course of our audit, the information included in the
corporate governance statement in accordance with the requirements of subparagraphs (iv) and (v) of
paragraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113, and which is included as a specific
section of the management report, have been prepared in accordance with the requirements of the Cyprus
Companies Law, Cap, 113, and is consistent with the consolidated and separate financial statements.
• In our opinion, based on the work undertaken in the course of our audit, the corporate governance statement
includes all information referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of paragraph 2(a) of Article 151
of the Cyprus Companies Law, Cap. 113.
• In light of the knowledge and understanding of the Group and its environment obtained in the course of the
audit, we are required to report if we have identified material misstatements in the corporate governance
statement in relation to the information disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of
the Cyprus Companies Law, Cap. 113. We have nothing to report in this respect.
Other Matters
This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance
with Article 10(1) of the EU Regulation 537/2014 and Section 69 of the Auditors Law of 2017 and for no other purpose.
We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to
whose knowledge this report may come to.
The engagement partner on the audit resulting in this independent auditor’s report is Andreas Avraamides.
Andreas Avraamides
Certified Public Accountant and Registered Auditor
for and on behalf of
Ernst & Young Cyprus Limited
Certified Public Accountants and Registered Auditors
Address
Jean Nouvel Tower,
6 Stasinou Avenue,
1511 Nicosia, Cyprus
Nicosia, 28 April 2022
GOVER
NANCE
ANNUAL REPORT 2021 PETROLIA SE
83
CORPORATE
GOVER
NANCE
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ANNUAL REPORT 2021 PETROLIA SE
THE BOARD OF DIRECTORS' REPORT
ON CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
The Corporate Governance Policy of Petrolia
SE (“Petrolia” or “the Company”) addresses
the responsibility and interaction between
shareholders, the General Assembly, the
Board of Directors (“the Board”) and the
executive management. The purpose of this
document is to outline the current status
of Petrolia’s Corporate Governance Policy.
As Petrolia is listed on the Oslo Stock
Exchange, it follows the Norwegian Code
of Practice for Corporate Governance of
14 October 2021 (the “Code of Practice”).
Adherence to the Code of Practice is based
on a “comply or explain” principle, whereby
companies will be expected to either comply
with the Code of Practice or explain why
they have chosen an alternative approach.
The Code of Practice is published on www.
nues.no/English
Below is an account outlining how Petrolia
has implemented the Code of Practice. This
account follows the same structure as the
Code of Practice and covers all sections
thereof. Petrolia complies with the Code of
Practice. Any deviations from the Code of
Practice are discussed under the relevant
sections. In addition to the Code of Practice,
the Norwegian Accounting Act § 3-3 stipu-
lates that companies must provide a report
on their policies and practices for corporate
governance either in the annual report or in
a document referred to in the annual report.
This report is integrated in this Corporate
Governance statement.
The holding company Petrolia SE is domiciled
in Cyprus and adheres to Cypriot law, con-
sequently various associated policies can be
subject to updates and revisions. Any updates
and changes in the Company’s Corporate
Governance Policy will be published on www.
petrolia.eu.
1. IMPLEMENTATION AND REPORTING ON
CORPORATE GOVERNANCE
Petrolia believes that maintaining solid stand-
ards of Corporate Governance will improve the
quality of discussions and work to be carried
out by the corporate bodies. Sound Corporate
Governance practice will strengthen confi-
dence in the Company among shareholders,
the capital market and other interested par-
ties and thus contribute to value creation for
the shareholders over time.
2. BUSINESS GOALS AND STRATEGY
Petrolia’s business scope is clearly defined
in the Company’s Articles of Association,
as follows: “The purpose of the Company
is to conduct business within the areas of
petroleum, shipping, oshore, transport,
trade, industry and finance and other related
areas and also participate as shareholder or
otherwise in other businesses”.
As of April 2022, the Company is described
as follows in Stock Exchange Notices: Petrolia
SE has two business segments: Energy divi-
sion and Energy Service division and is listed
on Oslo Stock Exchange under the ticker
code PSE. The activity includes investments
in Petrolia NOCO AS, an independent oil &
gas company approved as a licensee and
pre-qualified as an operator on the Norwegian
Continental Shelf, and a group of leading
rental equipment companies for the global
oil industry.
The Company’s core objective is to secure
a competitive return on the invested capital
of the shareholders in the longer term. In
accordance with this purpose, the Board of
Directors and the management shall actively
develop and control the Company and its
assets in order for the underlying values to
be reflected in the share price.
Petrolia is under several obligations provided
for in the relevant Cypriot and Norwegian
laws and the laws of other jurisdictions in
respect of the business operations carried
out by the Company and its subsidiaries. The
Board of Directors has formulated a Code
of Ethics, implemented across the Company,
based on corporate values and corporate
social responsibility principles. The Code of
Ethics summarises the Company’s values and
standards of behaviour in, among others,
human rights, safety, security and the working
environment. In addition, the Company has
implemented a strict policy regarding Health,
Safety, Security and Environment (HSSE).
3. EQUITY AND DIVIDENDS
Petrolia shall have a capital structure at a
level appropriate to the Company’s objective,
strategy and risk profile. Dividend payments
will depend on Petrolia’s earnings, financial
situation and cash flow. The possibility of
further value creation through investments
will also be taken into account.
The Company’s key targets for 2021 were
to improve the Company’s financial position,
to improve the profitability of the Energy
Services division following the improved
market and to develop Petrolia NOCO AS.
Dividends to shareholders are not prioritised
in the short term. Dividends are restricted to
a maximum of 30% of the Group’s profit aer
taxes according to the bond loan agreement
)refer to note 18).
Authorisations granted to the Board of
Directors to increase Petrolia’s share cap-
ital or to purchase its own shares shall, as
a general rule be restricted to defined pur-
poses. At each Annual General Meeting, the
shareholders shall have the opportunity to
evaluate and consider the authorisations
granted by the Board. Thus, the authorisa-
tions should be limited in time to no later than
the date of the next Annual General Meeting.
All authorisations not in compliance with
these guidelines should be accounted for in
the Annual Report.
As of 31 December 2021, the Company had
equity of USD 39 million, representing an
equity ratio of 57 per cent.
4. EQUAL TREATMENT OF SHAREHOLDERS
AND TRANSACTIONS WITH CLOSELY
RELATED PARTIES
Petrolia has one class of shares and all shares
are equal in all respects. Each share in the
Company carries one vote. All shares are
freely transferable. No shareholder shall be
treated unequally unless it is in the Company’s
and the shareholders’ common interests.
Any decision to waive the pre-emption rights
of existing shareholders to subscribe for
shares in the event of an increase in Petrolia’s
share capital must be justified, and an ex-
planation shall be appended to the agenda
for the General Meeting.
Any transactions carried out by Petrolia in
its own shares shall be made either through
the stock exchange or, if carried out in any
other way, at prevailing stock exchange prices.
If there is limited liquidity in the Company’s
shares, the Company should consider other
ways to ensure equal treatment of all
shareholders.
At the Annual General Meeting on 27 May
2021 the Board of Directors was granted
authorisations relating to acquiring its own
shares. The details of the authorisations
85
ANNUAL REPORT 2021 PETROLIA SE
CORPORATE GOVERNANCE
are provided in the minutes to the Annual
General Meeting, published 27 May 2021
on the Company’s website www.petrolia.eu.
5. FREELY NEGOTIABLE SHARES
The shares are listed on the Oslo Stock
Exchange and are freely transferable. No
form of restriction on negotiability is included
in the Articles of Association of Petrolia.
6. GENERAL MEETING
Through the General Meeting the share-
holders exercise the highest authority in
Petrolia. General Meetings are convened by
written notice to all shareholders with known
addresses and a minimum of 21 days’ notice.
All shareholders are entitled to submit items
to the agenda, meet, speak and vote at the
General Meetings as is normally outlined in
the summons to the General Meeting and as
required by law.
Summons to general meetings, including
supporting documentation on relevant items
on the agenda, are made available on the
Company’s website no later than 21 days
prior to the General Meeting. The Company’s
Articles of Association stipulate that docu-
ments pertaining to matters to be deliberated
by the General Meeting shall only be made
available on the Company’s website, and not
normally be sent physically by post to the
shareholders unless required by law. In order
to ensure that the General Meeting is an ef-
fective forum for the views of the shareholders
and the Board of Directors, the Board shall
ensure that the information distributed is
suciently detailed and comprehensive as
to allow the shareholders to form a view on
all matters to be considered.
The Board of Directors shall take steps to
ensure that as many shareholders as possible
can exercise their rights by participating in
General Meetings in Petrolia, for instance
by setting deadlines for shareholders to give
notice of their intention to attend the meeting
(if any) as close to the date of the meeting
as possible and by giving shareholders who
are not able to attend the option to vote by
proxy. To the extent practicable, the Board
of Directors shall make arrangements for
shareholders voting by proxy to give voting
instructions on each matter to be considered
at the meeting.
As it is a priority for the General Meeting
to be conducted in a sound manner, with all
shareholder votes to be cast, to the extent
possible, on the basis of the same informa-
tion, the Company has thus far not deemed
it advisable to recommend the introduction
of electronic attendance. The Company will
contemplate the introduction of such arrange-
ments on an on-going basis in view of, inter
alia, the security and ease of use oered by
available systems.
The General Meetings shall be organised in
such a way as to facilitate dialogue between
shareholders and the ocers of the Company.
Thus, the Board of Directors must ensure that
the members of the Board and the chairper-
son of the nomination committee are present
at all General Meetings. In addition, the Board
of Directors shall make arrangements to
ensure an independent Chairman for each
General Meeting, for instance by arrang-
ing for the person who opens the General
Meeting to put forward a specific proposal
for a Chairman.
The Minutes of the General Meetings will be
made available as soon as practicable on the
announcement system of the Oslo Stock Ex-
change, www.newsweb.no (ticker: PSE), and
on Petrolia’s own web site, www. petrolia.eu.
7. NOMINATION COMMITTEE
In accordance with its Articles, the Company
shall have a Nomination Committee. The com-
mittee shall present to the General Meeting
a proposal, justifying each candidate, for
candidates to be elected as members of the
Board. The committee shall also propose to
the General Meeting the Board members’
remuneration. The nomination committee
shall consist of three members who shall be
elected by the General Meeting. The committee
shall be independent of the Board and the
management of the Company. The General
Meeting shall set the committee members’
remuneration. The General Meeting may adopt
instructions for the Nomination Committee.
The costs of the Nomination Committee shall
be covered by the Company.
On 27 May 2021 Rob Arnott, Tove Kate Larsen
and Andros Constantinou were elected as
members of the Nomination Committee.
The work of the Nomination Committee is
regulated through Terms of Reference.
8. BOARD OF DIRECTORS: COMPOSITION
AND INDEPENDENCE
The Articles of Association stipulate that the
Board of Directors shall consist of three to
five directors elected by the General Meeting.
According to the Articles of Association, the
Board of Directors is appointed for one year
by the General Meeting.
The Board of Directors comprised four direc-
tors as per 31 December 2021. The current
composition of the Board of Directors is de-
scribed in note 6 in the Petrolia SE Annual
Report 2021. The Board shall attend to the
common interests of all shareholders, and its
members shall meet the Company’s need for
expertise, capacity and diversity. Attention
should be paid to the fact that the Board
of Directors can function eectively as a
collegiate body. The Board shall consist of
individuals who are willing and able to work
as a team. Each member shall have sucient
time available to devote to his or her appoint-
ment as a director.
The composition of the Board of Directors
shall ensure that it can operate independent-
ly of any special interests. Two of the four
members of the Board are independent of the
Company’s executive management, material
business contacts and main shareholder(s).
The two independent members are George
Hadjineophytou and Sjur Storaas. Polycarpos
Protopapas is the Managing Director of the
Company.
The Petrolia Group cannot, without the ap-
proval of the Board of Directors of Petrolia,
buy consultancy services from a board
member or from companies in which any board
member is an owner, employee or otherwise
has an interest.
Six board meetings were held during 2021,
with a complete attendance among the board
members.
All the directors are encouraged to hold
shares in Petrolia, however not to an extent
that can encourage a short-term approach
that is not in the best interest of Petrolia and
its shareholders. The shareholdings of the
directors as per 31 December 2021 are set
out in Note 17 to the consolidated financial
statements.
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ANNUAL REPORT 2021 PETROLIA SE
CORPORATE GOVERNANCE
9. THE WORK OF THE BOARD OF DIRECTORS
The proceedings and responsibilities of the
Board of Directors have been laid down in
written guidelines adopted by the Board of
Directors. The main responsibilities of the
Board of Directors are to:
• Lead Petrolia’s strategic planning and make
decisions that form the basis for the Executive
Management to prepare for and implement
investments and structural measures. The
Company’s strategy shall be reviewed on a
regular basis;
• Ensure that all instructions given by the
Board of Directors are complied with;
• Ensure that the Board of Directors are
well informed about the Company’s and the
Group’s financial position;
• Ensure the adequacy of the Company’s
executive management and issue instructions
for its work in which the areas of responsi-
bilities and duties are clearly defined, also
with respect to the relationship between
the executive management and the Board
of Directors;
• Agree on dividend policy;
• Annually evaluate its work, performance,
composition, expertise, and that of the man-
aging director (the "MD”). The evaluation of
the Board’s work should be made available
to the Nomination Committee. The Board of
Directors did not evaluate its own work in
2021;
• Ensure that a system of direction and in-
ternal control is established and maintained
as to ensure that the Group activities are
conducted in accordance with all rules and
regulation applicable to the Group, Petrolia’s
Articles of Association, its corporate values
and its ethical guidelines, as well as au-
thorisations and instructions approved by
the General Meeting. The internal control
arrangements must address the organisa-
tion and implementation of the Company’s
financial reporting. The Board of Directors
contributes its knowledge and experience
to the Company and has frequent meetings
with the executive management for updates
on the recent developments.
The Chairman of the Board of Directors car-
ries a particular responsibility for ensuring
that the Board of Directors performs its
duties in a satisfactory manner and that
the Board is well organised. The Board of
Directors will elect a Deputy Chairman who
takes chair in the event that the Chairman
of the Board cannot or should not lead the
work of the Board, including matters of a
material nature in which the Chairman has
an active involvement.
The Board of Directors has appointed an Audit
Committee. The committee, which is composed
of Sjur Storaas and George Hadjineophytou,
shall prepare the Board’s follow up of the
financial reporting process, monitor inter-
nal control and risk handling systems and
communicate with the Group’s auditor on a
regular basis in connection with the prepa-
ration of the annual accounts. Furthermore,
the committee shall assess the auditor’s
independence, in particular to which extent
other services to the Group may jeopardise
the independence. The Audit Committee held
regular meetings in 2021 and in 2022 (up
to 28 April 2022) and reviewed all interim
reports prior to publication. The committee
works closely with the auditor.
The Board of Directors has appointed a
Remuneration Committee. The committee
is composed of Sjur Storaas, Berge Gerdt
Larsen and George Hadjineophytou.
The Managing Director is responsible for
the day-to-day management of the Company.
Further, the Managing Director is responsible
for ensuring that the Company’s accounts
are in accordance with all applicable legis-
lation, and that the assets of the Company
are managed appropriately.
The Managing Director is appointed by the
Board of Directors and reports to the Board
of Directors. His or her powers and respon-
sibilities are defined by detailed instructions
adopted by the Board of Directors.
In the event of any material transactions
between the Company and its shareholders,
directors, members of the executive manage-
ment or close associates of any such parties,
the Board of Directors shall arrange for valu-
ation to be obtained from an independent third
party. The same shall apply to transactions
between companies within the Petrolia Group
where any of the companies involved have
minority shareholders. All such transactions
shall be reported by the Board of Directors
in the Annual Report. The Company has es-
tablished and operates guidelines to ensure
that members of the Board of Directors and
the executive management promptly notify the
Board of Directors if they have any significant
direct or indirect interest in any transaction
entered into by the Company.
A disclosure of any related party transaction
is presented in Note 24 in the Annual Report.
10. RISK MANAGEMENT AND INTERNAL
CONTROL
Risk management is primarily handled locally
in each Group company in accordance with
applicable rules and regulations. Internal
control in the Group is performed through
Group companies reporting to Petrolia on
operational and financial risk factors re-
lated to accounting, operations and HSE.
Key figures and information are reported
on a monthly basis, enabling the Board to
monitor the situation on a continuous basis
throughout the year.
The most important risk factors applicable
to the Group are thoroughly considered in
connection with yearly budgeting. The Audit
Committee reviews interim reports from the
Group companies and reports to the Board.
The annual accounts for all Group companies
are audited by the Group’s external auditor.
The Company’s risk management systems are
described in Note 23 of this Annual Report.
11. REMUNERATION OF THE BOARD OF
DIRECTORS
The remuneration awarded to the members of
the Board of Directors is determined annually
by the General Meeting, based on the Board’s
responsibility, expertise, time commitment
and the complexity of the operations of the
Group. The Nomination Committee will pro-
pose the remuneration for approval by the
General Meeting.
The remuneration is not linked to the Group’s
performance. No directors have been granted
or will be granted share options, and no di-
rectors participate in the incentive programs
available for the executive management and/
or other employees.
More detailed information about the reward
of individual directors in 2021 is provided in
Note 6 to the consolidated financial statements
for the Group.
No members of the Board of Directors (or
companies with which they are associated)
shall take on specific assignments for the
Group, in addition to their appointment as
director unless instructed by the Board. If
such assignments are taken on, they shall be
87
ANNUAL REPORT 2021 PETROLIA SE
CORPORATE GOVERNANCE
disclosed to the full Board, and the remuner-
ation shall be approved by the Board. Further,
all remuneration paid to each of the directors
shall be described in the Annual Report. Such
description shall include details of all elements
of the remuneration and benefits of each
member of the Board and any remuneration
paid in addition to normal director’s fees.
Details regarding Polycarpos Protopapas’
remuneration are disclosed in Note 6 to the
consolidated financial statements.
12. REMUNERATION OF EXECUTIVE
MANAGEMENT
The Managing Director’s remuneration shall
be determined by a convened meeting of the
Board of Directors and the Board has adopt-
ed guidelines for the reward of executive
management.
Remuneration for the other members of the
executive management is determined by the
Managing Director and Chairman of the Board
in accordance with guidelines provided by
the Board of Directors. The guidelines are
annually communicated to the General Meeting
and included in the Annual Report together
with detailed information on all elements of
the remuneration. The General Meeting shall
be informed of any changes made during
the last year.
The Company has no bonus schemes or in-
centives in place. As of 31 December 2021,
executive management held common shares
in the Company following the rights issue
oered to key employees and the Board of
Directors on 2 September 2011, in addition
to shares and options bought in the market.
Details regarding management remuneration
can be found in Note 6 to the consolidated
financial statements.
13. INFORMATION AND COMMUNICATION
Petrolia will ensure that the shareholders
receive accurate, clear, relevant and timely
information related to all matters of signif-
icance to shareholders. All information is
published in a way ensuring simultaneous
and equal access for all equity shareholders:
• Each year, Petrolia publishes a Financial
Calendar detailing key events.
• Information to shareholders is distributed
through stock exchange notices and/or on
www.petrolia.eu. To the extent required by
law, information is also sent by regular post
to shareholders.
• All information is available in English, and,
when required, Norwegian.
The Board of Directors has adopted guidelines
for the Company’s reporting of financial and
other information that is based on open-
ness, equal treatment of all shareholders
and participants in the securities market,
and restrictions imposed by law. The guide-
lines also include instructions on the internal
treatment of market sensitive information
and insider trading instructions and for the
Company’s contact with shareholders other
than through General Meetings.
To increase the share liquidity, the Company
aims to increase the investor activities going
forward, in addition to attending industry
conferences.
14. TAKE-OVERS
The Company’s objective is to create share-
holder value and the Board of Directors
and the executive management will not seek
to hinder or obstruct takeover bids for the
Company’s shares or activities unless there
are good reasons for this. In the event of any
possible takeover or restructuring situation,
the Board of Directors will take particular
care to protect shareholder value and the
common interests of all shareholders. The
Board of Directors will not exercise man-
dates or pass any resolutions to obstruct the
takeover bid unless approved by the General
Meeting following announcement of the bid. In
a takeover situation, the Board of Directors
will issue a recommendation to the share-
holders and arrange a valuation from an
independent expert.
Any transaction, which is in fact a disposal of
the Company’s activities, should be decided
by a General Meeting.
15. AUDITORS
Petrolia’s auditor is Ernst & Young Cyprus
Limited.
The auditor is elected by the General Meeting
and shall report to the General Meeting.
Excessive non-auditing work assigned to
the auditor may jeopardise his position and
diminish the public confidence in the auditor’s
integrity and independence from Petrolia.
The primary task of the auditor shall be to
perform the audit work required by law and
professional standards with the care, com-
petence and integrity prescribed by law or
said standards. The auditor will submit the
main features of the plan for the audit to the
Board of Directors annually. Further, the
Board of Directors will receive an annual
written confirmation from the auditor that the
requirements of independence and objectivity
have been met. The auditor shall also at least
once a year present to the Board of Directors
a review of the Company’s internal control
procedures, including identified weaknesses
and proposals for improvement.
The auditor will participate in any meetings
of the Board of Directors that deal with the
Annual Accounts. At these meetings, the
auditor shall review material changes in the
Company’s accounting principles, comment
on any material estimated accounting figures
and report all material matters on which
there has been disagreement between the
auditor and the executive management of
the Company. At least once a year, the Board
of Directors shall have a meeting with the
auditor in which no member of the Executive
Management is present. The Audit Committee
will adopt guidelines in respect of the use
of the auditor by the Company’s Executive
Management for services other than audit.
Each year, the auditor shall provide the Board
with a summary of all services in addition to
audit work which have been undertaken for
the Company.
The Board of Directors must report the re-
muneration paid to the auditor at the Annual
General Meeting, including details of the fee
paid for audit work and any fees paid for
other specific assignments.
88
ANNUAL REPORT 2021 PETROLIA SE
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ANNUAL REPORT 2021 PETROLIA SE
PETROLIA SE - ANNUAL REPORT 2020
Tel: +357 25 725 777 Fax: +357 25 356 500 E-mail: post(@)petrolia.eu
PETROLIA SE: 205 Christodoulou Chatzipavlou Street, Loulloupis Court, 4th floor, oce 401, 3036 Limassol, CYPRUS
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