ANNUAL REPORT 2016 Contents
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ANNUAL REPORT 2016 Contents Financial highlights and key figures 3 Greenland Sea 14 Letter from the Board of Directors 4 Jameson Land 15 Management’s review 5 Risk management 16 Expectations to 2017 6 Corporate governance 17 Hydrocarbon exploration in West Guidelines and policies 18 Greenland 7 Management´s statement 20 Nuuk West 9 Independent auditors’ report 21 Disko West 10 Accounting Policies 22 Industry PhD project through the Danish Income statement 25 Innovation Fund 11 Balance sheet 26 Baffin Bay 12 Cash flow statement 27 Seismic data acquisition within the Greenland Sea 2016 13 Notes 28 Company information THE COMPANY BOARD OF DIRECTORS NUNAOIL A/S Stine Bosse, Chairman Tuapannguit 38 Søren Lennert Mortensen, Vice-chairman P.O. Box 579 Louise Langholz GL-3900 Nuuk Per Winter Wullf Peter Helmer Steen Telephone: +299 32 87 03 Website: www.nunaoil.gl Email: [email protected] BOARD OF MANAGEMENT Follow NUNAOIL on LinkedIn Hans Kristian Olsen Reg. no.: 68.116 Founded: 23 January 1985 AUDITORS Registered office: Kommuneqarfik Sermersooq Grønlands Revisionskontor A/S, statsautoriserede revisorer Financial year: 1 January - 31 December ANNUAL GENERAL MEETING Annual general meeting held 7 June 2017 Cover: Map of Greenland including licenses 2016. The pictures from the Annual Report are from Disko – Nuussuaq region, 2016 EDITORS: NUNAOIL A/S | LAYOUT & PRODUCTION: ICICERO, NUUK | PUBLISHED: APRIL 2017 2 Annual report 2016 · NUNAOIL A/S Financial highlights and key figures 2016 2015 2014 2013 2012 DKK 1,000 Net profit for the year Revenue 185 755 1,612 3,418 3,128 Gross profit -1,006 ‑626 ‑1,543 ‑129 ‑2,404 Profit before net financials -5,772 ‑6,909 ‑8,235 ‑8,455 ‑12,455 Financial income and expenses 19 330 1,298 ‑329 478 Net profit for the year -5,753 ‑6,579 ‑6,733 ‑8,784 ‑11,977 Balance Sheet Balance Sheet 42,602 45,800 50,549 55,336 65,533 Total equity 17,161 22,913 29,492 36,225 45,009 Cashflow statement Operational activities -2,340 -4,529 -3,398 -2,407 -5,068 Investment activities 2,815 0 ‑13 ‑177 2,018 Financing activities -568 0 0 0 ‑566 Total cashflow -93 -4,529 -3,411 -2,584 -3,616 Employees Average number (full-time) 5 7 7 8 8 Financial ratio (in %) * Operational margin (EBIT-margin) -3,120,0 -915,1 -510,9 -247,4 -398,2 Equity ratio 40,3 50,0 58,3 65,5 68,7 Return on equity (ROE) -28,7 -25,1 -20,5 -21,6 -23,5 * 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 22. 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 2016 · Financial highlights and key figures · NUNAOIL A/S 3 Letter from the Board of Directors The low world oil prices have contrib- amount of data has been the pivot- of considerable value for the continued uted to a low hydrocarbon exploration al point for the board of directors and technical work as well as for the future activity in Greenland in 2016. Moreo- its dialogue with the owner in order to promotion of the hydrocarbon poten- ver, the following conditions, has con- define the future strategy for the com- tial in Greenland and nonetheless in re- tributed to the low interest in doing pany. At the end of 2016, the board lation to retention of data and history exploration in Greenland this year: of directors forwarded a proposal for as well as knowledge and know-how • The prospects of continued low oil a future strategy to the owner, which within the country. Early 2017, the prices and the uncertainty for future included the initiation of a co-opera- owner of NUNAOIL issued a hearing field developments means that the tion project between NUNAOIL, The document regarding a change in the oil industry currently has focus on Mineral Licence and Safety Authority NUNAOIL-law. NUNAOIL replied with a production from existing fields. and GEUS concerning a grouping, up- hearing answer in which NUNAOIL em- • Cop21 in Paris in 2015 has contrib- grading and qualification of existing phasized the importance of document- uted to insecurity within the oil- and data, interpretations and experiences ing existing data as well as the need gas market in the form of expecta- from the hydrocarbon exploration that for a thoroughly knowledge of the in- tions of increased investments in al- has been going on in Westgreenland dustry within the board of directors. At ternative energy. for many years. It is NUNAOIL’s opinion the end of the annual report the results • The oil companies have changed that a finalization of such a project is of the discussions regarding the future their strategy the last couple of years and their focus is now on prof- itability, productivity and efficiency in existing fields instead of explora- tion in frontier areas. According to the International Ener- gy Agency, the result of big transfor- mations within the global energy sec- tor happens within the coming years, where renewable energy sources and natural gas will ‘win’ in order to be able to maintain the growth of glob- al needs of energy until 2040. Howev- er, it is worth noticing, that fossil fuel such as oil and gas within the coming decades is expected still to be critical for the world energy supply. Nonethe- less, the abovementioned conditions have contributed to a change in explo- ration strategy for those oil companies who have been active in Greenland for many years. The result of this is that all licensees offshore Westgreenland have decided to relinquish their exploration licences to the Greenlandic authorities at the end of 2016. Today, NUNAOIL is in the possession of a comprehensive amount of da- ta acquired offshore Westgreenland as well as a comprehensive portfo- lio of non-tested prospects. This pros- pect portfolio represents a considerable amount (> hundred millions of kroner) paid by licensees in Greenland since year 2000. This macroeconomical re- ality and the fact that NUNAOIL today is in the possession of comprehensive 4 Annual report 2016 · Letter from the Board of Directors · NUNAOIL A/S of NUNAOIL is unknown. costs have been reduced, which has re- with the Innovationfond as well as oth- sulted in a delay of the need for capi- er budget cuts for example the deci- In addition to working on the strategy tal with one year. The reason for this is sion not to publish a paperversion of for the company the board of directors primarily that is has been decided not the annual report but to keep it as na and the management have focused to rehire when staff members have de- electronic version only. on the economy within the company. cided to leave the company; the initia- The board of directors notices that the tion of a Ph.D. project in co-operation Management’s review The longest era of continued hydro- sub-period 1, where the partnership shore West Greenland exploration con- carbon exploration activity offshore should decide whether to relinquish tinues in the Greenland Sea despite the West Greenland, which began with the or continue into the second sub-peri- rough climate conditions. In this area award of the ‘Atammik’ licence West od which included the drilling of an ex- the different partnerships have succeed- of Nuuk in 2002 followed by several li- ploration well. This means, that several ed in the acquisition of several thou- censing rounds and the award of up licences have been relinquished with- sand kilometers of 2D seismic data, to 20 exploration licences involving 13 out testing potential prospects and with which forms the basis for the evaluation international oil companies, ended at that there is currently no expectations of the prospectivity within the individu- the end of 2016. This era culminated of drilling any exploration wells offshore al licences. Moreover, hydrocarbon ex- with the drilling of 8 exploration wells West Greenland in the coming years. ploration continues in the two onshore in 2010 and 2011. Besides then, thou- licences in Jameson Land in central East sands kilometers of 2D and 3D seismic A consequence of a lowering inter- Greenland. data have been acquired as well as sev- est in doing exploration in Greenland eral geological, geophysical and envi- is that there were no applicants during ronmental projects. the Disko/Nuussuaq licensing round in 2016. The relinquishment of all exploration li- cences offshore West Greenland at the On the contrary to the lowering interest end of 2016 coincided with the end of in doing hydrocarbon exploration off- Annual report 2016 · Management’s review · NUNAOIL A/S 5 Expectations to 2017 The last couple of years the exploration shore Northeast Greenland acquired new geological and geophysical data in activity in Greenland has been declin- thousands kilometers of 2D seismic in the area have been acquired, and these ing and with the continuing relatively the Greenland Sea. These data forms data forms a great basis for eventual low world oil prices, NUNAOIL expects the basis of the geological mapping new companies, which may be inter- that this will continue in 2017.