Annual Report 2017

Financial highlights and key figures 3 Guidelines and policies 12 Letter from the Board of Directors 4 Management’s statement 14 Management’s review 5 Independent auditors’ report 15 Expectations to 2018 6 Accounting Policies 16 Greenland Sea 7 Income statement 19 Jameson Land 8 Balance sheet 20 NUNAOIL’s industrial Ph.D. project 9 Cash flow statement 21 Risk management 10 Notes 22 Corporate governance 11

Company information

THE COMPANY BOARD OF DIRECTORS NUNAOIL A/S Stine Bosse, Chairman Tuapannguit 38 Søren Lennert Mortensen, Vice-chairman P.O. Box 579 Peter Helmer Steen GL-3900 Nuuk

Telephone: +299 32 87 03 BOARD OF MANAGEMENT Website: www.nunaoil.gl Signe Ulfeldt Hede Email: [email protected] Follow NUNAOIL on LinkedIn AUDITORS Reg. no.: 68.116 Grønlands Revisionskontor A/S, statsautoriserede revisorer Founded: 23 January 1985 Registered office: Kommuneqarfik Sermersooq ANNUAL GENERAL MEETING Financial year: 1 January - 31 December Annual general meeting held 3 May 2018

Cover: Map of Greenland including licenses 2017. The pictures from the Annual Report are from Northeast Greenland during the summer of 2017.

EDITORS: NUNAOIL A/S | LAYOUT & PRODUCTION: ICICERO, NUUK | PUBLISHED: MAY 2018

2 Annual report 2017 · NUNAOIL A/S Financial highlights and key figures

2017 2016 2015 2014 2013 DKK 1,000

Net profit for the year Revenue 0 185 755 1,612 3,418 Gross profit ‑1,148 -1,006 -626 -1,543 -129 Profit before net financials ‑3,141 ‑5,772 ‑6,909 ‑8,235 ‑8,455 Financial income and expenses 109 19 330 1,298 -329 Net profit for the year ‑3,032 -5,753 -6,579 -6,733 -8,784

Balance Sheet Balance Sheet 36,829 42,603 45,800 50,549 55,336 Total equity 14,129 17,161 22,913 29,492 36,225

Cashflow statement Operational activities ‑7,768 ‑2,340 ‑4,529 ‑3,398 ‑2,407 Investment activities 4,713 2,815 0 -13 -177 Financing activities 0 ‑568 0 0 0 Total cashflow ‑3,055 -93 ‑4,529 ‑3,411 ‑2,584

Employees Average number (full-time) 4 5 7 7 8

Financial ratio (in %) * Equity ratio 38,4 40,3 50,0 58,3 65,5 Return on equity (ROE) ‑19,4 ‑28,7 ‑25,1 ‑20,5 ‑21,6

* Financial ratios are calculated in compliance with the ”Recommendations and Financial Ratios 2015” issued by the Danish Society of Finance Ana- lysts. For definitions on key ratios, please see section on accounting policies on page 16.

STATEMENT TO INATSISARTUT This annual report meets the legal requirements for submission of accounts in Greenland, and it is furthermore the statutory annual report to Inatsisartut according to Inatsisartut Act no. 15. Dated December 7th 2009 regarding NUNAOIL A/S. The Management Report, furthermore, is worked out based on recommendations on good company governance as stated by Naalakkersuisut.

The annual report is available in Greenlandic, Danish and English. In case of doubt the Danish version shall serve as the ap- plicable copy.

Annual report 2017 · Financial highlights and key figures · NUNAOIL A/S 3 Letter from the Board of Directors

During the last 18 months NUNAOIL’s who will implement NUNAOIL’s future The overview of the potential oil and board of directors has been working work together with the board of direc- gas resources and associated risks, very detailed with NUNAOIL’s strategy tors. A considerable smaller NUNAOIL which hereby will be established, will focusing on challenges and possibili- will be able to consolidate and main- be of great value for the future strate- ties of an industry which has changed tain the data and knowledge, which gic planning and for marketing of the drastically during the last couple of is in the company today. Doing that, Greenlandic oil and gas potential to- years due to a worldwide low oil price NUNAOIL will be ready to use it when- wards the global petroleum industry. of which the result has been a slow- ever it is needed. ing down of the exploration activity in Furthermore, NUNAOIL has taken the Greenland. The new strategy means In 2017, the board of directors was initiative to start a resource assess- that NUNAOIL will still serve as a reduced from five to three due to a ment project which will be carried out framework for all commercial hydro- change in the NUNAOIL-law. together with the Ministry of Mineral carbon activity in Greenland. In addi- Resources and international partners. tion to this, NUNAOIL will make sure The board of directors will towards The purpose of the project is to com- that all knowledge of the hydrocarbon the future make sure that the know pile all the geological models which potential in Greenland, which the com- ledge which already is created within have been used by the industry doing pany has been able to build up during the company today and through close petroleum exploration in Greenland, to the years, will be used and remain an- co-operation with the international oil establish an overview of where more chored in Greenland. companies contributes to the develop- information is needed and to point to- ment of a petroleum industry in Green- wards initiatives which can minimize The continued decrease in the number land. NUNAOIL is the only company, risks and costs. The project will be of exploration and exploitation licences which participates as a partner in all co-ordinated with the new oil and gas from seven to five (31 December 2017) exploration licences in Greenland, and strategy made by the Greenlandic au- has of course affected NUNAOIL not NUNAOIL therefore plays a key role in thorities. The time for such a project is only economically and physically but maintaining and anchoring knowledge now, where the different partners still also with respect to the number of em- about petroleum exploration in Green- are up-to-date with knowledge, re- ployees. As a result of a continued fo- land. sources and network. cus on the economy from the board of directors the office as well as the house Today, huge amounts of geological The board of directors would like to meant for the employees were sold at and geophysical data, interpretations, thank the former directors of the board the end of 2017. Furthermore, all em- maps, relinquishment reports and ex- and last but not least Hans Kristian ployees including the director of the periences from the many years of com- Olsen for a good and constructive company during the last 13 years were prehensive exploration in Greenland co-operation during the years. dismissed; except for the Ph.D. stu- are stored at NUNAOIL. All this know dent of the company. The employees ledge represents a huge value for the were dismissed only because of aus- Greenlandic society. However, a utili- terity measures. On 1 January 2018, zation of this value is only possible if the board of directors employed a new all of the knowledge and the evalua- managing director, Signe Ulfeldt Hede, tions are summarized and qualified.

4 Annual report 2017 · Letter from the Board of Directors · NUNAOIL A/S Management’s review

The number of exploration and ex- with a licence share of 12.5% within funds, which have accumulated over ploitation licences in 2017 has not been the Northeast Greenland licenses and the years due to the sale of seismic data this low since 2007. The year before, 6.25% within the two licenses onshore acquired by the KANUMAS group with the remaining licences offshore West Jameson Land. NUNAOIL’s financial risk NUNAOIL as an operator. The data ac- Greenland were relinquished, and in is limited due to the fact being a carried quisition took place from 1991 to 1995. 2017 exploration activity was only car- partner during the exploration phase. The KANUMAS funds shall be used for ried out within the five licences off- hydrocarbon related exploration pro- shore Northeast Greenland and the NUNAOIL does not expect to profit on jects. This specific resource assessment two licences onshore Jameson Land in the exploration before a commercial project is expected to contribute to the East Greenland. The exploration work discovery is put into production. How- new Greenlandic oil and gas strategy within these licences has worked out ever, the amount of geological and 2019-2023. as planned. Since the award of the li- geophysical data and knowledge with- cences a huge amount of data has in NUNAOIL represents a significant been acquired. In 2017, the focus for value, not only for NUNAOIL but al- the partnerships has been to evaluate so for Greenland. Therefore, NUNAOIL the petroleum potential, risks and pos- continued the work on getting a com- sibilities in order to make a qualified prehensive resource assessment pro- drill-or-drop decision before the end of ject up and running together with the the first sub-period. NUNAOIL partici- Ministry of Mineral Resources. The pro- pates as a carried (non-paying) partner ject will be financed by the KANUMAS

Annual report 2017 · Management’s review · NUNAOIL A/S 5 Expectations to 2018

After 10 years of hectic exploration ac- ploration drilling campaigns have been During the last years worldwide explo- tivity offshore West Greenland and an carried out as well. A comprehensive ration activity - and especially in the increasing exploration activity offshore resource evaluation of whole of Green- Arctic – has decreased, and globally East Greenland, a huge amount of ge- land has not been carried out since less and less money have been spend ological and geophysical data has been 2007. on exploring for new resources com- acquired. These data represent a signi pared to the period before the drama ficant value in terms of knowledge. In a time, where the exploration activ- tic drop in oil price at the end of 2014. The data has shown that the right ity in Greenland is low – as it is world- This means that exploration for new geological circumstances are present wide – it seems to be the right time to resources has built up a lag. The oil in terms of being able to make an oil make a new resource assessment of companies need to increase their ex- and/or gas discovery in Greenland. the Greenlandic offshore area includ- ploration effort in order to keep up or ing all new knowledge and all new da- increase their amount of available re- Unfortunately, it is not enough just to ta which has been acquired during the sources in the years to come. prove that the right circumstances in last 10 years. terms of being able to find a potential It is expected that the exploration ac- oil and/or gas accumulation is present. During 2018, NUNAOIL will together tivity is going to increase in the years It is also important to quantify how with the Ministry of Mineral Resour to come and with respect to that it is much oil/gas is likely to be present in ces and external partners initiate an NUNAOIL’s intention to show the oil in- the different areas as well as where analysis of all data to be included in a dustry that the Greenlandic continental the probability of finding the resources large resource assessment project. The margin is an attractive place to explore is highest. Greenland will be able to purpose is for NUNAOIL and Green- for new resources. use this knowledge strategically when land to be up-to-date with the latest choosing which new areas should be li- knowledge about potential resources Earlier on, NUNAOIL has made profit censed and on which terms. within the Greenlandic offshore areas. from the acquisition and sale of NUNAOIL will act as project leader for KANUMAS seismic data, and a part The latest resource evaluation of this resource assessment project, and of this amount will be used on the Greenland was made in 2007 (by the results from the Ph.D. project car- ’Whole-of-Greenland-resource-assess- USGS and GEUS) and it was based on ried out within the company are sup- ment-project’. a significant less amount of data com- posed to contribute to this project. pared to what is available today. From 2007 to 2017 thousands of km of 2D The results will be publically available and 3D (the first ever in Greenlandic and will be used for marketing as well waters) seismic has been acquired. In as strategically. addition to that, stratigraphic and ex-

6 Annual report 2017 · Expectations to 2018 · NUNAOIL A/S Greenland Sea

During 2017, NUNAOIL was a car- which was shown by several oil com- structure makes most operations very ried partner in five exploration and panies, and which was tied to the ex- expensive. exploitation licences offshore North- pectations of doing a commercial oil/ east Greenland with a licence share of gas discovery compared to the ones At the end of 2017, the partnership of 12.5%. All five licences were awarded made on the Norwegian Continental the two licences Umimmak and Nerieq during a licensing round which was Shelf. However, compared to Norway, decided to relinquish both licences to opened on 1 December 2011 with a Northeast Greenland is a high-cost the Greenlandic authorities before the deadline for submission of applica- area. The ice conditions are difficult end of first sub-period. tions on 15 December 2012. 19 blocks and the remote area in terms of infra- were open for bids of which four were awarded in 2013 and one in 2014, FACTS – GREENLAND SEA and all of them to big international oil companies. The licences have been Active licences 5 awarded an exploration period of 16 years, and all of them are in their first Licenced area 12,328 km2 sub-period of the work program. The Exploration wells 0 seismic commitment of their respective work program was finalized in 2016, 3D seismic 0 km2 and the exploration work during 2017 2D seismic approx 94,700 km has been focused on finalizing the seismic interpretation, structural mapping and evaluation of the prospectivity in order to be able to make a qualified drill-or-drop decision.

During the summer of 2017, tradi- tional geological field work and stratigraphic drilling of relevance for the petroleum exploration of the Danmarks havn Basin was carried out within the area from Daneborg to Danmarkshavn. The results from this work are included within the final evaluation of the prospectivity of the area made by the partnerships. The work was carried out by GEUS, and NUNAOIL participated during the four week long field season as a part of competence building within the company.

At the time, when the licences were awarded the oil price was around 100$ Exploration Licenses a barrel, and the expectations to the Chevron, GreenPex, Shell & Nunaoil exploration were high. The reason for ENI, BP, DONG & Nunaoil 0 25 50 100 this was the large interest for doing ENI, BP & Nunaoil Statoil & Nunaoil exploration in Northeast Greenland Kilometers

Annual report 2017 · Greenland Sea · NUNAOIL A/S 7 Jameson Land

Since 2015, Greenland Gas & Oil has been the operator of two exploration and exploitation licences onshore Jameson Land in East Greenland. NUNAOIL participates in both licences as a carried partner with a licence share of 6.25%. Both licences have been awarded an exploration period of 10 years and are currently in their first sub-period of the exploration phase.

The exploration on Jameson Land took its beginning in the 1980’s, and the seismic data that was acquired at that time is being worked on by the partnership.

In 2017, 7,607 km of iFTG data was acquired over a period of eight days. Nerlerit Inaat These data will give a detailed picture of ! ! Itterajivit! Illoqqortoormiut the geological structures and faults in !Uunarteq the subsurface. Together with other data, these will form the basis for the prospectivity evaluation performed by the 0 25 50 100 partnership. Exploration Licenses Kilometers Greenland Gas & Oil Plc. & Nunaoil

FACTS – JAMESON LAND

Active licences 2 Licenced area 5,495 km2 Exploration wells 0 3D seismic 0 km2 2D seismic approx 1,800 km

8 Annual report 2017 · Jameson Land · NUNAOIL A/S NUNAOIL’s industrial Ph.D. project

In 2016, NUNAOIL, together with In- The results indicate that some of these The sinistral strike-slip faulting activi- novation Fund Denmark, University of sediments could be sandy and might ty means that some of these possible Copenhagen and GEUS, started an in- be possible reservoir bodies. Paleocene-Eocene reservoir bodies are dustrial Ph.D. project on the formu- cut by faults, segmenting these reser- lation of a stratigraphic exploration Furthermore, the attribute analysis has voirs into smaller units. This compli- model for the Paleocene-Eocene time shown that the area West of the Iker- cates a potential field development. interval. The title of the project is “The miut Fault Zone has been exposed to Paleocene-Eocene stratigraphic explo- sinistral strike-slip faulting during Eo- The previous results have been present- ration model along the southern West cene age. This is in accordance with ed as oral presentations at two interna- Greenland Margin and its exploration previous interpretations of the devel- tional conferences during 2017 (EAGE potential”. opment of the area, but on 3D seis- in Paris and AAPG in London). mic the fault activity is more obvious- The project has regionally reinterpreted ly seen. the seismic data and mapped important regional horizons along the West Greenland Margin. The project has furthermore focused on the recent 3D seismic data set and the use of multi- attribute analysis in the mapping of possible reservoir bodies.

An important observation from these studies, is the indication that some of the larger structural elements e.g. the Kangerluk Structure and the Ikermi- ut Fault Zone have been exposed and acted as source area for the genesis of sediments during periods of the Pale- ocene and Eocene. This is important new information in the development of new paleogeographic maps of the area.

Annual report 2017 · NUNAOIL’s industrial Ph.D. project · NUNAOIL A/S 9 Risk management

NUNAOIL has structured its risk management activities via an Staff established risk management process. Significant risks influ- Development of the exploration activities for oil in Greenland encing the operations and strategic situation of the compa- depends of contributions from the staff of the Company. In- ny are identified and assessed to support the management ternal requirements for documentation and description of in taking the right business decisions. processes are established and continuously adjusted to minimize the vulnerability of the Company if changes of its limit- Risk management is a central issue to any oil company. In ed number of employees should occur. the exploration phase NUNAOIL’s risks are comparatively limited, as they are reduced to the operation of the company Financing and its present activities and obligations. The main reason NUNAOIL will need additional capital in the future, and no being that the company is a carried interest partner in the guarantee can be given that NUNAOIL will be able to attract Greenland licenses and, consequently, is not exposed to ex- the necessary financing. In that connection the risk is as fol- penditures until the time when a possible decision is taken lows: to develop a discovery – a decision lying many years ahead. • NUNAOIL may not maintain its staff For NUNAOIL mapping of financial risk factors is a constant • NUNAOIL may not develop existing or new projects at the area of focus. The risk factors at present primarily being rele- desired pace vant to the company are: • NUNAOIL’s share in its partners’ projects are diluted or withdrawn Authorities and legislation Changes in legislation and administrative practices in Green- Cooperation and partners land are of considerable concern to NUNAOIL. It may be in If NUNAOIL is not given satisfactory financing the company relation to awarding, extending, and transfer of licenses as is unable to contribute in relation to the agreed ideal num- well as taxation, employment conditions, environment pro- ber of shares in established or future partnerships. The Com- tection, safety and all other conditions and areas where the pany’s share in such projects, as a consequence, will be dilut- relevant resort authorities and not NUNAOIL have the com- ed or possibly withdrawn and NUNAOIL will risk losing influ- petence of deciding. In addition to that entering into and ence and other rights in such co-operations. meeting partnership agreements are subject to the approval of the authorities. NUNAOIL cannot guarantee that such ap- Currency provals from authorities may be obtained on conditions and NUNAOIL has placed some of its available funds in US$, but terms satisfactory to the Company. as the Company has balanced its outstanding accounts and obligations in the same currency, risks concerning rate of exchange is minimized.

10 Annual report 2017 · Risk management · NUNAOIL A/S Corporate governance

NUNAOIL is giving high priority to running the Company in The Management of NUNAOIL compliance with the principles of good company govern- NUNAOIL’s Managing Director, Signe Ulfeldt Hede, is a geol- ance. ogist. She joined the Company as the new Managing Direc- tor on 1 January 2018. The Management of NUNAOIL re- NUNAOIL, consequently, has posted a full description regard- ceives a fixed numeration incl. pension of DKK 909,600. Ex- ing the guidelines for limited companies owned by the Gov- penses for telecommunication are covered by NUNAOIL in ernment of Greenland in its homepage. This statement is accordance to common practice. The Managing Director is a complete overview of the Company’s work following the subject to a term of notice of 12 months from the Company, recommendations of the guidelines after the “follow or ex- and has, herself, to give 6 months notice. No bonus or re- plain”-principle for each single recommendation. The pur- tirement age has been stated. pose of this complete overview is to make easier the acces- sibility and understanding of the interests of the Company. Management of NUNAOIL in 2017 The following states a short concentrate of the guidelines The Board of Directors: for the governance of the Company. • Stine Bosse, Chairman The members of the Board are paid a fixed fee of DKK • Søren Lennert Mortensen, Vice Chairman 50,000 pr. year. The Chairman is paid DKK 150,000 pr. year • Peter Helmer Steen and the vice-chairman DKK 75,000 per year. The fee is in compliance with the Owner’s recommendation for companies similar to NUNAOIL. There are no representatives of the employee on the Board. The Board of NUNAOIL is holding four ordinary board meetings pr. year. Each year the Board of Directors assisted by an external consultant carries out a “self evaluation” and submits the results and recommendations to the Government of Greenland.

Annual report 2017 · Corporate governance · NUNAOIL A/S 11 Guidelines and policies

NUNAOIL has worked out a number of guidelines and poli- Relation to business connections cies for the Company and its staff to assist in ensuring that We endeavour to visualize our CSR-policy to our license part- NUNAOIL is considering the interests of its partners and soci- ners and business connections in order to ensure for Green ety in the best possible way. The Annual Report states a con- land a responsible management of CSR obligations from our centrate of the guidelines and the various policies, and they cooperation partners, a correct reporting and risk assess- may be found, too, in full on the homepage of the Company. ments. Within the frames of influence it is our goal to influence our license partners and business connections as well as Corporate Social Responsibility (CSR) to perform NUNAOIL’s activities in a sustainable way minimiz- The CSR-policy is a tool for the Management and the Board, ing damage to the environment and respecting the internally which currently and at least once a year enters CSR on the recognized human rights. agenda when preparing the Annual Report. NUNAOIL’s CSR-policy is an integrated part of the Company’s staff manu- NUNAOIL’s role in society al thereby committing all the employees of the Company. As a representative of the Government of Greenland, NUNAOIL is participating in all licenses in Greenland during NUNAOIL’s superior scope as an oil company owned by the the present phase of prospecting for oil in the country. Greenland Government is to contribute as much as possible NUNAOIL in its present organization is to accumulate know to ensure that the Greenland society via NUNAOIL within re- ledge and know-how concerning exploration for oil in Green- sponsible and sustainable limits is getting the best possible land. The further development of the company will be fo- benefit and use of the potential oil and gas resources found cused to optimizing to the benefit of Greenland any possible in the country. NUNAOIL is striving towards this goal via a re- exploitation of the oil resources of Greenland when commer- sponsible cooperation creating confidence among our inter- cial discoveries are made. ested parties, cooperation partners, owners, authorities, license partners, business connections and the society in which The targets for the exploration phase are: we work. • Optimizing of the exploration for oil for Greenland as soon as possible to prove the hydrocarbon potentials of a com- We are committed to performing our business in an ethical, mercial discovery. sustainable and responsible way in compliance with Green- • Promotion of knowledge of the oil potential of Greenland land and other legislation, awarded licenses, cooperation to interested parties within the oil industry in order to in- agreements with license partners and business connections as crease its interest in Greenland. well as Naalakkersuisut’s guidelines for good company gov- • Compiling of databases containing geological and other ernance in the limited companies owned by the Government oil-related information useful for the authorities’ future of Greenland. planning of the oil industry of Greenland, including on de- mand contribute to the future license hearings held by the authorities.

12 Annual report 2017 · Guidelines and policies · NUNAOIL A/S • Constructive and active participation in the license work in plying with approved and best international standards for the order to improve the opportunities for making commercial oil and gas industry. These standards are to be adhered to in discoveries of oil to the benefit of the Greenland society. the technical arena as well as in relation to social influence. • Information to the public on relevant conditions in the soci- The Minerals Act specify the requirements to the license hold- ety regarding oil activities locally and nationally concerning er to as far as possible observe that activities related to hy- facts, opportunities, consequences and risks. drocarbon activities take place under control, identification of risks, assessment of risks and minimizing of risks. The Act We commit ourselves continuously to contribute by giving lec- furthermore stresses that the final responsibility concerning tures, participation in conferences, meetings in the local com- offshore activities rests on the operator of the license. As a li- munities or any other relevant support and to increase the cense partner NUNAOIL actively follows up on the HSE activ- efforts and the focus of Greenland on education, vocation- ities of the operators in order to provide input for them and al training and building up of competence within the mineral other participants in their licenses whenever considering ap- industry. propriate in relation to the current acts and regulations.

Health, Environment protection and Safety – the The Ministry of Mineral Resources and the Ministry of Nature, HSE policy of NUNAOIL Environment and Justice are to monitor that companies com- NUNAOIL’s activities are based on health, environment pro- ply with all HSE requirements concerning employees and in tection and safety and are regarding HSE as a prioritized and relation to the public and the environment to the extent they integrated part of the activities and culture of the Company. are influenced by decisions concerning design, construction, Compliance with these obligations, resting with the Compa- execution of operations, maintenance and abandoning activ- ny due to legal acts, statutory regulations and license agree- ities or facilities. NUNAOIL is striving to influence operators ments in the Greenland oil industry is contributing to NUNA and partners in the licenses to select the optimal systems and OIL’s activities being performed in a sustainable way aiming solutions in relation to the requirements of the at minimizing harmful influence to the environment and safe- authorities. guarding the safety and health of the Company’s employees. All employees of NUNAOIL have a joint responsibility for ob- Business ethical guidelines of NUNAOIL serving that work in the Company is undertaken under se- The purpose of the business ethical guidelines of NUNAOIL is cure conditions and in a way that cares for and promotes the to clarify the principles that are to permeate the operation of health of the individual and protects the environment. the company and the behaviour of its employees in combi- nation with the other policies and the Personnel Manual. The The foundation for the HSE-policy of NUNAOIL is the Green- guidelines comprise subjects like working environment, re- land Minerals Act the aim of which is to ensure that the hy- sponsible behaviour, language policy, conflicts of interest and drocarbon activities in Greenland are performed in a respon- confidentiality, ethics and bribing, communication, IT, com- sible way regarding health, environment and safety, exploita- plaints and reports of worries. The entire policy may be read tion of the resources, social impact and in all aspects are com- or downloaded on the homepage of the company.

Annual report 2017 · Guidelines and policies · NUNAOIL A/S 13 Management’s statement

MANAGEMENT ENDORSEMENT per December 31st 2017 as well as the result of the activities The Board of Directors and the Management today have sub- of the company and the cash flow for the accounting year of mitted the Annual Report for the accounting year of 1st of January 1st – December 31st 2017. January – 31st of December 2017 for NUNAOIL A/S. To our best impression the Management Report contains a The Annual Report is submitted in compliance with the State- correct description of the issues stated in the report. ments Act. The Annual Report is submitted for approval by the General We consider the used accounting practice as expedient and Assembly. to our opinion the Annual Report provides a correct picture of the assets, liabilities and financial situation of the Company as

Nuuk, 19 February 2018

MANAGEMENT DIRECTOR

Signe Ulfeldt Hede

BOARD OF DIRECTORS

Stine Bosse Søren Lennert Mortensen Chairman Vice Chairman

Peter Helmer Steen

14 Annual report 2017 · Management’s statement · NUNAOIL A/S Independent auditors’ report

TO THE SHAREHOLDER OF NUNAOIL A/S An audit comprises inquiries to obtain auditing proof regarding the figures and information in the annual report. Endorsement of the Annual Report The chosen ways of auditing depend on the auditor’s assess- We have reviewed the Annual Report for NUNAOIL A/S for ment, hereunder an estimate of the risk of significantly un- the financial year January 1st – December 31st 2017 com- reliable information in the annual report whether they are prising Management Endorsement, Management Report, caused by fraud or mistakes. The risk assessment makes the criteria for reporting, statement of result, balance, statement auditor consider internal control relevant to the company’s of cash flow and notes. The Annual Report has been stated submission of an annual report providing a correct picture. in accordance with the Statement Act. The purpose of this is to perform an audit suited to the con- Management’s responsibility for the ditions but not expressing a conclusion on the efficiency of Annual Report the internal control. An audit, furthermore, comprise an as- The Management is responsible for preparing an Annual Re- sessment of whether the Management’s choice of account- port providing a correct picture in accordance with the State- ing policy is adequate, if the assessments of the Manage- ment Act. The Management, furthermore, is responsible for ment are reasonable as well as the total presentation of the the internal control considered necessary for the Manage- annual report. ment to present an annual report without significantly unreliable information regardless of this being caused by fraud or It is our conviction that the performed audit is sufficient and mistakes. suitable as the basis of our conclusion.

Auditor’s responsibility The audit has given no reason for reservations. Our responsibility is to express our conclusion based on our audit on liability of the annual report. We have performed Conclusion the audit in compliance with the international standards on It is our conviction that this annual report provides a correct audits and additional requirements stated by Danish act on picture of the company’s assets, liabilities and financial state auditing requiring us to uphold ethical requirements as well as pr. December 31st 2017, and that the result of the Com- as plan and perform the audit to obtain a high degree of pany’s activities and cash flows for the financial year January certainty as to the annual report being without significant 1st – December 31st 2017 are in compliance with the act on unreliable information. annual accounts.

Nuuk, 19 February 2018

Grønlands Revisionskontor A/S statsautoriserede revisorer

Knud Østergaard State Authorized Public Accountant

Annual report 2017 · Independent auditors’ report · NUNAOIL A/S 15 Accounting Policies

The Annual Report for NUNAOIL A/S has been prepared in CALCULATION OF RESULT accordance with the Order to Greenland on rules for government-owned limited companies (exemption clauses) submitted Revenue in compliance with the provisions of the Financial Statement Revenue is entered into the result if delivery and transfer of Act for class B companies. Additionally, the company has cho- risk has taken place before the end of the year, and if the in- sen to comply with some provisions for class C companies. come can be reliably assessed and expected to be received.

The accounting policy remains unchanged from last year and Other operating income and expenses is submitted in DKK. Other operating income and expenses are items of lesser im- portance compared to the company´s main activities. General information on calculation and measuring Other external costs The result states the proceeds as they are realized. Hereun- Other external costs comprise purchasing of data related to der is calculated regulation of values of financial activities exploration, projects, cost of facilities, travels, accommoda- and liabilities. The result is also stating costs including de- tion for staff, marketing, administration etc. The Compa- preciations, impairment losses, and provisions for obliga- ny’s portfolio of seismic data is not measured at any value as tions as well as reversed sums due to change of estimates of the earnings potential in the event of a sale therefore can- amounts previously included in the result. not be predicted. The costs of producing such data therefore charged to the income statement on an ongoing basis. Assets are included in the balance if it is likely that future economical advantages will accrue to the company and the Staff value of the assets can be reliably estimated. Costs relating to employed staff comprise salary and fee paid to staff and Board of Directors, salary-depending items, trav- Liabilities are included in the balance if it is likely that future el and accommodation of Board etc. economical advantages will be denied the company and the value of the denied asset can be reliably estimated. Depriciation and writing down Depriciation and writing down contains depriciations and Initially, assets and liabilities are stated at cost price. Subse- profits and losses on sale of tangible fixed assets. quently, assets and liabilities are assessed as described below in each item of the account. When calculating and measur- Financial income and expenses ing consideration has been taken to foreseeable losses and Financial income and expenses comprise interest and out- risks appearing before the submission date of the annual standing interest, realized and unrealized capital gain from report and related to conditions existing on the day of bal- transactions in foreign currency, amortizing of financial as- ance. sets and liabilities. Financial income and expenses are calcu- lates as the amounts related to the accounting year. Conversion of foreign currency Transactions in foreign currency are converted to the rate of exchange of the day of the transaction. Differences caused by the rate of the day of the transaction and the rate of the day of payment are stated in the result as a financial item.

Outstanding debt, liability and other monetary items in foreign currency not paid on the day of balance are calculated to the rate of exchange on the day of the balance. The difference between the rate of the day of the balance and the rate of the day of the incurrence of the liability or the debt is stated under financial profit and costs.

16 Annual report 2017 · Accounting Policies · NUNAOIL A/S BALANCE Outstanding accounts Outstanding accounts from sales and services are measured Property and equipment at amortized costs normally corresponding to nominal value. Buildings, plants and other facilities, fixtures and furniture They are reduced to net sales value in order to take into ac- are assessed at cost value less accumulated depreciation and count any expected loss. impairment losses. Prepayments Basis for assessing the depreciation is cost less the expected Prepayments entered under assets comprise paid costs relat- residual value after end of use. ed to the following accounting period.

Cost comprises the cost of acquisition and expenses direct- Cash ly related to the acquisition at the time when the asset was Cash is deposits in banks and cash. ready for use. Liabilities Depreciation is calculated on a straight line basis over the ex- Financial liabilities are calculated from the time of borrowing pected lives of the asset: of the sum less costs of the transaction. In the following pe- Buildings 50 years riod the financial liabilities are stated at amortized cost cor- Other plants, fixtures, furniture etc. 3-5 years responding to the capitalized value using the effective rent of interest, so the difference between the proceeds and the Assets of a cost of less than DKK 10,000 kr. pr. unit are rec- nominal value is stated in the result over the period of loan. ognized in the income statement as costs of the year of acquisition. Any other liability comprising debt to supplier and other debt is entered at amortized cost which is normally corre- Profit or loss from sale of material assets is calculated as the sponding to nominal value. difference between the sales price less expenses from sale of the assets and the accounting value at the time of sale. Prof- Prepayments it or loss is entered as depreciation in the balance. Received payments relating to subsequent years are stated as items for a limited period.

Annual report 2017 · Accounting Policies · NUNAOIL A/S 17 CASH FLOW STATEMENT KEY FIGURES The cash flow statement shows the cash flow during the year split up into operational activities, investment activities Key figures are complying with “Recommendations and Fi- and financing activities for the year, the movements of assets nancial Ratio 2015” issued by the Danish Society of Finance during the year as well as assets at the beginning and the Analysts. end of the year. The key figures and financial ratios have been calculated as The effect of purchases and sales of companies is illustrated follows: as a separate item under cash flows from investment activities. In the cash flow statement cash flow from purchased companies is included from the point of purchase. Cash flow Equity ratio: from sold companies is included up till the point of sale. Equity excl. minority interests ultimo x 100 Cash flow from operational activities Total Liabilities ultimo Cash flow from operational activities are states as the result of the year adjusted for non-cash operational items, changes in operational capital and paid company tax. Return on equity (ROE):

Cash flow from investment activities Result* x 100 Cash flow from investment activities comprises payments in Average equity excl. minority interests connection with purchase and sale of companies and activities as well as purchase and sale of investments.

* The result of the year less the share of minority interests. Cash flow from financing activities Cash flow from financing activities comprises changes in the amount or composition of joint capital of the company and its related costs. Additionally, the cash flows comprise raising of a loan, installments of interest-bearing loans, and payment of dividend.

Liquid assets Liquid assets comprise liquids less short-term debt to financial institutions and short-term securities, that without delay can be turned into liquids and only have insignificant risk of changing their value

18 Annual report 2017 · Accounting Policies · NUNAOIL A/S Income statement 1 January ‑ 31 December 2017

Note 2017 2016 DKK 1,000

Revenue 0 185 Other operational profit 190 243 Other external costs ‑1,338 -1,434

Gross profit ‑1,148 ‑1,006

1 Staff costs ‑4,046 -4,742 2 Depreciation 2,053 -24

Profit before net financials ‑3,141 ‑5,772

Other financial income 124 25 3 Other financial costs ‑15 -6

Result before tax ‑3,032 ‑5,753

Result of the year ‑3,032 ‑5,753

Proposed disposal of the result:

Disposed from transferred result ‑3,032 -5,753 Disposed in total ‑3,032 ‑5,753

Annual report 2017 · Income statement 1 January ‑ 31 December 2017 · NUNAOIL A/S 19 Balance sheet 31 December 2017

Note 2017 2016 DKK 1,000

ASSETS

Fixed assest 4 Buildings 0 5,990 4 Other plants, fixtures and furniture 39 39 Tangible fixed assets total 39 6,029

Fixed assets 39 6,029

Current assets Other receivables 3,690 479 Prepayments 66 28 Receivables total 3,756 507

Cash holdings 33,034 36,067

Current assets, total 36,790 36,574

Assets total 36,829 42,603

LIABILITIES

Equity

5 Share capital 10,000 10,000 6 Debt to credit institutions 4,129 7,161 Long-term liabilities, total 14,129 17,161

Liabilities Debt to banks 22 0 Suppliers of goods and services 156 229 Other debt 700 761 7 Prepayments 21,822 24,452 Short-term liabilities, total 22,700 25,442

Liabilities, total 22,700 25,442

Liabilities & equity total 36,829 42,603

8 Fee to auditor of the General Meeting 9 Close parties

20 Annual report 2017 · Balance sheet 31 December 2017 · NUNAOIL A/S Cash flow statement 1 January – 31 December 2017

Note 2017 2016 DKK 1,000

Result of the year ‑3,032 -5,753 10 Adjustments ‑2,162 4 11 Changes in Working Capital ‑2,684 3,388 Cash flow from operation before net financials ‑7,878 -2,361 Interest received and similar 125 27 Interest payments and similar ‑15 -6 Net income ‑7,768 -2,340

Cash flow from operational activities ‑7,768 ‑2,340

Sale of tangible fixed assets 4,713 2,815 Cash flow from investment activities 4,713 2,815 Repayment of long-term liabilities 0 -568 Cash flow from financing activities 0 ‑568

Change in cash ‑3,055 ‑93

Cash as per January 1st 2017 36,067 36,160 Cash as per December 31st 2017 33,012 36,067

Cash Cash available 33,034 36,067 Short-term liabilities to financial institutions ‑22 0 Cash as per December 31st 2017 33,012 36,067

Annual report 2017 · Cash flow statement 1 January – 31 December 2017 · NUNAOIL A/S 21 Notes

2017 2016 DKK 1,000

1. Staff costs Salaries 3,597 4,087 Pensions 384 433 Other costs related to social security 46 45 Other staff costs 354 451 Re-invoiced (Appendix 4) ‑335 -274 4,046 4,742 Directors 1,592 1,593 Board 353 375 1,945 1,968

Average number of employees 4 5

2. Depreciations Depreciation of buildings 162 182 Depreciation of plants, fixtures and furniture 0 44 Depreciation of plants, fixtures and furniture ‑2,215 -202 ‑2,053 24

3. Other financial cost Other financial cost 15 6 15 6

4. Tangible fixed assets Other plants, fixed assets DKK 1,000 Buildings furniture

Cost as per January 1st 2017 8,101 794 Acquisition Cost of fixed asset ‑8,101 0

Cost as per December 31st 2017 0 794

Depreciation and amortization as per January 1st 2017 2,110 755 Depreciation and amortization through the year 162 0 Reversal of depreciation and amortization of sal of buildings ‑2,272 0 Depreciation and amortization as per December 2017 0 755

Accounting value as per December 31st 2017 0 39

22 Annual report 2017 · Notes · NUNAOIL A/S 2017 2016 DKK 1,000

5. Share capital Share capital as per January 1st 2017 10,000 10,000 10,000 10,000 The share capital consists of 10,000 shares á DKK 1,000 or multiples of this The capital is not divided into classes

Within the latest 5 years no movements in the share capital have taken place.

6. Transferred result Transferred result from January 1st 2017 7,161 12,914 Transferred profit or deficit of the year ‑3,032 -5,753 4,129 7,161

7. Prepayments Provision for exploration activities 19,319 21,949 Reamaining unused Appendix 4 funds 2,503 2,503 21,822 24,452

Provision to exploration activities According to the KANUMAS agreement profit from sales of data are accrued to NUNAOIL A/S and shall – after discussion with the KANUMAS Group and approval from the Ministry of Mineral Resources – be used for hydrocarbon-related exploration in Greenland where information provided by exploration activities are made available to KANUMAS group free of charge. The obligation is in US$ and changes in the obligation are solely caused by changes in the rate of exchange of the US$. The risk related to rate of exchange is covered by a similar amount of money in US$ placed in a financial institution.

Remaining unused Appendix 4 funds In connection with relinquishment of licenses from the operators there are transferred unused Appendix 4 funds to NUNAOIL A/S. NUNAOIL A/S can use the funds to training and education purposes. The amount is considered as source of income in line with use of expenses to training and education.

8. Fee to the auditor of the General Meeting Grønlands Revisionskontor A/S, chartered accountant 140 146 Fee paid for statutory audit 60 60 Fee for other services 80 86 140 146

Annual report 2017 · Notes · NUNAOIL A/S 23 9. Related parties Other related parties Stine Bosse, Nationernes Alle 26, 3000 Helsingør Chairman Søren Lennert Mortensen, Jagtvej 13 0501, 3900 Nuuk Vice Chairman Peter Helmer Steen, Åtoften 27, 2990 Nivå Board Member Signe Ulfeldt Hede, Innannguaq 38, 3900 Nuuk Director

Transactions Apart from normal transfer of salary no financial transactions have been made with Board, Directors, senior members of staff or shareholders.

Ownership The following is stated in the company’s list as an owner of minimum 5% of the votes or minimum 5% of the company’s capital: The Government of Greenland

2017 2016 DKK 1,000

10. Adjustments Depreciations and writing down of fixed and intangible assets ‑2,053 23 Other financial income ‑124 -25 Other financial costs 15 6 ‑2,162 4

11. Changes in Working Capital Changes in receivables 81 236 Changes in supplier debt and other debt ‑2,765 3,152 ‑2,684 3,388

Exploration and exploitation licences in Greenland 2017 Jameson Land Greenland Sea

2015/13 - ”Block 2” 2013/40 - ”Amaroq” Greenland Gas & Oil 93,75% ENI 35,00% NUNAOIL 6,25% BP 35,00% DONG 17,50% 2015/14 - ”Block 3” NUNAOIL 12,50% Greenland Gas & Oil 93,75% NUNAOIL 6,25% 2013/41 - ”Avinngaq” Statoil 87,50% NUNAOIL 12,50%

2013/45 - ”Umimmak” Chevron 29,17% Greenpex 29,17% Shell 29,17% NUNAOIL 12,50%

2013/46 - ”Nerieq” Chevron 29,17% Greenpex 29,17% Shell 29,17% NUNAOIL 12,50%

2014/14 - ”Qialivaq” ENI 43,75% BP 43,75% NUNAOIL 12,50%

24 Annual report 2017 · Notes · NUNAOIL A/S