Norway Company Analysis

UNIVERSITY OF AKRON Norway Company AnalysisThomas Bishop Ginger Edmonds Daniel Carrier Cory Facemire Group 7 12/2/2008 Instructor: Dr. Chandra1 Introduction:XYZ Financial Company has been hire by Dr. Chanda to perform analysis of six Norwegian Companies of XYZ’s choosing to invest into and benchmark information security systems after. In the follow, we will identify the criteria for choosing the six companies to analyze, disclose the ranking system applied in the evaluation, a brief description of each company, conclusions from the research and finally recommendations. Criteria for Norwegian Companies:The criteria used to choose the companies to be evaluated were obtained by entering parameters into Research Insight. The parameters were set as companies with a net income greater than 0 and a return on equity of greater than .15. Researched Insight retrieved 28 companies that fit our criteria. These parameters were chosen due to current market conditions as economies report recessionary conditions (cite). Within the 28 companies, there are 7 in the energy industry, which is one of Norway’s leading exports (cite). We chose the energy industry because of the relevant exposure the oil industry across the global has been getting with their high prices and profits. Ranking System:The ranking system will consist of six information security system disclosures. Each company will be evaluated based on their individual financial statements for the past five years. Each company will be scored and averaged in according with the frequency of the information disclosed. The ranking is based on the following:2 1). Does the company include an external audit within their individual reports?Scoring: 0 – was not included in the reports 5 – included, but showed weak internal controls 10 – included and showed no internal control weakness2). What is the degree that risk, controls, and governance are mentioned within the reports? (Norway Government Standards)Scoring:  0 – if controls are only mentioned briefly  5 – if internal controls are mentioned in additional sections more than once 10 – internal controls are mentioned throughout the reports greater than two different occurrences3.) Does the company disclose improvements about their internal controls? Scoring:  0 – no mention of any weakness or strengths 5 – shows weakness within the system  10 – show improvements upon prior areas of weakness4.) Does the company mention or show that management is ultimately responsible for the company’s internal controls?Scoring : 3  0 – no mention of management responsibility  5 – show that management is held responsible for internal controls 10 – based on management’s evaluation of the company’s internal controls are effective5). How well do the companies disclose their Internal Controls?Scoring :  0 – no framework or structure was mentioned for internal controls within the report 5-mention internal controls and disclosures  10 – internal controls substantially presented within the reports6). How does the company rank according to its financial and operational risk?Scoring :  0-High risk 5-Medium risk 10-Low riskNorwegian Companies:Statoilhydro is an international energy company, focusing mainly on upstream oil and gas operations. Statoil, a company with over 30 years of experience, merged with Hydro’s oil and gas in October of 2007 to create Statoilhydro. This company has emerged as a world leader in the use of deepwater technology operating in waters 100 meters and deeper. The company uses this technology in their oil and gas operations 4 along with carbon capture and storage. The company is primarily held by the Norwegian State Ministry of Petroleum and Energy. Statoil took advantage of their political power along with monetary influence in 4 major corruption cases since 1991. The government’s65% stake in the company has help the company maintains stability but has also weakened the management responsibility (Statoilhydro 2008). . Management responsibility was the major weakness that was found for Statoilhydro, and their strength was internal controls. The financial reports’ used internal controls to assess and mitigate risk throughout the company. According to Wright Investment Services, Statoilhydro is a strong investment. The company seems profitable and will remain stable with government interest so the company will continue to grow (Wright Investment Services 2008). For Statoilhydro’s scorecard, see Figure 1.Aker Solution is involved with oil and gas exploration and products. The company is a subsidiary to Aker ASA. Aker ASA is a diverse company with affiliations from seafood to clean carbon and DOF supply. Aker ASA holds 60% of Aker solution, just recently selling the remaining 40%: 30% to the government, 7.5% to SAAB, and 2.5% to investors. Aker Solution is involved with several different industries. Oil and Gas, Refining and Chemicals, Mining and Metals, and Power Generation each have a different member that makes up their executive team. The executive team was implemented after a merger of Russian rival who was hurt by poor management. This team has created management responsibility in Aker solution, which was determined to be their strength (Aker Solution 2008). The major weakness of Aker solution was their risk, control, and governance mostly due to the numerous sectors that the company is involved with. Wright Investment Services rated Aker Solution a moderate to strong 5 investment that is profitable and has potential to grow (Wright Investment Services 2008). For Aker Solution’s scorecard, see Figure 2.Solstad Offshore ASA is a Norway company that is in the oil and gas drilling sector. They have 29 vessels that they operate out of their headquarters. These vessels are used in their three business segments. Solstad Offshore ASA employs about 1,000 people of which 73% work at sea. The company had a record sales volume for 2007 of 2,216 million NOK. They also do business in the North Sea, Mediterranean, West Africa, Asia, and the Americas. In our ranking system, their strength was risk, control, and governance because they had a governance plan in their annual report. Their weakness was with management responsibilities because top management was lacking with regards to responsibilities with the financial reports. Solstad Offshore ASA’s overall average is 25%. For Solstad Offshore ASA’s scorecard, see Figure 3.PGS-Petroleum GEO-Services is an oil and gas drilling company. Their website has the largest multi-client data base in regards to oil reserves, current expeditions and all other energy related fields. The Geophysical Services Division is located throughout world analyzing and collecting raw material resources. The website also has an extensive investor relations file, which provides investors with current financial and market indicators about the company itself and the industries market standing. The corporate governance with in the company’s profile is well disclosed and it is apparent their ongoing improvements. In their scorecard (Figure 4), the company’s strength is their disclosure of an external audit in the financials. The company’s weakness is their financial and operational risk. The company’s average score is 30%.6 Revus Energy is in the oil and gas sector and was founded in 2002. The organizations goal is to be a medium-sized company, and they explore for oil reserves along the Norwegian continental shelves. In 2005, there were increased internal and external controls due to the implementation of International Financial Reporting Standards (IFRS) in the European Union. Their area of strength was identifying financial and operational risk, and their weakness was disclosing improvements in their internal controls from the prior year. Revus’s audit report did not disclose any control framework, such as COSO/COBIT. Financial risk was calculated by total liabilities divided by total equity. Operational risk was determined comparing fixed assets to the total assets of the company. For Rebus Energy’s scorecard, see Figure 5.Subsea 7 Inc. is also in the oil & gas sector, and they operate throughout the world. They employ roughly about 5,500 employees and are one of the world’s leading companies in subsea engineering and construction. After reviewing the financials from the previous five years, there was an increase in external and internal controls in 2005. Subsea 7’s strength was disclosing internal controls. While on the other hand, their weakness was disclosing improvements in their internal controls from the prior year. As far as control frameworks, the audit report did not mention the use of COSO/COBIT. For Subsea 7 Inc.’s scorecard, see Figure 6.Conclusions from Research:The graph in Figure 7 illustrates a ranking of the company’s income. We converted all of the financial statements to $USD thousands.In conclusion, we found that higher income does not necessitate increased controls, but it may help. In 2005, there was an increase of internal and external controls 7 due to the implementation of International Financial Reporting Standards (IFRS). Lastly in 2006, we found that there was an increase in governance from 2005. The graph in Figure 8 illustrates the ranking of the company’s be the research ranking on information security systems. The ranking is based on overall average of disclosure.Recommendations:There are several recommendations that will help to strengthen the companies if implemented. From all of the information provided above, we made the following ones. The benchmark for the companies was Statoilhydro because they scored second in our ranking and had the highest net income from the companies we picked. However with Statoilhydro, there needs to be corruption controls put in to effect for their company because the government owns so much of the company. The other recommendations that apply to all the companies is that there needs to be external audits done by more of the companies, and the companies need to put more internal controls in place. Also, management responsibility was fairly low for the majority of companies. Limited management responsibility increases the risk of corruption, especially with government backing as seen from Statoilhydro. A system that requires executives to take the blame for avoidable errors will add to management responsibility. These are the recommendations for our six companies. 8 Figure 1 Statoilhydro’s ScorecardYear ended 2003 2004 2005 2006 2007 Question: 1 – External Audit 5 5 10 10 0 2 – RCG 0 0 0 5 10 3 – Improvements 10 10 5 5 5 4 – Mgmt Responsibility 0 0 0 0 0 5 – Internal Control 5 5 10 10 10 6 – Fin/Oper. Risk 5 5 5 5 5 Total: 25/60 25/60 30/60 35/60 30/60Average: 24/60=40%9 Figure 2 Aker Solution’s ScorecardYear ended 2003 2004 2005 2006 2007 Question: 1 External Audit 0 0 0 0 0 2 RCG 0 0 0 5 5 3 Improvements 5 5 10 10 10 4 Mgmt Responsibility 5 10 10 10 10 5 Internal Control 5 5 10 10 10 6 Fin/Oper. Risk 5 10 0 0 0 Total: 20/60 30/60 30/60 35/60 35/60 Average: 25/60=42%10 Figure 3 Solstad Offshore ASA’s ScorecardYear Ended: 2003 2004 2005 2006 2007 Question: 1 External Audit 0 0 0 0 0 2 RCG 5 5 5 5 10 3 Improvements 0 0 0 0 0 4 MgmtResponsibility 0 0 0 0 0 5 Internal Control 5 5 5 5 5 6 Fin/Oper. Risk 5 5 5 5 5 Total: 15/60 15/60 15/60 15/60 15/60 Total: 15/60 15/60 15/60 15/60 15/60 Average: 15/60=25%11 Figure 4 PGS-Petroleum GEO-Services’s Scorecard Year Ended: 2003 2004 2005 2006 2007 Question: 1 External Audit 5 5 0 10 10 2 RCG 0 0 5 5 5 3 Improvements 0 0 5 0 5 4 Mgmt Responsibility 5 5 5 10 10 5 Internal Controls 0 5 5 0 5 6 Fin/Oper. Risk 5 0 0 0 0 Total: 15/60 15/60 20/60 25/60 35/60 Average: 18/60=30%12 Figure 5 Revus Energy’s ScorecardYear Ended: 2003 2004 2005 2006 2007 Question: 1 External Audit 0 0 5 5 5 2 RCG 0 0 5 5 10 3 Improvements 0 0 0 0 0 4 Mgmt Responsibility 0 0 0 5 5 5 Internal Controls 0 0 10 10 10 6 Fin/Oper. Risk 5 5 10 10 10 Total: 5/60 5/60 30/60 35/60 40/60 Average: 19/60=32%13 Figure 6 Subsea 7 Inc.’s ScorecardYear Ended: 2003 2004 2005 2006 2007 Question: 1 External Audit 0 0 10 10 5 2 RCG 0 0 5 10 10 3 Improvements 0 0 0 0 0 4 MgmtResponsibility 0 0 0 10 10 5 Internal Controls 0 0 10 10 10 6 Fin/Oper. Risk 0 5 0 10 10 Total: 0/60 5/60 25/60 50/60 45/60 Average: 21/60=35%14 Figure 715 Figure 8 Averages on Ranking16 References:Aker Solutions. 2008. Factsheet.http://www.akersolutions.com/Internet/InvestorRelations Analyticalinformation/Factsheet.htm(last accessed November 25, 2008)Aker Solution. 2007,2006,2005,2004. Financial Statements. http://www.akersolutions.com/NR/rdonlyres/78C1DC15-71FB-45B8-BC1C- 46DBF1DB03A9/15712/Annual_report1.pdf(last accessed November 25, 2008)CIA Factbook www.ciafactbook.comIIA Norway. 2008. Institute of Internal Auditors Framework. http://www.theiia.org/certification/certified-internal-auditor/cia-eligibility- requirements/approved-certifications-for-cia-prc-iv/index.cfm?i=2012(last accessed November 25, 2008).PGS. 2007,2006,2005,2004, 2003. Financial Statements. http://www.pgs.com/Investor_Relations/Financial_Reports/Annual_Reports/(last accessed November 25, 2008)PGS. 2008. Financial statements http://www.pgs.com/(last accessed November 25, 2008)Revus Energy. 2007,2006,2005,2004, 2003. Financial Statements. http://www.revus.no/investor-relations-reports.asp?id=530Solstad Offshore. 2008. http://www.solstad.no/web/internet.nsf/ (docs)/1D5205C03FD93D27C125730900310C02?opendocument&cat1=About us(last accessed November 25, 2008)Solstad Offshore. 2007,2006,2005,2004, 2003. Financial Statements. http://www.solstad.no/web/internet.nsf/ (docs)/00253B3EE4EC4A4BC12572F80048D412?opendocument&cat1=Investor %20Relations&start=1&count=10(last accessed November 25, 2008)Statoilhydro. 2007, 2006,2005,2004,2003 Financial statements. 2007http://www.statoilhydro.com/en/InvestorCentre/AnnualReport/2007/Downlo ads/SH%2020F%202007.pdf(last accessed November 25, 2008)Statoilhyrdro. 2008.AboutStatoilHydro. http://www.statoilhydro.com/en/AboutStatoilHydro/StatoilHydroInBrief/Pages/de fault.aspx. (last accessed November 25, 2008)17 Wright Investment Services. 2008 Quality rating. http://www.corporateinformation.com/Wright-Quality-Ratings.aspx(last accessed November 25, 2008)Subsea 7, 2003 http://www.subsea7.com/cms/pdf/report/Annual_report_2003.pdfSubsea 7, 2004 http://www.subsea7.com/cms/pdf/report/AnnualReport2004.pdfSubsea 7, 2005 http://www.subsea7.com/cms/files/Subsea_7_Inc_Annual_Report_2005.pdfSubsea 7, 2006 http://www.subsea7.com/cms/files/Subsea7AnnualReport2006.pdfSubsea 7, 2007 http://www.subsea7.com/cms/files/AnnualReport2007.pdfSubsea 7, home page http://www.subsea7.com/inv_forum.php?in=20&n=418

Norway Company Analysis

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