THE TRANSFORMATION OF ANNUAL REPORT 2014 THE HISTORY TABLE OF CONTENTS The story about Det norske is the story about entrepreneurship and a small start-up company from Trondheim that grew to be a major player on the Norwegian Continental Shelf. Through listing on the Introduction to Det norske stock exchange, mergers, acquisitions and organic growth, Det norske has been transformed into one of Europe’s largest listed independent E&P companies. 4 Five years with Det norske 5 Key figures 6 About Det norske 8 Key events in 2014 2005 2007 2009 2014 9 Quarterly financial results The current company was In October 2007, the In 2009, negotiations In the summer of 2014, 10 A great leap forward established in Trondheim boards of directors of regarding a merger with Det norske announced its 12 Hand in glove in 2005, through re- Pertra and DNO decided Aker Exploration com- acquisition of Marathon 16 Licences and exploration establishment of the E&P to carry out a merger of menced. Aker ASA was Oil Norge AS. Effective as 18 Ivar Aasen company Pertra. Pertra and the Norwe- a new major owner of Det of 15 October 2014, Det 24 A giant project creating major ripple effects gian interests of DNO, norske, and the merger norske emerged as a new 28 Production organized through the was effective from 23 and larger company with 34 Finance 2006 company NOIL Energy. December 2009. By year- considerable production 36 Health, safety and the environment In 2006, the company As a result of the merger, end 2009, the company from the Alvheim area 40 Corporate social responsibility (CSR) was listed on Oslo Børs Pertra changed its name had 176 employees. and an experienced ope- 42 A challenging year for the oil industry as Pertra ASA. By year- to Det norske oljeselskap rational organization in 44 Organization and the working environment end 2006, the company ASA. NOIL Energy’s li- Stavanger. As of 31 Decem- 48 The Executive Management Team had 29 employees. cence portfolio comprised 2013 ber, the company employed 50 Board of Directors inter alia the Ivar Aasen As operator and with start- 507 people. 52 Words and phrases and Johan Sverdrup li- up of production on the cences. By year-end 2007, Jette field, Det norske Board of Directors’ Report the company had 78 became in May 2013 a employees. fully-fledged oil company 56 Board of Directors’ Report with activities in the entire 72 The Board of Directors’ Report on Corporate Governance chain of value creation; exploration, development Financial Statements and production. By year- end 2013, the company 84 Financial Statements with Notes had 230 employees. 139 Statement from the Board of Directors and the Chief Executive Officer 140 Auditor’s Report Key figures 2014 2013 2012 2011 2010 No. of licence interests as of 31 December 79 80 67 65 66 No. of operatorships 35 33 26 28 30 Total production per year (boe) 5 704 900* 1 629 115 544 734 548 268 763 494 FIVE YEARS Average production per day (boe) 15 630* 4 463 1 488 1 502 2 092 Reserves (P50) as of 31 December (boe) 206 mill. 66 mill. 65 mill. 68 mill. 1 mill. WITH DET NORSKE Total operating revenues (USD million) 464 161 57 78 61 Operating profit/loss before depreciation and 208 -185 -272 -151 -214 amortization (USD million) Operating profit/loss (USD million) -299 -379 -660 -192 -263 Income/loss before taxes (USD million) -376 -433 -678 -234 -287 NumberNumber of licences of licences andand operatorships operatorships ShareShare performance performance *Adjusted for equity issues As of 31.12.2014 Net income/loss (USD million) -279 -93 -164 -66 -93 100,00 10 000 000 90 90,00 9 000 000 80 80,00 8 000 000 70 70,00 7 000 000 60 60,00 6 000 000 Volume Exploration costs (USD million) 158 279 276 181 234 50 50,00 5 000 000 40 40,00 4 000 000 Total exploration costs (expensed and 199 282 284 323 405 30 NOK per share* 30,00 3 000 000 capitalized) (USD million) 20 20,00 2 000 000 10 10,00 1 000 000 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2015 Cash flow before financing activities (USD million) -2 003 -321 -370 -47 -183 Operatorships Licences NOK per share Volume Book value of equity (USD million) 652 524 671 614 522 Market capitalization as of 31 December (USD million) 1 087 1 543 2 085 1 878 512 NumberNumber of of employees Total production As of 31.12.2014 600 Total production No. of shares as of 31 December 202 618 602 140 707 363 140 707 363 127 915 786 111 111 111 500 30 000 000 400 25 000 000 Nominal value per share as of 31 December (NOK) 1.00 1.00 1.00 1.00 1.00 20 000 000 300 Share price as of 31 December (NOK) 39.87 66.70 82.50 88.00 27.00 15 000 000 200 Barrels of o.e. 10 000 000 100 5 000 000 No. of employees as of 31 December 507 230 214 173 193 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Alvheim Volund Vilje Jette Atla Jotun Enoch Glitne Varg *Production volumes from Marathon Oil Norge AS are included from 15.10.2014 4 5 ANNUAL REPORT 2014 144 144 ABOUT DET NORSKE LICENCES AND OPERATORSHIPS Det norske is a fully-fledged oil company engaged in exploration, development and production on the Norwegian Continental Shelf. We are building one of Europe’s largest independent E&P companies. Operator Det norske is the operator for the producing fields Alvheim, Bøyla, Vilje, Volund and Jette. We are also the operator Partner of the development of the Ivar Aasen field. The company is partner in the Johan Sverdrup field and has an active Office exploration programme on the Norwegian Continental Shelf. The company has an ambitious strategy for continued growth. Det norske’s headquarters are located in Trondheim, with offices in Stavanger, Oslo and Harstad. Det norske is listed on Oslo Børs under the ticker ‘DETNOR’. Vision Since its establishment, Det norske has made bold choices on the Norwegian Continental Shelf. ”Always moving We have embraced the possibilities and not succum- bed to limitations. We have gone further than others. forward to With our history, our expertise and our ambitions, we will challenge conventional truths. create value on We shall continue to explore and develop the oppor- the Norwegian tunities on the Norwegian Continental Shelf to deliver the highest possible value to our employees, to our shelf” investors and to society. We will always be moving forward. Values ENQUIRING RESPONSIBLE RELIABLE COMMITTED We are always curious We always put safety We always build trust We are always commit- and aiming for new first and strive to create and reputation through ted to each other, to and better solutions. the highest possible reliability and consis- the company and to value for our owners tent behaviour. society. and for society. 6 ANNUAL REPORT 2014 144 Quarterly financial results Q4 Q3 Q2 Q1 Total production (barrels of oil equivalent per day)* 54 175 2 335 2 698 2 895 Oil and gas production (Kboe = thousand barrels of oil equivalent) 4 984 215 245 261 Oil price realized (USD/barrel) 74 104 108 107 KEY EVENTS IN 2014 Operating revenues (USD million) 346 18 74 26 EBITDA (USD million) 239 -62 33 -2 Cash flow from production (USD million) 299 10 16 18 Exploration expenses (USD million) 50 70 20 18 Total exploration expenditures (expensed and capitalized) (USD million) 33 91 50 25 Operating profit/loss(-) (USD million) -184 -90 19 -44 Net profit/loss(-) for the period (USD million) -287 -17 27 -2 No. of licences (operatorships) 79 (35) 70 (25) 74 (27) 77 (27) *Production volumes from Marathon Oil Norge AS are included from 15.10.2014 2 January 21 January 21 February 2 June 8 July 15 October 19 December Oil and gas discovery Six new licences and two Oil discovery in the Det norske announces Signs USD 3 billion Acquires Marathon Oil Norge Oil discovery in in the Askja prospect in new operatorships awarded Trell and Langlitinden the acquisition of reserve-based AS and becomes one of the the Krafla North the North Sea in the licensing round for prospects Marathon Oil Norge AS lending facility largest independent listed E&P prospect mature areas on the companies in Europe. A new Norwegian Continental executive management team Shelf (APA 2013) take up their appointments 14 January 13 February 1 May 30 June 30 July 3 November Det norske spuds Announces the Karl Johnny Hersvik Unitization agreement The board of directors Environmental impact Langlitinden, the company’s development concept takes up the position of and increased volumes approves the allocation assessment for Johan first operated well in the for the Johan Sverdrup Chief Executive Officer for Ivar Aasen of offer shares in the Sverdrup is announced Barents Sea field rights issue and shows that the project progresses according to plan 20148 9 ANNUAL REPORT 2014 144 144 Therefore, Det norske was well equipped when oil prices dropped and the environment in which we operate became more challenging last autumn. The oil price plummeted to around half of the prices we realized during the summer and the volatility in the markets increased. With this in mind, I am pleased that we in Det norske are fortunate to benefit from a word-class, low break-even cost asset base.