ANNUAL REPORT 2018 Contents

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 auditor’s report 16 Expectations to 2019 6 Accounting Policies 18 The Greenland Sea 7 Income statement 21 Jameson Land 8 Balance sheet 22 NUNAOIL’s industrial Ph.D. project 9 Cash flow statement 23 Risk Management 10 Notes 24 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 CVR: 77 74 43 12 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 2 May 2019

Cover: Map of Greenland including licences 2018.

The pictures from the Annual Report are from a geology excursion to Trail Ø and Ella Ø, which are situated just North of Jameson Land in East Greenland.

EDITORS: NUNAOIL A/S | LAYOUT & PRODUCTION: ICICERO, NUUK | PUBLISHED: MAY 2019

2 Annual Report 2018 · NUNAOIL A/S Financial highlights and key figures

2018 2017 2016 2015 2014 DKK 1,000

Net profit for the year Revenue 103 0 185 755 1,612 Gross profit ‑932 -1,147 -1,006 -626 -1,543 Profit before net financials ‑2,817 ‑3,140 ‑5,772 ‑6,909 ‑8,235 Financial income and expenses 32 108 19 330 1,298 Net profit for the year ‑2,785 -3,032 -5,753 -6,579 -6,733

Balance Sheet Balance Sheet 35,717 36,829 42,603 45,800 50,549 Total equity 11,343 14,129 17,161 22,913 29,492

Cashflow statement Operational activities 2,402 ‑7,761 ‑2,340 ‑4,529 ‑3,398 Investment activities 11 4,713 2,815 0 -13 Financing activities 0 0 ‑568 0 0 Total cashflow 2,413 ‑3,048 -93 ‑4,529 ‑3,411

Employees Average number (full-time) 2 4 5 7 7

Financial ratio (in %): Equity ratio 31,8 38,4 40,3 50,0 58,3 Return on equity (ROE) ‑21,9 ‑19,4 ‑28,7 ‑25,1 ‑20,5

The calculation of the key figures and financial ratios are complying with the recommendations from the Danish Finance Society and deviates only on a few items from this.

The key figures and financial ratios have been calculated as follows:

Equity ratio:

Equity excl. minority interests ultimo x 100 Total Liabilities ultimo

Return on equity (ROE):

Result x 100 Average equity excl. minority interests

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 applicable copy.

Annual Report 2018 · Financial highlights and key figures · NUNAOIL A/S 3 Letter from the Board of Directors

During 2018, NUNAOIL board of direc- the Greenlandic subsurface based on NUNAOIL is the only company which tors has focused on the restructuring new knowledge and all of the explora- participates in all exploration and ex- of the company in order to secure its tion data that have been acquired dur- ploitation licences that are being grant- future development and economy in a ing the years, is necessary in order to ed in Greenland, and the company time, which is still challenged by a low be able to attract robust oil companies therefore plays a key role in maintain- oil price and a decline in the explora- and further investments to Greenland. ing and anchoring knowledge about tion activity in Greenland. petroleum exploration in Greenland. Therefore, NUNAOIL initiated a mul- Large amounts of geological and ge- In 2018, the number of explora- ti-year resource assessment project ophysical data, interpretations, maps, tion and exploitation licences during during 2018. The aim of the project is relinquishment reports and experienc- which NUNAOIL participated as a car- to point towards those areas of Green- es from the many years of comprehen- ried (non-paying) partner, was reduced land, which have the biggest explo- sive exploration work in Greenland are from 5 to 2 (31/12 2018). This is the ration potential and to quantify how stored at NUNAOIL. All these infor- lowest number of licences in Green- much oil/gas is most likely present in mations are made available for the re- land since 2005. However, there seems the different areas. Moreover, the pro- source assessment project. to be new exploration interest from ject will provide an overview of where newcomers as well as from compa- more information is needed as well as This means that NUNAOIL will not on- nies which previously have been active pointing towards initiatives which can ly provide a framework for the com- in Greenland. Therefore, it is expected reduce exploration risk and costs in mercial petroleum activities in Green- that the exploration activity in Green- Greenland. land. NUNAOIL will also ensure that land will increase during the coming the comprehensive knowledge about years. In relation to that, it is NUNA This has not been done before, and the petroleum potential of Greenland, OIL’s intention to demonstrate that there is no doubt that this will be ben- which has been accumulated in the Greenland is an attractive place to in- eficial not only for the oil industry but company during the years, are being vest when it comes to exploration for also for the Greenlandic energy au- utilized in order to create new inter- new resources. thorities. The project is being coordi- est for carrying out exploration work in nated with the implementation of the Greenland and in the long term con- The NUNAOIL board of directors has oil strategy 2019-2023 initiated by the tribute to the development of a petro- assessed that being able to promote a Greenlandic energy authorities. leum industry in Greenland. detailed and standardized overview of potential petroleum resources within

4 Annual Report 2018 · Letter from the Board of Directors · NUNAOIL A/S Management’s review

Activity development The project involves all geological NUNAOIL’s share capital amounts to In 2018, NUNAOIL participated as a car- knowledge about the petroleum re- DKK 10 million, while its equity end ried partner in 5 exploration and ex- sources in Greenland, which is available 2018 amounted to DKK 11,343 mil- ploitation licences; 2 on Jameson Land from Denmark and Greenland, and thus lion. Total cash flow of the company in East Greenland and 3 offshore North- makes the project very unique. was positive by DKK 2.4 million due to east Greenland. NUNAOIL’s licence received payment of office sale in 2017 share varies from 6.25% to 12.5%. As The resource assessment project is as well as received payment of un-used a carried partner NUNAOIL participates mainly being financed by already ex- Appendix 4 funds during relinquish- on equal terms as the other partners isting funds within NUNAOIL – the so- ment of exploration and exploitation within the licences. Being carried means called KANUMAS funds, which has licences. that NUNAOIL’s expenditures are cov- been accumulated in the company due ered for by the partners within the re- to the sale of seismic data acquired by After the date of balance no situations spective licences, but only during the the KANUMAS group with NUNAOIL as have occurred significantly influencing exploration phase. NUNAOIL’s commit- operator during the period of 1991 to the accounts. ment is the same as for the partners, 1994. The KANUMAS funds have to be and is of great importance in terms of spend on petroleum related project like The budget for 2019 is envisaging a anchoring knowledge about petroleum this one. deficit of DKK 2.3 million. Possible sales geology, technology, environment and of seismic data will have a positive influ- law within Greenland. ence on the result but out of prudence Financial results and further sales of seismic data are not in- In 2018, the exploration work within expectations cluded in the budget. the 5 licences worked out as planned. The result of the year was a deficit of Focus has been on the evaluation of the 2.7 million DKK, which is better than It is expected that the Namminersorlutik petroleum potential, risks and possibili- anticipated due to non-budgeted sale Oqartussat, The Government of Green- ties within the individual licences in or- of seismic data. land, during 2019 will launch a petrole- der to be able to make a qualified drill- um strategy, as replacement for Green- or-drop decision before the end of the In 2018, NUNAOIL decided to initiate land’s oil and mineral strategy 2014- first sub-period. Three of the five part- a resource assessment project main- 2018. If this new strategy will mean nerships decided to relinquish their re- ly financed by the so-called KANUMAS changes to NUNAOIL is unknown. spective licenses to the Greenlandic au- funds, which have had a positive influ- thorities, and at the end of 2018 there ence on the result of the year. was then two active exploration and exploitation licences. Until a commercial discovery of oil/gas is made and production intiated NUNAOIL During 2018, NUNAOIL intiated a com- is expecting its result to show a deficit. prehensive resource assessment project. Due to being a carried partner, NUNA The aim of the project is to point to- OIL is not exposed to expenditures until wards those areas of Greenland which oil production has commenced, which is has the greatest petroleum exploration a decision that lies many years ahead. potential. The project is being carried out in close co-operation with geolo- Attached to each awarded explora- gists from the Ministry of Industry and tion- and exploitation licence in Green- Energy and the Geological Survey of land financial funds have been allo- Denmark and Greenland (GEUS) as well cated for developing the competence as other external international partners of the NUNAOIL staff. These funds are with NUNAOIL as project leader. The named Appendix 4 funds. In 2018, project is based on all new geological the total costs of this refundable build- knowledge and the many exploration up of competence amounted to DKK data that have been acquired during 717,000. The board and management the years. The results from the industrial are closely monitoring the use of the Ph.D. project, which is being carried out funds in order to ensure the best possi- by NUNAOIL’s Ph.D. student, will also be ble build-up of competence in the com- incorporated. pany.

Annual Report 2018 · Management’s review · NUNAOIL A/S 5 Expectations to 2019

Petroleum exploration in Greenland The areas, which will be evaluated dur- The result of the project will be a stand- has been going on for almost 50 years. ing the project period, are: ardized resource assessment of the en- During that period enormous amounts 1. Davis Strait og Labrador Sea tire Greenlandic subsurface. This has have been invested in exploration pro- 2. Baffin Bay never been done before and makes the jects as well as environmental and so- 3. Offshore Disko West and onshore project quite unique. The results will be cioeconomic projects, and the interest Disko-Nuussuaq made public available during the 3.5 has created work locally as well as in- 4. Central East Greenland years project period. It is expected that ternationally. The first exploration and 5. Nordeast Greenland the results will be of great value for exploitation licences were awarded off- 6. Southeast Greenland the strategic planning and for qualified shore West Greenland during the 70’s. 7. North Greenland marketing of the Greenlandic petrole- Later on the exploration interest moved um potential towards the global oil in- further North and then to the East due dustry. to licensing rounds held by the Green- landic authorities.

Today, the exploration interest in Green land is less than it was just a few years ago. The main reason for this is that Greenland is an expensive area with great geological uncertainty to carry out exploration activities and a drilling pro- gramme in 2010-2011, which did not lead into a commercial discovery. 7. North Greenland

During the many years of intensive exploration activity in Greenland, almost 5. Northeast Greenland 300,000 km 2D seismic data offshore West and East Greenland, offshore and onshore stratigraphical cores, 14 offshore exploration wells of which some have been drilled far North and Green-

land’s largest – and some of the World’s 2. Baffin Bay most northerly 3D seismic surveys with the acquisition of more than 35,000 km2 data have been carried out. These

data represents a large value for Green- 4. Central East Greenland land in terms of knowledge, and they have shown that the geological circum- 3. Disko West stances for making a petroleum discovery are present.

In order to be able to quantify how much oil and/or gas there is most likely present within the different areas, as well as where the likelihood of finding these resources is largest, NUNAOIL has initiated a resource assessment project.

The aim of this project is to point to- 6. Southeast Greenland wards those areas in Greenland which have the largest petroleum exploration potential. The resource assessment pro- 1. Davis Strait and Labrador Sea ject began in 2018 and continues until mid-2022.

6 Annual Report 2018 · Expectations to 2019 · NUNAOIL A/S The Greenland Sea

Petroleum exploration in the Greenland 1. subperiod. There have been projects testing any of the mapped prospects in Sea began in 1991, when NUNAOIL as of both geological, technical, environ- terms of an exploration well. an operator for a consortium of 7 in- mental and socioeconomical character. ternational oil companies – also called the KANUMAS (Kalaallit Nunaat Ma- At the end of 2018, the partnership rine Seismic) consortium – acquired of all three licences independently de- seismic data with the help from the cided to relinquish the licences to the Danish navy and their inspection ship Greenlandic authorities. It is especially ’Thetis’. This was the first larger seismic the profitability which has been essen- project which was carried out offshore tial for this decision. Offshore North- Northeast Greenland. During four sea- east Greenland is an expensive area to sons almost 7000 km 2D seismic da- carry out exploration, and the currently ta were acquired, and these data were low oil price is pushing the profitabili- the reason for the first exploration in- ty of this area. With this decision there terest within that area. will be no licences within the Green- land Sea at the end of year 2018. In 2013, the first exploration and exploitation licences offshore Northeast All three licences were relinquished at Greenland were awarded to various the end of the 1. subperiod without partnerships during a licensing round held by the Greenlandic authorities. FACTS – GREENLAND SEA Since then, some of the licences have been relinquished to the Greenlandic Active licences 3 authorities, and in 2018 NUNAOIL was a carried partner in just three explora- Licenced area 7.438 km2 tion and exploitation licences with a Exploration wells 0 licence share of 12.5%. Two of these, ’Amaroq’ and ’Avinngaq’, were award- 3D seismic 0 km2 ed in 2013, and have a size of 2630 2D seismic approx 94.700 km km2 and 2548 km2 respectively. These two licences are operated by ENI and Equinor respectively. The third licence, ’Qialivaq’, which is operated by ENI, was awarded in 2014 and has a size of 2260 km2.

The Greenland Sea licences are some of the most northerly situated exploration licences, which have ever been awarded in Greenland. The area is known for its relative harsh ice conditions and remote location. None the less, the licensees of the three licen ces have acquired several thousand km 2D seismic with great operational success. These data have been the basis for the geological mapping of the licence areas. Several prospects have been mapped, of which all have potential of commercial discoveries of hydro- carbons. Exploration Licences 2018

ENI, BP, Ineos, & Nunaoil In 2018, the partnerships have fo- ENI, BP & Nunaoil Equinor & Nunaoil cused on completing the comprehensive work program, which have been 0 25 50 100 a part of the licence conditions for the Km

Annual Report 2018 · The Greenland Sea · NUNAOIL A/S 7 Jameson Land

NUNAOIL is a carried partner in 2 exploration and exploitation licences onshore Jameson Land in East Greenland with a licence share of 6.25%. The licences were awarded in 2015 with an exploration period of 10 years. Green- land Gas & Oil is the operator of both

licences. Qaarsut !

In 2018, there have been no operational activities within the licence areas. The focus of the partnership has been to use already existing data for the assessment of the prospectivity within the licence areas. Nerlerit Inaat ! Narsarsuaq !

Itterajivit ! !Illoqqortoormiut !Uunarteq

Exploration Licences 2018

Greenland Gas & Oil Plc.& Nunaoil

0 25 50 100 Km

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 2018 · Jameson Land · NUNAOIL A/S NUNAOIL’s industrial Ph.D. project

The industry Ph.D. project, which NUNAOIL initiated in 2016, contin- ued its progress during 2018. Focus has been on mapping and developing the seismic stratigraphic model for the Paleocene-Eocene time interval for several of the basins in the southern part of the Disko West area and the northern part of the Davis Strait. The focus has particularly been on the Si- simiut Basin, the Ikermiut Basin and the southern part of the Aasiaat Basin, basins bounded by the Ikermiut Fault Zone, the Hellefisk Structure, the Davis Strait High and the Kangeq High.

The study has furthermore focused on the tectonic and structural development of the Ikermiut Fault Zone and its potential as source for sediments in the Sisimiut and Ikermiut basins respectively. Using both multiattribute maps and structural reconstruction of selected seismic profiles, it is suggested that the Ikermiut Fault Zone has acted as sediment source for the Ikermiut Basin and with a change in sediment provenance area during Paleocene-Eocene time in such a way that different areas of the Ikermiut Fault Zone has acted as sediment source through time for the Iker- miut Basin.

Furthermore, the results suggests that some of the smaller intra-basinal highs in the Ikermiut Basin could also have acted as sediment source in the southern part of the Ikermiut Basin, which further complicates the mapping of sedimentary facies in the basin.

The results are being communicated as publications in international scientific journals. It is expected that the indu stry Ph.D. project terminates during the first half of 2019 and the results will be incorporated into the resource evaluation project initiated by NUNAOIL.

The project is financed equally by the Danish Innovation Fond and NUNAOIL.

Annual Report 2018 · 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 mini- mize 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 an exploration licence turns lows: into an exploitation licence – a decision lying many years • NUNAOIL may not maintain its staff ahead. For NUNAOIL mapping of financial risk factors is a • NUNAOIL may not develop existing or new projects at the constant area of focus. desired pace • NUNAOIL’s share in its partners’ projects are diluted or The risk factors at present primarily being relevant to the withdrawn company are: Cooperation and partners Authorities and legislation If NUNAOIL is not given satisfactory financing the company Changes in legislation and administrative practices in Green- is unable to contribute in relation to the agreed ideal num- land are of considerable concern to NUNAOIL. It may be in ber of shares in established or future partnerships. The Com- relation to awarding, extending, and transfer of licenses as pany’s share in such projects, as a consequence, will be dilut- well as taxation, employment conditions, environment pro- ed or possibly withdrawn and NUNAOIL will risk losing influ- tection, safety and all other conditions and areas where the ence and other rights in such co-operations. relevant resort authorities and not NUNAOIL have the competence of deciding. In addition to that entering into and Currency meeting partnership agreements are subject to the approval NUNAOIL has placed some of its available funds in US$, but of the authorities. NUNAOIL cannot guarantee that such ap- as the Company has balanced its outstanding accounts and provals from authorities may be obtained on conditions and obligations in the same currency, risks concerning rate of ex- terms satisfactory to the Company. change is minimized.

10 Annual Report 2018 · 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 ge- ance. ologist. She joined the Company as the new Managing Di- rector on 1 January 2018. The Management of NUNAOIL NUNAOIL, consequently, has posted a full description regard- receives a fixed numeration incl. pension of DKK 917,829 . ing the guidelines for limited companies owned by the Gov- Expenses 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 2018 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 50,000 pr. year. The Chairman is paid DKK 150,000 pr. year • Søren Lennert Mortensen, Vice Chairman and the vice-chairman DKK 75,000 per year. The fee is in • Peter Helmer Steen 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 2018 · Corporate governance · NUNAOIL A/S 11 Guidelines and policies

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

12 Annual Report 2018 · Guidelines and policies · NUNAOIL A/S Health, Environment protection and Safety – the offshore activities rests on the operator of the license. As a li- HSE policy of NUNAOIL cense partner NUNAOIL actively follows up on the HSE activ- NUNAOIL’s activities are based on health, environment pro- ities of the operators in order to provide input for them and tection and safety and are regarding HSE as a prioritized and other participants in their licenses whenever considering ap- integrated part of the activities and culture of the Company. propriate in relation to the current acts and regulations. Compliance with these obligations, resting with the Compa- ny due to legal acts, statutory regulations and license agree- The Ministry of Industry and Energy and the Ministry of Na- ments in the Greenland oil industry is contributing to NUNA ture, Environment and Justice are to monitor that companies OIL’s activities being performed in a sustainable way aiming comply with all HSE requirements concerning employees and at minimizing harmful influence to the environment and safe- in relation to the public and the environment to the extent guarding the safety and health of the Company’s employees. they are influenced by decisions concerning design, construc- All employees of NUNAOIL have a joint responsibility for ob- tion, execution of operations, maintenance and abandoning serving that work in the Company is undertaken under se- activities or facilities. NUNAOIL is striving to influence opera- cure conditions and in a way that cares for and promotes the tors and partners in the licenses to select the optimal systems health of the individual and protects the environment. and solutions in relation to the requirements of the authorities. The foundation for the HSE-policy of NUNAOIL is the Green- land Minerals Act the aim of which is to ensure that the hy- Business ethical guidelines of NUNAOIL drocarbon activities in Greenland are performed in a respon- The purpose of the business ethical guidelines of NUNAOIL is sible way regarding health, environment and safety, exploita- to clarify the principles that are to permeate the operation of tion of the resources, social impact and in all aspects are com- the company and the behaviour of its employees in combi- plying with approved and best international standards for the nation with the other policies and the Personnel Manual. The oil and gas industry. These standards are to be adhered to in guidelines comprise subjects like working environment, re- the technical arena as well as in relation to social influence. sponsible behaviour, language policy, conflicts of interest and The Minerals Act specify the requirements to the license hold- confidentiality, ethics and bribing, communication, IT, com- er to as far as possible observe that activities related to hy- plaints and reports of worries. The entire policy may be read drocarbon activities take place under control, identification or downloaded on the homepage of the company. of risks, assessment of risks and minimizing of risks. The Act furthermore stresses that the final responsibility concerning

Exploration and exploitation licences in Greenland 2018

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% INEOS 17,50% 2015/14 - ”Block 3” NUNAOIL 12,50% Greenland Gas & Oil 93,75% NUNAOIL 6,25% 2013/41 - ”Avinngaq” Equinor 87,50% NUNAOIL 12,50%

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

* All exploration and exploitation licences have been relinquished December 31st 2018

Annual Report 2018 · Guidelines and policies · NUNAOIL A/S 13 Management’s statement

MANAGEMENT ENDORSEMENT per December 31st 2018 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 2018. January – 31st of December 2018 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 2019

MANAGEMENT DIRECTOR

Signe Ulfeldt Hede

BOARD OF DIRECTORS

Stine Bosse Søren Lennert Mortensen Chairman Vice Chairman

Peter Helmer Steen

14 Annual Report 2018 · Management’s statement · NUNAOIL A/S Annual Report 2018 · NUNAOIL A/S 15 Independent auditor’s report

TO THE SHAREHOLDER OF NUNAOIL A/S Auditor’s responsibilities for the audit of the annual accounts Opinion Our objectives are to obtain reasonable assurance about We have audited the annual accounts of NUNAOIL A/S for whether the annual accounts as a whole are free from ma- the financial year 1 January to 31 December 2018, which terial misstatement, whether due to fraud or error, and to comprise accounting policies used, profit and loss account, issue an auditor’s report including an opinion. Reasonable balance sheet, cash flow statement and notes. The annu- assurance is a high level of assurance, but is not a guaran- al accounts are prepared in accordance with the Financial tee that an audit conducted in accordance with international Statements Act. standards on auditing and the additional requirements applicable in Greenland will always detect a material misstate- In our opinion, the annual accounts give a true and fair view ment when it exists. Misstatements may arise due to fraud of the company’s assets, liabilities and financial position at or error and may be considered material if, individually or in 31 December 2018 and of the results of the company’s op- the aggregate, they could reasonably be expected to influ- erations and cash flows for the financial year 1 January to ence the economic decisions made by users on the basis of 31 December 2018 in accordance with the Financial State- the annual accounts. ments Act. As part of an audit conducted in accordance with interna- Basis for opinion tional standards on auditing and the additional requirements We conducted our audit in accordance with international applicable in Greenland, we exercise professional evaluations standards on auditing and the additional requirements appli- and maintain professional scepticism throughout the audit. cable in Greenland. Our responsibilities under those stand- We also: ards and requirements are further described in the below section “Auditor’s responsibilities for the audit of the annu- • Identify and assess the risks of material misstatement in al accounts”. We are independent of the company in ac- the annual accounts, whether due to fraud or error, design cordance with international ethics standards for accountants and perform audit procedures in response to those risks, (IESBA’s Code of Ethics) and the additional requirements ap- and obtain audit evidence that is sufficient and appropriate plicable in Greenland, and we have fulfilled our other ethical to provide a basis for our opinion. The risk of not detect- responsibilities in accordance with these standards and re- ing a material misstatement resulting from fraud is high- quirements. We believe that the audit evidence obtained is er than the risk of not detecting a misstatement resulting sufficient and appropriate to provide a basis for our opinion. from error, as fraud may involve collusion, forgery, inten- tional omissions, misrepresentations, or the override of in- The management’s responsibilities for the ternal control. annual accounts The management is responsible for the preparation of an- • Obtain an understanding of the internal control relevant to nual accounts that give a true and fair view in accordance the audit in order to design audit procedures that are ap- with the Financial Statements Act. The management is al- propriate in the circumstances, but not for the purpose of so responsible for such internal control as the management expressing an opinion on the effectiveness of the compa- determines is necessary to enable the preparation of annual ny’s internal control. accounts that are free from material misstatement, whether due to fraud or error. • Evaluate the appropriateness of accounting policies used by the management and the reasonableness of account- In preparing the annual accounts, the management is re- ing estimates and related disclosures made by the manage- sponsible for evaluating the company’s ability to continue as ment. a going concern, and, when relevant, disclosing matters related to going concern and using the going concern basis of accounting when preparing the annual accounts, unless the management either intends to liquidate the company or to cease operations, or if it has no realistic alternative but to do so.

16 Annual Report 2018 · Independent auditor’s report · NUNAOIL A/S • Conclude on the appropriateness of the management’s Statement on the management’s review preparation of the annual accounts being based on the The management is responsible for the management’s re- going concern principle and, based on the audit evidence view. obtained, whether a material uncertainty exists related to events or conditions that may raise significant doubt about Our opinion on the annual accounts does not cover the the company’s ability to continue as a going concern. If we management’s review, and we do not express any kind of as- conclude that a material uncertainty exists, we are required surance opinion on the management’s review. to draw attention in our auditor’s report to the related disclosures in the annual accounts or, if such disclosures are In connection with our audit of the annual accounts, our re- inadequate, to modify our opinion. Our conclusions are sponsibility is to read the management’s review and in that based on the audit evidence obtained up to the date of connection consider whether the management’s review our auditor’s report. However, future events or conditions is materially inconsistent with the annual accounts or our may cause the company to cease to continue as a going knowledge obtained during the audit, or whether it other- concern. wise appears to contain material misstatement.

• Evaluate the overall presentation, structure and contents of Furthermore, it is our responsibility to consider whether the the annual accounts, including the disclosures in the notes, management’s review provides the information required un- and whether the annual accounts reflect the underlying der the Financial Statements Act. transactions and events in a manner that gives a true and fair view. Based on the work we have performed, we believe that the management’s review is in accordance with the annual ac- We communicate with those charged with governance re- counts and that it has been prepared in accordance with the garding, among other matters, the planned scope and tim- requirements of the Financial Statement Acts. We did not ing of the audit and significant audit findings, including any find any material misstatement in the management’s review. significant deficiencies in the internal control that we identify during our audit.

Nuuk, 19. February 2019

Grønlands Revisionskontor A/S statsautoriserede revisorer CVR‑nr. 12 24 49 67

Per Jansen State Authorized Public Accountant mne21323

Annual Report 2018 · Independent auditor’s report · NUNAOIL A/S · NUNAOIL A/S 17 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 is submitted in DKK. Other operating income are items of lesser importance com- pared 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 including holiday pay and pension as well as costs associated Liabilities are included in the balance if it is likely that future with social security etc paid to staff and travel and accom- economical advantages will be denied the company and the modation of Board etc. value of the denied asset can be reliably estimated. Depriciation and writing down Initially, assets and liabilities are stated at cost price. Subse- Depriciation and writing down contains depriciations and quently, assets and liabilities are assessed as described below profits and losses on sale of tangible fixed assets. in each item of the account. When calculating and measuring consideration has been taken to foreseeable losses and Financial income and expenses risks appearing before the submission date of the annual Financial income and expenses comprise interest realized report and related to conditions existing on the day of bal- and unrealized capital gain from transactions in foreign cur- ance. rency, amortizing of financial assets and liabilities as well as allowances and grants under the account tax scheme etc. Fi- Conversion of foreign currency nancial income and expenses are calculates as the amounts Transactions in foreign currency are converted to the rate of related to the accounting year. 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. BALANCE

Outstanding debt, liability and other monetary items in for- Property and equipment eign currency are calculated to the rate of exchange on the Buildings, plants and other facilities, fixtures and furniture day of the balance. The difference between the rate of the are assessed at cost value less accumulated depreciation and day of the balance and the rate of the day of the incurrence impairment losses. of the liability or the debt or calculation related to the accounting year is stated under financial profit and costs. Basis for assessing the depreciation is cost less the expected residual value after end of use.

Cost comprises the cost of acquisition and expenses direct- ly related to the acquisition at the time when the asset was ready for use.

18 Annual Report 2018 · Accounting Policies · NUNAOIL A/S Depreciation is calculated on a straight line basis over the ex- Cash pected lives of the asset: Cash is deposits in banks and cash. Other plants, fixtures, furniture etc. 3-5 years Liabilities Assets of a cost of less than DKK 10,000 kr. pr. unit are rec- Financial liabilities are calculated from the time of borrowing ognized in the income statement as costs of the year of of the sum less costs of the transaction. In the following pe- acquisition. riod the financial liabilities are stated at amortized cost corresponding to the capitalized value using the effective rent Profit or loss from sale of material assets is calculated as the of interest, so the difference between the proceeds and the difference between the sales price less expenses from sale of nominal value is stated in the result over the period of loan. the assets and the accounting value at the time of sale. Prof- it or loss is entered as depreciation in the balance. Any other liability comprising debt to supplier and other debt is entered at amortized cost which is normally corre- Outstanding accounts sponding to nominal value. Outstanding accounts from sales and services are measured at amortized costs normally corresponding to nominal value. Prepayments They are reduced to net sales value in order to take into ac- Received payments relating to subsequent years are stated count any expected loss. as items for a limited period.

Prepayments Prepayments entered under assets comprise paid costs related to the following accounting period.

Annual Report 2018 · Accounting Policies · NUNAOIL A/S 19 CASH FLOW STATEMENT Cash flow from financing activities The cash flow statement shows the cash flow during the Cash flow from financing activities comprises changes in the year split up into operational activities, investment activities amount or composition of joint capital of the company and financing activities for the year, the movements of assets and its related costs. Additionally, the cash flows comprise during the year as well as assets at the beginning and the raising of a loan, installments of interest-bearing loans, and end of the year. payment of dividend.

Cash flow from operational activities Liquid assets Cash flow from operational activities are states as the result Liquid assets comprise liquids less short-term debt to finan- of the year adjusted for non-cash operational items, changes cial institutions and short-term securities with a run for less in operational capital and paid company tax. than 3 months, that without delay can be turned into liquids and only have insignificant risk of changing their value Cash flow from investment activities Cash flow from investment activities comprises payments in connection with purchase and sale of companies and activi ties as well as purchase and sale of nonmaterial, material and financial investments.

20 Annual Report 2018 · Accounting Policies · NUNAOIL A/S Income statement 1 January ‑ 31 December 2018

Note 2018 2017 DKK 1,000

Revenue 103 0 Other operational profit 19 191 Other external costs -1,054 -1,338

Gross profit ‑932 ‑1,147

2 Staff costs ‑1,898 -4,046 3 Depreciation 13 2,053

Profit before net financials ‑2,817 ‑3,140

Other financial income 38 123 4 Other financial costs -6 -15

Result before tax ‑2,785 ‑3,032

Result of the year ‑2,785 ‑3,032

Proposed disposal of the result:

Disposed from transferred result ‑2,785 -3,032 Disposed in total ‑2,785 ‑3,032

Annual Report 2018 · Income statement 1 January ‑ 31 December 2018 · NUNAOIL A/S 21 Balance sheet 31 December 2018

Note 2018 2017 DKK 1,000

ASSETS

Fixed assest 5 Other plants, fixtures and furniture 0 39 Tangible fixed assets total 0 39

Deposits 41 0

Financial fixed assets 41 0

Fixed assets 41 39

Current assets Assets for sale 36 0 Holdings 36 0

Other receivables 88 3,690 Prepayments 55 66 Receivables total 143 3,756

Cash holdings 35,497 33,034

Current assets, total 35,676 36,790

Assets total 35,717 36,829

LIABILITIES

Equity

6 Share capital 10,000 10,000 7 Debt to credit institutions 1,343 4,129 Long-term liabilities, total 11,343 14,129

Liabilities Debt to banks 61 22 Suppliers of goods and services 95 156 Other debt 276 700 8 Prepayments 23,942 21,822 Short-term liabilities, total 24,374 22,700

Liabilities, total 24,374 22,700

Liabilities & equity total 35,717 36,829

1 Fee to auditor of the General Meeting 9 Close parties

22 Annual Report 2018 · Balance sheet 31 December 2018 · NUNAOIL A/S Cash flow statement 1 January – 31 December 2018

Note 2018 2017 DKK 1,000

Result of the year ‑2,785 -3,032 10 Adjustments ‑45 -2,161 11 Changes in Working Capital 5,211 -2,684 Cash flow from operation before net financials 2,381 -7,877 Interest received and similar 27 124 Interest payments and similar ‑6 ‑8 Net income 2,402 -7,761

Cash flow from operational activities 2,402 ‑7,761

Sale of tangible fixed assets 16 4,713 Purchase of financial fixed assets -41 0 Other cash flow from (used in) investment activities 36 0 Cash flow from investment activities 11 4,713

Change in cash 2,413 ‑3,048

Cash as per January 1st 2018 33,012 36,067 Regulation of rate of exchange (cash) 11 -7 Cash as per December 31st 2018 35,436 33,012

Cash Cash available 35,497 33,034 Short-term liabilities to financial institutions -61 -22 Cash as per December 31st 2018 35,436 33,012

Annual Report 2018 · Cash flow statement 1 January – 31 December 2018 · NUNAOIL A/S 23 Notes

2018 2017 DKK 1,000

1. Fee to the auditor of the General Meeting Grønlands Revisionskontor A/S, statsautoriserede revisorer 172 140

Fee paid for statutory audit 60 60 Fee for other services 112 80 172 140

2. Staff costs Salaries 1,538 3,262 Pensions 166 384 Other costs related to social security 28 46 Other staff costs 166 354 1,898 4,046

Directors 918 1,592 Board 275 353 1,193 1,945

Average number of employees 2 4

For salaries an amount of DKK 335,000 is related to re-invoicing cf. Appendix 4, for 2017 the amount is DKK 335,000.

3. Depreciations Depreciation of buildings 0 162 Depreciation of plants, fixtures and furniture -13 -2,215 -13 ‑2,053

4. Other financial cost Other financial cost 6 15 6 15

5. Tangible fixed assets Other plants, fixed assets DKK 1,000 furniture

Cost as per January 1st 2018 794 Acquisition Cost of fixed asset -3 Transfers -36

Cost as per December 31st 2018 755

Depreciation 1 January 2018 755 Depreciation 31 December 2018 755

Accounting value as per December 31st 2018 0

24 Annual Report 2018 · Notes · NUNAOIL A/S 2018 2017 DKK 1,000

6. Share capital Share capital as per January 1st 2018 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.

7. Transferred result Transferred result from January 1st 2018 4,128 7,161 Transferred profit or deficit of the year ‑2,785 -3,032 1,343 4,129

8. Prepayments Provision for exploration activities 17,729 19,319 Reamaining unused Appendix 4 funds 6,117 2,503 Other prepayments 96 0 23,942 21,822

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 Industry and Energy – be used for hydrocarbon-related exploration in Greenland where information provided by exploration activities are made available to KANUMAS group free of charge.

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.

9. Related parties Related parties are the Board of Directors and the Managing Director as well as the shareholder, the Government of Greenland.

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

Annual Report 2018 · Notes · NUNAOIL A/S 25 2018 2017 DKK 1,000

10. Adjustments Depreciations and writing down of fixed and intangible assets -13 -2,053 Other financial income -38 -123 Other financial costs 6 15 ‑45 ‑2,161

11. Changes in Working Capital Changes in inventories -36 0 Changes in receivables 3,612 81 Changes in supplier debt and other debt 1,635 -2,765 5,211 ‑2,684

26 Annual Report 2018 · Notes · NUNAOIL A/S