Bluenord Energy Denmark A/S

Ledelsesberetning

2024 2023 2022 2021 2020Income Statement (USD million)Revenue698.7 791.6 960.5 558.4 480.2 Profit (loss) before financial items234.0 326.0 488.0142.9 70.4 Net financial items(166.3) (145.1) (114.9) (102.7) (40.7)Profit (loss) for the year10.4 111.1 103.3 17.6 65.0 Balance sheet (USD million)Total Assets4,086.6 4,038.7 3,845.4 3,615.6 2,609.7 Shareholders' Equity586.8 626.7 503.2 317.9 382.1 Investments (USD million) Production licence0.0 0.0 0.0 0.0 0.0Production facilities236.3 313.1 237.7 228.2 235.1Financial ratiosAverage oil price (USD/bbl)7468 76 58 57Operating margin33 % 41 % 51 % 26 % 15 %Return on invested capital6 % 10 % 19 % 7 % 5 %Return on Equity 2 % 20 % 25 % 5 % 20 %Equity ratio14 % 16 % 13 % 9 % 15 %Average number of employees 23 21 18 16 16Average oil price is calculated as total invoiced oil sales adjusted for settlement of hedges in place, divided by total lifted volume.The key figures are calculated as shown below:Profit (loss) before financial items x 100Operating marginRevenueProfit (loss) before financial items x 100Return on invested capitalAverage invested capital*Profit (loss) for the year x 100Return on Equity Average equityEquity, year-end x 100Equity ratioTotal liabilites, year-end*) Average invested capital is calculated as total liabilities less non interest bearing debts, and Cash in hand and at BankFollowing the acquisition of Shell’s Danish upstream assets in 2019, BlueNord Energy Denmark (BlueNord) holds a 36.8 percent non-operated interest in the DUC and is the second largest oil and gas producer in Denmark. DUC is a joint venture between TotalEnergies (43.2 percent), BlueNord (36.8 percent) and Nordsøfonden (20.0 percent), and comprises four hubs (Halfdan, Tyra, Gorm and Dan) and 11 producing fields. It is operated by TotalEnergies, which has extensive offshore experience in the region and worldwide. Since the acquisition in 2019, BlueNord has built a meaningful presence in Denmark and established good relationships with its partners TotalEnergies and Nordsøfonden, as well as other stakeholders, including the Danish Energy Agency (‘DEA’). In 2024, the Company achieved production from the Halfdan, Dan and Gorm hubs with an annual average of 24.1 mboepd, supplemented by 0.9 mboepd from the Tyra Hub, resulting in an overall operational efficiency of approximately 90.5 percent. The Tyra redevelopment project is, to date, the largest project carried out on the Danish continental shelf. Production started early in 2024, reaching full capacity by November 2024. The project has now moved into operation and production is ramping up to plateau. The first gas was successfully achieved in Q1 2024 from Dan, with first export of Tyra gas from Harald in April. During ramp up technical problems were encountered with the transformers for the intermediate pressure (‘IP’) and low pressure (‘LP’) compressors. The transformers were duly repaired, and technical capacity was subsequently achieved. Commissioning and hook up activities, alongside the repair of the transformers, progressed smoothly, enabling an accelerated production ramp up after reaching technical capacity. This included the unplugging of wells from Tyra West and East and the reinstatement of Tyra satellites, including Tyra South-East, Roar and Valdemar. In 2024, the Company participated in the following licences/concessions: Licence Field Ownership % DK 1/90 & 7/86 Lulita 10.000 DK Sole Concession of 8 July 1962 DUC 36.800 Organisational structure BlueNord Energy Denmark A/S is a wholly owned subsidiary of BlueNord Denmark A/S. The ultimate parent company BlueNord ASA is registered in Norway and listed at the Oslo Børs. For more information about the group, please see the website www.bluenord.com. BlueNord Energy Denmark A/S is the parent company of the subsidiaries BlueNord Gas Denmark A/S, BlueNord Energy UK Ltd and CarbonCuts A/S. BlueNord Gas Denmark A/S BlueNord Gas Denmark holds a 10.0% share of license 1/90 & 786. The company has no employees. BlueNord Energy UK Ltd. The company currently holds no licences, however, BlueNord Energy UK Ltd. is actively seeking strategic opportunities. CarbonCuts A/S The company was acquired in January 2024. CarbonCuts was awarded the exploration licence for Project Ruby on 20 June 2024. Project Ruby was awarded an onshore licence during the year by the DEA for the storage of up to 1.5 million tonnes of CO2 per annum from 2030. Award of the licence represents a milestone for the project, offering a material emissions reduction solution without compromising energy security. BlueNord’s investment in CarbonCuts further demonstrates BlueNord’s commitment to the energy transition. This initiative supports Denmark and the EU’s ambitions for carbon storage deployment. Key operations and profit Total revenue for 2024 amounted to USD 698 million, a decrease from USD 792 million the previous year. The revenue is related to oil and gas sales from the DUC fields. The revenue in 3 2024 was achieved by a production of 6.6 million barrels of oil and 363.9 million Nmof gas from the Company’s share in the DUC fields, compared to 6.8 million barrels of oil and 307.3 3million Nm of gas the previous year. The decrease in revenue reflects reduced oil volumes (down 4.9 percent) and lower gas commodity prices (down 86.1 percent after hedging) compared to 2023. This was partly offset by increased gas volumes (up 7.7 percent) as the Tyra Hub restarted in late 2024, and higher realised average oil price (up by 9.8 percent after hedging) compared to 2023. Production cost amounted to USD 398 million in 2024 compared to USD 407 million in 2023. Net financial items amounted to an expense of USD 166 million in 2024, compared to an expense of USD 145 million in 2023. Income Tax amounted to an expense of USD 57 million for the year, compared to an expense of USD 70 million in 2023.Net profit after tax for the year amounted to USD 10 million compared to USD 111 million in 2023. Equity amounted to USD 587 million as of 31 December 2024 compared to USD 627 million as of 1 January 2024. The directors propose a dividend of USD 300 million. The equity after this dividend is USD 287 million. The change in equity reflects the net profit after tax, value adjustments of financial instruments and proposed dividend. Outlook for 2025 BlueNord has a stable business, underpinned by the Company’s position in the DUC and further supported by risk mitigations. The volatility in prices has been significant and Management is continuously assessing the market to mitigate commodity price volatility. The Company has during 2024 entered into a mix of financial instruments for oil and gas volumes from 2024 to 2026 to partly hedge the Company’s exposure to commodity prices and provide visibility over revenue and cashflow. The Company monitors global as well as local political and economic conditions that may affect future results. See further detail on this issue and mitigations as outlined in the section Risks and Uncertainties on page 12. Activity to progress value adding organic DUC investment projects also continues, and we will seek to sanction projects as they are sufficiently matured. BlueNord believes economic investments in these projects will help to replace produced reserves and provide strong financial returns benefiting the Company’s shareholders. First gas from the Tyra II field was achieved 21 March 2024, and maximum technical capacity was reached by 10 November 2024. Ramp-up is ongoing and Tyra is expected to be at plateau production in mid-2025. This will lead to a step-change in performance for BlueNord, with a doubling of production from 25 mboepd in 2024 to above 50 mboepd combined with a lowering of production cost per barrel of oil equivalent (boe) and 30 percent lower emissions from the Tyra Hub compared to the old facility. Direct field operating expenditures are expected to decrease to USD 13 per barrel on average when Tyra is fully ramped-up. Research and development BlueNord invests in research and development to support and further grow its E&P activities. The DUC has a partnership with DTU, Technical University of Denmark, and have together established the Danish Offshore Technology Centre (‘DOTC’). DOTC conducts research into responsible and efficient oil and gas production from the Danish North Sea with a reduced environmental and climate footprint. In 2023, the DUC invested DKK 18 million in the DOTC. Current ongoing work programme includes: • Abandonment of offshore oil and gas fields. Monitoring of abandoned installations in reference to an environmental baseline, and cost-effective abandonment options that will deliver robust environmental protection. • CO2 storage in old oil and gas fields. • Produced water management. Developing new technologies to optimise the water treatment process, with a view to achieving our vision of zero harmful discharge. • Operations and maintenance technology. Modular architecture for planning maintenance in a cost-effective way. BlueNord has made a strategic investment in CarbonCuts A/S, intending to establish an onshore CO2 storage location in Denmark. Its core business is to build, own and operate permanent geological sites for CO2 storage. The target for the first storage of CO2 is 2030. CarbonCuts’ first project in the Rødby area has received local support and has attracted national and international political interest. Goals and policies for the underrepresented gender Reporting on goals and policies for the underrepresented gender is done according to the Danish Financial Statements Act, section 99b. The Board believes that its members should be elected on the basis of their combined qualifications and at the same time recognise the advantages of a Board comprising a wide range of backgrounds, such as industry experience, professional competence, culture and gender. On this basis, the Board has in April 2021 defined a target to increase the share of the under-represented gender on the Board to account for at least 33% of the board members appointed at the general meeting within 4 years. As of 31 December 2024, there was 2 women among the 3 board members appointed at the general meeting. Consequently, the Company’s board is, according to the Danish Financial Statements Act, considered to have equal representation of genders among the Company’s board members. At present, the gender composition is 5 women and 5 men at the other management levels, these are detailed below. Consequently, the Company’s other management levels are, according to the Danish Financial Statements Act, considered to have equal representation of genders among the Company’s other management levels. For further information, see page 58 in the Annual Report and Accounts 2024 of BlueNord ASA. Health, Environment and Safety BlueNord puts emphasis on its employees performing company activities in line with the principals of business integrity and with respect for people and the environment. During 2024, BlueNord was, through its ownership in the DUC in which TotalEnergies is the operator, involved in production of oil and gas which are responsible for emission to the sea and to the air. BlueNord’s wholly owned subsidiary CarbonCuts is involved in CO2 storage through operatorship of the Project Ruby licence. BlueNord will conduct its business operation in full compliance with all applicable national legislation in the countries where it is operating. The Company is committed to carry out its activities in a responsible manner to protect people and the environment. Our fundamentals of health, safety, environment and quality (HSEQ) and safe business practice are an integral part of BlueNord’s operations and business performance. The Danish Offshore Safety Act is the legal framework for promotion of a high level for health and safety offshore and for creating a framework enabling the companies to solve offshore health and safety issues themselves. The Danish Offshore Safety Act generally applies to all offshore activities related to hydrocarbon facilities, infrastructure and pipelines connected hereto. Licensees under the Danish Subsoil Act are required to identify, assess and reduce health and safety risks as much as reasonably practicable, as well as be compliant with the ALARP (As Low As Reasonably Practicable) principle. Furthermore, the licensee shall ensure that operators are able to fulfil the safety and health obligations pursuant to the Danish Offshore Safety Act. Reporting of tax payments to Governments Requirements according to the Danish Financial Statements Act, section 99c, have been fulfilled. The information can be found in the Annual Report and Accounts 2024 of BlueNord ASA on page 83. The annual report can be found at: https://www.bluenord.com/annual-report-2024/ Risks and uncertainties The Company faces various risks which may impact the Company and not all these risks are necessarily within the Company’s control. For this reason, the Company has established a risk management process to identify and assess how to respond to risks. That response can include acceptance, an action plan with mitigating factors to reduce the risk, transfer to third parties, or terminating the risk by ceasing certain activities. Within the BlueNord Group a single overall control framework is in place. The internal control framework supports the Management and mitigation of risk. The process is designed to manage, mitigate and communicate, rather than eliminate, the risk of failure to achieve strategic priorities. The risks and uncertainties described in this section are the material known risks and uncertainties faced by BlueNord at the time of publication. Geographical concentration and field interdependency Production of oil and gas is concentrated in a limited number of offshore fields in a limited geographical area of the Danish continental shelf. Consequently, the concentration of fields and infrastructure may result in incidents or events in one location affecting a significant part of BlueNord business. Material influencing factors: • Four producing hubs that are interconnected and utilise the same infrastructure. • The fields within one hub are interconnected and one field can depend on another to extract hydrocarbons. • All gas produced at the different hubs is processed and transported to shore via the Tyra Hub or the NOGAT pipeline. • The Gorm Hub receives liquids from all the other hubs and sends it to shore via pipeline from Gorm E. Actual reserves may differ from reported reserves estimates The reported reserves and resources represent significant estimates based on several factors and assumptions made as of the reported date, all of which may vary considerably from actual results. Further, oil and gas production could also vary significantly from reported reserves and resources. Should the actual results of the Company deviate from the estimated reserves and resources, this may have a significant impact on the value of the Group’s assets and net cash flow from operations. Material influencing factors: • Assumptions on which the reserves estimates are determined include geological and engineering estimates (which have inherent uncertainties), historical production, the assumed effects of regulation by governmental agencies and estimates of future commodity prices and operating costs including the cost of CO. Regulation and 2COcosts are considered climate-related risks and on reserves estimates. 2• The Company is a non-operated partner in the DUC and as such has less control of future decline-mitigating investments in the producing assets that have an impact on oil and gas production. Ongoing investment in developments The Company makes and expects to continue to make substantial investments in its business for the development and production of oil and natural gas reserves. Such projects require substantial investments to bring into production, which come with several inherent risks. Material influencing factors: • Development projects have inherent execution risks including cost overruns and delays, in addition to the impact of commodity prices on the economics of a project. • The Company may also be unable to obtain needed capital or financing on satisfactory terms, which could lead to a decline in its oil and gas reserves. Tyra redevelopment project The Tyra redevelopment project is, to date, the largest project carried out on the Danish continental shelf. The project has now moved into operation and production is ramping up to plateau. The risk of performance uncertainty once wells are commissioned continues to be monitored and is reducing as further actual production occurs and knowledge of the reservoir performance will be assessed. Fully pressurising the facilities may lead to temporary exposure of components which in turn may influence stability. Such risk may have an adverse effect on our financial position. Decommissioning estimates There are significant uncertainties and significant estimation risks relating to the cost and timing for decommissioning of offshore installations and infrastructure. Deviation from such estimates may have a material adverse effect on the Company’s operational results, tax position, cash flow and financial condition. This includes the timing of when security may need to be put in place. Material influencing factors: • Within the DUC, the partners are primarily liable to each other on a pro-rata basis and, secondarily, jointly and severally liable for all decommissioning obligations. • There is an obligation for participants to provide security for their respective share of any decommissioning liabilities ahead of actual decommissioning based on calculations as set out in the joint operating agreement. • Timing of decommissioning of a hub will depend on the economic cut off of reserves and links with the risk regarding actual reserves compared with reported estimates. A change in those estimates can impact the timing of decommissioning and will be reflected in an update in decommissioning estimates Market risks Commodity prices The Company’s main business is to produce and sell oil and gas, therefore, future revenues, cash flow, profitability, financing, and rate of growth depend substantially on prevailing prices of oil and gas. Because oil and gas are globally traded, the Company is unable to control or predict the prices it receives for the oil and gas it produces. Commodity price fluctuations could reduce the Company’s ability to refinance its outstanding credit facilities and could result in a reduced borrowing base under credit facilities available to the Company, including the RBL facility. Fluctuations in commodity prices could also lead to impairments of the Company’s assets. Material influencing factors: • While volatility and uncertainty remain in the commodity market, global supply risks have been managed through 2024. Geopolitical risk continues to have an impact but markets have tended to adapt to this situation over the short-term. • The hydrocarbons produced from specific fields may also have a premium or discount in relation to benchmark prices, such as Brent, which may vary over time. • The majority of the natural gas produced by the Company is sold at Trading Hub Europe(‘THE’) prices. THE closely follows the Dutch Title Transfer Facility (‘TTF’) price. The Company is more exposed to additional price volatility deriving from proposed responses by the European Commission, as seen with the proposed Market Correcting Mechanism, however, this has not recurred in 2024. Foreign currency exposure The Company is exposed to market fluctuations in foreign exchange rates. Significant fluctuations in exchange rates between euros and Danish kroner to US dollars may materially adversely affect the reported results. Material influencing factors: • Revenues are in US dollars for oil and in euros for gas, while operational costs, taxes and investments are primarily in US dollars, euros and Danish kroner. With Tyra coming onstream, delivering a more balanced portfolio of oil to gas, this means more revenue will be euro-denominated, thus reducing currency exposure on costs in euros and Danish kroner. • The Company’s financing is primarily in US dollars. Cyber security A compromised network or infrastructure would seriously impair the Company’s ability to maintain regular operations, including the ability to continue reporting, and to meet regulatory and financial obligations, if required information were not available. Material influencing factors: • As in 2023, ongoing global tensions continue to raise IT security risks around cybercrime and similar threats. • Protection and monitoring of critical infrastructure continues to be a high priority in the Danish energy sector. Financial liabilities Available funding to meet the Company’s financial liabilities The Company has several debt instruments which expose it to interest rate risk and obligations to meet certain covenants. The Company’s material hedging programme provides significant visibility over its ability to meet these requirements. However, if the Company is unable to, then actions to rectify this position may be required. There can be no assurance that such actions will be available, or sufficient, to allow BlueNord to ultimately fulfil its obligations. The availability of funding and the nature and diversity of lenders being used can pose third party liquidity risk. Material influencing factors: • Exposure to floating interest rates through the Company’s USD 1.4 billion RBL. • Exposure to fixed interest rates through a USD 208 million convertible bond and a USD 300 million senior unsecured note. • Under these financing instruments, the Company is subject to several covenants, including maximum leverage relative to earnings and demonstration of a minimum level of liquidity. Future capital requirements BlueNord’s future capital requirements will be determined based on several factors, including production levels, commodity prices, future expenditures that are required to be funded, and the development of the Company’s capital structure. To the extent the Company’s operating cash flow is insufficient to fund the business plan at the time, additional external capital may be required. BlueNord currently has a strong financial base, supported by existing liquidity and hedging positions. However, any unexpected changes that result in lower revenues or increased costs may necessitate the raising of additional external capital. There can be no guarantee that, if required, BlueNord would be able to access the debt or equity markets on favorable terms, or if necessary, be able to adequately restructure or refinance its debt.Insurance risk The Company maintains liability insurance in an amount that it considers adequate and consistent with industry standards. However, the nature of the risks inherent in oil and gas industry generally, and on the Danish continental shelf specifically, are such that liabilities could materially exceed policy limits or not be insured at all. In this situation, the Company could incur significant costs that could have an adverse effect on its financial condition, operational results and cash flow. Material influencing factors: • Due to the ongoing geopolitical situation there may be an increased risk of the Company’s assets becoming the target of acts of war and/or sabotage, as seen with the Nord Stream pipeline in 2022. No such events were noted during 2023 or 2024, but action may be directed towards infrastructure in future. • Any such acts of war and/or sabotage directed towards the Company’s assets may have a material adverse effect on the Company’s assets and financial position. Whether an incident is classified as an act of war or sabotage under the Company’s insurances may have consequences for the Company’s right to claim insurance proceeds under the relevant insurances. Third-party risk The Company does not have a majority interest in any of its licences and consequently cannot solely control such assets. The Company has operatorship and an 80 percent interest in one exploration licence related to investigating the potential for onshore CO2 storage in Denmark. This new licence in 2024 has changed the profile of the company in this risk aspect as there are now more direct engagements with suppliers, albeit on a relatively small scale for the current exploration programme. The Company has limited control over management of the oil and gas assets. Mismanagement by the Operator, or disagreements with the Operator as to the most appropriate course of action, may result in significant delays, losses or increased costs. Regarding the CO2 storage exploration licence, the company engages with a number of selected contractors and maintains a detailed diligence approach as well as engaging regularly with the other joint venture partners. This venture is governed by a joint operating agreement. Jointly owned licences (as is the case for the Company’s licences) also result in possible joint liability, on certain terms and conditions. Other participants in licences may default on their obligations to fund capital or other funding obligations in relation to the assets. In such circumstances, the Company may be required under the terms of the relevant operating agreement or otherwise to contribute all or part of such funding shortfall. The Company may not have the resources to meet these obligations. Politics, regulation and compliance Changes in obligations arising from operating in markets that are subject to a high degree of regulatory, legislative and political intervention and uncertainty Exploration and development activities in Denmark are dependent on receipt of government approvals and permits to develop assets. There is no assurance that future political conditions in Denmark will not result in the government adopting new or different policies and regulations relating to exploration, development, operation and ownership of oil and gas, environmental protection, and labour relations. Any of the above factors may have a material adverse effect on the Company’s business, results of operations, cash flow and financial condition. Material influencing factors: • Future political conditions in Denmark could result in the government adopting new or different policies, meaning that the Company may be unable to obtain, maintain or renew required drilling rights, licences and permits, resulting in work being halted. • Due to the conflict in Ukraine, new regulations have been imposed by the EU, United States, United Kingdom and other governments, which affects the export and import of oil and gas to and from the Russian market. • Trade restrictions on the Russian market could increase the importance of the oil and gas fields in Europe, including in Denmark. Such increase in importance could result in governments adopting new regulations that could affect the assets and the operations of the Company. Danish taxation and regulations All of BlueNord’s petroleum assets are located in Denmark, and the petroleum industry is subject to higher taxation than other businesses. There is no assurance that future political conditions in Denmark will not result in the relevant government adopting different policies for petroleum taxation than those currently in place. Material influencing factors: • Proposed legislation around the Solidarity Contribution was enacted in 2023 and its impact on the Company is known and accounted for. No new exposures have been identified during 2024. • As taxation has a major impact on the Company’s results, such amendments may significantly impact the Group’s cash flow and financial condition. • In 2024 a tax was adopted regarding additional CO2 duties. This will be implemented from 2025 and its impact has been incorporated into the Company assessment of forward-looking performance and exposures Financial reporting risk While BlueNord has internal controls in place covering the Company’s financial reporting function. However, any material error or omission could significantly impact the accuracy of reported financial performance and expose the Company to a risk of regulatory or other stakeholder action.Reputational risks BlueNord may be negatively affected by adverse market perception as it depends on a high level of integrity to maintain the trust and confidence of investors, DUC participants, public authorities and counterparties. Any mismanagement, fraud or failure to satisfy fiduciary or regulatory responsibilities, or negative publicity resulting from other activities, could materially affect the Company’s reputation, as well as its business, access to capital markets and commercial flexibility.Climate risk Changes to and impacts of environmental regulations All phases of the oil and gas business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of international conventions and state and municipal laws and regulations. Compliance with such legislation can require significant expenditures, and a breach may result in the imposition of fines and penalties, some of which may be material, in addition to loss of reputation. Material influencing factors: • Environmental legislation provides for, among other things, restrictions and prohibitions on spills, and releases or emissions of various substances produced in association with oil and gas operations. • Legislation also requires that wells and facility sites are operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. • The Company is subject to legislation in relation to the emission of carbon dioxide, methane, nitrous oxide, and other greenhouse gases (GHGs). • Environmental legislation is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability, and potentially increased investments and operating costs. • With all assets on the Danish continental shelf, the Company is highly exposed to changes in Danish law. • CO2 costs and the Danish CO2 duty are an ongoing exposure and incorporated in the Company future forecasts and estimates. Active management of emissions and cost of allowances is required to manage this exposure as any increases can have an impact on the Company’s financial performance and future outlook. Subsequent events There are no events with significant accounting impacts that have occurred between the end of the reporting period and the date of this report.