2013 Statoil Petroleum AS

Transcription

1 2013 Statoil Petroleum AS

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3 Statoil Petroleum AS - annual report 2013 Document last updated :37 CEST

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5 Statoil Petroleum AS - annual report 2013 Board of directors' report 1 Our business 1 Profit and loss analysis 2 Cash flows 3 Liquidity and capital resources 3 Risk review 4 Outlook and market view 4 Safety, security and sustainability 4 People and organisation 5 Research and development 6 Board developments 6 Financial statements 7 Notes to the financial statements for Statoil Petroleum AS 10 1 Organisation and basis of presentation 10 2 Significant accounting policies 10 3 Dispositions 14 4 Financial risk management and derivatives 15 5 Revenues 16 6 Remuneration 16 7 Auditors' remuneration 16 8 Research and development expenditures 16 9 Financial items Income taxes Property, plant and equipment Intangible assets Investments in subsidiaries and other equity accounted companies Financial liabilities Trade and other receivables Equity and shareholders Provisions Trade and other payables Leases Other commitments and contingencies Related parties Reserves (unaudited) Subsequent events 27 Independent auditor's report 29

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7 Board of directors' report Statoil Petroleum AS generated total revenues of NOK billion in 2013, a reduction of 11% compared to 2012, mainly because of lower production in The financial position is solid and the company is well placed to maintain its production on the NCS, and to continue to deliver shareholder value. Net operating income was NOK billion in 2013, down 20% compared to NOK billion in The decrease was mainly attributable to lower production of both liquids and gas, and higher operating expenses. Net income decreased by 12% in 2013 compared to 2012, largely affected by the decrease in net operating income. The decrease was partly offset by a lower effective tax rate and a reduction in financial expenses. The company maintained strong project execution through 2013, with good safety performance. Statoil Petroleum AS is paying a group contribution after tax of NOK 3.2 billion to the parent company, Statoil ASA. Statoil Petroleum AS was founded in 2007 and is domiciled in Norway. Statoil Petroleum's business consists principally of the exploration, production and transportation of petroleum and petroleum-derived products. In accordance with the Norwegian Accounting Act 3-7, Statoil Petroleum AS does not prepare consolidated financial statements. For further information, see the notes to the financial statements and Statoil ASA's annual report Our business Statoil Petroleum AS is a wholly owned subsidiary of Statoil ASA, and operates about 69% of all oil and gas production on the NCS. Effective 1 January 2009, Statoil Petroleum AS received certain assets and assumed certain liabilities from its parent company with a net amount of NOK 47.9 billion. The transfer included all of the parent company's exploration and production assets and liabilities on the Norwegian continental shelf (NCS) and related transportation systems, processing plants and terminals. Following the restructuring of assets and liabilities within the Statoil group, Statoil Petroleum AS has become the co-obligor or guarantor of certain parent company liabilities. Through its subsidiaries and other equity accounted companies, Statoil Petroleum AS owns additional licenses in oil and gas fields internationally. The company also owns oil and gas processing and transportation facilities in Norway. Statoil Petroleum AS has no employees, but purchases necessary services from the parent company and other companies in the Statoil group. Statoil Petroleum AS, Statutory report

8 Profit and loss analysis Net operating income was NOK billion in 2013, compared to NOK billion in The 20% decrease was mainly attributable to lower production of both liquids and gas, and increased operating, depreciation and exploration expenses. Higher loss from subsidiaries and equity accounted companies were partly offset by higher gains from sales of assets in Condensed financial statements NGAAP For the year ended 31 December (in NOK billion) change Revenues (10%) Net income (loss) from subsidiaries and other equity accounted companies (9.1) (2.2) >100% Other income % Total revenues and other income (11%) Purchases [net of inventory variation] (8.2) (6.3) 30% Operating expenses and selling, general and administrative expenses (38.7) (36.2) 7% Depreciation, amortisation and net impairment losses (33.1) (30.7) 8% Exploration expenses (5.5) (3.5) 54% Net operating income (20%) Net financial items (1.0) (5.1) (80%) Income before tax (18%) Income tax (99.9) (125.9) (21%) Net income (12%) The statements below are related to developments in 2013 compared to Revenues and other income decreased by 11%, mainly attributable to lower production of both liquids and gas, partly offset by higher average prices on gas (measured in NOK). Higher net loss from subsidiaries and other equity accounted companies was partly offset by increased other income, mainly related to higher gains from sales of assets in Purchases [net of inventory variation] amounted to NOK 8.2 billion in The 30% increase was mainly due to higher volumes of third party gas purchased. Operating expenses include field production and transport systems costs related to the company's share of oil and natural gas production while selling, general and administrative expenses include expenses related to the sale and marketing of our products. Operating expenses and selling, general and administrative expenses increased by 7% mainly because of increased environmental tax expenses caused by increased CO 2 tax rate as of 1 January 2013, and new fields in production, partly offset by divestments, redetermination and reduced cost level at several fields. Depreciation, amortisation and net impairment losses includes depreciation of production installations and transport systems, depletion of fields in production, amortisation of intangible assets and impairment of capitalised exploration expenditure. It also includes impairment of long-lived assets and reversals of impairment. These expenses amounted to NOK 33.1 billion in The 8% increase was mainly due to new fields in production with higher depreciation cost per unit and increased investments on major producing fields. This was partly offset by reduced depreciation due to net decreased production, increased proved reserves, effect of reduced retirement obligation, divestments and redetermination. Exploration expenditures are capitalised to the extent that exploration efforts are considered successful, or pending such assessment. Otherwise, such expenditures are expensed. The exploration expenses consist of the expensed portion of our exploration expenditures in 2013 and exploration expenditures capitalised in previous years. Exploration expenses increased by NOK 2.0 billion mainly due to higher drilling activity and field development work within the Johan Sverdrup and Johan Castberg areas. This was partly offset by a higher portion of current exploration expenditures being capitalised in 2013 and a lower portion of exploration expenditures capitalised in previous periods being expensed in this period. 2 Statoil Petroleum AS, Statutory report 2013

9 Net operating income was NOK billion in 2013, down 20%. The decrease was mainly attributable to lower revenues due to decreased volumes of liquids and gas sold, higher net loss from subsidiaries and other equity accounted companies, partly offset by increased income from sales of assets in Increased costs as described above also added to the decrease in net operating income. Net financial items amounted to a loss of 1.0 billion in The NOK 4.1 billion positive change is mainly related to net foreign exchange gains, partly offset by increased interest expenses and other financial expenses. Income taxes were NOK 99.9 billion in 2013, equivalent to a tax rate of 72%, compared to NOK billion in 2012, equivalent to a tax rate of 74%. The lower tax rate in 2013 is mainly explained by increased net financial items with lower than average tax rate. As a result of the above, net income decreased by 12% compared to The net income of NOK 39.3 billion will be allocated to group contribution to Statoil ASA of NOK 3.2 billion and NOK 36.1 billion to retained earnings. The Financial Supervisory Authority (FSA) of Norway has conducted a review of Statoil ASA's 2012 Consolidated financial statements. There is no numerical effect on the financial statements for 2013 and prior years. Statoil ASA has filed an appeal with the Ministry of Finance and has been granted a stay for one of the FSA's conclusions. See note 23 Subsequent events to the financial statements for more information. In accordance with 3-3 of the Norwegian Accounting Act, the board of directors confirms that the financial statements have been prepared on the basis of the going concern assumption. Cash flows Cash flows provided by operating activities contributed with NOK 69.9 billion, and cash flows used in investing activities amounted to NOK 46.0 billion in The most significant drivers for cash flows provided by operating activities, are the level of production and prices for liquids and natural gas that impact revenues, cost of purchases (net of inventory valuation), taxes paid and changes in working capital items. In 2013, cash flows provided by operating activities amounted to NOK 69.9 billion, a decrease of NOK 24.1 billion compared to NOK 94.0 billion in The decrease was largely driven by decreased income before tax, affected by lower volumes for both liquids and gas, lower prices for liquids and higher prices for gas. The decrease was partly offset by lower taxes paid of NOK 4.8 billion between the two years. Cash flows provided by operating activities was NOK 70.4 billion lower than net operating income in 2013, and the principally reason for this significant difference is the NOK billion payment of taxes in Cash flows used in investing activities was NOK 46.0 billion in 2013 compared to NOK 76.9 billion in The decrease was mainly related to a decrease in non-current loans granted and other non-current items, partly offset by higher additions to PP&E and intangible assets. Proceeds from sales and businesses and repayment of capital contribution also decreased, and for the year ended 2013 proceeds were mainly related to the sale of assets to OMV and Wintershall. For the year ended 2012 proceeds were mainly related to the sale of the NCS assets to Centrica. Cash flows used in financing activities was NOK 23.9 billion in 2013, compared to NOK 17.1 billion in The decrease of NOK 6.8 billion was due to a NOK 24.8 billion negative change in cash flows to/from Statoil group companies related to financial receivables and liabilities, partly offset by lower cash payments related to group contribution of NOK 18.0 billion. Liquidity and capital resources Statoil Petroleum AS has maintained a solid financial position through Our annual cash flow from operations is highly dependent on oil and gas prices and our levels of production. It is only influenced to a small degree by seasonality and maintenance turnarounds. Fluctuations in oil and gas prices, which are outside our control, will cause fluctuations in our cash flows. Statoil Petroleum AS' liquidity and debt position are managed at Statoil group level. Statoil Petroleum AS, Statutory report

10 Risk review The financial results are very dependent upon the prices of crude oil and natural gas, the USDNOK exchange rate and realised refining margins. The financial results of operations largely depend on a number of factors, most significantly those affecting prices received in NOK for sold products. Specifically, such factors include the level of crude oil and natural gas prices, trends in the exchange rate between USD and NOK, equity production and entitlement sales volumes of liquids and natural gas, available petroleum reserves, and Statoil Petroleum AS', as well as its partners', expertise and cooperation in recovering oil and natural gas from those reserves, and changes in the portfolio of assets due to acquisitions and disposals. The results will also be affected by trends in the international oil industry, including possible actions by governments and other regulatory authorities in the jurisdictions in which the group operates. Also possible or continued actions by members of the Organization of Petroleum Exporting Countries (OPEC) that affect price levels and volumes, refining margins, increasing costs of oilfield services, supplies and equipments, increasing competition for exploration opportunities and operatorships, and deregulation of the natural gas markets may cause substantial changes to the existing market structures and to the overall level and volatility of prices. Fluctuating foreign exchange rates can have a significant impact on our operating results. Our revenues and cash flows are mainly denominated in, or driven by US dollars, while our operating expenses and income taxes payable largely accrue in NOK. We seek to manage this currency mismatch by issuing or swapping long-term debt in USD. This debt policy is an integrated part of our total risk management programme. We also engage in foreign currency hedging in order to cover our non-usd needs, which are primarily in NOK. We manage the risk arising from our interest rate exposure through the use of interest rate derivatives, primarily interest rate swaps, based on a benchmark for the interest reset profile of our long-term debt portfolio. In general, an increase in the value of USD in relation to NOK can be expected to increase our reported earnings. Outlook and market view Statoil Petroleum AS expects to maintain and increase its production level on the NCS in the medium and long term by exploring for new discoveries and maturing projects from its large portfolio of existing discoveries. Statoil Petroleum AS expects prices for crude oil to continue to be volatile in the short to medium term, but at a relatively high level. Oil product prices will in general follow those of crude oil. Supply of natural gas liquids (NGL) is expected to increase significantly, especially as supply associated with new US shale gas production reaches the market. European NGL production is likely to remain high as volumes associated with oil fields are replaced by NGL volumes from non-associated production. Statoil Petroleum AS' income could vary significantly with changes in commodity prices, even if volumes remain stable through the year. There is a small seasonal effect on volumes in the winter and summer seasons due to normally higher off-takes of natural gas during cold periods. There is normally an additional small seasonal effect on volumes as a result of the higher maintenance activity level on offshore production facilities during the second and third quarters each year, since generally better weather conditions allow for more maintenance work. These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Safety, security and sustainability Safety and sustainability must go to the core of our business. The safety and security of people who work for us is our first priority. Safety, health and working environment Statoil Petroleum AS' objective is to operate with zero harm to people and the environment and in accordance with the Statoil group's principles for sustainable development. Safe and efficient operations is our first priority. 4 Statoil Petroleum AS, Statutory report 2013

11 The board of directors emphasises the importance of understanding factors that create risks in order to avoid major accidents. We work systematically to mitigate risks that are critical to operating safely and reliably, and continuous improvement for better safety results has high attention in all our business areas. Environment and climate Our activities, from exploration through construction and operation of facilities and to the end use of our products, have potential to affect the environment. The impact may be due to emissions, discharges or resource use. Statoil Petroleum AS is committed through Statoil group's climate policy to contribute to sustainable development. We recognise that there is an accepted link between the use of fossil fuels and man-made climate change, and the climate policy takes into account the need for proactively combating global climate change in our operations, as well as evaluating the company's efforts on renewables and clean technology. Statoil Petroleum AS relies in full on the Statoil group's climate policy which sets out the principles for addressing the challenge of global warming and its ambition of maintaining the position as an industry leader in relation to sustainable development. Statoil Petroleum AS is continuously focusing on energy efficiency on our installations. Requirements for energy efficiency are incorporated in governing documents. We continuously monitor our emissions and several modification projects for further reductions are being implemented. The group-wide indicators to measure environmental performance are oil spills, emissions of carbon dioxide (CO 2 ), sulphur oxides (SO x ), nitrogen oxides (NO x ), methane (CH 4 ) and non-methane volatile organic compounds (nmvoc), energy consumption and the recovery rate for non-hazardous waste. The following environmental performance disclosures are related to our assets on the NCS: The volume of accidental oil spills increased from 12.8 cubic meters in 2012 to 43.5 cubic meters in CO 2 emissions decreased from 9.1 million tonnes in 2012, to 8.9 million tonnes in SO x emissions were 0.5 thousand tonnes in 2012 and remained the same level in NO x and CH 4 emissions decreased from 36.0 thousand tonnes and 20.5 thousand tonnes in 2012 to 35.7 thousand tonnes and 20.1 thousand tonnes in 2013, respectively. NmVOC emissions increased from 23.6 thousand tonnes in 2012 to 24.8 thousand tonnes in Energy consumption decreased from 42.0 TWh in 2012 to 41.1 TWh in The recovery rate for non-hazardous waste decreased from 94% in 2012 to 93% in In 2013, Statoil Petroleum AS accepted two fines related to safety incidents; a NOK 30 million fine following the well control incident on the Gullfaks C platform in 2010, and a NOK 10 million fine imposed on the company for sending 180 cubic metres of wash water with chemicals and scale, stored on board the Oseberg C platform, with the oil flow to Sture in May Society Growing and sustaining our business depends on our ability to establish enduring and mutually beneficial relationships with the societies in which we operate. Wherever we operate, we make decisions based on how they affect our interests and those of the societies around us. Stakeholders include governments, communities, partners, contractors and suppliers, employees, customers and investors. It is Statoil Petroleum AS' responsibility to create value for its stakeholders. This is not only an ethical imperative. Living up to these responsibilities is required to support long-term profitability and consistency in complex environments. In line with our corporate policy on social responsibility, we are committed to: making decisions based on how they affect the group's interests and the interests of the affected societies. ensuring transparency, anti-corruption, and respect for human rights and labour standards. generating positive spin-offs from core activities to help meet the aspirations of the societies in which the group operates. People and organisation Statoil Petroleum AS has no employees, and relies on the services provided by other companies in the Statoil group and the Statoil group's principles and practices pertaining to people and organisation. Statoil Petroleum AS, Statutory report

12 Research and development Statoil is a technology intensive group of companies and research and development is an integral part of its strategy. Improved oil and gas recovery and improved drilling and well solutions are important to successfully fight declining production from mature fields. The research and development work is managed at a Statoil group level, and is in close cooperation with universities and research institutions. Statoil has achieved some of the petroleum industry's highest recovery factors on the NCS by combining scientific and engineering capabilities and boldly introducing new technology. As a part of the Statoil group, we contribute to the group's intention to further advance the most important technologies to meet forthcoming improved oil recovery ambitions. Research and development expenditures were NOK 2.7 billion in 2013, compared to NOK 2.2 billion in Board developments At present, Statoil Petroleum AS' board of directors consists of 5 members. The composition of the board has remained unchanged during The board held nine meetings in 2013 and the average meeting attendance was 93%. STAVANGER, 31 MARCH 2014 THE BOARD OF DIRECTORS OF STATOIL PETROLEUM AS TORGRIM REITAN CHAIR ASLEIV BRANDSØY MANAGING DIRECTOR NINA BIRGITTE KOCH ODD HELGE BRUVIK HANS HENRIK KLOUMAN 6 Statoil Petroleum AS, Statutory report 2013

13 Financial statements STATEMENT OF INCOME STATOIL PETROLEUM AS - NGAAP For the year ended 31 December (in NOK million) Note Revenues 5 221, ,790 Net income (loss) from subsidiaries and other equity accounted companies 13 (9,071) (2,198) Other income 3 13,248 7,831 Total revenues and other income 225, ,423 Purchases [net of inventory variation] (8,222) (6,344) Operating expenses (37,483) (34,550) Selling, general and administrative expenses (1,261) (1,655) Depreciation, amortisation and net impairment losses 11, 12 (33,072) (30,679) Exploration expenses (5,453) (3,546) Net operating income 140, ,649 Net financial items 9 (1,028) (5,132) Income before tax 139, ,517 Income tax 10 (99,913) (125,941) Net income 39,347 44,576 The subtotals and totals in some of the tables may not equal the sum of the amounts shown due to rounding. Statoil Petroleum AS, Statutory report

14 BALANCE SHEET STATOIL PETROLEUM AS - NGAAP At 31 December (in NOK million) Note ASSETS Property, plant and equipment , ,340 Intangible assets 12 7,199 5,613 Investments in subsidiaries and other equity accounted companies , ,868 Prepayments and financial receivables 2,476 2,225 Receivables on group companies Total non-current assets 397, ,495 Inventories 2, Trade and other receivables 15 11,297 10,785 Receivables on group companies 40,629 24,579 Total current assets 54,122 35,383 Total assets 451, ,878 EQUITY AND LIABILITIES Share capital 36,155 26,136 Additional paid-in capital 54,016 14,035 Retained earnings 86,564 53,369 Other reserves (2,407) (7,413) Total equity ,328 86,127 Deferred tax liabilities 10 56,478 58,551 Liabilities to group companies 14 67,020 67,735 Provisions 17 71,524 73,298 Total non-current liabilities 195, ,584 Trade and other payables 18 18,695 15,172 Current tax payable 48,585 58,961 Liabilities to group companies 14 14,887 70,034 Total current liabilities 82, ,167 Total liabilities 277, ,751 Total equity and liabilities 451, ,878 8 Statoil Petroleum AS, Statutory report 2013

15 STATEMENT OF CASH FLOWS STATOIL PETROLEUM AS - NGAAP (in NOK million) Income before tax 139, ,517 Depreciation, amortisation and impairment losses 33,072 30,679 Exploration expenditures written off (Gains) losses on foreign currency transactions and balances (1,727) (337) (Gains) losses on sales of assets and other items 6, (Increase) decrease in non-current items related to operating activities 1,665 1,375 Interest received 584 1,072 Interest paid (2,934) (2,167) Taxes paid (107,078) (111,917) Adjustments for working capital items (Increase) decrease in inventories (247) (19) (Increase) decrease in trade and other receivables (759) 956 Increase (decrease) in trade and other payables 3,225 (134) (Increase) decrease in receivables/liabilities to/from group companies (1,550) 2,519 Cash flows provided by operating activities 69,922 93,984 Additions to property, plant and equipment (57,017) (47,543) Capitalised interest paid (501) (622) Exploration expenditures capitalised and additions to other intangibles (2,843) (2,397) (Increase) decrease in non-current loans granted and other non-current items (4,496) (60,606) Proceeds from sales of assets and businesses, and repayment of capital contribution 18,812 34,289 Cash flows used in investing activities (46,045) (76,879) Group contribution (31,000) (49,000) Increase (decrease) in financial receivables and liabilities to/from Statoil group companies* 7,083 31,915 Cash flows used in financing activities (23,917) (17,085) Net increase (decrease) in cash and cash equivalents (40) 20 Cash and cash equivalents at the beginning of the year 20 0 Cash and cash equivalents at the end of the year (20) 20 *Including deposits in Statoil group s internal bank arrangement. Statoil Petroleum AS, Statutory report

16 Notes to the financial statements for Statoil Petroleum AS 1 Organisation and basis of presentation Statoil Petroleum AS was founded in 2007 as a demerger of Norsk Hydro Produksjon AS, prior to and in connection with the merger between Statoil ASA and the oil and gas activities of Norsk Hydro ASA (Hydro Petroleum), which was effective 1 October The company is incorporated and domiciled in Norway. The address of its registered office is Forusbeen 50, N-4035 Stavanger, Norway. Statoil Petroleum AS's business consists principally of the exploration, production and transportation of petroleum and petroleum-derived products. The Statoil group's net assets on the Norwegian continental shelf (NCS) are owned by Statoil Petroleum AS. Statoil Petroleum AS is consolidated into Statoil ASA's Consolidated financial statements, cf. Statoil ASA's annual report. In accordance with the Norwegian Accounting Act 3-7, Statoil Petroleum AS does not prepare consolidated financial statements. For more information see Statoil ASA's annual report The Consolidated financial statements can be obtained by contacting Statoil ASA, Forusbeen 50, 4035 Stavanger or from the website, The accounting policies of Statoil Petroleum AS correspond with the NGAAP accounting policies of its parent company, Statoil ASA. The functional currency of Statoil Petroleum AS is Norwegian kroner (NOK). 2 Significant accounting policies Statement of compliance The financial statements of Statoil Petroleum AS are prepared in accordance with the Norwegian Accounting Act of 1998 and good accounting practice (NGAAP). Basis of preparation The financial statements are prepared on the historical cost basis with some exceptions, as detailed in the accounting policies set out below. These policies have been applied consistently to all periods presented in these financial statements. The Statement of cash flows has been prepared in accordance with the indirect method. Subsidiaries, associated companies and jointly controlled entities Shareholdings and interests in subsidiaries, associated companies (companies in which Statoil Petroleum AS does not have control, or joint control, but has the ability to exercise significant influence over operating and financial policies; generally when the ownership share is between 20 and 50%) and jointly controlled entities are accounted for using the equity method. Jointly controlled assets Interests in jointly controlled assets are recognised through including Statoil Petroleum AS's share of assets, liabilities, income and expenses on a line-by-line basis. Statoil Petroleum AS as operator of jointly controlled assets Indirect operating expenses such as personnel expenses from Statoil ASA are accumulated in cost pools. These expenses are allocated to business areas and Statoil Petroleum AS's operated jointly controlled assets (licences) on an hours incurred basis. Only Statoil Petroleum AS's share of Statement of income and Balance sheet items related to Statoil Petroleum AS's operated jointly controlled assets are reflected in the Statement of income and Balance sheet. Asset transfers between Statoil Petroleum AS and its subsidiaries Transfers of assets and liabilities between Statoil Petroleum AS and entities directly or indirectly controlled by Statoil Petroleum AS are accounted for at the carrying amounts of the assets and liabilities transferred. Foreign currency translation Transactions in foreign currencies are translated to NOK at the foreign exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to NOK at the foreign exchange rate at the balance sheet date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets that are measured at historical cost in a foreign currency are translated using the exchange rate at the dates of the transactions. Revenue recognition Revenues associated with sale and transportation of crude oil, natural gas, petroleum and chemical products are recorded when title and risk pass to the customer, which is normally at the point of delivery of the goods based on the contractual terms of the agreements. 10 Statoil Petroleum AS, Statutory report 2013

17 Revenues from the production of oil and gas from properties in which Statoil Petroleum AS has an interest with other companies are recognised on the basis of volumes lifted and sold to customers during the period (sales method). Where Statoil Petroleum AS has lifted and sold more than the ownership interest, an accrual is recorded for the cost of the overlift. Where the company has lifted and sold less than the ownership interest, costs are deferred for the underlift. Sales and purchases of physical commodities, which are not settled net, are presented on a gross basis as Revenues and Purchases [net of inventory variation] in the Statement of income. Activities related to the trading of commodity based derivative instruments are reported on a net basis, with the margin included in Revenues. Research and development The company undertakes research and development both on a funded basis for licence holders, and on an unfunded basis for projects at its own risk. The company's own share of the licence holders' funding and the total costs of the unfunded projects are considered for capitalisation under the applicable NGAAP requirements. Subsequent to initial recognition, any capitalised development costs are reported at cost less accumulated amortisation and accumulated impairment losses. Income tax Income tax in the Statement of income for the year comprises current and deferred tax expense. Income tax is recognised in the Statement of income except when it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax consists of the expected tax payable on the taxable income for the year and any adjustment to tax payable for previous years. Uncertain tax positions and potential tax exposures are analysed individually and the best estimate of the probable amount for liabilities to be paid (unpaid potential tax exposure amounts, including penalties) and virtually certain amount for assets to be received (disputed tax positions for which payment has already been made) in each case is recognised within current tax or deferred tax as appropriate. Interest income and interest expenses relating to tax issues are estimated and recognised in the period in which they are earned or incurred, and are presented within Net financial items in the Statement of income. Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases, subject to the initial recognition exemption. The amount of deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable income will be available against which the asset can be utilised. In order for a deferred tax asset to be recognised based on future taxable income, convincing evidence is required, taking into account the existence of contracts, production of oil or gas in the near future based on volumes of proved reserves, observable prices in active markets, expected volatility of trading profits and similar facts and circumstances. A special petroleum tax (Norwegian petroleum tax), currently levied at 50% (51% from 2014), is levied on profits derived from petroleum production and pipeline transportation on the NCS. The special tax is applied to relevant income in addition to the standard 28% income tax (27% from 2014), resulting in a 78% marginal tax rate on income subject to petroleum tax. The basis for computing the special petroleum tax is the same as for income subject to ordinary corporate income tax, except that onshore losses are not deductible against the special petroleum tax, and a tax-free allowance (uplift) is computed on the basis of the original capitalised cost of offshore production installations at a rate of 5.5% per year. The uplift may be deducted from taxable income for a period of four years, starting in the year in which the capital expenditures are incurred. The uplift benefit is recognised when the deduction is included in the current year tax return and impacts taxes payable. Unused uplift may be carried forward indefinitely. Oil and gas exploration and development expenditures Statoil Petroleum AS uses the successful efforts method of accounting for oil and gas exploration costs. Expenditures to acquire mineral interests in oil and gas properties and to drill and equip exploratory wells are capitalised as exploration and evaluation expenditures within Intangible assets until the well is complete and the results have been evaluated. If, following the evaluation, the exploratory well has not found proved reserves, the previously capitalised costs are evaluated for derecognition or tested for impairment. Geological and geophysical costs and other exploration expenditures are expensed as incurred. For exploration and evaluation asset acquisitions (farm-in arrangements) in which the company has made arrangements to fund a portion of the selling partners' (farmor's) exploration and/or future development expenditures (carried interests), these expenditures are reflected in the financial statements as and when the exploration and development work progresses. The company reflects exploration and evaluation asset dispositions (farm-out arrangements) when the farmee correspondingly undertakes to fund carried interests as part of the consideration on a historical cost basis with no gain or loss recognition. A gain or loss related to a post-tax based disposition of assets on the NCS includes the release of tax liabilities previously computed and recognised related to the assets in question. The resulting gross gain or loss is recognised in full in the line item Other income in the Statement of income. Exchanges (swaps) of exploration and evaluation assets are accounted for at the carrying amounts of the assets given up with no gain or loss recognition. Capitalised exploration and evaluation expenditures, including expenditures to acquire mineral interests in oil and gas properties, related to wells that find proved reserves are transferred from Exploration expenditure (Intangible assets) to Assets under development (Property, plant and equipment) at the time of sanctioning of the development project. Statoil Petroleum AS, Statutory report

18 Property, plant and equipment Property, plant and equipment are reflected at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of an asset retirement obligation, if any, and, for qualifying assets, borrowing costs. Exchanges of assets are measured at the fair value of the asset given up unless the fair value of neither the asset received nor the asset given up is reliably measurable. Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets, inspection costs and overhaul costs. Where an asset or part of an asset is replaced and it is probable that future economic benefits associated with the item will flow to the company, the expenditure is capitalised. Inspection and overhaul costs, associated with regularly scheduled major maintenance programs planned and carried out at recurring intervals exceeding one year, are capitalised and amortised over the period to the next scheduled inspection and overhaul. All other maintenance costs are expensed as incurred. Capitalised exploration and evaluation expenditures, development expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells, and field-dedicated transport systems for oil and gas are capitalised as producing oil and gas properties within Property, plant and equipment. Such capitalised costs are depreciated using the unit of production method based on proved developed reserves expected to be recovered from the area during the concession or contract period. Capitalised acquisition costs of proved properties are depreciated using the unit of production method based on total proved reserves. Depreciation of other assets and transport systems used by several fields is calculated on the basis of their estimated useful lives, normally using the straight-line method. Each part of an item of Property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. For exploration and production assets the company has established separate depreciation categories which as a minimum distinguish between platforms, pipelines and wells. The estimated useful lives of property, plant and equipment are reviewed on an annual basis and changes in useful lives are accounted for prospectively. An item of Property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in Other income or Operating expenses, respectively, in the period the item is derecognised. Leases Leases for which the company assumes substantially all the risks and rewards of the ownership are reflected as finance leases. Assets are recognised within Property, plant and equipment, with corresponding entry within non-current liabilities. All other leases are classified as operating leases and the costs are charged to the relevant operating expense related caption on a straight line basis over the lease term, unless another basis is more representative of the benefits of the lease to the company. The company distinguishes between lease and capacity contracts. Lease contracts provide the right to use a specific asset for a period of time, while capacity contracts confer on the company the right to and the obligation to pay for certain volume capacity availability related to transport, terminal use, storage etc. Such capacity contracts that do not involve specified single assets or that do not involve substantially all the capacity of an undivided interest in a specific asset are not considered by the company to qualify as leases for accounting purposes. Capacity payments are reflected as Operating expenses in the Statement of income in the period for which the capacity contractually is available to the company. Intangible assets Intangible assets are stated at cost, less accumulated amortisation and accumulated impairment losses. Intangible assets mainly include expenditure on the exploration for and evaluation of oil and natural gas resources. Expenses related to the drilling of exploration wells are initially capitalised as intangible assets pending determination of whether potentially economic oil and gas reserves have been discovered by the drilling effort. This evaluation is normally finalised within one year after well completion. Exploration wells that discover potentially economic quantities of oil and natural gas remain capitalised as intangible assets during the evaluation phase of the find, see further information under the "Oil and gas exploration and development expenditures" section above. Intangible assets relating to expenditures on the exploration for and evaluation of oil and natural gas resources are not amortised. When the decision to develop a particular area is made, its intangible exploration and evaluation assets are reclassified to Property, plant and equipment. Certain balance sheets of subsidiaries and associated companies reflected through the equity method include goodwill, which is depreciated over ten years on a straight-line basis. The related depreciation expense is included in Statoil Petroleum AS's Statement of income under Net income (loss) from subsidiaries and other equity accounted companies. Financial assets Trade and other receivables are carried at the original invoice amount, less a provision for doubtful receivables, which is made when there is objective evidence that the company will be unable to recover the balances in full. Financial assets are presented as current if these contractually will expire or otherwise are expected to be recovered within 12 months after the balance sheet date, or if these are held for the purpose of being traded. 12 Statoil Petroleum AS, Statutory report 2013

19 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined by the first-in first-out method and comprises direct purchase costs, cost of production, transportation and manufacturing expenses. Derivative financial instruments Commodity-based derivatives traded on organised exchanges are valued at fair market value and the resulting gains and losses are recognised in the Statement of income. Other commodity-based derivatives such as over-the counter (OTC) instruments are valued according to the lower of cost or market principle. Under NGAAP, elements with derivative characteristics (embedded derivatives) are not separately identified nor reflected at fair value. Impairment of intangible assets and of property, plant and equipment The company assesses assets or groups of assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Individual assets are grouped based on levels with separately identifiable and largely independent cash inflows. Normally, separate cash generating units are individual oil and gas fields or plants. For capitalised exploration expenditures, the cash generating units are individual wells. In assessing whether a write-down of the carrying amount of a potentially impaired asset is required, the asset's carrying amount is compared to the recoverable amount. Frequently the recoverable amount of an asset proves to be the company's estimated value in use, which is determined using a discounted cash flow model. The estimated future cash flows applied are based on reasonable and supportable assumptions and represent management's best estimates of the range of economic conditions that will exist over the remaining useful life of the cash generating assets, set down in the Statoil group's most recently approved long-term plans. The long-term plans are reviewed by corporate management and updated at least annually. The plans cover a 10- year period and reflect expected production volumes for oil and natural gas in that period. For assets and cash generating units with an expected useful life or timeline for production of expected reserves extending beyond 10 years, the related cash flows include project or asset specific estimates reflecting the relevant period. Such estimates are established on the basis of Statoil group principles and group assumptions consistently applied. In performing a value-in-use based impairment test, the estimated future cash flows are adjusted for risks specific to the asset and discounted using a real post-tax discount rate which is based on Statoil's post-tax weighted average cost of capital (WACC). Unproved oil and gas properties are assessed for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount, and at least once a year. Exploratory wells that have found reserves, but where classification of those reserves as proved depends on whether major capital expenditure can be justified or where the economic viability of that major capital expenditure depends on the successful completion of further exploration work, will remain capitalised during the evaluation phase for the exploratory finds. Thereafter it will be considered a trigger for impairment evaluation of the well if no development decision is planned for the near future and there are no concrete plans for future drilling in the licence. Impairments are reversed as applicable to the extent that conditions for impairment are no longer present. Impairment losses and reversals of impairment losses are presented in the Statement of income as Exploration expenses or Depreciation, amortisation and net impairment losses, on the basis of their nature as either exploration assets (intangible exploration assets) or development and producing assets (property, plant and equipment), respectively. Financial liabilities Interest-bearing loans and borrowings are generally from the parent company Statoil ASA, or from other entities in the Statoil group. These are initially recognised at cost and subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs as well as discount or premium on settlement. Financial liabilities are presented as current if the liabilities are due to be settled within 12 months after the balance sheet date, or if these are held for the purpose of being traded. Group contributions for the year to other entities within Statoil's Norwegian tax group are reflected in the Balance sheet as current liabilities within Liabilities to group companies. Provisions Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised under Interest and other financial expenses in Net financial items. Onerous contracts The company recognises as provisions the net obligation under contracts defined as onerous. Contracts are deemed to be onerous if the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received in relation to the contract. A contract which forms an integral part of the operations of a cash generating unit whose assets are dedicated to that contract, and for which the economic benefits cannot be reliably separated from those of the cash generating unit, is included in impairment considerations for the applicable cash generating unit. Asset retirement obligations (ARO) Provisions for ARO costs are recognised when the company has an obligation (legal or constructive) to dismantle and remove a facility or an item of property, plant and equipment and to restore the site on which it is located, and when a reasonable estimate of that liability can be made. The amount Statoil Petroleum AS, Statutory report

20 recognised is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. The expenses are estimated based upon current regulation and technology, considering relevant risks and uncertainties. The discount rate used in the calculation of the ARO is a risk-free rate based on the applicable currency and time horizon of the underlying cash flows, adjusted for a credit premium which reflects the company's credit premium. Normally an obligation arises for a new facility, such as an oil and natural gas production or transportation facility, on construction or installation. An obligation may also crystallise during the period of operation of a facility through a change in legislation or through a decision to terminate operations, or be based on commitments associated with the company's ongoing use of pipeline transport systems where removal obligations rest with the volume shippers. The provisions are classified under Provisions in the Balance sheet. Processing plants that are not limited by licence periods are deemed to have indefinite lives and in consequence no ARO has been recognised. When a provision for ARO cost is recognised, a corresponding amount is recognised to increase the related property, plant and equipment. This is subsequently depreciated as part of the costs of the facility or item of property, plant and equipment. Any change in the present value of the estimated expenditures is reflected as an adjustment to the provision and the corresponding property, plant and equipment. Removal provisions associated with shipping of volumes through third party transport systems are expensed as incurred. Use of estimates Preparation of the financial statements requires the company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingencies. Actual results may ultimately differ from the estimates and assumptions used. The nature of Statoil Petroleum AS's operations, and the many countries in which the company operates, are subject to changing economic, regulatory and politicial conditions. Statoil Petroleum AS does not believe it is vulnerable to the risk of a near-term severe impact as a result of any concentration of is activities. Proved oil and gas reserves have been estimated by internal experts on the basis of industry standards and governed by criteria established by regulations of the SEC. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. Unless evidence indicates that renewal is reasonably certain, estimates of economically producible reserves only reflect the period before the contracts providing the right to operate expire. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence within a reasonable time. Expected oil and gas reserves, which differ from proved reserves, have been estimated by internal experts on the basis of industry standards and are used for impairment testing purposes and for calculation of asset retirement obligations. 3 Dispositions 2013 Sale of interests in exploration and production licences on the Norwegian continental shelf to Wintershall In July 2013 a sales transaction with Wintershall, entered into in October 2012, for certain ownership interests in licences on the Norwegian continental shelf (NCS) was closed. Statoil recognised a gain of NOK 6.4 billion. The gain has been presented in the line item Other income in Statement of income. The transaction was tax exempt under the rules in the Norwegian petroleum tax system. Proceed from the sale was NOK 4.7 billion. Sale of interests in exploration and production licences on the Norwegian continental shelf to OMV In October 2013 a sales transaction with OMV, entered into in August 2013, to sell certain ownership interests in licences on the NCS was closed. Statoil recognised a gain of NOK 6.6 billion. The gain has been presented in the line item Other income in the Statement of income. The part of the transaction covering assets on the NCS was tax exempt under the rules in the Norwegian petroleum tax system. Proceed from the sale was NOK 10.5 billion Sale of interests in exploration and production licences on the Norwegian continental shelf In April 2012 Statoil closed an agreement with Centrica, entered into in November 2011, to sell interests in certain licences on the NCS for a total consideration of NOK 8.6 billion. The consideration includes a cash payment of NOK 7.1 billion and a contingent element relating to production in a four year period, capped at NOK 0.6 billion. A gain of NOK 7.5 billion was presented as Other income. The net book value of the assets taken over by Centrica was NOK 2.0 billion. The transaction was tax exempt under the rules in the Norwegian petroleum tax system and the gain included a release of deferred tax liabilities of NOK 0.9 billion related to the transaction Sale of interests in Gassled, Norway On 5 June 2011 Statoil entered into an agreement with Solveig Gas Norway AS to sell a 24.1% ownership interest in the Gassled joint venture (Gassled). Statoil continued to hold a 5% interest in the joint venture after the divestment date 30 December Solveig Gas Norway AS paid a consideration of NOK 13.9 billion in cash in January 2012 for the 24.1% ownership interest in the joint venture. The transaction was principally tax exempt under the rules in the Norwegian petroleum tax system, however, a portion is taxable under the ordinary Norwegian tax system. Statoil Petroleum AS recognised a pre-tax gain of NOK 8.4 billion from the transaction in the fourth quarter 2011, which included a release of deferred tax liabilities related to the tax exempted portion of the transaction. The transaction was presented as Other income. 14 Statoil Petroleum AS, Statutory report 2013

21 4 Financial risk management and derivatives General information relevant to financial risks Financial market risks are managed at the group level within the Statoil group on a short-term basis with focus on achieving the highest risk adjusted returns for the group within the given mandate. Long-term exposure, defined as having a time horizon of six months or more, are managed at the corporate level while short-term exposure are managed at segment and lower levels according to trading strategies and mandates approved by the group's Corporate Risk Committee. Statoil has guidelines for entering into derivative contracts to manage its commodity price, foreign currency rate, and interest rate risk. Within the guidelines, Statoil has developed a comprehensive model, which encompasses Statoil Petroleum AS's most significant market and operational risks. Market risk Statoil Petroleum AS operates in the worldwide crude oil and natural gas market and is exposed to market risks including fluctuations in hydrocarbon prices, foreign currency rates and interest rates that can affect the revenues and costs of operating, investing and financing. Commodity price risk Commodity price risk constitutes Statoil Petroleum AS's most important short-term market risk. Changes in commodity prices have a significant effect on the company's income. Statoil Petroleum AS has established guidelines for entering into commodity based derivative contracts in order to manage the commodity price risk, mainly related to natural gas prices. The commodity based derivative contracts consist of over-the-counter (OTC) forward contracts, market swaps and options related to natural gas. The term for natural gas derivatives is usually three years or less. However they are presented in the balance sheet as current since the contracts included in the portfolio are entered into and held for the purpose of being traded. Currency risk In addition to price developments Statoil Petroleum AS's operating results and cash flows are affected by foreign currency fluctuations of the most significant currencies, the USD and the EUR, against the NOK. The company's cash inflows are largely denominated in or driven by USD while cash outflows, such as operating expenses and taxes payable, are to a large extent denominated in NOK. Foreign exchange risk is managed at corporate level in accordance with policies and mandates. Interest rate risk Statoil Petroleum AS has liabilities with both variable and fixed interest rates. The liabilities with floating interest rate condition expose the company to cash flow risk caused by market interest rate fluctuations. Fair value measurement of derivative financial instruments Statoil Petroleum AS measures derivative financial instruments at the lowest of the cost price and the fair value. Changes in the carrying value of the derivative financial instruments are recognised in the Statement of income within Revenues. Statoil Petroleum AS's portfolio of derivative financial instruments consists of commodity based derivative contracts. When determining the fair value of the derivative financial instruments Statoil Petroleum AS uses prices quoted in an active market to the extent possible. When this is not available Statoil Petroleum AS uses inputs that either directly or indirectly are observable in the market as a basis for valuation techniques such as discounted cash flow analysis or pricing models. Statoil Petroleum AS, Statutory report

22 5 Revenues For the year ended 31 December (in NOK million) Revenues third party 93, ,243 Intercompany revenues 127, ,547 Revenues 221, ,790 Statoil Petroleum AS sells most of its volumes to external customers through the parent company Statoil ASA. A significant portion of these sales are based on back-to-back contracts between Statoil Petroleum AS and Statoil ASA whereby Statoil Petroleum AS carries all risks related to the sale. These back to back sales contracts are considered as Revenues third party. The receivables from these sales are included in the Balance sheet as Receivables on group companies. 6 Remuneration The company has no employees. No salary or other remuneration has been paid to the chief executive officer (CEO) in 2013 or The CEO is employed and paid by Statoil ASA. No compensation was paid to the board of directors in 2013 or Auditors' remuneration For the year ended 31 December (in NOK million, excluding VAT) Audit fees Audit related fees Total In addition to the figures above, audit fees and audit related fees to the external auditor related to Statoil Petroleum AS operated licences amount to NOK 6 million and NOK 7 million for 2013 and 2012, respectively. There are no fees incurred related to tax services or to other services. 8 Research and development expenditures Research and Development (R&D) expenditures were NOK 2.7 billion in 2013 and NOK 2.2 billion in R&D expenditures are partly financed by partners in Statoil Petroleum AS operated licences. Statoil Petroleum AS's share of the expenditures has been recognised as expense in the Statement of income. 16 Statoil Petroleum AS, Statutory report 2013

23 9 Financial items For the year ended 31 December (in NOK million) Net foreign exchange gains (losses) 3,751 (1,862) Dividends received 5 6 Interest income from group companies Interest income and other financial income Interest income and other financial items 592 1,159 Capitalised borrowing costs Accretion expense asset retirement obligations (2,427) (2,248) Interest expense to group companies (3,281) (2,628) Interest expense and other financial expenses (165) (175) Interest and other financial expenses (5,371) (4,429) Net financial items (1,028) (5,132) Statoil Petroleum AS, Statutory report

24 10 Income taxes Income tax expense For the year ended 31 December (in NOK million) Current taxes payable (102,068) (122,106) Change in deferred tax 2,155 (3,835) Income tax expense (99,913) (125,941) Uplift credit for the year 10,451 10,604 Reconciliation of Norwegian nominal statutory tax rate to effective tax rate For the year ended 31 December (in NOK million) Income before tax 139, ,517 Calculated income taxes at: Nominal tax rate (28%) (38,993) (47,745) Petroleum surtax at statutory rate (50%) (69,630) (85,258) Tax effect of: Uplift 5,543 5,302 Financial items subject to 28% basis only 1,173 (1,024) Tax result subject to 28% basis only Permanent differences 3,547 3,779 Income tax prior years (638) 116 Other (947) (1,150) Total (99,913) (125,941) Effective tax rate 71.7% 73.9% When computing the petroleum tax of 50% ( 51% from 2014) on income from the Norwegian continental shelf, a tax-free allowance, or uplift, is granted at a rate of 7.5% per year for investments made prior to 5 May For investments made from 5 May 2013 the rate is 5.5% per year. Transitional rules are in place for projects that have submitted a PDO to the Ministry of Oil and Energy prior to 5 May The uplift is computed on the basis of the original capitalised cost of offshore production installations. The uplift may be deducted from taxable income for a period of four years, starting in the year in which the capital expenditure is incurred. Unused uplift may be carried forward indefinitely. At year end 2013 and 2012 unrecognised uplift credits amounted to NOK 19.2 billion and NOK 17.5 billion respectively. 18 Statoil Petroleum AS, Statutory report 2013

25 Significant components of deferred tax assets and liabilities were as follows At 31 December (in NOK million) Deferred tax assets on Other items 7,829 5,580 Asset retirement obligations 55,013 55,840 Total deferred tax assets 62,842 61,420 Deferred tax liabilities on Other items Property, plant and equipment 102, ,448 Capitalised exploration expenditures and capitalised interest 16,009 15,745 Total deferred tax liabilities 119, ,971 Net deferred tax liabilities 56,478 58,551 The movement in deferred income tax (in NOK million) Deferred income tax liability at 1 January 58,551 55,596 Charged to the Statement of income (2,155) 3,834 Acquisitions, sales and other 82 (879) Deferred income tax liabilities at 31 December 56,478 58,551 Statoil Petroleum AS, Statutory report

26 11 Property, plant and equipment Machinery, Production equipment and plants oil and Refining and transportation gas, including manufacturing Buildings Assets under (in NOK million) equipment pipelines plants and land development Total Cost at 31 December , ,660 3, , ,110 Additions and transfers 65 39, ,540 58,424 Disposal assets at cost 0 (41,838) 0 0 (4,796) (46,634) Cost at 31 December , ,621 3, , ,900 Accumulated depreciation and impairment losses at 31 December 2012 (1,089) (404,183) (2,406) (4) (88) (407,770) Depreciation and net impairment losses for the year (77) (32,287) (108) (1) (596) (33,069) Accumulated depreciation and impairment disposed assets 0 32, ,274 Accumulated depreciation and impairment losses at 31 December 2013 (1,166) (404,197) (2,514) (5) (684) (408,566) Carrying amount at 31 December , , ,334 Estimated useful lives (years) 3-10 * *Depreciation according to unit of production method, see note 2 Significant accounting policies. 20 Statoil Petroleum AS, Statutory report 2013

27 12 Intangible assets Exploration (in NOK million) expenditure Other Total Cost at 31 December , ,626 Additions 2, ,843 Disposals at cost (480) 0 (480) Transfers (471) 0 (471) Expensed exploration expenditures previously capitalised (303) 0 (303) Cost at 31 December , ,215 Accumulated amortisation and impairment losses at 31 December 2012 (13) (13) Amortisation and impairments for the year (2) (2) Accumulated amortisation and impairment losses at 31 December 2013 (15) (15) Carrying amount at 31 December , , Investments in subsidiaries and other equity accounted companies (in NOK million) Investment at 1 January 144, ,893 Net income (loss) from subsidiaries and other equity accounted companies (9,071) (2,198) Additional paid-in equity 4,689 45,726 Distributions (9,830) (4,984) Translation adjustments 5,006 (6,569) Other (845) 0 Investments at 31 December 134, ,868 The closing balance of NOK 134,817 million consists of investments in subsidiaries amounting to NOK 134,350 million and investments in other equity accounted companies amounting to NOK 467 million. In 2012, the amounts were NOK 142,651 million and NOK 2,217 million respectively. Amortisation of goodwill amounts to NOK 1,078 million in Statoil Petroleum AS, Statutory report

28 Ownership in certain subsidiaries and other equity accounted companies (in %) Name Country of % incorporation Saga Petroleum Holding AS 100 Norway Statoil Angola AS 100 Norway Statoil Angola Block 22 AS 100 Norway Statoil Bahamas AS 100 Norway Statoil Dezassete AS 100 Norway Statoil Dolginskaya AS 100 Norway Statoil Greenland AS 100 Norway Statoil Holding AS 100 Norway Statoil International Holding AS 100 Norway Statoil International Well Response Company AS 100 Norway Statoil Majunga AS 100 Norway Statoil Morocco AS 100 Norway Statoil Oil & Gas Cuba AS 100 Norway Statoil Oil & Gas Mozambique AS 100 Norway Statoil Quatro AS 100 Norway Statoil Sverige Kharyaga AB 100 Sweden Statoil Trinta e Quatro AS 100 Norway SCIRA Offshore Energy Limited 50 United Kingdom 14 Financial liabilities Non-current liabilities to group companies At 31 December (in NOK million) Interest bearing liabilities to group companies 65,000 65,000 Non-interest bearing liabilities to group companies 2,020 2,735 Liabilities to group companies 67,020 67,735 NOK 15.0 billion of Interest bearing liabilities to group companies at 31 December 2013 and at 31 December 2012 are due within five years. Current liabilities to group companies Liabilities to group companies includes group contribution to Statoil ASA of NOK 4.0 billion at 31 December 2013 and group contribution to Statoil ASA of NOK 31.0 billion and liabilities related to Statoil group's internal bank arrangements of NOK 31.0 billion at 31 December Statoil Petroleum AS, Statutory report 2013

29 15 Trade and other receivables At 31 December (in NOK million) Trade receivables Other receivables 10,867 10,144 Trade and other receivables 11,297 10,785 Other receivables mainly consist of joint venture receivables and prepaid expenses. 16 Equity and shareholders (in NOK million) Shareholders equity at 1 January 86,127 79,036 Net income 39,347 44,576 Foreign currency translation adjustments 5,006 (6,734) New capital injection 50,000 0 Group contribution (5,234) (31,000) Other (918) 249 Shareholders equity at 31 December 174,328 86,127 Share capital consists of 17,424,000 shares at a nominal value of NOK 2,075. All shares are owned by Statoil ASA. The accumulated foreign currency translation effect as of 31 December 2013 decreased total equity by NOK 2.4 billion. At 31 December 2012 the corresponding effect was a decrease in total equity of NOK 7.4 billion. Statoil Petroleum AS, Statutory report

30 17 Provisions (in NOK million) Asset retirement obligations Other provisions Total Non-current portion at 31 December ,810 2,488 73,298 Current portion at 31 December 2012 reported as trade and other payables Provisions at 31 December ,590 2,593 74,183 New or increased provisions 16,044 1,427 17,471 Unused amounts reversed (618) (60) (678) Amounts charged against provisions (606) (418) (1,024) Effects of change in the discount rate (13,418) (97) (13,515) Reduction due to divestments (4,865) (310) (5,175) Accretion expenses 2, ,427 Provisions at 31 December ,554 3,134 73,688 Current portion at 31 December 2013 reported as trade and other payables 1, ,165 Non-current portion at 31 December ,249 2,275 71,524 Expected timing of cash outflows (in NOK million) Asset retirement obligations Other provisions Total ,918 2,446 7, , , , , , ,447 Thereafter 27, ,924 At 31 December ,554 3,134 73,688 The decrease in the asset retirement obligation is mainly due to an increase in the discount rate and divestments also mentioned in note 3 Dispositions. This is partly offset by increase in the expected plugging and abandonment expense, additional wells drilled during the year, increased inflation and change in expected removal year. The timing of cash outflows related to Asset retirement obligations primarily depends on when the production ceases at the various facilities. For further information of methods applied and estimates required, see note 2 Significant accounting policies. 24 Statoil Petroleum AS, Statutory report 2013

31 18 Trade and other payables At 31 December (in NOK million) Trade payables 1,698 1,554 Non-trade payables, accrued expenses and provisions 16,997 13,618 Trade and other payables 18,695 15,172 Non-trade payables mainly consist of joint venture payables. 19 Leases Statoil Petroleum AS leases certain assets, notably vessels and drilling rigs. Statoil Petroleum AS has certain operating lease contracts for drilling rigs as of 31 December The remaining significant contracts' terms range from two months to eight years. Certain contracts contain renewal options. Rig lease agreements are for the most part based on fixed day rates. Statoil Petroleum AS's rig leases have been entered into in order to ensure drilling capacity for sanctioned projects and planned wells and to secure long-term strategic capacity for future exploration and production drilling. Certain rigs have been subleased in whole or for part of the lease term mainly to Statoil Petroleum AS operated licences on the Norwegian continental shelf. These leases are shown gross as Operating leases in the table below. However, for rig leases where the joint venture is the original lessee, Statoil Petroleum AS only includes its proportional share of the rig lease. In 2013, net rental expenses were NOK 11.7 billion (NOK 12.1 billion in 2012) of which minimum lease payments were NOK 15.1 billion (NOK 14.3 billion in 2012) and sublease payments received were NOK 3.3 billion (NOK 2.2 billion in 2012). No material contingent rent payments have been expensed in 2013 or The information in the table below shows future minimum lease payments under non-cancellable leases at 31 December Operating Operating (in NOK million) leases sublease ,104 (3,417) ,955 (1,789) ,322 (1,536) ,890 (572) ,804 (544) Thereafter 12,616 (1,200) Total future minimum lease payments 63,692 (9,059) 20 Other commitments and contingencies Contractual commitments Statoil Petroleum AS has contractual commitments of NOK 50.0 billion at 31 December The contractual commitments reflect Statoil Petroleum AS's share and comprise construction and acquisition of property, plant and equipment. As a condition for being awarded oil and gas exploration and production licenses, participants may be committed to drill a certain number of wells. At the end of 2013, Statoil Petroleum AS was committed to participate in 10 wells with an average ownership interest of approximately 42%. Statoil Petroleum AS's share of estimated expenditures to drill these wells amounts to NOK 1.2 billion. Additional wells that Statoil Petroleum AS may become committed to participating in depending on future discoveries in certain licences are not included in these numbers. Other long-term commitments Statoil Petroleum AS has entered into various long-term agreements for pipeline transportation as well as terminal use, processing, storage and entry/exit capacity commitments and commitments related to specific purchase agreements.the agreements ensure the rights to the capacity or volumes in question, Statoil Petroleum AS, Statutory report

32 but also impose on the group the obligation to pay for the agreed-upon service or commodity, irrespectively of actual use. The contracts' terms vary, with duration of up to 30 years. Take-or-pay contracts for the purchase of commodity quantities are only included in the table below if their contractually agreed pricing is of a nature that will or may deviate from the obtainable market prices for the commodity at the time of delivery. Obligations payable by the group to entities accounted for using the equity method are included gross in the tables below. For assets (e.g. pipelines) that the group accounts for by recognising its share of assets, liabilities, income and expenses (capacity costs) on a line-by-line basis in the financial statements, the amounts in the table include the net commitment payable by Statoil Petroleum AS (i.e. gross commitment less Statoil Petroleum AS's ownership share). Nominal minimum commitments at 31 December 2013: (in NOK million) , , , , ,080 Thereafter 43,281 Total 81,210 Guarantees All of the group's Norwegian continental shelf (NCS) net assets are owned by Statoil Petroleum AS, and the company is co-obligor or guarantor of existing debt securities and other loan arrangements of Statoil ASA. For the portion of the debt for which it is co-obligor, Statoil Petroleum AS assumes and agrees to perform, jointly and severally with Statoil ASA, all payment and covenant obligations. During 2013, Statoil ASA executed sixteen issues of debt securities, all guaranteed by Statoil Petroleum AS. The issues were executed under the US Shelf Registration Statement Form (nine issues), the Euro Medium Term Note Programme (five issues) and under separate Norwegian documentation (two issues). At year end 2013 the carrying value of debts for which Statoil Petroleum AS is the co-obligor or guarantor, mainly for Statoil ASA, is equivalent to NOK 18.2 billion and NOK billion, respectively. Contingencies A number of Statoil Petroleum AS's long-term gas sales agreements contain price review clauses. Certain counterparties have requested arbitration in connection with price review claims. The related exposure for Statoil Petroleum AS has been estimated to an amount equivalent to approximately NOK 6.9 billion for gas delivered prior to year end Statoil Petroleum AS has provided for its best estimate related to these contractual gas price disputes in the financial statements, with the impact to the Statement of income reflected as revenue reduction. During the normal course of its business Statoil Petroleum AS is involved in legal proceedings, and several other unresolved claims are currently outstanding. The ultimate liability or asset in respect of such litigation and claims cannot be determined at this time. Statoil Petroleum AS has provided in its financial statements for probable liabilities related to litigation and claims based on the company's best judgement. Statoil Petroleum AS does not expect that its financial position, results of operations or cash flows will be materially affected by the resolution of these legal proceedings. 21 Related parties The Norwegian State is the majority shareholder of Statoil ASA and also holds major investments in other Norwegian entities. Statoil ASA is the parent company of Statoil Petroleum AS. This ownership structure means that Statoil Petroleum AS participates in transactions with parties that are under a common ownership structure and therefore meet the definition of a related party. All transactions are considered to be on arm's length basis. Revenue transactions with related parties are presented in note 5 Revenues. In relation to its ordinary business operations, Statoil Petroleum AS also has regular transactions with certain entities in which Statoil has ownership interests. Statoil Petroleum AS purchases pipeline transport and third party gas on a back to back basis from Statoil ASA. Statoil Petroleum AS carries all the risks related to these purchases and they are therefore presented as third party purchases and operating expenses in Statoil Petroleum AS`s financial statements. Expenses incurred on behalf of Statoil Petroleum AS are accumulated in cost pools in Statoil ASA and other group companies. Such expenses are allocated to Statoil Petroleum AS and to licences where Statoil Petroleum AS is operator. Expenses allocated from group companies amounted to NOK 35.9 billion and NOK 32.7 billion in 2013 and 2012, respectively. Statoil Petroleum AS`s share of these expenses are reflected in the Statement of income and the 26 Statoil Petroleum AS, Statutory report 2013

33 remaining part is recharged to the other partners in the licences. The major part of the allocation is related to personnel expenses from Statoil ASA which is charged to Statoil Petroleum AS on an hours incurred cost basis. Expenses allocated from Statoil Petroleum AS to group companies amounted to NOK 1.6 billion and NOK 2.0 billion in 2013 and 2012, respectively. Finance transactions with group companies are presented in note 9 Financial items. Non-current and current liabilities to group companies are included in note 14 Financial liabilities. 22 Reserves (unaudited) The company's proved oil and gas reserves have been estimated by its parent company's experts in accordance with industry standards under the requirements of the US Securities and Exchange Commission (SEC). At the end of the year the company's proved reserves amounted to approximately 623 million Sm3 o.e. (643 million Sm3 o.e. in 2012). Proved reserves will be produced in the period from 2014 to Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. Unless evidence indicates that renewal is reasonably certain, estimates of economically producible reserves only reflect the period before the contracts providing the right to operate expire. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence within a reasonable time. 23 Subsequent events On 10 March 2014, following a regular review process of Statoil's 2012 Consolidated financial statements, the Financial Supervisory Authority of Norway (the FSA) concluded that it had identified three errors, related to interpretation and application of IFRS accounting principles for determination of cash generating units (CGUs) and impairment evaluations. The errors relate to the following three matters: 1. use of reliability intervals for value-in-use estimates in impairment testing of non-financial assets, which in the FSA's view is not in accordance with IFRS; 2. CGU identification for unconventional onshore assets, specifically the Marcellus shale play, which in the FSA's view should be split into more than one CGU for impairment testing; and 3. redefinition of the CGU containing the Cove Point capacity contracts and establishment of a separate onerous contract provision, which in the FSA's view should have been done in a financial period prior to the first quarter 2013 when Statoil provided for these take-or-pay capacity contracts in full. It is assumed that the FSA would have the view that there are no GAAP differences between IFRS and NGAAP for the three matters identified as errors. For the matters described under 1 and 2 above, Statoil has accepted the FSA's interpretations and has applied such interpretations in preparing Statoil Petroleum AS's financial statements as of and for the year ended 31 December The impact on Statoil Petroleum AS's financial statements is considered to be immaterial in all relevant periods for these two items. Statoil has filed an appeal with the Ministry of Finance, and has been granted a stay, for item 3 of the FSA's conclusion. Accepting the FSA's order would involve recognising a provision within one of the subsidiaries of Statoil Petroleum AS in an earlier reporting period, rather than in the first quarter of As the contracts have now been fully provided for in the first quarter 2013, there would be no impact on Statoil Petroleum AS's equity at 31 December 2013.The actual amount to be provided in an earlier period would depend on the period in which the provision would be recorded. Statoil Petroleum AS, Statutory report

34 STAVANGER, 31 MARCH 2014 THE BOARD OF DIRECTORS OF STATOIL PETROLEUM AS TORGRIM REITAN CHAIR ASLEIV BRANDSØY MANAGING DIRECTOR NINA BIRGITTE KOCH ODD HELGE BRUVIK HANS HENRIK KLOUMAN 28 Statoil Petroleum AS, Statutory report 2013

35 Independent auditor's report Statoil Petroleum AS, Statutory report

36 30 Statoil Petroleum AS, Statutory report 2013

37 Statoil Petroleum AS, Statutory report

38 STATOIL ASA BOX 8500 NO-4035 STAVANGER NORWAY TELEPHONE: