Akastor ASA Annual Report 2022

Plain-text annual report

2022 ANNUAL REPORT 2022 in brief Net interest-bearing debt reduced by NOK 431 million through the year, mainly driven by the sale of preference shares held in Odfjell Drilling Strong activity growth year-over-year across almost all portfolio companies HMH executed on synergy plan with wave one of ERP implementation completed. Bridge loan facility refinanced with new Nordic bond of USD 150 million. New four-year contract for Aker Wayfarer with a total value of around USD 282 million secured within AKOFS Offshore DRU arbitration proceeding was further progressed, with hearing concluded last week of February 2023. Arbitration outcome expected in second half of 2023. Agreement to divest Cool Sorption entered into in the year, with closing completed in February 2023 Net capital employeed per year end 2022 NOK million NOK 4.6bn Net Capital Employed (2021: 5.1bn) NOK 553 m Net Interest-bearing Debt (2021: 984m) +73%Total Shareholder return (2021: -25%) 60%Equity share (2021: 57%) Book value per share (NOK) 10.4 2.2 2.3 2.0 536 636 615 5000 4000 3000 2000 1000 0 2 863 0.8 231 -0.9 (237) 17.0 -2.0 14.9 (553) (984) 4 645 4 092 DRU contracts Other Net Capital Employed NIBD Equity 3 TABLE OF CONTENTS 01. BOARD OF DIRECTORS' REPORT 02. DECLARATION BY THE BOARD OF DIRECTORS AND CEO 03. CORPORATE GOVERNANCE STATEMENT – AKASTOR ASA 04. FINANCIALS AND NOTES a. Akastor Group b. Akastor ASA 05. AUDITOR'S REPORT 06. ALTERNATIVE PERFORMANCE MEASURES 07. BOARD OF DIRECTORS 08. MANAGEMENT 09. COMPANY INFORMATION 4 14 15 24 24 77 89 94 96 99 100 Annual Report 2022 4 01. BOARD OF DIRECTORS' REPORT Akastor is an investment company based in Norway with a portfolio of companies in the oilfield services sector, with a flexible mandate for active ownership and long-term value creation. The shares of Akastor ASA are traded on the Oslo Stock Exchange under the ticker AKAST. The Akastor portfolio of companies had a total net capital employed of NOK 4.6 billion at the end of 2022. Highlights 2022 2022 will be remembered first and foremost by the geopolitical tension seen in the world, escalated by Russia’s invasion of Ukraine in February. The war in Ukraine had effect on energy prices and led to increasing oil prices through the first half of 2022, primarily because of supply concerns and low oil inventories going into 2022. Through the second half of 2022, oil prices decreased driven by fear of recession and lower global activity levels following high global inflation seen through the year, partly driven by energy prices. Despite a volatile year in terms of crude oil prices, with only a moderate price increase year-over-year, the activity within oil and gas related businesses increased and is expected to further increase in 2023 and forward driven by high focus on energy security and higher global activity following the normalization after the COVID-19 pandemic. For Akastor, the increase in offshore upstream capex seen through 2022 and higher rig activity had positive bearing on activity levels throughout the Akastor portfolio of companies. Despite uncertainty related to inflation and increasing interest rates threatening global growth as well as geopolitical instability, the prospects for Akastor going into 2023 look promising based on continued estimated growth for energy related businesses. In January, Akastor announced that its 50% owned joint venture HMH Holding B.V. (HMH) had successfully completed a USD 150 million senior secured bond issue with a tenor of 3 years with net proceeds used for repayment of a bridge loan. The bond loan was listed at the Oslo Stock Exchange in November. In July, Akastor’s 50% owned joint venture AKOFS Offshore AS (AKOFS Offshore) entered into a firm contract for its vessel “Aker Wayfarer” in order for the vessel to continue to perform services as a subsea equipment support vessel (SESV) for Petrobras in Brazil. The duration of the contract is around 4 years, and the services are expected to commence in the first half of 2023. Total contract value was about USD 282 million, of which about USD 198 million will be revenue allocated to AKOFS Offshore and included in the company’s backlog. In September, Akastor announced that its wholly owned subsidiary, DDW Offshore, had been awarded a firm one year contract by Petrofac for the AHTS vessel Skandi Atlantic with contract start in September 2022. In November, Akastor sold the preference shares held in Odfjell Drilling for a value of USD 95.2 million, of which USD 75.2 million was settled in cash at closing. The remaining USD 20 million is to be settled pursuant to a seller’s credit agreement with maturity date July 31, 2024. The warrants held in Odfjell Drilling were not part of the transaction and remain with Akastor. The transaction reduced net debt and strengthened the financial position of Akastor. In December, Akastor announced a change in the management team of HMH as Chairperson & Chief Executive Officer, Merrill A. (“Pete”) Miller, Jr, was to step down as Chief Executive Officer at the end of 2022. Mr. Miller remains Chairperson of the HMH Board of Directors while Mr. Eirik Bergsvik, former President of the Equipment and System Solutions Division in HMH, was elected to succeed Pete Miller as Chief Executive Officer, effective from January 1, 2023. Also in December, Akastor entered into a share purchase agreement with Diamond Key International Pty. Ltd. (“DKI”) regarding the sale of all shares held in Cool Sorption A/S (“Cool Sorption”) for DKK 20 million on a cash and debt free basis. Closing of the transaction took place in February 2023. Akastor’s total net capital employed decreased from NOK 5.1 billion in 2021 to NOK 4.6 billion in 2022, mainly driven by the sale of Odfjell Drilling preference shares. Net interest-bearing debt for Akastor was reduced from NOK 1.0 billion per year end 2021 to NOK 0.6 billion per 2022 driven by proceeds received in connection with the divestment of Odfjell Drilling shares. Total equity of Akastor was NOK 4.1 billion per year end 2022, at the same level as per year end 2021. Company Overview Aker Holding AS, wholly owned by Aker ASA, is the largest shareholder of Akastor with a shareholding of 36.7 percent. Akastor is primarily operating within the oilfield services sector. The portfolio per end of 2022 includes several industrial holdings within this sector, including: HMH, which provides drilling systems, equipment, and aftermarket services. Ownership interest is 50 percent. AKOFS Offshore, a subsea well installation and interven- tion services provider. Ownership interest is 50 percent. AGR, which delivers well-, reservoir- and software ser- vices to the offshore drilling industry. Economic interest is 64 percent (agreement to sell AGR entered into in March 2023, see Subsequent Events). Annual Report 2022 | Board of Directors' ReportBoard of Directors’ Report5 Each above-mentioned Akastor portfolio company is organized as an independent business which is self-sufficient and with its own dedicated management team fully responsible for all aspects of its operational activities. All portfolio companies have separate boards of directors, consisting of appointed Akastor investment managers, including, for some companies, external board members and employee representatives. This governance model provides for strong management of operational activities and a good foundation for close cooperation between Akastor, the portfolio companies and their employees. In addition to its portfolio of industrial holdings, Akastor has several financial investments, including: DDW Offshore, which owns and operates five offshore vessels. Ownership interest is 100 percent. in depth, in order to evaluate current valuation versus future potential. The business models of the portfolio companies are decentralized with each entity being self-sufficient, but as part of the Akastor portfolio, all companies share a common foundation based on Akastor’s values, governing documents, and compliance structure. Akastor seeks to maximize value by combining strategic, operational, and financial measures. Akastor’s strategy as an investment company remains as before, targeting to generate investments. New an acceptable return on investments may be made in the existing portfolio companies in order to strengthen the companies and prepare for a future exit. The ultimate goal is to return the capital to the shareholders of Akastor upon divestments of assets, however ensuring that Akastor has a solid capital structure. its current NES Fircroft, a technical and engineering staffing com- pany. Economic interest is approximately 15 percent. Market Outlook DRU contracts, full economic interest in four drilling equipment contracts with Jurong Shipyard. This posi- tion was carved out from MHWirth in connection with the merger with Baker Hughes’ SDS business. Awilco Drilling, ownership interest is 6.8 percent. In addition to the equity ownerships, Akastor also holds interest bearing positions towards HMH and AKOFS Offshore, as well as towards Odfjell Drilling as a result of the seller’s credit agreement following the sale of the preference shares held in Odfjell Drilling in November 2022. The Akastor corporate organization is based at Fornebu, just outside of Oslo in Norway, with a team of 13 employees, working closely with the boards and management of its portfolio companies. Akastor has a total of 412 employees (including hired-ins) within its consolidated subsidiaries as per year end 2022. Strategy The strategy of Akastor remains unchanged compared to last year. Akastor is an investment company, employing an independent approach for each portfolio company to optimize its development potential. Akastor aims to create long-term value for its shareholders through active development of its portfolio companies as stand-alone businesses, while maintaining the flexibility to be opportunistic. Akastor works closely with each portfolio company’s management to make decisions on operational activity, business development, acquisitions and divestments to maximize the value of the company. Each portfolio company develops and executes independent value creation plans in close cooperation with the Akastor investment team. As an owner, Akastor emphasizes understanding the portfolio companies’ markets and challenges Akastor’s portfolio companies operate mainly in the oilfield services industry. In 2022, the energy markets were heavily affected by the Russian invasion into Ukraine which led to disruption of gas supplies into Europe and extreme increases in energy prices through the first half of the year. Despite Akastor’s portfolio companies having very limited exposure towards the Russian or Ukrainian markets, a lot of efforts and focus in 2022 were used on monitoring the situation in these countries as well securing compliance with the sanctioning regulations. The war in Ukraine has led to an increasing focus on energy security throughout the world which in turn should have positive bearings for the industries, where the Akastor portfolio companies operate, through increasing investment levels. However, the geopolitical situation following the Russian invasion also represents a risk going into 2023 in terms of instability and a higher degree of geopolitical and economic uncertainty. Over the last couple of years, the industry in which Akastor operates has also been heavily affected by the outbreak of the COVID-19 virus which caused significant disruption to the global economy. The oil and gas markets were strongly affected by negative demand development following lower global activity, adding additional pressure on the global economy, with direct effects on the investment level of oil companies and thereby effects also for the oilfield services industry. In 2022, the effects following the global pandemic continued to normalize, with increasing activity levels seen across most industries. After a period of decreasing investment levels seen within oil and gas following the outbreak of COVID -19, the global offshore oil and gas project capex commitments in 2022 increased compared to 2021 on the back of higher commodity prices. Further growth is forecasted from 2023 and forward. 2022 was also a strong year for investments in renewable energy sources. According to Rystad Energy, aggregate investments in renewable energy capacity exceeded upstream oil and gas investments for the first time in 2022 and several Annual Report 2022 | Board of Directors' Report6 large new renewable energy hubs came on stream during the year. Akastor acknowledges and strongly believes that the development and growth of renewable energy sources as part of the total energy mix are crucial to reach the global emission targets. We also believe the trend towards cleaner and greener energy represents opportunities for the Akastor portfolio companies as an addition to its current primary focus on more traditional oil and gas related activities. Through 2022, the oil and gas markets have seen further increase in important macro fundamentals such as global offshore upstream capex spending and rig utilization, which in turn had positive bearing on Akastor through increased activity for the various portfolio companies. A clear risk looking forward into 2023 is a potential deeper recession following high inflation and rapidly increasing global interest rates seen in the second half of 2022 which in turn could affect global industrial activity and energy prices, and thereby also oilfield service activity. Also, the turmoil in global financial markets seen in March 2023 increases uncertainty and risk. If the turmoil leads to longer term effects on financial markets, this could in turn also affect Akastor and its portfolio companies, e.g. through ability to conclude transactions and limit access to financing. In 2023, Akastor will continue to closely monitor the development of the war in Ukraine with focus on mitigating any direct effects following these circumstances, including securing compliance with all relevant economic sanctions. Despite limited direct exposure to the region, Akastor could be affected through more general market effects. Akastor is part of the Aker Security Centre of Excellence, which is an Aker network focusing on monitoring global risk factors related to the geopolitical situation, cyber security as well as climate risk with the target of improving the basis for decisions and ensuring business security for the Aker Group of companies. Also, Akastor will continue to follow the general economic outlook in light of a potential recession with the ambition to adjust capacity throughout the portfolio if required as a result of a potential lowered activity level. The financial impact as a result of the changing global dynamics remains uncertain as it is difficult to predict the duration and the longer-term impact on financial markets and industrial activity level. From an accounting perspective, these factors could however impact future assessments of valuation of Akastor’s assets if the current volatility results in a negative long-term market outlook. Based on the current footprint of the portfolio, the oilfield services industry will remain the primary market for Akastor and its portfolio companies going forward. However, Akastor clearly believes that the ongoing energy transition represents exciting opportunities and will through its role as an active owner continue to develop offering and presence within non-oil markets and the renewable energy space to further diversify the portfolio. Technology development remains a strategic target for all portfolio companies and Akastor is targeting to support the industry’s transition to more energy-efficient operations for its clients through development of new solutions. Akastor will continue to support HMH in its efforts to optimize and reduce fuel consumption and carbon footprint for its clients through enabling more efficient drilling operations while also seeking opportunities within industries outside of oil and gas. AGR is continuing the development of its suite of software solutions, enabling more efficient operations for oil companies and is also positioning itself within low carbon solutions such as carbon capture, geothermal drilling and wind solutions. Early in 2022, AGR established Føn Energy Services, a joint venture together with IKM, to provide wind power project management, operations and maintenance services to offshore wind farms. Akastor views this as an interesting opportunity for growth within the renewable space and will continue to invest in this platform in 2023. Through 2022, Akastor saw an increase in activity across almost all portfolio companies. Despite continued risk and uncertainty related to the global geopolitical situation as well as the global financial turmoil seen lately, Akastor management remains cautiously optimistic that activity levels within the oilfield services industry will continue to increase going forward based on the positive underlying market fundamentals and increasing focus on energy security. Group Financial Performance Akastor presents its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. All amounts below refer to the consolidated financial statements for the group, unless otherwise stated. Please note that consolidated revenue and operating profit in Akastor only include financial performance of portfolio companies that constitute a minor part of Akastor’s total net capital employed. Income Statement Revenue and other income for 2022 increased by 11 percent to NOK 1 059 million. Operating profit before interest, tax, depreciation and amortization (EBITDA) was negative NOK 10 million, compared to break even in 2021. Depreciation, amortization and impairment was NOK 66 million in 2022, compared to NOK 82 million in the previous year. Net financial income were NOK 80 million in 2022 compared to NOK 194 million in the previous year. Akastor’s share of net loss from the equity-accounted investees is NOK 263 million, compared to NOK 346 million in 2021, mainly related to net loss in AKOFS Offshore and HMH. The pre-tax loss for the year was NOK 259 million, compared to a loss of NOK 235 million the previous year. The income tax expense for 2022 was NOK 2 million, compared to a tax benefit of NOK 20 million in 2021. The effective tax rate is impacted by several items, such as impairment of deferred tax assets as well as non-tax deductible items. Annual Report 2022 | Board of Directors' Report7 Net loss from continuing operations was NOK 261 million, compared to loss of NOK 215 million in 2021. The group had an operating loss of NOK 257 million for the year. Financial Position Total assets of Akastor amounted to NOK 6.8 billion as of December 31, 2022, compared with NOK 7.2 billion at year-end 2021. The decrease is mainly related to sale of preference shares held in Odfjell Drilling. Net debt (excluding lease liabilities) was NOK 1 220 million at the end of the period, while net interest-bearing debt (NIBD) was NOK 553 million. Net interest-bearing debt decreased by NOK 431 million through the year, primarily explained by the sale of preference shares held in Odfjell Drilling, partly mitigated by corporate costs in the period. Total equity amounted to NOK 4.1 billion at year-end 2022, of which non-controlling interests were NOK 36 million. The equity ratio was 60 percent as of December 31, 2022, compared to 57 percent in 2021. Going Concern The group was not in breach of any financial covenants as of December 31, 2022. The current assessment is that the group will continue to be able to meet the mandatory terms and conditions of its banking facilities including the minimum liquidity covenant, taking into account the extension of the maturity of the corporate financing facilities to February/March 2024 and the NOK 200 million increase of the subordinated Aker facility secured in March 2023. The current strategy of Akastor is based on realization of its investments and the base plan for 2023 includes cash proceeds from several holdings. Through this, Akastor is targeting to increase liquidity and reduce refinancing risk in 2024. Based on this, the board of directors confirms that the going concern assumption, on which the consolidated financial statements have been prepared, is appropriate. The Akastor Portfolio Cash Flow As of December 31, 2022, Akastor had cash of NOK 119 million, compared to NOK 89 million in 2021. The net cash flow from operating activities was negative NOK 244 million, compared to operating cash flow of negative NOK 96 million in the previous year. The net cash flow from operating activities comprises of cash flow generated from operating activities of negative NOK 176 million as well as net interest cost payments of NOK 102 million. HMH HMH was established in October 2021 following the merger between MHWirth (previously 100% owned by Akastor) and Baker Hughes’ Subsea Drilling Systems (SDS) business. Akastor owns 50 percent of the shares in HMH, with the remaining shares owned by Baker Hughes. HMH is classified as a joint venture and accounted for using equity method in the consolidated financial statements. Net cash flow from investing activities was positive NOK 619 million, compared to NOK 431 million in 2021. The cash flow from investing activities included proceeds of NOK 750 million from sale of preference shares in Odfjell Drilling. Net cash flow from financing activities amounted to negative NOK 318 million, compared to negative NOK 516 million in 2021. The cash flows included net repayment of borrowings of NOK 240 million and payment of lease liabilities of NOK 78 million. Subsequent Events In February 2023, the maturity of Akastor’s corporate credit facilities was extended to February/March 2024. In March 2023, the subordinated Aker facility was increased with NOK 200 million to NOK 450 million. In March 2023, Akastor entered into a share purchase agreement with ABL Group ASA (“ABL Group”) for the sale of all shares in AGR against a combination of shares in ABL Group and cash. Certain defined assets are excluded from the transaction and will be retained by Akastor. This includes AGR’s ownership in Føn Energy Services AS. The transaction is expected to generate an accounting gain upon completion in 2023. HMH is a global provider of drilling solutions, engineering, projects, equipment and services. HMH has a track record of product and service delivery in more than 120 countries worldwide. At year-end 2022, the company had approximately 2 000 employees. The company’s operations are divided in two main business areas: Projects, Products and Other and Aftermarket Services. HMH is Akastor’s largest portfolio company both in terms of sales revenue and employees. Key Figures 1) Amounts in USD million Revenue 2) EBITDA (adj) 3) EBITDA Order intake 2022 Proforma 2021 675 100 562 85 79 64 692 820 NIBD (incl. shareholder loans) 260 226 1) The figures are unaudited, presented on 100% basis 2) Revenue/EBITDA excludes disposed entities in 2022 3) EBITDA (adj) excludes integration costs and other non-recurring items The revenue for 2022 of USD 675 million was up 20 percent compared to 2021 proforma figures for the combined entity, driven primarily by increased activity within Projects, Products and Other. EBITDA adjusted for integration cost and defined non-recurring items increased from USD 85 million in 2021 to Annual Report 2022 | Board of Directors' Report 8 USD 100 million in 2022. The adjusted EBITDA margin ended at 14.8 percent for 2022, slightly down from 15.2 percent in 2021 explained mainly by the increase in revenues from Projects and Products where contribution margin is lower. Akastor owns 50 percent of the shares in AKOFS Offshore, with the remaining shares owned by Mitsui & Co and Mitsui O.S.K. Lines, each with 25 percent. AKOFS Offshore is classified as a joint venture and accounted for using equity method in the consolidated financial statements. Revenues from Projects, Products and Other increased with around 81 percent to USD 232 million in 2022, driven by higher revenues from large projects following the order backlog within this segment secured in 2021 and executed in 2022. Full year revenues from Aftermarket Services were USD 445 million in 2022, slightly up from USD 436 million in 2021 (proforma). The average number of active rigs with equipment package from HMH increased slightly compared to 2021, however with a higher active base per end of period and good growth potential into 2023. The offshore drilling market has over the last couple of years been affected by an overcapacity of offshore drilling rigs. Following the increased focus on energy security and higher global capex spend among E&P companies, the rig demand through 2022 increased and led to an improved drilling market and higher activity for HMH as a result of more rigs with their equipment in operation. Despite these effects, order intake within Projects and Products decreased in 2022 compared to last year, driven primarily by the award of three larger project contracts in 2021. Order intake within single equipment increased in 2022, with the non-oil segment continuing as the main driver. Total order intake for HMH was USD 692 million in 2022, compared to USD 820 million in 2021. Going forward, HMH remain positive and anticipate good growth in rig activity based on the current outlook, fuelled by Brazil and Middle East activity. The rig newbuilding market continues to be muted and is expected to remain so also in the near future. In 2022, HMH refinanced its bridge bank facility with a new Nordic bond loan of USD 150 million which was an important step to establish a longer-term capital structure. HMH also executed on its synergy plan with wave one of the ERP implementations completed, and the Baker Hughes transitional service agreement exited. HMH will during the course of 2023 complete the integration, including the finalization of the implementation of a joint ERP system for the combined company. Through 2023, HMH will also increase its focus on growth and will assess both organic initiatives as well as M&A to potentially strengthen its presence within the offshore and onshore drilling markets. HMH will also evaluate opportunities to grow within the renewable sector and a further expansion of its offering to non-oil markets. It is still important for HMH to participate in the oil and gas industry’s transition towards more energy-efficient solutions, and this will form a key area in the strategy of HMH going forward. AKOFS Offshore AKOFS Offshore is a provider of vessel-based subsea well installation and intervention services to the oil and gas industry. The company operates three specialized offshore vessels, AKOFS Santos, Aker Wayfarer and AKOFS Seafarer, and employed 348 people as per the end of 2022. Key Figures 1) Amounts in USD million Revenue and other income EBITDA EBIT CAPEX and R&D capitalization NCOA Net capital employed Order intake Order backlog Employees (FTE) 2022 149 48 8 29 19 349 198 470 348 2021 147 37 (15) 5 25 375 80 384 292 1) The figures are presented at 100 percent basis. The company’s revenue was USD 149 million in 2022, around 1 percent higher than previous year, positively affected by full year operations of the Aker Wayfarer vessel which in 2021 underwent its five-year periodic survey, partly mitigated by the AKOFS Santos vessel that went to yard in July. The EBITDA increased by USD 11 million to USD 48 million in 2022, primarily explained by higher revenue utilization for Aker Wayfarer. Through 2022, both AKOFS Santos and Aker Wayfarer operated on contracts in Brazil for subsea equipment installation work. Aker Wayfarer was on contract with Petrobras through the year while AKOFS Santos was operating on a short-term contract with a third party until July, after which she went to yard to prepare for the new three-year contract with Petrobras originally expected to commence late 2022. However, a period of delay related to deliveries from a sub-supplier led to that the contract first commenced in March 2023. Utilization for the two vessels operating in Brazil was good throughout 2022, with revenue utilization for Aker Wayfarer and AKOFS Santos of 97 percent and 91 percent respectively, adjusted for the AKOFS Santos yard stay. In July, AKOFS Offshore secured a new four-year contract for Aker Wayfarer to perform services as a subsea equipment support vessel Petrobras in Brazil. The new contract is expected to commence in the third quarter of 2023, following expiry of its current contract in April 2023 and a shorter yard stay. Total contract value of the new contract is about USD 282 million, of which about USD 198 million will be revenue allocated to AKOFS Offshore and included in the company’s backlog. AKOFS Seafarer continued to operate on its five-year contract with Equinor for Light Well Intervention services in the North Sea and has through 2022 been delivering solid operational performance. The vessel recorded a technical uptime above 97 percent in 2022, adjusted for periods on yard and waiting on weather. Total revenue utilization ended at around 86 percent, affected by a period of both mobilization and demobilization of Annual Report 2022 | Board of Directors' Report9 coiled tubing equipment to prepare the vessel for coiled tubing operations during the summer season. 2022 was the first time AKOFS Seafarer was used for coiled tubing, and the vessel delivered a successful campaign for its client. positive earnings in 2022. AGR today is mainly exposed towards Norway and APAC, with APAC delivering solid growth and strong results in 2022 driven by good activity within both consultancy and well management. The market situation for AKOFS Offshore over the last years has been affected by relatively low investment levels among oil companies. This has affected the prospects available for the company and more concretely day rates on the contracts for the various vessels. In 2022, AKOFS Offshore secured a new contract for the Aker Wayfarer vessel, an important achievement for the company, and with this all AKOFS Offshore’s vessels are on relatively long-term contracts. In 2023 and forward, AKOFS Offshore will continue to focus on delivering high uptime on its existing contracts. Further, securing successful commencement of the Aker Wayfarer vessel on the new four-year contract is a key focus area in the year. In addition, the company is continuously evaluating opportunities to grow through further leveraging its competencies within subsea well construction and intervention services. AGR AGR is a provider of well-, reservoir- and software services to the offshore drilling industry. Akastor holds 100 percent of the shares and 64 percent of the economic interest in the company. Nordea and DNB hold the remaining 36 percent of economic interest. Key Figures Amounts in NOK million Revenue and other income EBITDA EBIT CAPEX and R&D capitalization NCOA Net capital employed Order intake Order backlog Employees (FTE) 2022 789 2021 723 81 66 10 19 246 804 554 368 33 9 16 (9) 192 769 518 388 AGR had total revenues of NOK 789 million in 2022, compared to NOK 723 million in 2021. EBITDA in 2022 ended at NOK 81 million, up from 33 million in 2021, partly driven by a non-cash accounting gain of NOK 21 million related to establishment of the joint venture Føn Energy Services. During 2022, the increased activity level in AGR was driven by increased activity within its Norwegian consultancy business. The Norwegian consultancy segment remains the largest business segment in AGR, constituting more than 80 percent of revenues in 2022. Over the last years, AGR has had strong focus on its cost base, targeting to improve profitability within its international segments. After AGR closed down its UK well management business in December 2021, all geographical segments of AGR delivered As described under Subsequent Events above, Akastor entered into a share purchase agreement with ABL Group ASA (“ABL Group”) for the sale of all shares in AGR in March 2023. Following signing of the agreement, AGR will be presented as discontin ued operations for Akastor and held for sale until completion of the trans action which is expected to occur in the second quarter of 2023. Other Holdings Other Holdings per end of 2022 mainly included 100 percent ownership of Cool Sorption (sold to Diamond Key International Pty. Ltd. with closing in February 2023), 100 percent ownership of DDW Offshore AS, around 15 percent economic interest of NES Fircroft, a warrant structure towards Odfjell Drilling and 6.8 percent shareholding in Awilco Drilling. Also, the financial interest in four drilling equipment contracts with Jurong Shipyard (the DRU contracts) is included within Other Holdings. In addition, this segment includes corporate functions and certain long-term office lease contracts that remained in Akastor after the demerger from Aker Solutions in 2014. Key Figures Amounts in NOK million Revenue and other income EBITDA EBIT CAPEX and R&D capitalization NCOA Net capital employed Employees (FTE) 2022 270 (91) (142) (2) 224 921 44 2021 232 (32) (92) 65 239 1 483 43 Total EBITDA for Other Holdings for the year was negative NOK 91 million. Cool Sorption delivered an EBITDA of NOK 4 million in 2022, same as in 2021. DDW Offshore contributed positively with NOK 7 million in 2022, compared to NOK 17 million in 2021. The positive EBITDA of DDW Offshore in 2021 included an accounting gain related to bareboat charter agreements entered into with OceanPact Servicos Maritimos S.A. which was classified as the underlying performance in DDW Offshore in 2022 was better than last year, driven by higher utilization on the remaining vessels. The remaining negative EBITDA within Other Holdings mainly related to corporate overhead costs, as well as certain legacy costs. lease. Thus, financial Parent Company and Allocation of Net Loss The parent company Akastor ASA is the ultimate parent company in the Akastor group and its business is the ownership and management of all subsidiaries. Akastor ASA has outsourced all management functions to other companies within the group, mainly Akastor AS. However, assets and liabilities related to the Akastor Treasury function are held by Akastor Annual Report 2022 | Board of Directors' Report10 ASA. Akastor ASA has a net loss of NOK 457 million in 2022 (loss of NOK 664 million in 2021). The parent company’s dividend policy states that Akastor's shareholders shall receive a competitive return on their investment either through cash dividends or increases in the share price, or both. The company does not intend to distribute regular or annual dividends, but will consider dividends on an ongoing basis taking into consideration the company’s M&A activities, expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. The board thereby proposes no dividend for 2022 and the net loss for the year of NOK 457 million be allocated to retained earnings. Risk Management Akastor and its portfolio companies are exposed to various forms of market, operational and financial risks that may affect the companies’ performance, their ability to meet strategic goals and the companies’ reputation. Akastor’s risk management model is designed on the basis that Akastor is an investment company with an overall objective of securing its shareholders’ investments and developing the group’s assets in order to provide the shareholders with a solid return. Akastor’s current investment portfolio is focused on the oilfield services industry. This focus is mainly driven by the company’s experience, expertise and track-record within this industry. Although Akastor has a flexible mandate, it has traditionally not sought to spread risk by investing in different industries. Instead, Akastor has focused on mitigating its vulnerability to the risk environment inherent to the oilfield services industry through sound risk management systems. The risks associated with the global uncertainty that have impacted markets during most of 2022, both arising from the war in Ukraine as well as the recession warnings, also impact Akastor’s ability to execute value enhancing transactions. More specifically, we have seen that the runway on some transactions has had to be extended or delayed and that the financing costs have increased. On the other hand, this has been balanced and to a large degree been offset by solid performance from Akastor’s portfolio companies combined with increased focus on the oil service industry as an important business to ensure energy security. In sum, Akastor’s financial position has been strengthened and we believe that Akastor is well positioned to continue its strategy to make value enhancing transactions in a continued unstable market situation. Our focus on climate risk has continued throughout 2022, in close dialogue with all portfolio companies. Following on the main achievements in 2021, where i.a. all portfolio companies have set defined sustainability targets, focus for 2022 has been to ensure that proper reporting requirements are set and that a credible strategy for achieving the targets is set and monitored. All portfolio companies are expected to prepare and be ready when Corporate Sustainability Reporting Directive (CSRD) is implemented. On the operational side, risks are primarily mitigated by securing new orders and sound project execution by the portfolio companies. Results also depend on costs, both the portfolio companies’ own costs and those charged by suppliers. Akastor and its portfolio companies are also exposed to financial risk under performance guarantees and financial guarantees issued, and financial market risks as further detailed below. In addition, the portfolio companies, through their business activities within their respective sectors and countries, are also exposed to legal/compliance and regulatory/political risks, e.g. political decisions on international sanctions that impact supply and demand of the services offered by the portfolio companies, as well as environmental regulations. Moreover, we have over the recent years seen an increase in the threat faced from different forms of cyber risks such as e.g. risk of ransomware and phishing attempts. These are risk areas that are under continuous development and where it is important that Akastor and this its portfolio companies continuously monitor development and the risks associated. As an investment company, Akastor and its portfolio companies from time to time engage in mergers and acquisitions and other transactions that could expose the companies to financial and other non-operational risks, such as warranty and indemnity claims and price adjustment mechanisms. Moreover, the entire transaction process, including the process from signing to closing as well as proper integration of new business operations, entails a set of risks for Akastor that will need to be managed and mitigated. To manage and mitigate risks within Akastor, risk evaluation is an integral part of all business activities, including when making decisions regarding mergers and acquisitions and other investment matters. As an owner, Akastor actively supervises risk management in its portfolio companies through participation on the board of directors of each portfolio company, and by defining a clear set of risk management and mitigation processes and procedures that all portfolio companies must adhere to. The current and revised governing documents defined by Akastor were rolled out during the first half of 2016 and are reviewed annually. The overall responsibility for ensuring sound internal control and an appropriate framework for risk management in Akastor lies with its board of directors. A risk review is presented to and reviewed by the audit committee and the board of directors of Akastor on an annual basis. The directors and officers of Akastor companies are covered under an Aker group Director & Officer’s Liability Insurance (D&O). The insurance covers personal legal liabilities including defence- and legal costs. The officers and directors of the parent company and all subsidiaries globally (owned 50% or more) are covered by the insurance. The cover also includes employees in managerial positions or employees who become named in a claim or investigation. Annual Report 2022 | Board of Directors' ReportFinancial Risks Akastor is exposed to a variety of financial market risks such as currency risk, interest rate risk, tax risk, price risk, credit and counterparty risk, liquidity risk and capital risk as well as risks associated with access to and terms of financing. The financial risks, affecting the group’s income and the value of any financial instruments held, are discussed in greater details in Note 29 Financial risk management and exposures to the group’s consolidated financial statements. The objective of financial risk management is to manage and control financial risk exposures and thereby minimize potential adverse effects on Akastor’s financial position. Akastor per today is an investment company with limited upstream cash flow from its portfolio companies and therefore to a large degree depends on realization of assets to reduce debt and improve liquidity. As described under Going Concern above, liquidity risk has been mitigated in the short to medium term through the increase of the Aker facility in March 2023. However, in order to mitigate 2024 refinancing risk when the corporate financing facilities mature and secure available liquidity past 2023, Akastor is in accordance with its strategy focusing on realization of holdings. In 2023, the outcome related to the DRU arbitration process is a key milestone in this regard. If realization processes planned for the year should be delayed or if proceeds come in at a lower value than anticipated, refinancing risk in 2024 would increase and other sources of capital could be required. Integrity Risks All Akastor portfolio companies use education and awareness training to manage and mitigate integrity risks. All employees must complete an annual Code of Conduct training program. In addition, all Akastor managers and office-based staff are required to conduct integrity e-learning training and participate in classroom courses. For employees in specific functions, where chance of facing integrity risk is considered higher than normal, additional training has been tailored for their role and responsibilities. Hired-in personnel in high risk roles are also required to undertake integrity training, just as third-party representatives receive integrity training specially prepared for them. The requirement for all portfolio companies is to complete and report on the training within six months from employment or publication of a new training session. Akastor has established a whistleblowing system in line with the company’s Governance Policy. The whistleblowing channel is open for all external and internal stakeholders who wish to report a breach of the Code of Conduct, other internal guidelines or governing policies. Akastor employees are required to report breaches of the Code of Conduct, and Akastor encourages reporting of any concerns pertaining to compliance with law or ethical standards. Climate Risks The main climate-related risks in Akastor are with our industrial investments due to the fact that the industry is in a state of 11 accelerated transition to a lower-carbon intensive industry. Governmental regulation of GHG emissions is expected to increase and it will continue to be challenging to get necessary financing with potential lenders electing not to invest in the oil and gas market but rather move capital to new green markets. Unless these risks are met with mitigating measures, we could face a scenario where many of Akastor’s portfolio companies lose its market positions and/or are left with product lines that are obsolete and replaced by more energy efficient/green alternatives. However, this transition to low carbon intensive industry will also create several opportunities, which the portfolio companies are addressing, for example HMH’s concept developments towards the offshore wind industry and AGR’s Carbon Capture and management services. Each portfolio company addresses climate-related risks and opportunities within its yearly risk assessment, and the assessment is reviewed by its Board of Directors. Environmental, Social and Governance Akastor’s operating model reflects the fact that the portfolio companies are independent companies which operate different business models and therefore face different Environmental, Social and Governance (ESG) risks and expectations from stakeholders. As a holding company, Akastor is responsible for setting the overall ESG priorities and providing the appropriate risk management framework and policies applicable for the portfolio. Akastor Sustainability Policy describes how Akastor aims to integrate sustainability in its investment processes, own operations, and in the governance of its organisation. The policy includes the investment policy and how Akastor engages with these the portfolio companies. expectations, each portfolio company is responsible for defining their own ESG strategy with relevant activities and, where necessary, supporting policies. turn, and based on In Akastor also focuses on maintenance and development of industrial relations and collaboration with unions. Historically, good industrial relations have played an important role, and maintaining these strong relations have proven to be one of the success criteria in developing the company over the years. Within the ESG efforts, Akastor is focused on areas that build financial and non-financial value in the portfolio companies. Akastor’s ESG strategy is based on four main priorities: working against corruption, respecting human rights, addressing health and safety and minimizing adverse impact on the environment. Environment and Human Rights have had an increased focus in 2022 where Akastor intends to take part in the industry’s transition towards more sustainable operations. All the portfolio companies have completed human rights risk assessment, and climate risk and opportunities assessments and are responsible for working systematically and managing these possibilities and consequences. In regards of Human Rights, Akastor and its portfolio companies have not identified any actual adverse impacts or significant risk for adverse impacts through its risk Annual Report 2022 | Board of Directors' Report12 assessments or due diligences of business partners. The portfolio companies are defining their own ESG strategies is continuously these priorities. Akastor encompassing monitoring the implementation and integration of the priorities of the ESG strategy, Code of Conduct, Sustainability Policy and Integrity Policy across all the portfolio companies. For in-depth reporting on each portfolio company’s approach to ESG, including their Health, Safety and Environment work, refer to the Akastor ESG Report for 2022. The Akastor ESG report also includes Akastor's reporting adhering to the Transparency Act, a Norwegian legislation, which requires companies to promote respect for human rights and decent working conditions. The Akastor ESG report is available on the website www.akastor. com. Research, Innovation and Technology Development NOK 9 million was capitalized in 2022, compared to NOK 24 million in 2021, related to development activities. No research and development costs were expensed during the year (NOK 1 million in 2021). All research, innovation and development initiatives are performed by the Akastor portfolio companies. Akastor ASA and Akastor AS performed no such activity in 2022. People and Teams Akastor is committed to equal opportunity and non-discrimination. This commitment is described in Akastor’s Code of Conduct, as well as Akastor’s policies and agreements, and builds on a frame agreement signed with national and international trade unions in 2008. This agreement was renewed in 2012 and sets out fundamental labour rights and standards for general employment terms and employee relations, with specific focus on non-discrimination. Equal opportunities are fundamental for Akastor and its portfolio companies. In 2022, as in previous years, no events violating these agreements were reported. As of year-end 2022, Akastor ASA’s board comprised eight directors inclusive three employee elected directors, of which two shareholders elected directors are female directors. Akastor and its subsidiaries had a total of 412 employees (FTE) as of December 31, 2022. AKOFS Offshore had a total of 348 employees (FTE) as of December 31, 2022. HMH had a total of 1 983 employees (FTE) as of December 31, 2022. In Akastor AS, the male/female ratio was 77/23. The male/female ratio (excluding hired ins) in the major portfolio companies and Akastor Group were as follows: HMH 18% 82% AKOFS Offshore 10% 90% AGR 27% 73% Akastor Consolidated 26% 74% Female Male All portfolio companies regularly assess whether they live up to the principle of equal pay for equal work and no significant differences have been identified. Each portfolio company promotes equal opportunities by setting specific requirements for diversity in recruitment and people development, and by supporting programs dedicated to equal opportunity. Akastor and its portfolio companies are not aware of any employees that work involuntary part time. Akastor ASA fulfils the requirements of the Norwegian Companies Act with regards to gender representation on the board of directors, as two out of five shareholder elected directors are women. Aggregated sick leave in Akastor Group was 2.0 percent in 2022. There were no fatal injuries in any of the portfolio companies. The total recordable incident frequency has increased for all companies, and Akastor has thoroughly analysed all incidents and taken actions to avoid similar situations going forward. Caring for employee’s health and safety is an integrated part of the group’s culture. See figures below for details. AKOFS HMH Offshore AGR Akastor Consolidated Lost time Incident Frequency (LTIF) 1) Total Recordable Incident Frequency (TRIF) 1) Fatalities incl. subcontractors Sick leave (percent) 1.6 3.2 - 3.6 - 1.7 - 3.8 - - - 3.3 - 8.9 - 2.0 1) Per million hours worked. Includes subcontractors Annual Report 2022 | Board of Directors' Report13 Corporate governance Corporate governance is a framework of values, responsibilities and governing documents to control the business and ensure sustainable value creation for shareholders over time. It is the responsibility of the board of directors of Akastor to ensure that the company implements sound corporate governance. The audit committee supports the board in safeguarding that the company has internal procedures and systems in place to ensure that corporate governance processes are effective. Akastor’s corporate governance principles are based on the Norwegian Code of Practice for Corporate Governance and are designed to secure the shareholders’ investment through value creation and to ensure good control with the portfolio companies. The corporate governance principles are included in this annual report and available on the company’s website www.akastor.com. Fornebu, March 22, 2023 I Board of Directors of Akastor ASA Frank O. Reite | Chairperson Lone Fønss Schrøder | Deputy Chairperson Svein Oskar Stoknes | Director Kathryn M. Baker | Director Luis Antonio G. Araujo | Director Henning Jensen | Director Asle Christian Halvorsen | Director Stian Sjølund | Director Karl Erik Kjelstad | CEO Annual Report 2022 | Board of Directors' ReportBoard of Directors’ Report14 02. DECLARATION BY THE BOARD OF DIRECTORS AND CEO The board and CEO have today considered and approved the annual report and financial statements for the Akastor group and its parent company Akastor ASA for the year ended on December 31, 2022. The board has based this declaration on reports and statements from the group’s CEO and/or on the results of the group’s activities, as well as other information that is essential to assess the group’s position which has been provided to the board of directors. To the best of our knowledge: The financial statements for 2022 for Akastor group and its parent company have been prepared in accordance with all applicable accounting standards. The information provided in the financial statements gives a true and fair portrayal of the group and its parent company’s assets, liabilities, profit and overall financial position as of December 31, 2022. The annual report provides a true and fair overview of the development, profit and financial position of Akastor group and its parent company, as well as the most significant risks and uncertainties facing the group and the parent company. Fornebu, March 22, 2023 I Board of Directors of Akastor ASA Frank O. Reite | Chairperson Lone Fønss Schrøder | Deputy Chairperson Svein Oskar Stoknes | Director Kathryn M. Baker | Director Luis Antonio G. Araujo | Director Henning Jensen | Director Asle Christian Halvorsen | Director Stian Sjølund | Director Karl Erik Kjelstad | CEO Annual Report 2022 | Declaration by the Board of Directors and CEODeclaration by the Board of Directors and CEO15 03. CORPORATE GOVERNANCE STATEMENT – AKASTOR ASA Corporate governance is a framework of values, responsibilities and governing documents to control the business and ensure sustainable value creation for shareholders over time. Sound corporate governance shall ensure that appropriate goals and strategies are adopted, that the strategies are implemented in a good manner and that the results achieved are subject to measurement and follow-up. 1. The Corporate Governance Report Basis for this Report The corporate governance principles of the group are laid down by the board of directors of Akastor ASA (“Akastor” or the “company”). The principles are based on the Norwegian Code of Practice for Corporate Governance dated 14 October 2021 (the «Code of Practice»), the regulations set out in the Rulebook II of Oslo Børs (the stock exchange in Oslo) and the relevant Norwegian background law such as the Norwegian Accounting Act and the Norwegian Public Limited Liability Companies Act. The Code of Practice may be found at www.nues.no and the Oslo Børs Rulebook II may be found at laws and regulations are www.euronext.com. Norwegian available at www.lovdata.no. This report outlines how Akastor has implemented the Code of Practice. Deviations from the Code of Practice are addressed under the relevant sections. In general, the Akastor board only approves deviations that the board believes contributes to value creation for its stakeholders. In addition to the Code of Practice, the Norwegian Accounting Act section 3-3b stipulates that companies must provide a report on their policies and practices for corporate governance either in the annual report or in a document referred to in the annual report. Such report is integrated in the below corporate governance statement . Governance Structure Akastor is an oilfield services investment company with a portfolio of industrial holdings and other investments. The company has a flexible mandate for active ownership and long- term value creation. Completed transactions in 2022 include the sale of preference shares in Odfjell Drilling Ltd as well as the sale of all shares in Cool Sorption A/S (sales agreement signed in December 2022 and completed in February 2023). On this background Akastor currently has an active investment portfolio within the oilfield services industry consisting of AGR, DDW Offshore, 50 percent of the shares in HMH, 50 percent of the shares in AKOFS Offshore, a 15 percent economic ownership in NES Fircroft, in addition to other holdings and investments (see below), with a total net capital employed of NOK 4.6 billion. HMH is a global provider of drilling solutions, engineering, projects, equipment and services. AKOFS Offshore is a provider of subsea well installation and intervention services. AGR is a leading provider of well and reservoir consultancy services as well as software and technical manpower for its clients. DDW Offshore operates five offshore vessels. NES Fircroft is a global technical and engineering staff provider. Other investments mainly include warrant investments in Odfjell Drilling and Awilco Drilling, a subletting portfolio through Akastor Real Estate and an investment in Aker Pensjonskasse. In addition, following the completion of the transaction in 2021 when HMH was formed, Akastor holds full ecomonic interest in the four DRU contracts, which are still held by MHWirth as contract holder, but where the financial exposure will be with Akastor. It is the responsibility of the board of directors of Akastor to ensure that Akastor and its portfolio of companies implement sound corporate governance. The board of directors evaluates this corporate governance statement on an annual basis. The the corporate board’s audit committee also evaluates governance statement as well as other key policies and procedures pertaining to compliance and governance. Compliance with, and implementation of these corporate governance guidelines are continuously evaluated by the board and said committee; inter alia by way of the board being the decisive body for the company’s defined management and reporting structure, which include regular reporting. Policies and Procedures Akastor has a total of eleven corporate policies providing business practice guidance within a number of key areas, all of which are reviewed and updated on an annual basis. These policy documents express the overall position of the group with regard to for instance compliance, integrity and governance. The policies provide instructions and guidelines that apply to the portfolio companies and to individual employees in order to ensure that the group’s operations are in compliance with internal and external regulatory framework. In addition, the portfolio companies are requested to implement their own policies specific to their business within areas like project execution, HSE and tendering. Values and Code of Conduct Akastor aims to develop and refine its portfolio of companies as stand-alone enterprises, with the goal of maximizing the value potential of each entity. The company works to develop the business models of the portfolio companies, capitalize on their market positions and promote aftersales services for the equipment and systems delivered. The current investments are Annual Report 2022 | Corporate Governance StatementCorporate Governance Statement 16 within the oilfield services sector, but the company has a flexible mandate for active ownership and long-term value creation. Akastor has an opportunistic approach and will continue to own the portfolio companies as long as Akastor creates more value than alternative owners. Akastor wishes to contribute to sustainable social development through responsible business practices. The company’s Code of Conduct is a handbook that applies to all employees and provides guiding on what Akastor considers to be responsible ethical conduct. The Code of Conduct provides a framework of core corporate values which reflects Akastor’s prudent business practice and shall be reflected in every aspect of our operations. The ethical guidelines and other governing documents of the group have been drafted on the basis of these core corporate values. 2. Business The objectives of the company, as defined in its articles of association, are «to own or carry out industrial and other associated businesses, management of capital, and other functions for the group, and to participate in or acquire other businesses». The articles of association are available at www. akastor.com. The principal strategies of the group are presented in the annual report. To ensure value creation for its shareholders, the board of directors annually performs a designated strategy process where it sets objectives and targets for the company, assesses risk, evaluates the existing strategy and approves any significant changes. Information concerning the financial position and principal strategies of the company, and any changes thereto is disclosed to the market in the context of the company’s quarterly reporting and in designated market presentations as well as at www.akastor.com. Corporate Responsibility Akastor takes an active approach to corporate responsibility. Corporate responsibility in Akastor is about making prudent business decisions, with minimum risk to reputation, brand and the future sustainability of our business. The main focus of corporate responsibility activities in Akastor, defined in our group-wide integrity policy, is to work against corruption, to respect human rights and to care for health, safety and the environment. In the Akastor Sustainability Policy it is described how Akastor aims to integrate sustainability in its investment processes and engages with the portfolio companies. Akastor’s primary stakeholders are the shareholders (existing and potential), customers of its portfolio companies and employees of the Akastor group. Akastor has an ongoing stakeholder dialogue, media analysis and investor presentations, which provide to Akastor’s work on corporate responsibility topics. All our portfolio companies are expected to ensure integration of stakeholder engagement and a strong corporate responsibility in their operations. Akastor recognizes important input and respects the United Nations’ 17 Sustainable Development Goals (SDGs), and has identified four SDGs that Akastor positively impacts. A self-assessment is used to identify where Akastor has the most opportunity to contribute to the SDGs. Akastor identified 8, 12, and 13 as priority SDGs and encourages the portfolio companies to identify and work towards relevant SDGs in their work and strategy. Akastor is committed to follow the Global Framework Agreement (GFA) entered into by Aker with the trade unions Fellesforbundet, IndustriALL Global Union, NITO and Tekna on December 17, 2012. The GFA builds on and continues the commitment from the previous framework agreements signed in 2008 and 2010, and outlines key responsibilities in relation to human and trade union rights. The parties commit themselves to achieving continuous improvements within the areas of working conditions, industrial relations with the employees of the Aker group of companies, health and safety standards at the workplace and environmental performance. Akastor is a member of the UN Global Compact, and also aligns with the principles of the United Nations Convention against Corruption, the Universal Declaration of Human Rights, the UN Guiding Principles for Business and Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work. These international principles guide our Code of Conduct and Integrity Policy and provide the overall framework for the corporate responsibility efforts in the Akastor group. in information Further the corporate social respect of responsibility work of Akastor and its portfolio of companies can be found in the separate Environmental, Social and Governance (ESG) report published simultaneously as the company’s annual report for 2023. 3. Equity and Dividends Equity The management and the board regularly monitor that the group’s equity and liquidity are appropriate for its objectives, strategy and risk profile. The book equity of the group as per December 31, 2022 is NOK 4 092 million, which represents an equity ratio of 60 percent. The management of financial risk is further described in the annual report. Dividend Policy The board proposes the level of dividend payment to the general meeting who in turn is the decisive corporate body for dividend decisions. Over time, the aim is that Akastor’s shareholders shall receive a competitive return on their investment either through cash dividends or increase in the share price, or both. The company does not intend to distribute regular or annual dividends, but will consider dividends on an ongoing basis taking into consideration the company’s M&A activities, expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. Annual Report 2022 | Corporate Governance Statement17 Authorizations for the Board of Directors Proposals from the board of directors for future authorizations for share capital increases, share buy-backs or similar shall be for defined purposes, such as share purchase programs and acquisitions of companies, and shall remain in effect until the next annual general meeting. The company’s annual general meeting on 20 April 2022 resolved to authorize the board to purchase treasury shares for three purposes for utilization, all of which were subject to separate voting under the general meeting: (i) purchase of treasury shares to be used as transaction currency in connection with acquisitions, mergers, demergers and other transactions, (ii) purchase of treasury shares to be sold and/or transferred to employees and directors under share purchase programs and (iii) purchase of treasury shares for the purpose of investment or for subsequent sale or deletion of such shares. The authorizations were all limited to ten percent of the share capital. The board’s authorizations to purchase treasury shares are valid for the period until the date of the annual general meeting of 2023. No shares were bought by the company in 2022 pursuant to the authorizations to the board of directors. As of December 31, 2022, the company holds 1 985 164 own shares. In addition, the annual general meeting in 2022 granted the board of directors the mandate to approve the distribution of dividends based on the company’s annual accounts for 2021 as set out in the Public Limited Liability Companies Act section 8-2, second paragraph. The mandate is valid for the period until the date of the annual general meeting of 2023. There are no current provisions in the articles of association of the company or power of attorney from the general meeting which grant the board of directors the mandate to issue or buy back of shares in the company for the purposes of capital increases. Share Purchase Programs There are currently no active share purchase programs in place in Akastor. 4. Equal Treatment of Shareholders and Transac- tions with Related Parties The company has only one class of shares, and all shares carry equal rights. Existing shareholders shall have pre-emptive rights to subscribe for shares in the event of share capital increases, unless otherwise indicated by special circumstances. If the pre-emptive rights of existing shareholders are waived in respect of a share capital increase, the reasons for such waiver shall be explained by the board of directors. Transactions in own shares are effected via Oslo Børs. The largest shareholder of Akastor, Aker Holding AS, is wholly- owned by Aker ASA, which in turn is controlled by Kjell Inge Røkke through TRG Holding AS and The Resource Group TRG AS. As of December 31, 2022, Aker Holding AS owns 36.7% of the shares in Akastor ASA, which is an associated company of Aker ASA. The board of directors is of the view that it is positive for Akastor that Aker ASA assumes the role of an active owner and is actively involved in matters of importance to Akastor and to all shareholders. The cooperation with Aker ASA offers Akastor access to special know-how and resources within strategy, transactions and funding. Moreover, Aker ASA offers network and negotiation resources from which Akastor benefits in various contexts. This complements and strengthens Akastor without curtailing the autonomy of the group. It may be necessary to offer Aker ASA special access to commercial information in connection with such cooperation. Any information disclosed to Aker ASA’s representatives in such a context is subject to in confidentiality undertakings and disclosure regulations compliance with applicable laws. Aker ASA and Aker Solutions ASA (or their subsidiaries) are not deemed, within the meaning of the Public Limited Liability Companies Act, to be a related party of Akastor. The board of directors and the executive management team of Akastor are nevertheless conscious that all relations with these companies shall be premised on commercial terms and structured in line with arm’s length principles. In the event of any material transactions between the company and shareholders, directors, senior executives, or related parties thereof, which do not form part of the ordinary course of the company’s business, the board of directors shall arrange for an independent assessment. The same shall, generally speaking, apply to the relationship between Akastor and Aker ASA related companies. In respect of the above, the «Related parties» note to the consolidated financial statements contains information on the most significant transactions between Akastor and companies within the Aker ASA group. 5. Freely Negotiable Shares The shares are listed on the Oslo Børs and are freely transferable. No transferability restrictions are laid down in the articles of association. There are no restrictions on the party’s ability to own, trade or vote for shares in the company. 6. General Meetings Attendance, Agenda and Voting The general meetings in Akastor will be conducted electronically. The decision to hold virtual meetings without the possibility to attend a physical meeting, is partly due to the requirements in the Public Limited Liability Companies Act section 5-8, third paragraph, letter b, and party for practical considerations. The shareholders will be invited to participate online via PC, phone or tablet, and a description of how to participate is included in the notice of general meeting that will be announced. By Annual Report 2022 | Corporate Governance Statement18 participating online, shareholders will receive a live webcast from the general meeting, the opportunity to ask written questions, and vote on each of the items. The company encourages shareholders to attend the general meetings. It will also, like previous years, be possible to vote in advance or give a proxy before the meetings. Notices convening general meetings, including comprehensive documentation relating to the items on the agenda, including the recommendation of the nomination committee, shall be sought made available on the company’s website no later than 21 days prior to the general meeting. The articles of association of the company stipulate that documents pertaining to matters to be deliberated by the general meeting shall only be made available on the company’s website, and not normally be sent physically by post to the shareholders unless required by statute. The following matters are typically decided at the annual general meeting, in accordance with the articles of association of Akastor ASA and Norwegian background law: Election of the nomination committee and stipulation of the nomination committee's fees; election of shareholder representatives to the board of directors as well as stipulation of fees to the board of directors; election of the external auditor and approval of the auditor’s fee; approval of any amendments to the board of directors’ regarding stipulation of salary and other policy remuneration to the executive management, if any; advisory vote on the board of directors’ report on remuneration to the executive management; approval of the annual accounts and the board of directors’ report, including distribution of dividend; and other matters which, by law or under the articles of associ- ation, are the business of the annual general meeting. The deadline for registering intended attendance is as close to the general meeting as possible. Information concerning both the registration procedure, online participation and the filing of proxies is included in the notice convening the general meeting and on the registration form. The company also aims to structure, to the extent practicable, the proxy form such as to enable the shareholders to vote on each individual item on the agenda. Chairperson The articles of association stipulate that the general meetings shall be chaired by the chairperson of the board of directors or a person appointed by said chairperson. According to the Code of Practice the board should however «make arrangements to ensure an independent chairperson for the general meeting». Thus, the articles of Akastor ASA deviate from the Code of Practice in this respect. This has its background in a long-lasting tradition in Akastor. Having the chairperson of the board chairing the general meeting also simplifies the preparations for the general meetings significantly. Election of Directors It is a priority for the nomination committee that the board of directors shall work in the best possible manner as a team, and that the background and competence of the directors shall complement each other. As a consequence, the nomination committee will propose that the shareholders are invited to vote on the full board composition proposed by the nomination committee as a group, and not on each director separately. Hence, Akastor deviates from the Code of Practice stipulating that one should make «appropriate arrangements for the general meeting to vote separately on each candidate nominated for election to the company’s corporate bodies». Minutes Minutes of general meetings will be published as soon as practicable on the announcement system of Oslo Børs, www.newsweb.no (ticker: AKAST), and at www.akastor.com. 7. Nomination Committee The articles of association stipulate that the company shall have a nomination committee. The nomination committee shall have no less than three members, who shall normally serve for a term of two years. The current members of the nomination committee are Ingebret G. Hisdal (chairperson), Charlotte Håkonsen and Kjetil E. Stensland, who were all elected at last year’s annual general meeting and are therefore not up for re-election this year. Charlotte Håkonsen is the General Counsel of Aker ASA (and was employed by Akastor until 2018). No members of the nomination committee are employed by, or directors of, Akastor. The majority of the members of the nomination committee are independent of both Akastor’s board of directors and the executive management of the company. The committee’s recommendations (relating to particularly the board of directors and their remuneration) shall address how the new board candidates will attend to the interests of the shareholders in general and fill the requirements of the company, including with to competence, capacity and independence. respect The composition of the nomination committee shall reflect the interests of all shareholders and ensure independence from the board of directors and the executive management. The members and the chairperson of the nomination committee are appointed by the general meeting, which also determines the remuneration of the committee. The annual general meeting in 2010 adopted guidelines governing the duties of the nomination committee. According to Annual Report 2022 | Corporate Governance Statementthese guidelines, the committee shall emphasize that candidates for the board have the necessary experience, competence, and capacity to perform their duties in a satisfactory manner. A reasonable to gender and background should also be emphasized. representation with regard The chairperson of the nomination committee has the overall responsibility for the work of the committee. In the exercise of its duties, the nomination committee may contact, among others, shareholders, the board, management, and external advisors. The nomination committee shall also ensure its recommendations are endorsed by the largest shareholders. that Information concerning the nomination committee and deadlines for making suggestions or proposing candidates for directorships will be made available on the company’s website, www.akastor. com when there are candidates up for election. 8. Composition and Independence of the Board of Directors Composition It has been agreed with the employees that the company shall have no corporate assembly. Hence, the board appoints its own chairperson, cf. the Public Limited Liability Companies Act section 6-1, second paragraph, unless the chairperson is appointed by the general meeting. The proposal of the include a proposed nomination committee will normally candidate for appointment as chairperson of the board of directors. The board of directors appoints its own deputy chairperson. According to the Public Limited Liability Companies Act, the directors are appointed for a term of two years at a time unless otherwise stated in the company’s articles of association. The articles of association of Akastor stipulate that directors may be elected for a period of one to three years. The right of the employees to be represented and participate in decision making is safeguarded through expanded employee representation on the board of directors of both Akastor and in a number of the group’s portfolio companies. The articles of association stipulate that the board of directors shall comprise six to twelve persons, one third of whom shall be elected by and amongst the employees of the group. In addition, up to three shareholder-appointed alternates may be appointed. As per December 31, 2022, the board of directors comprised eight directors, five of whom were elected by the shareholders and three of whom were elected by and amongst the employees. The company encourages the directors to hold shares in the company. The shareholdings of the directors as of December 31, 2022 will be set out in the 2022 remuneration report. The chairperson Frank O. Reite and the directors Lone Fønss Schrøder, Kathryn M. Baker and Svein Oskar Stoknes are currently shareholders in Akastor. The board composition, including information about the directors’ background and expertise will be detailed in the annual report for 2022. 19 The appointment of employee representatives to the board of directors is conducted as prescribed by the Public Limited Liability Companies Act, the Representation Regulations and also as per practice agreed with the union representatives of the employees of Akastor’s portfolio companies and industrial holdings. The board of directors has appointed a designated election committee charged with implementing the appointment of such employee representatives. Independence A majority of the directors elected by the shareholders are independent of the executive personnel and important business associates of Akastor. None of the executive personnel of the company are members of the board of directors. The composition of the board of directors aims to ensure that the interests of all shareholders are attended to, and that the company has the know-how, resources, and diversity it needs at its disposal. Among the five shareholder-elected directors, the majority are deemed independent from the company’s largest indirect shareholder, Aker ASA. 9. The Work of the Board of Directors Procedures For each calendar year, the board plans for its work and meetings. Furthermore, there are rules of procedure for the board of directors and Chief Executive Officer, which govern areas of responsibility, duties and the distribution of roles between the board of directors, the chairperson of the board of directors and the Chief Executive Officer. The rules of procedure for the board of directors also include provisions on convening and chairing board meetings, decision making, the duty and right of the Chief Executive Officer to disclose information to the board of directors, the duty of confidentiality, etc. According to the company’s articles of association, each of the directors elected by the shareholders will serve for a period of one to three years pursuant to further decision by the general meeting. This to provide the nomination committee with the flexibility to propose varying terms of service for the candidates. Akastor has prepared guidelines as part of its rules of procedure for the Chief Executive Officer and board of directors ensuring that directors and the Chief Executive Officer notify the board of directors if they have any material direct or indirect personal interest in any agreement concluded by the group. The guidelines stipulate that the directors and the Chief Executive Officer shall not participate in the preparation, deliberation, or resolution of any matters that are of such special importance to themselves, or any of their related parties, so that the person in question must be deemed to have a prominent personal or financial interest in such matters. The relevant board member or the Chief Executive Officer shall raise the issue of his or her competence whenever there may be cause to question it, and each director is the primary responsible for adopting the correct decision as to whether he or she should step down from participating in the discussion of the matter at hand. Annual Report 2022 | Corporate Governance Statement20 In general, as further stipulated in Akastor’s principles for related party transactions, directors of Akastor should be cautious in participating in the consideration of issues where a potential conflict of interest or conflict of role may arise, undermining the confidence in the decision process. Such person may not participate in board discussions of more than one company that is part of the same agreement, unless the companies have common interests. These assessments will be carried out on a case-by-case basis; in most events, and as a starting point, by the relevant directors themselves, but often also in cooperation with internal and/or external legal counsel. The above principles will normally also be applied if Akastor contracts with other companies in which said board members hold direct or indirect ownership interests that exceed, in relative terms, their ownership interests in Akastor. If grounds for legal incapacity are established, the relevant board member will, as a ground rule, not be granted access to any documentation prepared to the board of directors for the deliberation of the agenda item in question. In general, Akastor applies a strict norm as far as competence assessments are concerned. In cases where the chairperson of the board of directors does not participate in the deliberations, the deputy chairperson of the board of directors chairs the meeting. As far as the other officers and employees of Akastor are concerned, transactions with related parties and conflicts of interest are comprehensively addressed and regulated in the group’s Code of Conduct. Meetings The board of directors will hold board meetings whenever needed, but normally six to twelve times a year. The need for extraordinary board meetings may typically arise because the internal authorization structure of the company requires the board of directors to deliberate and approve material tenders to be submitted by the company or in relation to M&A transactions. Whilst the deadlines for such submission often change, it is difficult to fit this into the calendar of ordinary board meetings. The board of directors held six ordinary board meetings in 2022. In addition, two extraordinary board meetings were held whereby decisions were taken by way of circulation. The aggregate attendance rate at the board meetings was close to 100 percent. The Matters Discussed by the Board of Directors The Chief Executive Officer prepares cases for deliberation by the board of directors in cooperation with the chairperson of the board. Endeavours are made to prepare and present matters in such a way that the board of directors is provided with an adequate basis for its deliberations. The board of directors has overall responsibility for the management of Akastor and shall, through the Chief Executive Officer, ensure that its activities are organized in a sound manner. The board of directors shall adopt plans and budgets for the business, and keep itself informed of the financial position of, and development within, the company. This encompasses the annual planning process of Akastor, with the adoption of overall goals and strategic choices for the group, as well as financial plans, budgets, and forecasts for the group and the portfolio companies. The board of directors performs annual evaluations of its work and its know-how. Audit Committee Akastor will have an audit committee comprising two to four of the directors. The audit committee currently comprises the directors Lone Fønss Schrøder (chair), Kathryn M. Baker and Henning Jensen. The audit committee is independent from the management. At least one of the members of the audit committee shall have either formal qualifications within accounting or auditing, or relevant experience and skills within the same. Both members Fønss Schrøder and Baker have such relevant experience and skills. The audit committee has a mandate and a working method that complies with statutory requirements. The audit committee mandate forms an integrated part of the rules of procedures for the board of directors. The committee will participate, on behalf of the board of directors, in the quality assurance of guidelines, policies, and other governing instruments in Akastor. The audit committee performs a qualitative review of the quarterly and annual reports of Akastor, including Akastor’s reporting on ESG and other non-financial matters. Significant judgment calls (uncertain estimates) made in the financial statements in the quarter are reviewed by the audit committee. The audit committee further supports the board of directors in safeguarding that the company has sound risk management and internal controls. The audit committee reviews the status on internal controls on an annual basis. In order to safeguard appropriate processes and assessments, the board’s audit committee shall also review major M&A transactions as well as related party transactions which are not part of the company’s ordinary course of business, unless such related party transactions are immaterial. Akastor currently has no remuneration committee as the experiences from having such showed more merit in discussing matters comprised by this committee’s mandate with all directors present. As of December 31, 2022, there are no other board committees than the audit committee. The board does not envisage appointing any further board committees in 2023. The board evaluates its performance and qualification annually. A summary of the evaluation was made available to the nomination committee. 10. Risk Management and Internal Control Governing Principles The board of directors shall ensure that Akastor has sound internal control and systems for risk management that are appropriate in Annual Report 2022 | Corporate Governance Statement21 relation to the extent and nature of the company’s activities. The audit committee supports the board of directors in safeguarding that the company has internal procedures and systems that ensure good corporate governance, stakeholder engagement, effective internal controls and proper risk management, particularly in relation to financial reporting. The Chief Financial Officer reports directly to the audit committee on matters relating to financial reporting, financial risks and internal controls. Akastor has implemented an internal system for reporting serious matters such as breaches of ethical guidelines and violations of the law, which is also available to external parties at www.akastor.com. Risk Management Akastor and its portfolio companies are exposed to a variety of market, operational and financial risks. The board of directors carries out an annual review of the company’s most important areas of exposure to risk and its internal control arrangements. Being an investment company, the main objective of Akastor is to create value for its shareholders. Potential impacts on the net asset value, share price or predictability of earnings are therefore key parameters in the board’s risk evaluation. Sound risk management throughout the organization, including by its portfolio companies and industrial holdings, is recognized by Akastor as an invaluable tool in the process of achieving strategic, financial and operational goals while at the same time ensuring compliance with requirements and adherence to high integrity standards. regulatory Risk evaluation is an integral part of all business activities and Akastor employs a decentralized model for allocating managerial responsibility under which the portfolio companies are required to establish their own risk management and internal control systems. Akastor’s representatives on boards of directors in the portfolio companies seek to ensure that the portfolio companies follow the principles of sound corporate governance. Akastor manages risk through an internal framework both on a corporate and portfolio company level comprising guidelines, policies and procedures intended to ensure good business operations and provide unified and reliable financial reporting. The board of directors has adopted an authorization matrix that forms part of its governing documents where authority is delegated to the Akastor Chief Executive Officer. Furthermore, authorization matrices are adopted for each of the portfolio companies, pursuant to which the Akastor Chief Executive Officer delegates authority to the boards and Chief Executive Officers of the respective portfolio companies, which again adopts authorization matrices for the portfolio organizations. including from Akastor’s portfolio companies, investment directors and board representatives. Management of operational risk and risk related to ESG primarily rests with the underlying portfolio companies, although Akastor acts as an active driver through its involvement on the boards and through support and follow-up by the various Akastor corporate functions towards relevant functions in the portfolio companies. Akastor’s management holds review meetings with the management of the different portfolio companies. The purpose of the meetings is to conduct an in-depth review of the development of each portfolio company, focusing on operations, risk management, market conditions, the competitive situation and strategic issues. These meetings provide an important foundation for Akastor’s assessment of its overall financial and operational risk. A key risk in one of the smaller portfolio companies may still be negligible on the group level, whereas important risks in the largest portfolio companies may have a serious impact on the group as a whole. Akastor’s decentralized approach to operational risk management, as described above, raises a need for management to process and calibrate the insight obtained through various interfaces with the portfolio companies prior to the board’s annual risk review. The objective of such exercise is to ensure that risks are reported in a format that allows the board to acquire a true and fair view of the overall risk environment of the Akastor group in an efficient manner and to focus its attention on risks that are material on an aggregated group level. Prior to the board’s review of risk reporting, the audit committee the reported risks and associated risk-reducing reviews measures. The audit committee also reviews the company’s in- house reporting systems and internal control and risk management, and prepares the board’s review of financial reporting. Financial Reporting The Akastor financial reporting division reports to the Chief Financial Officer and is responsible for the external reporting process and the internal management financial reporting process. This also includes assessing financial reporting risks and internal controls over financial reporting in the group. The consolidated external financial statements are prepared in accordance with IFRS and IAS standards as approved by the EU. The existing policies and standards governing the annual and quarterly financial reporting in the group, including the Akastor accounting principles, are available for Akastor employees. The board receives and reviews risk reports prepared by the management, in respect of regular operational/business risk as well as risk related to ESG. The management’s risk reporting is based on the total level of insight obtained through regular reporting and the close cooperation that Akastor has with the Clearing meetings are held with the management teams of the portfolio companies (with owernship more than 50 percent) in connection with the annual closing of accounts and may also be held in connection with quarterly financial reporting. For the 2022 financial year, clearing meetings with the portfolio Annual Report 2022 | Corporate Governance Statement22 companies were held in October 2022 and January 2023. The main purpose is to ensure high-quality financial reporting. Such meetings focus on important items involving estimation and judgment, non-balance-sheet items, accounting for significant transactions, new or modified accounting principles and other topics relevant to the respective portfolio companies. The external auditor is present in the clearing meetings. Other Reporting In addition to the abovementioned financial reporting, there are regular business review and board meetings in the portfolio companies which ensure timely and high-quality reporting from the portfolio companies to the corporate management. Regular reports for Akastor and the portfolio companies are submitted to the board of directors. The quarterly business update contains key financial numbers, M&A updates, financing, status of value creation plans, compliance, risk management and share price information for the Akastor group. Further, it contains key financial numbers, key operational topics, status on value drivers as well as key market information for the main portfolio companies. The monthly business update contains high level financial and operational information for the Akastor group, as well as key highlights for the main portfolio companies. 11. Remuneration of the Board of Directors individual directors The remuneration of the board of directors will reflect its responsibilities, know-how and time commitment, as well as the complexity of the business. The remuneration will be proposed by the nomination committee, and is not performance-related or linked to options in Akastor. More detailed information about the the remuneration of remuneration report for 2022, as further described in section 12 below. Neither the directors, nor companies with whom they are affiliated, should accept specific paid duties for Akastor beyond their directorships. If they nevertheless do so, the board of directors shall be informed and the remuneration shall be approved by the board of directors. No remuneration shall be accepted from anyone other than the company or the relevant group company in connection with such duties. is provided in 12. Remuneration of Executive Personnel The board of directors has adopted designated guidelines for the remuneration of executive management pursuant to the provisions of section 6-16a of the Public Limited Liability Companies Act. The current guidelines were adopted by the general meeting on April 20, 2022. The board of directors has not considered it necessary to suggest any amendments to the guidelines and the existing policy will therefore apply also for 2023. In accordance with section 6-16b of the Public Limited Liability Companies Act, the board of directors has also prepared a report on the remuneration to the executive management, detailing the remuneration received by members of the executive management in 2022. The report is available at www. akastor.com, and will be subject for an advisory vote on the annual general meeting 2023. 13. Information and Communication Akastor has no option schemes or option programs for the allotment of shares to employees. The Chief Executive Officer determines the remuneration of executive management on the basis of the guidelines laid down by the board of directors. All performance-related remuneration within the group will be the made subject remuneration of each executive manager is provided in the mentioned remuneration report for 2022. to a cap. Further information about The company has adopted a designated communications and investor relations policy which covers, among other things, guidelines for the company’s contact with shareholders other than through general meetings. The company’s reporting of financial and other information is based on openness and the equal treatment of all securities market players. The long-term purpose of the investor relations function is to ensure access for the company to capital on competitive terms, whilst at the same time ensuring that the shareholders are provided with the most correct pricing of the shares that can be achieved. This shall take place through correct and timely distribution of price-sensitive information, whilst ensuring, at the same time, that the company is in compliance with applicable rules and market practices. Reference is also made to the above discussion concerning the flow of information between Akastor and Aker ASA in connection with their cooperation within, inter alia, strategy, transactions, and funding. All stock exchange announcements and press releases are made available on the company’s website, and stock exchange announcements are also available at www.newsweb.no. The company holds open presentations in connection with the reporting of financial performance, either by a physical meeting or by a conference call and webcast, and these presentations are broadcasted on the internet. The financial calendar of the company is available at www.akastor.com. 14. Take-overs The overriding principle for Akastor is equal treatment of shareholders. In a bid situation, the board of directors and management have an independent responsibility to help ensure that shareholders are treated equally, and that the company’s business activities are not disrupted unnecessarily. In a take- over situation, the board will have a particular responsibility to ensure that shareholders are given sufficient information and time to form a view of the offer. The board of directors has not deemed it appropriate to adopt specific guidelines for take-over situations as long as Aker Annual Report 2022 | Corporate Governance Statement23 Holdings AS continues to be the dominant shareholder of Akastor. This represents a deviation from the Code of Practice. 15. Auditors The external auditor presents a plan for the performance of the audit work to the audit committee annually. In addition, the auditor provides the audit committee with an annual written confirmation to the effect that the independence requirement is met. The auditor attends all audit committee meetings, and the auditor has reviewed any material changes to the accounting principles of the company, or to the internal controls of the company, with the audit committee. The external auditor also attends the board meeting where the annual financial statements are reviewed and approved, normally in March. The board of directors holds a minimum of one annual meeting with the auditor without any executive personnel being in attendance. The board’s audit committee stipulates guidelines on the scope for using the auditor for services other than auditing,and makes recommendations to the board of directors concerning the appointment of the external auditor and the approval of the auditor’s fees. Fees payable to the auditor, separated into those relating to auditing and those relating to other services, are specified in the «Other operating expenses» note to the consolidated financial statements for the group and are also reported to the general meeting. The auditor’s fees relating to auditing are subject to approval by the general meeting. Annual Report 2022 | Corporate Governance Statement24 04. a. FINANCIALS AND NOTES AKASTOR GROUP Akastor Group | Consolidated income statement Akastor Group | Consolidated statement of comprehensive income Akastor Group | Consolidated statement of financial position Akastor Group | Consolidated statement of changes in equity Akastor Group | Consolidated statement of cash flow General Note 1 | Corporate information Note 2 | Basis for preparation Note 3 | Significant accounting policies Note 4 | Significant accounting estimates and judgements Performance of the year Note 5 | Discontinued operations Note 6 | Disposal group held for sale and disposal of subsidiaries Note 7 | Operating segments Note 8 | Revenue and other income Note 9 | Salaries, wages and social security costs Note 10 | Other operating expenses Note 11 | Finance income and costs Note 12 | Income tax Note 13 | Earnings per share Assets Note 14 | Property, plant and equipment Note 15 | Intangible assets and goodwill Note 16 | Impairment testing of goodwill Note 17 | Equity-accounted investees Note 18 | Other investments Note 19 | Non-current interest-bearing receivables Note 20 | Trade and other receivables Note 21 | Cash and cash equivalents Equity and liabilities Note 22 | Capital and reserves Note 23 | Borrowings Note 24 | Other liabilities Note 25 | Employee benefits – pension Note 26 | Provisions Note 27 | Trade and other payables Financial risk management Note 28 | Capital management Note 29 | Financial risk management and exposures Note 30 | Financial instruments Other Note 31 | Leases Note 32 | Group companies Note 33 | Related parties Note 34 | Events after reporting date 25 26 27 28 29 30 30 31 36 38 39 40 44 46 46 47 48 50 51 52 53 54 56 57 57 58 59 60 61 64 64 65 66 69 72 74 75 76 Annual Report 2022 | Financials and Notes | Akastor GroupFinancials and Notes | Akastor GroupAkastor Group | Consolidated income statement For the year ended December 31 Amounts in NOK million Revenue and other income Materials, goods and services Salaries, wages and social security costs Other operating expenses Impairment loss on receivables Operating expenses Operating profit before depreciation, amortization and impairment Depreciation, amortization and impairment Operating profit (loss) Finance income Finance expenses Impairment loss on debt instruments Net finance income Share of net profit (loss) from equity-accounted investees Profit (loss) before tax Income tax benefit (expense) Profit (loss) from continuing operations Profit (loss) from discontinued operations (net of income tax) Profit (loss) for the period Profit (loss) for the period attributable to: Equity holders of the parent company Non-controlling interests Basic / diluted earnings (loss) per share (NOK) Basic / diluted earnings (loss) per share continuing operations (NOK) Basic / diluted earnings (loss) per share discontinued operations (NOK) 25 2021 953 (294) (367) (78) (214) (953) - (82) (82) 369 (175) - 194 (346) (235) 20 (215) 1 140 925 919 6 3.38 (0.81) 4.20 2022 1 059 (420) (366) (109) (174) (1 069) (10) (66) (76) 490 (244) (166) 80 (263) (259) (2) (261) 4 (257) (276) 19 (1.01) (1.03) 0.02 Note 7, 8 9 10 20 14,15, 31 11 17 12 5 13 13 13 Annual Report 2022 | Financials and Notes | Akastor Group 26 Akastor Group | Consolidated statement of comprehensive income For the year ended December 31 Amounts in NOK million Profit (loss) for the period Other comprehensive income Cash flow hedges, effective portion of changes in fair value Cash flow hedges, reclassification to income statement Total change in hedging reserve, net of tax Total change in fair value reserve, net of tax Currency translation differences - foreign operations Currency translation differences, reclassification to income statement upon disposal Share of OCI from equity-accounted investees Total items that may be reclassified subsequently to profit or loss, net of tax Remeasurement gain (loss) net defined benefit liability Deferred tax of remeasurement gain (loss) net defined benefit liability Share of OCI from equity-accounted investees Total items that will not be reclassified to profit or loss, net of tax Total other comprehensive income, net of tax Total comprehensive income (loss) for the period, net of tax Attributable to: Equity holders of the parent company Non-controlling interests Note 2022 (257) 2021 925 17 25 17 - - - - 325 - (86) 239 (11) - 10 (1) (22) 1 (21) (20) 33 (472) (7) (487) 9 (6) - 3 238 (484) (19) (38) 19 441 435 6 Annual Report 2022 | Financials and Notes | Akastor Group Akastor Group | Consolidated statement of financial position As of December 31 Amounts in NOK million Deferred tax assets Property, plant and equipment Intangible assets and goodwill Right-of-use assets Equity-accounted investees Other investments Non-current interest-bearing receivables Non-current finance lease receivables Other non-current assets Total non-current assets Inventories Trade and other receivables Derivative financial instruments Current finance lease receivables Current investments Cash and cash equivalents Assets classified as held for sale Total current assets Total assets Issued capital incl. treasury shares Other capital paid in Reserves and retained earnings Equity attributable to equity holders of the parent company Non-controlling interests Total equity Non-current borrowings Non-current lease liabilities Employee benefit obligations Deferred tax liabilities Other non-current liabilities Provisions, non-current Total non-current liabilities Current borrowings Current lease liabilities Current tax liabilities Provisions, current Trade and other payables Other current liabilities Liabilities classified as held for sale Total current liabilities Total liabilities Total equity and liabilities 27 Note 2022 2021 12 14 15 31 17 18 19 31 20 31 18 21 6 22 23 31 25 12 24 26 23 31 26 27 24 6 37 237 146 27 3 502 869 668 10 2 5 497 5 769 - 208 162 119 43 1 307 6 804 161 1 540 2 355 4 056 36 4 092 198 37 96 4 459 3 796 1 142 48 2 31 498 162 32 1 916 2 712 6 804 42 251 145 41 3 408 1 625 315 176 21 6 025 5 872 10 64 147 89 - 1 187 7 212 161 1 538 2 393 4 091 18 4 109 1 372 72 108 4 628 26 2 211 16 82 1 20 625 148 - 892 3 103 7 212 Fornebu, March 22, 2023 | Board of Directors of Akastor ASA Frank O. Reite | Chairperson Lone Fønss Schrøder | Deputy Chairperson Svein Oskar Stoknes | Director Kathryn M. Baker | Director Luis Antonio G. Araujo | Director Henning Jensen | Director Asle Christian Halvorsen | Director Stian Sjølund | Director Karl Erik Kjelstad | CEO Annual Report 2022 | Financials and Notes | Akastor Group 28 Akastor Group | Consolidated statement of changes in equity Share capital Treasury shares Other capital paid in Hedging reserve 1) Fair value reserve1) Currency trans- lation reserve1) Retained earnings Equity attributable to equity holders of the parent company Non-con- trolling interests (NCI) Total equity Amounts in NOK million 2021 Equity as of January 1, 2021 162 (2) 1 538 Profit (loss) for the period Other comprehensive income Total comprehensive income Transaction with NCI - - - - - - - - - - - - Equity as of December 31, 2021 162 (2) 1 538 2022 Profit (loss) for the period Other comprehensive income Total comprehensive income Treasury share transactions - - - - - - - - - - - 2 Equity as of December 31, 2022 162 (1) 1 540 21 - (21) (21) - - - (8) (8) - (8) 1) See Note 22 Capital and reserves. (52) - (20) (20) - (72) - - - - 182 - (446) (446) - 1 808 3 657 11 3 669 919 3 922 (1) 919 (484) (435) (1) 6 - 6 1 925 (484) 441 - (264) 2 730 4 091 18 4 109 - 248 248 - (276) (1) (277) - (276) 238 (38) 2 (72) (16) 2 453 4 056 19 - 19 - 36 (257) 238 (19) 2 4 092 Annual Report 2022 | Financials and Notes | Akastor GroupAkastor Group | Consolidated statement of cash flow For the year ended December 31 Amounts in NOK million Note 2022 2021 29 Cash flow from operating activities Profit (loss) for the period - continuing operations Profit (loss) for the period - discontinued operations Profit (loss) for the period Adjustments for: Income tax expense (benefit) Net interest cost and unrealized currency (income) loss Depreciation, amortization and impairment (Gain) loss on disposal of subsidiaries (Gain) loss on disposal of assets (Profit) loss from equity-accounted investees Other non-cash effects Changes in net working capital Cash generated from operating activities Dividend received Interest paid Interest paid for leases Interest received Interest received for leases Income taxes paid Net cash from operating activities Cash flow from investing activities Acquisition of property, plant and equipment Payments for capitalized development Acquisition of subsidiaries, net of cash acquired Proceeds (payments) related to sale of subsidiaries Proceeds from (acquisition of) other investments Payments to equity-accounted investees Proceeds from finance lease receivables Net cash flow from other investing activities Net cash from investing activities Cash flow from financing activities Proceeds from borrowings Repayment of borrowings Payment of lease liabilities Proceeds from transaction with non-controlling interests Net cash used in financing activities Effect of exchange rate changes on cash and bank deposits Net increase (decrease) in cash and bank deposits Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Of which is restricted cash The statement included cash flows from discontinued operations prior to the disposal. (261) 4 (257) 2 193 66 (25) (2) 263 (229) (187) (176) 22 (168) (6) 66 21 (3) (244) 2 (11) 2 (96) 745 (76) 53 - 619 756 (996) (78) - (318) (26) 31 89 119 2 (215) 1 140 925 (20) 142 260 (1 225) (51) 346 (272) (151) (46) 37 (120) (26) 38 12 8 (96) (112) (24) - 591 (9) (47) 29 3 431 1 067 (1 472) (112) 1 (516) (5) (186) 275 89 - 14, 15, 31 17 14 15 23 23 31 21 Annual Report 2022 | Financials and Notes | Akastor Group30 Note 1 | Corporate information Akastor ASA is a limited liability company incorporated and domiciled in Functional and presentation currency Norway and whose shares are publicly traded. The registered office is The consolidated financial statements are presented in NOK, which is located at Oksenøyveien 10, Bærum, Norway. The largest shareholder is Akastor ASA’s functional currency. All financial information presented in Aker Holding AS which is wholly owned by Aker ASA as of December 31, NOK has been rounded to the nearest million (NOK million), except when 2022. otherwise stated. The subtotals and totals in some of the tables in these consolidated financial statements may not equal the sum of the amounts The consolidated financial statements of Akastor ASA and its subsidiaries shown due to rounding. (collectively referred as Akastor or the group, and separately as group companies) for the year ended December 31, 2022 were approved by the When the functional currency in a reporting unit is changed, the effect of the board of directors and CEO on March 22, 2023. The consolidated financial change is accounted for prospectively. statements will be authorized by the Annual General Meeting on April 19, 2023. Use of estimates and judgements The group is an oilfield services investment company with a portfolio of management to make judgements, estimates and assumptions that affect industrial holdings and other investments. Akastor is listed on the Oslo Stock the application of policies and reported amounts of assets and liabilities, Exchange under the ticker AKAST. Information on the group’s structure is income and expenses. Although management believes these assumptions provided in Note 32 Group companies. Information on other related party to be reasonable, given historical experience, actual amounts and results relationships of the group is provided in Note 33 Related parties. could differ from these estimates. The items involving a higher degree of The preparation of financial statements in conformity with IFRS requires judgement or complexity, and items where assumptions and estimates are material to the consolidated financial statements, are disclosed in Note 4 Note 2 | Basis for preparation Significant accounting estimates and judgements. Basis of accounting The estimates and underlying assumptions are reviewed on an ongoing The consolidated financial statements have been prepared in accordance basis. Revisions to accounting estimates are recognized in the period in with International Financial Reporting Standards as adopted by the which the estimate is revised and in any future periods affected. European Union (IFRS), their interpretations adopted by the International Accounting Standards Board (IASB) and the additional requirements of the Norwegian Accounting Act as of December 31, 2022. Going concern basis of accounting The consolidated financial statements have been prepared on a going concern basis, which assumes that the group will be able to meet the mandatory terms and conditions of the banking facilities as disclosed in Note 28 Capital management. Please refer to Board of Directors’ report for more information about going concern assessment. Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following material items, which are measured on an alternative basis on each reporting date: Derivative financial instruments are measured at fair value. Non-derivative financial instruments at Fair Value through Profit or Loss (FVTPL) are measured at fair value. Debt instrument at Fair Value through Other Comprehensive Income (FVOCI) are measured at fair value. Contingent considerations assumed in business disposals are measured at fair value. Net defined benefit (asset) liability is recognized at fair value of plan assets less the present value of the defined benefit obligation. Annual Report 2022 | Financials and Notes | Akastor Group31 Note 3 | Significant accounting policies Summary of significant accounting policies A joint venture is an arrangement in which the group has joint control, The principal accounting policies applied in the preparation of these whereby the group has rights to the net assets of the arrangement, rather consolidated financial statements are set out below. These policies have to its assets and obligations for its liabilities. Joint control is established been consistently applied to all the years presented, unless otherwise stated.. by contractual agreement requiring unanimous consent of the ventures for Basis of consolidation Subsidiaries strategic, financial and operating decisions. Interests in joint ventures are accounted for using the equity method. Subsidiaries are entities controlled by the group. The group controls They are initially recognized at cost, which includes transaction costs. an entity when it is exposed to, or has rights to, variable returns from Subsequent to initial recognition, the consolidated financial statements its involvement with the entity and has the ability to affect those returns include the group’s share of the profit and loss and other comprehensive through its power over the entity. The financial statements of subsidiaries income of the equity-accounted investees. When the group’s share of are included in the consolidated financial statements from the date on which losses exceeds its interest in an equity-accounted investee, the carrying control commences until the date of which control ceases. amount of that interest, including any long-term investments, is reduced Business combinations to zero, and further losses are not recognized except to the extent that the group incurs legal or constructive obligations or has made payments on Business combinations are accounted for using the acquisition method behalf of the investee. as of the acquisition date, which is the date when control is transferred to the group. The consideration transferred in the acquisition is generally Transactions eliminated on consolidation measured at fair value, as are the identifiable net assets acquired. Any Intra-group balances and transactions, and any unrealized gains and goodwill that arises is tested annually for impairment. losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized Transaction costs, other than those associated with the issue of debt or gains arising from transactions with joint ventures are eliminated to the equity securities incurred in connection with a business combination are extent of the group’s interest in the entity. Unrealized losses are eliminated expensed as incurred. in the same way as unrealized gains, but only to the extent that there is no Any contingent consideration payable is measured at fair value at the acquisition date. Changes in the fair value of the contingent consideration Assets held for sale evidence of impairment. from acquisition of a subsidiary or non-controlling interest for transactions Non-current assets, or disposal groups comprising assets and liabilities, will be recognized in Other income as gain or loss, except for the obligation that are expected to be recovered primarily through sale rather than through that is classified as equity. Non-controlling interests continuing use, are classified as held for sale. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be Non-controlling interests are measured initially at their fair value at the date committed to the sale, which should be expected to qualify for recognition of acquisition. Changes in the group’s ownership interest in a subsidiary that as a completed sale within one year from the date of classification. do not result in a loss of control are accounted for as equity transactions. Loss of control Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to On the loss of control, the group derecognizes the assets and liabilities of sell. Property, plant and equipment and intangible assets once classified the subsidiary, any non-controlling interests and the other components of as held for sale are not depreciated or amortized, but are considered in the equity. Any resulting gain or loss is recognized in the income statement. overall impairment testing of the disposal group. Any interest retained in the former subsidiary is measured at fair value when control is lost. Subsequently it is accounted for as an equity-accounted No reclassifications are made for years prior to the year when non-current investee or as an available-for-sale financial asset depending on the level assets or disposal groups are classified as a held for sale. of influence retained. Any contingent consideration receivable is measured at fair value at the A discontinued operation is a component of the group’s business that disposal date. Changes in the fair value of the contingent consideration represents a separate major line of business or geographical area of from divestment of a subsidiary for transactions will be recognized in Other operations that has been disposed of or is held for sale, or is a subsidiary income as gain or loss. acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to Investments in joint ventures be classified as held for sale, if earlier. Discontinued operations The group’s interests in equity-accounted investees comprise interests in joint ventures. In the consolidated income statement, income and expenses from discontinued operations are reported separately from income and expenses Annual Report 2022 | Financials and Notes | Akastor Group32 from continuing operations, down to the level of profit after taxes. When an group’s normal operating cycle, is held primarily for the purpose of being operation is classified as a discontinued operation, the comparative income traded, the liability is due to be settled within twelve months after the statement is restated as if the operation had been discontinued from the reporting period, or if the group does not have an unconditional right to start of the comparative year. defer settlement of the liability for at least twelve months after the reporting The statement of cash flow includes the cash flow from discontinued operations prior to the disposal. Cash flows attributable to the operating, Financial assets, financial liabilities and equity investing and financing activities of discontinued operations are presented On initial recognition, a financial asset is classified as measured at amortized in the notes to the extent these represent cash flows with third parties. costs, FVOCI or FVTPL. The classification depends on the group’s business period. All other liabilities are classified as non-current. Foreign currency Foreign currency transactions and balances model for managing the financial assets and the contractual terms of the cash flows. Transactions in foreign currencies are translated at the exchange rate at A financial asset is measured at amortized costs if the business the date of the transaction. Monetary assets and liabilities denominated model is to hold the asset to collect contractual cash flows, and in foreign currencies at the reporting date are translated to the functional the contractual cash flows are solely payments of principal and currency at the exchange rate on that date. Foreign exchange differences interests (SPPI criterion). arising on translation are recognized in the income statement. Non- monetary assets and liabilities measured in terms of historical cost in a A debt instrument is classified at FVOCI if the business model foreign currency are translated using the exchange rate on the date of the is both collecting contractual cash flows and selling the financial transaction. Non-monetary assets and liabilities denominated in foreign asset, and it meets the SPPI criterion. currencies that are measured at fair value are translated to the functional currency at the exchange rates on the date the fair value is determined. All financial assets not classified as measured at amortized cost or FVOCI are measured at FVTPL. Investments in foreign operations Items included in the financial statements of each of the group’s entities Financial assets are not reclassified subsequent to their initial recognition are measured using the currency of the primary economic environment in unless the group changes its business model for managing financial assets. which the entity operates. The results and financial positions of all the group entities that have a functional currency different from the group’s presentation Other investments currency are translated into the presentation currency as follows: Other investments include equity and debt investments in companies where Assets and liabilities, including goodwill and fair value adjustments, by less than 20 percent of the voting power. The investments are categorized are translated at the closing exchange rate at the reporting date. as financial assets measured at FVTPL or FVOCI and recognized at fair the group has neither control nor significant influence, usually represented value at the reporting date. Subsequent to initial recognition, changes in Income statements are translated at average exchange rate for financial assets measured at FVTPL are recognized in profit and loss. the year, calculated on the basis of 12 monthly end rates. Exchange differences arising from the translation of the net investment interest income calculated using the effective interest method, foreign in foreign operations, and of related hedges, are included in other exchange gains and losses and impairment losses are recognized in profit comprehensive income as currency translation reserve. These translation and loss. Other changes in fair value are recognized in other comprehensive differences are reclassified to the income statement upon disposal of the income and presented as part of fair value reserve. When financial asset related operations or when settlement is likely to occur in the near future. measured at FVOCI is derecognized, the gain or loss accumulated in other When a debt instrument is classified as financial asset measured at FVOCI, comprehensive income is reclassified to profit and loss. Monetary items that are receivable from or payable to a foreign operation are considered as part of the net investment in that foreign operation, when Trade and other receivables the settlement is neither planned nor likely to occur in the foreseeable future. Trade and other receivables are generally classified as financial assets Exchange differences arising from these monetary items are recognized in measured at amortized costs. They are recognized at the original invoiced other comprehensive income. amount, less loss allowance made for credit losses. The interest rate element is disregarded if insignificant, which is the case for the majority of Current/non-current classification the group’s trade receivables. An asset is classified as current when it is expected to be realized or is intended for sale or consumption in the group’s normal operating cycle, it Interest-bearing receivables is held primarily for the purpose of being traded, or it is expected/due to Interest-bearing receivables include loans to related parties and are be realized or settled within twelve months after the reporting date. Other generally classified as financial assets measured at amortized costs. assets are classified as non-current. Such financial assets are recognized initially at fair value and subsequent measurement at amortized cost using the effective interest method, less A liability is classified as current when it is expected to be settled in the any impairment losses. Annual Report 2022 | Financials and Notes | Akastor Group33 Cash and cash equivalents Income tax Cash and cash equivalents include cash on hand, demand deposits held at Income tax recognized in the income statement comprises current and banks and other short-term highly liquid investments with original maturity deferred tax. Income tax is recognized in the income statement except of three months or less. to the extent that it relates to items recognized directly in equity or other Trade and other payables comprehensive income. Trade payables are recognized at the original invoiced amount. Other Current tax is the expected tax payable or receivable on the taxable income payables are recognized initially at fair value. Trade and other payables or loss for the year, using tax rates enacted or substantially enacted at the are valued at amortized cost using the effective interest rate method. The reporting date, and any adjustment to tax payable in respect of previous interest rate element is disregarded if it is insignificant, which is the case for years. Current tax payable also includes any tax liability arising from the the majority of the group’s trade payables. declaration of dividends, recognized at the same time as the liability to pay Interest-bearing borrowings the related dividend. Interest-bearing borrowings are recognized initially at fair value less Deferred tax is recognized in respect of temporary differences between attributable transaction costs. Subsequent to initial recognition, interest- the carrying amounts of assets and liabilities for financial reporting and the bearing borrowings are measured at amortized cost with any difference amounts used for taxation purposes. Deferred tax is not recognized for: between cost and redemption value being recognized in the income statement over the period of the borrowings on an effective interest basis. Goodwill not deductible for tax purposes Share capital The initial recognition of assets or liabilities that affects neither Ordinary shares are classified as equity. Repurchase of share capital is accounting nor taxable profit recognized as a reduction in equity and is classified as treasury shares. Temporary differences relating to investments in subsidiaries to Finance income and expense the extent that they will not reverse in the foreseeable future Finance income and expense include interest income and expense, foreign exchange gains and losses, dividend income, gains and losses on derivatives, Deferred tax is measured at the tax rates that are expected to be applied to as well as change in fair value of financial assets measured at FVTPL. temporary differences when they reverse, based on the tax rates that have Interest income and expenses include calculated interest using the effective been enacted or substantively enacted at the reporting date. interest method, in addition to discounting effects from assets and liabilities measured at fair value. Gains and losses on derivatives include effects Deferred tax assets and liabilities are offset if there is a legally enforceable from derivatives that do not qualify for hedge accounting and embedded right to offset current tax liabilities and assets, and they relate to income derivatives, in addition to the ineffective portion of qualifying hedges. taxes levied by the same tax authority on the same taxable entity, or on Revenue from contract with customers and assets on a net basis, or to realize the tax assets and settle the liabilities different taxable entities which intend either to settle current tax liabilities IFRS 15 Revenue from Contracts with customers establishes a five-step method simultaneously. that applies to all customer contracts. Under the standard, only approved customer contracts with a firm commitment are basis for revenue recognition. Deferred tax assets are recognized for unused tax losses, tax credits The deliveries in the contracts are reviewed to identify distinct performance and deductible temporary differences, to the extent that it is probable that obligations, and revenue is recognized in line with how the entity satisfies these future taxable profits will be available against which they can be utilized. performance obligations – either over time or at a point in time. This assessment Measurement of deferred tax assets are reviewed at each reporting date. may involve significant judgement. For contracts with customers for which the performance obligations are satisfied over time, revenue is recognized over Impairment time using a cost progress method or as time and material are delivered to the Trade receivables and contract assets customer. For contracts with customers for which the performance obligations Loss allowance is recognized in profit or loss and measured at lifetime are satisfied at a point in time, revenue is recognized at the point in time ECLs. ECLs are a probability-weighted estimate of credit losses. Lifetime when the customer obtains control of the product or the service. ECLs are the ECLs that result from all possible default events over the expected life of a financial asset. The group considers a financial asset to be Majority of the group’s revenue is service revenue generated from rendering of in default when the group is unlikely to receive its outstanding contractual services to customers. The customers simultaneously receive and consume amount in full, or the contractual payments are more than 90 days past due. the benefits provided by these services. The invoicing is usually based on When estimating ECLs, the group considers reasonable and supportable the service provided at regular basis. Under some service contracts, the information that is relevant and available without undue cost or effort, based invoices are based on hours or days performed at agreed rates. The group on the group’s historical experience including forward-looking information. has assessed that these performance obligations are satisfied over time. The The loss allowance is recognized in financial items to the extent that revenue is recognized according to progress, or using the invoiced amounts impairment is caused by the insolvency of the customer. when the invoiced amounts directly correspond with the value of the services that are transferred to the customers. The gross carrying amount of trade receivable is written off when the group Annual Report 2022 | Financials and Notes | Akastor Group34 has no reasonable expectations of recovering a trade receivable in its Onerous contracts entirety or a portion thereof. The group individually makes an assessment Provision for onerous contracts is recognized when the expected benefits to with respect to the timing and amount of write-off based on whether there be derived by the group from a contract are lower than the unavoidable costs is a reasonable expectation of recovery. Trade receivables that are written of meeting the obligations under the contract. The provision is measured at off could still be subject to enforcement activities in order to comply with the the lower of the expected cost of terminating the contract and the expected net group’s procedures for recovery of amounts due. cost of continuing with the contract. Before a provision is recognized, the group recognizes any impairment loss on the assets associated with the contract. Debt instruments measured at amortized cost or at FVOCI Debt instruments measured at amortized cost or at FVOCI are considered Leases to be “credit-impaired” when there is significant financial difficulty of the As a lessee borrower or it is probable that the borrower will enter bankruptcy or other Right-of-use assets financial reorganization. The loss allowance is charged to profit and loss. The group recognizes right-of-use asset at the lease commencement date. Non-financial assets The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any prepaid lease payments The carrying amounts of the group’s non-financial assets (other than made at or before the commencement date, plus any initial direct costs. employee benefit assets, inventories and deferred tax assets) are reviewed Subsequently, the right-of-use asset is depreciated on a straight-line basis at the end of each reporting period to determine whether there is any over the shorter of its estimated useful life and the lease term. In addition, indication of impairment. If an indication of impairment exists, the asset’s the right-of-asset is subject to impairment assessment of non-financial recoverable amount is estimated. Cash-generating units (CGU) containing assets and adjusted for certain remeasurement of the lease liability. goodwill, intangible assets with an indefinite useful life and intangible assets that are not yet available for use are tested for impairment annually. Lease liabilities The recoverable amount is the greater of fair value less costs to sell and measured at the present value of the lease payments over the lease term, value in use. In assessing value in use, the estimated future cash flows discounted using the group's incremental interest rate. Generally, the lease are discounted to their present value using a pre-tax discount rate that payments include fixed payments and variable lease payments that depend At the lease commencement date, the group recognizes lease liability reflects current market assessments of the time value of money and the on an index or rate. risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the The lease liability is subsequently increased by the interest cost on the CGU to which the asset belongs. lease liability and decreased by lease payment made. It is remeasured when there is a change in future lease payments arising from a change in An impairment loss is recognized whenever the carrying amount of an an index or rate, or as appropriate, changes in the assessment of whether asset or a CGU exceeds its recoverable amount. Impairment losses are an extension option is reasonably certain to be exercised or a termination recognized in the income statement. option is reasonably certain not to be exercised. An impairment loss recognized in respect of a CGU (or a group of CGUs) Short term leases and leases of low-value assets containing goodwill is allocated first to goodwill and then to the other assets The group applies the recognition exemption to its leases that have a lease in the CGU(s) on a pro rata basis. term of 12 months or less from the commencement date and do not contain An impairment loss on goodwill is not reversed. An impairment loss on exemption to leases that are considered of low-value assets, mainly IT other assets is reversed if there has been a change in the estimates used equipment and office equipment. Lease payments associated with the short to determine the recoverable amount, and the change can be objectively -term leases and leases of low -value assets are recognized as expenses related to an event occurring after the impairment is recognized. An on a straight -line basis over the lease term. a purchase option (short-term leases). The group also applies recognition impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been Lease term determined, net of depreciation or amortization, if no impairment loss had The group determines the lease term as the non-cancellable term of the been recognized. Provisions lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any period covered by an option to terminate the lease if it is reasonably certain not to be exercised. A provision is recognized when the group has a present obligation as a The group applies judgment in evaluating whether it is reasonably certain result of a past event that can be estimated reliably and it is probable that to exercise extension option, considering all relevant factors that create the group will be required to settle the obligation. If the effect is material, economic incentive to exercise the extension option. provisions are determined by discounting the expected future cash flows at a market based pre-tax rate that reflects current market assessments of the As a lessor time value of money and, where appropriate, the liability-specific risks. The When the group acts as a lessor, it determines at lease inception whether unwinding of the discount is recognized as finance expense. each lease is a finance lease or an operating lease. Annual Report 2022 | Financials and Notes | Akastor Group35 To classify each lease, the group makes an overall assessment of whether disposed of. The same principle is used for allocation of goodwill when the the lease transfers substantially all of the risks and rewards incidental to group reorganizes its businesses. ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, Research and development the group considers certain indicators such as whether the lease is for the Expenditures on research activities undertaken with the prospect of major part of the economic life of the asset. obtaining new scientific or technical knowledge and understanding is recognized in the income statement as incurred. When the group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification Development activities involve a plan or design for the production of new or of a sub-lease with reference to the right-of-use asset arising from the head substantially improved products or processes. Development expenditure is lease, not with reference to the underlying asset. capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic The group recognizes lease payments received under operating leases benefits are probable and the group intends to and has sufficient resources as income on a straight line basis over the lease term as part of “Lease to complete development and to use or sell the asset. The capitalized revenue”. Property, plant and equipment expenditure includes cost of materials, direct labour overhead costs that are directly attributable to preparing the asset for it intended use and capitalized interest on qualifying assets. Other development expenditures Property, plant and equipment are measured at cost less accumulated are recognized in the income statement as an expense as incurred. depreciation and impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour, borrowing costs on qualifying Capitalized development expenditure is measured at cost less accumulated assets, production overheads and the estimated costs of dismantling and amortization and accumulated impairment losses. removing the assets and restoring the site on which they are located. Other intangible assets If the components of property, plant and equipment have different useful Acquired intangible assets are measured at cost less accumulated lives, they are accounted for as separate components. amortization and impairment losses. Subsequent costs Subsequent expenditures The group capitalizes the cost of a replacement part or a component of Subsequent expenditures on intangible assets are capitalized only when property, plant and equipment when that cost is incurred if it is probable they increase the future economic benefits embodied in the specific asset to that the future economic benefits embodied with the item will flow to the which they relate. All other expenditures are expensed as incurred. group and the cost of the item can be measured reliably. All other costs are expensed as incurred. Amortization Depreciation Amortization is recognized in the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such useful Depreciation is normally recognized on a straight-line basis over the lives are indefinite. Intangible assets are amortized from the date they are estimated useful lives of property, plant and equipment. available for use. Intangible assets Goodwill Employee benefits Defined contribution plans Goodwill that arises from the acquisition of subsidiaries is presented as Obligations for contributions to defined contribution pension plans are intangible asset. For the measurement of goodwill at initial recognition, see recognized as an expense in the income statement as incurred. Business combinations. Defined benefit plans Goodwill is measured at cost less accumulated impairment losses. In The group’s net obligation in respect of defined benefit pension plans is respect of equity-accounted investees, the carrying amount of goodwill is calculated separately for each plan by estimating the amount of future included in the carrying amount of the investment, and any impairment loss benefit that employees have earned in the current and prior periods; is allocated to the carrying amount of the equity-accounted investee as a discounting that amount and deducting the fair value of any plan assets. whole. When the group disposes of an operation within a CGU or group of CGUs qualified actuary using the projected unit credit method. The discount to which goodwill has been allocated, a portion of the goodwill is included rate is the yield at the reporting date on government bonds or high-quality in the carrying amount of the operation when determining the gain or loss corporate bonds with maturities consistent with the terms of the obligations. The calculation of defined benefit obligations is performed annually by a on disposal. The portion of the goodwill allocated is measured based on the relative values of the operation disposed of and the portion of the CGU Remeasurement of the net defined benefit liability, which comprises retained at the date of partial disposal, unless it can be demonstrated that actuarial gains and losses, the return on plan assets (excluding interest) another method better reflects the goodwill associated with the operation and the effect of the asset ceiling (if any, excluding interest), are recognized Annual Report 2022 | Financials and Notes | Akastor Group36 immediately in other comprehensive income. The group determines the net 3 inputs is included in Note 30 Financial Instruments. interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit Impairment of financial assets obligation at the beginning of the annual period to the then-net defined The group has invested in significant debt instruments measured at fair benefit liability (asset), taking into account any changes in the net defined value through other comprehensive income (FVOCI). The impairment of benefit liability (asset) during the period as a result of contributions and these financial assets are subject to expected credit loss. The loss allowance benefit payments. Net interest expense and other expenses related to is recognized in profit and loss and reduces the fair value loss otherwise defined benefit plans are recognized in the income statement. recognized in OCI. The loss allowance is based on assumptions of expected cash flows from the debt instruments. When making these assumptions, the When the benefits of a plan are changed or when a plan is curtailed, the group uses judgements selecting the similar inputs as used in the fair value resulting change in benefit that relates to past service or the gain or loss on measurement since the valuation model also considers the present value of curtailment is recognized immediately in the income statement. The group expected cash flows from such investments. Key assumptions include the recognizes gains and losses on the settlement of a defined benefit plan expected disposal value of the investments and discount factor. when the settlement occurs. Deferred and contingent considerations Fair value measurement Deferred and contingent considerations resulting from business When available, the group measures the fair value of a financial instrument combinations and disposals are measured at fair value at transaction date. using the quoted price in an active market for that instrument. If there is no When a deferred and contingent consideration meets the definition of a quoted price in an active market, then the group uses valuation techniques financial asset or liability, it is subsequently remeasured at fair value at the that maximize the use of relevant observable inputs and minimize the use reporting date. The determination of fair value is based on discounted cash of unobservable inputs. The chosen valuation technique incorporates all flows. Key assumptions made by the management include the probability of of the factors that market participants would take into account in pricing a meeting each performance target and the discount factor. transaction. Income taxes The best evidence of the fair value of a financial instrument on initial The group is subject to income taxes in numerous jurisdictions. Significant recognition is normally the transaction price. If the group determines that judgement is required to determine the worldwide provision for income the fair value on initial recognition differs from the transaction price and taxes. There are many transactions and calculations for which the ultimate the fair value is evidenced neither by a quoted price in an active market tax determination is uncertain during the ordinary course of business. for an identical asset or liability nor based on a valuation technique that Provisions for anticipated tax audit issues are based on estimates of uses only data from observable markets, the financial instrument is initially eventual additional taxes. measured at fair value, and the difference between the fair value on initial recognition and the transaction price is recognized as a deferred gain or Valuation of deferred tax assets is dependent on management’s assessment loss. Subsequently, the deferred gain or loss is recognized in profit or loss of future recoverability of the deferred tax benefit. Expected recoverability on an appropriate basis over the life of the instrument. may result from expected taxable income in the near future, planned Note 4 | Significant accounting estimates and judgements change may affect the results for each future reporting period. transactions or planned tax optimizing measures. Economic conditions may change and lead to a different conclusion regarding recoverability, and such Estimates and judgements are continually reviewed and are based on Tax authorities in different jurisdictions may challenge calculation of income historical experiences and expectations of future events. The resulting taxes from prior periods. Such processes may lead to changes to prior accounting estimates will, by definition, seldom accurately match actual periods’ taxable income, resulting in changes to income tax expense. When results, but are based on the best estimate at the time. Estimates and tax authorities challenge income tax calculations, management is required assumptions that have a significant risk of causing material adjustments to to make estimates of the probability and amount of possible tax adjustments. the carrying amounts of assets and liabilities within the next financial year Such estimates may change as additional information becomes known. are discussed below. Further details about income taxes are included in Note 12 Income tax. Fair value measurement Pension benefits The group has invested in significant financial assets that require the The present value of the pension obligations depends on a number of factors measurement of fair value. If there is no quoted price in an active market, determined on the basis of actuarial assumptions. These assumptions then the group uses valuation techniques that maximize the use of include financial factors such as the discount rate, expected salary growth, relevant observable inputs and minimize the use of unobservable inputs. inflation and return on assets as well as demographical factors concerning The chosen valuation technique incorporates all of the factors that market mortality, employee turnover, disability and early retirement. Assumptions participants would take into account in pricing a transaction. The fair value about all these factors are based on the situation at the time the assessment measurement requires a high degree of judgment. Judgements include is made. However, it is reasonably certain that such factors will change over considerations of inputs such as cash flow projection, discount rate and the very long periods for which pension calculations are made. Any changes volatility. Further information about the fair value measurement using level in these assumptions will affect the calculated pension obligations with Annual Report 2022 | Financials and Notes | Akastor Group37 immediate recognition in other comprehensive income. Further information Legal disputes and contingent liabilities about the pension obligations and the assumptions used are included in Given the scope of the group’s worldwide operations, group companies Note 25 Employee benefits - pension. are inevitably involved in legal disputes in the course of their business Lease terms activities. In addition, as an investment company, Akastor and its portfolio companies from time to time engage in mergers, acquisitions and other Some of the property leases, in which the group is a lessee, contain transactions that could expose the companies to financial and other extension or termination options exercisable before the end of the non- non-operational risks, such as indemnity claims and price adjustment cancellable period. These options are used to provide operational flexibility mechanisms resulting in recognition of deferred settlement obligations. for the group. In determining the lease term, the group considers all facts and circumstances that create an economic incentive to exercise an Provisions have been made to cover the expected outcome of the legal extension option, or not exercise a termination option. Extension options (or claims and disputes to the extent negative outcomes are likely and reliable periods after termination options) are only included in the lease term if the estimates can be made. However, the final outcomes of these cases are lease is reasonably certain to be extended (or not terminated). The most subject to uncertainties, and resulting liabilities may exceed provisions relevant factors to be considered as “creating economic incentive” include recognized. The group follows the development of these disputes on case- significant leasehold improvement, alternatives for the leased property and by-case basis and makes assessment based on all available evidence as the costs and business disruption required to replace the leased assets. at the reporting date. Most extension options in offices leases have not been included in the lease term, because the group expects to be able to replace the assets without significant cost or business disruption. Most of the early termination options are not considered in the lease term either as the group assesses it as reasonably certain that the leases will not be terminated early. The lease term assessment requires management’s judgment and is made at the commencement of the leases. The lease term is reassessed if an option is actually exercised or the group becomes obliged to exercise it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the group’s control. Please see Note 31 Leases for more information about the leases where the group is a lessee. Annual Report 2022 | Financials and Notes | Akastor Group38 Note 5 | Discontinued operations Discontinued operations MHWirth SDS business to HMH in return for the other 50% of the shares and USD On October 1, 2021, Akastor completed the transaction to bring together 200 million in consideration, of which USD 120 million was paid in cash at Akastor’s wholly owned subsidiary, MHWirth AS (MHWirth) and Baker closing. HMH has issued shareholder notes to Akastor and Baker Hughes Hughes’ Subsea Drilling Systems (SDS) business to create a joint venture representing the balance of the consideration owed to them. The notes are company HMH Holding B.V. (HMH). HMH delivers a global full-service subordinated to HMH’s external debt financing. HMH financed the cash offshore drilling equipment offering that provides customers with a broad consideration payable to Baker Hughes and Akastor by way of a USD 220 portfolio of products and services. million bank facility. HMH is owned 50/50 by Akastor and Baker Hughes. Akastor contributed Following the transaction, MHWirth was deconsolidated and classified as its shares in MHWirth to HMH in return for 50% of the shares of HMH and discontinued operations. HMH is classified as a joint venture to the group USD 120 million in consideration, of which USD 100 million (before certain and accounted for using the equity method. See Note 17 Equity-accounted adjustments) was paid in cash at closing. Baker Hughes contributed the investees for more information. Results of discontinued operations Amounts in NOK million Revenue Expenses Net financial items Profit (loss) before tax Income tax Profit (loss) from operating activities, net of tax Gain (loss) on sale of discontinued operations Net profit (loss) from discontinued operations Basic/diluted earnings (loss) per share from discontinued operations (NOK) 2022 2021 2 024 (2 096) (27) (99) 3 (96) 1 236 1 140 4.20 4 4 0.02 Gain on sale of discontinued operations in 2022 was related to re-assessment of contingent considerations related to divestments from prior years. Gain on sale from the disposal in 2021 included gain of NOK 1 240 million for MHWirth divestment, offset by loss of NOK 4 million on divestments from previous years. The gain in 2021 included currency translation differences of NOK 362 million that were reclassified from Other Comprehensive Income to the income statement as part of gain from the disposal of MHWirth. Cash flows from (used in) discontinued operations Amounts in NOK million Net cash from operating activities Net cash from investing activities (incl. net cash proceeds from sale of the operations) Net cash from financing activities Net cash flow from discontinued operations 2021 50 592 (49) 593 Annual Report 2022 | Financials and Notes | Akastor Group39 Note 6 | Disposal group held for sale and disposal of subsidiaries Disposal group held for sale In December 2022, Akastor entered into a share purchase agreement with Diamond Key International Pty. Ltd. (“DKI”) for the sale of all shares in Cool Sorption A/S (“Cool Sorption”) for DKK 20.4 million on a cash and debt free basis. Cool Sorption is a specialist supplier of Vapour Recovery Units (VRU) and systems and is included in “Other holdings” in segment reporting. Accordingly, Cool Sorption is presented as a disposal group held for sale as of December 31, 2022. The sale transaction was completed in February 2023. Assets and liabilities of disposal group held for sale Amounts in NOK million Deferred tax assets Intangible assets Trade and other receivables Assets held for sale Provision, current Trade and other payables Liabilities held for sale 2022 6 1 35 43 1 31 32 Disposal of entities Disposal of AGR Well Management Limited (UK) in 2021 Disposal of AGR Wind Services in 2022 On December 22, 2021, Akastor completed the transfer of the shares in In February 2022, Akastor completed the transaction to establish a joint AGR Well Management Limited (“AGR Well Management”), a wholly- venture company, Føn Engergy Services, together with IKM Group. Akastor owned subsidiary, to SpotOn Energy Holding AS (“SpotOn Energy”). As transferred the shares in AGR Wind Services AS (“AGR Wind”) to Føn compensation for the transfer, Akastor, through its subsidiary AGR AS, Energy Services. As compensation for the transfer, Akastor, through its received 20% ownership in SpotOn Energy, which is expected to strengthen subsidiary AGR AS, received 45% ownership in Føn Energy Services. The the cooperation between AGR and SpotOn Energy going forward. SpotOn company offers integrated Operations and Maintenance (O&M) solutions Energy is accounted as an associated company to the group. The to developers, operators, suppliers and owners of offshore renewables transaction resulted in an accounting loss of NOK 11 million, included as infrastructure, and in particular offshore wind farms. Føn Energy Services is Other revenue and income in the income statement for 2021. classified as a joint venture to the group and accounted for using the equity method. The disposal of AGR Wind Services resulted in an accounting gain of NOK 21 million, included as Other revenue and income in the income statement for 2022. Annual Report 2022 | Financials and Notes | Akastor Group 40 Note 7 | Operating segments Basis for segmentation HMH and AKOFS Offshore are classified as joint ventures and accounted As of December 31, 2022, Akastor has three reportable segments which for using the equity method, see Note 17 Equity-accounted investees. The are the strategic business units of the group. The strategic business units segment information of the two joint ventures are presented at 100% basis. are managed separately and offer different products and services due to different market segments and different strategies for their projects, Further, Akastor holds 100 percent ownership in Cool Sorption (divested in products and services: February 2023), 100 percent in DDW Offshore AS, 15 percent economic interest in NES Fircroft and 93 percent of Aker Pensjonskasse, equity HMH is a premier drilling solutions provider, which was formed as instruments in Awilco Drilling, as well as economic interests in four drilling an independent company in October 2021 through the merger of equipment contracts with Jurong Shipyard (DRU contracts). These are Baker Hughes' Subsea Drilling Systems business and Akastor's included in “Other holdings”. wholly owned subsidiary, MHWirth AS. HMH combines integrated delivery capabilities, capital, renowned industry expertise and Measurement of segment performance delivers the full range of offshore drilling equipment products and Segment performance is measured by operating profit before depreciation, packages at scale. amortization and impairment (EBITDA) which is reviewed by the group’s Executive Management Group (the chief operating decision maker). AKOFS Offshore is a global provider of vessel-based subsea well Segment profit, together with key financial information as described below, construction and intervention services to the oil and gas industry, gives the Executive Management Group relevant information in evaluating covering all phases from conceptual development to project the results of the operating segments and is relevant in evaluating the results execution and offshore operations. of the segments relative to other entities operating within these industries. AGR is a well design and drilling project management, HSEQ, reservoir and field management service company delivering solutions for the entire field life cycle. The company also provides rig procurement, tailored training, software and technical manpower for clients globally. Annual Report 2022 | Financials and Notes | Akastor Group41 Information about reportable segments Equity-accounted investees Consolidated entities Amounts in NOK million Note HMH (JV) AKOFS Off- shore (JV) AGR Other holdings Total operating segments Adjustment of JVs and elimination Total Akastor 2022 Income statement External revenue and other income 8 Total revenue and other income Operating profit before depreciation, amortization and impairment (EBITDA) Depreciation and amortization 14, 15, 31 Impairment Operating profit (loss) (EBIT) Assets Current operating assets Non-current operating assets Finance lease receivables Assets held for sale Segment assets Liabilities Current operating liabilities Non-current operating liabilities Lease liabilities Liabilities held for sale Segment liabilities Net current operating assets Net capital employed 31 6 31 6 6 477 6 477 1 425 1 425 762 (457) - 306 4 725 7 158 - - 458 (376) - 81 578 4 517 - - 11 883 5 095 3 235 452 344 - 4 032 1 490 7 852 393 6 1 245 - 1 644 185 3 451 789 789 81 (14) - 66 167 253 - - 419 148 13 13 - 173 19 246 269 269 (91) (31) (20) (142) 779 1 088 218 43 2 130 555 549 72 32 8 961 8 961 (7 902) (7 902) 1 059 1 059 1 209 (1 220) (878) (20) 311 833 - (387) 6 249 13 016 218 43 (5 312) (8 197) - - 19 527 (13 510) 4 331 1 020 1 675 32 (3 637) (458) (1 590) - (10) (45) (20) (76) 937 4 819 218 43 6 017 693 562 85 32 1 208 7 058 (5 685) 1 372 224 921 1 918 12 469 (1 675) (7 824) 243 4 645 Annual Report 2022 | Financials and Notes | Akastor Group 42 Amounts in NOK million Note HMH (JV) 1) AKOFS Off- shore (JV) AGR Other holdings Total operating segments Adjustment of JVs and elimination Total Akastor Equity-accounted investees Consolidated entities 2021 Income statement External revenue and other income Inter-segment revenue Total revenue and other income Operating profit before depreciation, amortization and impairment (EBITDA) 8 Depreciation and amortization 14, 15, 31 Impairment Operating profit (loss) (EBIT) Assets Current operating assets Non-current operating assets Finance lease receivables 31 Segment assets Liabilities Current operating liabilities Non-current operating liabilities Lease liabilities Segment liabilities 31 Net current operating assets Net capital employed 1 419 - 1 419 215 (116) - 99 3 701 6 736 - 10 436 2 655 582 381 3 619 1 045 6 817 1 269 - 1 269 320 (365) (88) (134) 610 4 249 - 4 859 387 7 1 163 1 556 224 3 303 723 - 723 33 (16) (7) 9 149 228 - 376 158 13 13 184 (9) 192 230 2 232 (32) (59) - (92) 736 2 045 241 3 021 496 901 142 1 539 239 1 483 3 641 2 3 643 534 (556) (95) (117) (2 688) (2) (2 690) (534 ) 481 88 35 5 195 13 257 241 (4 318) (7 576) - 18 693 (11 894) 953 - 953 - (76) (7) (82) 877 5 681 241 6 799 647 914 155 3 696 1 503 1 699 6 898 1 499 11 796 (3 049) (589) (1 544) (5 182) 1 716 (1 269) (6 712) 231 5 084 1) HMH was established as a joint venture to Akastor as of October 1, 2021.The income statement information is presented at 100% basis for the period October 1- December 31, 2021. Segment assets and liabilities refer to financial positions in HMH at 100% basis as of December 31, 2021. Annual Report 2022 | Financials and Notes | Akastor Group Reconciliations of information on reportable segments to IFRS measures Amounts in NOK million Assets Total segment assets Derivative financial instruments Cash and cash equivalents Non-current interest-bearing receivables Consolidated assets Liabilities Total segment liabilities Current borrowings Non-current borrowings Consolidated liabilities Geographical information 43 Note 2022 2021 21 19 23 23 6 017 - 119 668 6 804 1 372 1 142 198 2 712 6 799 10 89 315 7 212 1 716 16 1 372 3 103 Geographical revenue is presented on the basis of geographical location of the group companies selling to the customers. Non-current segment assets and capital expenditures are based on the geographical location of the assets. Amounts in NOK million Norway Netherlands United Kingdom Denmark Australia Other countries Total Major customer Revenue and other income 2022 2021 779 - 91 82 104 2 1 059 663 - 128 79 75 8 953 Non-current assets exclud- ing deferred tax assets and financial instruments 2022 1 036 2 886 3 - 12 - 2021 1 180 2 650 3 1 9 3 3 913 3 847 Revenues from one customer of AGR represent approximately NOK 154 million (NOK 150 million in 2021) of the group’s total revenue. Annual Report 2022 | Financials and Notes | Akastor Group 44 Note 8 | Revenue and other income Revenue types The group generates revenue primarily from provision of consultancy and engineering services to its customers in AGR, a supplier of well-, reservoir- and software services to the offshore drilling industry. Other sources of revenue are mainly lease revenue from charter lease of vessels in DDW Offshore. Amounts in NOK million Revenue from contracts with customers Other revenue and income Lease revenue Other revenue Gain (loss) on disposal of subsidiaries Gain on disposals of assets Total revenue and other income Note 2022 31 880 155 1 21 2 1 059 2021 834 76 3 (11) 51 953 Disaggregation of revenue from contracts with customers Revenue from contracts with customer is disaggregated in the following table by major contract and revenue types and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with revenue information as shown in Note 7 Operating segments. Amounts in NOK million 2022 Major contract/revenue types Construction revenue Sale of standard products Service revenue Total Revenue from contracts with customers Timing of revenue recognition Transferred over time Transferred at point in time Total Revenue from contracts with customers Other revenue and income Total external revenue and other income in segment reporting AGR Other holdings Total Akastor - 17 751 768 751 17 768 21 789 48 - 63 111 111 - 111 158 269 48 17 814 880 862 17 880 179 1 059 Annual Report 2022 | Financials and Notes | Akastor Group Amounts in NOK million 2021 Major contract/revenue types Construction revenue Sale of standard products Service revenue Total Revenue from contracts with customers Timing of revenue recognition Transferred over time Transferred at point in time Total Revenue from contracts with customers Other revenue and income Total external revenue and other income in segment reporting Contract balances Amounts in NOK million Receivables, which are included in “trade and other receivables” Contract assets Contract liabilities 45 AGR Other holdings Total Akastor - 16 718 734 718 16 734 (11) 723 47 - 53 100 100 - 100 130 230 47 16 771 834 818 16 834 120 953 Note 2022 2021 20 27 115 61 25 117 47 21 Contract assets relate to the group’s rights to consideration for work completed, but not yet invoiced at the reporting date. The contract assets are transferred to receivables when the rights to payment become unconditional, which usually occurs when invoices are issued to the customers. No impairment on contract assets was recognized in 2022 or 2021. Contract liabilities relate to advance consideration received from customer for work not yet performed. Revenue recognized in 2022 that was included in contract liabilities in the beginning of the year was NOK 14 million (NOK 11 million in 2021). Transaction price allocated to the remaining performance obligations The following table includes revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) as of December 31, 2022. Amounts in NOK million Transaction price allocated 2023 599 Later 53 Total 652 The amounts disclosed above do not include variable consideration which is constrained. The group applies the practical expedient and does not adjust the transaction price allocated to performance obligations for the effects of a significant financing component if the group expects, at contract inception, that the period between when the group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Annual Report 2022 | Financials and Notes | Akastor Group46 Note 9 | Salaries, wages and social security costs Amounts in NOK million Note 2022 2021 Salaries and wages including holiday allowance Social security tax/ national insurance contribution Pension cost Other employee costs Salaries, wages and social security costs Note 10 | Other operating expenses Amounts in NOK million External consultants and hired-ins inclusive audit fees Rental and other costs for premises and equipment Office supplies and travel expenses Other Total other operating expenses Fees to the auditors 25 298 43 12 15 366 299 43 11 13 367 2022 2021 79 8 17 6 109 55 7 8 9 78 The table below summarizes audit fees (exclusive VAT), as well as fees for audit related services, tax services and other services incurred by the group during 2022 and 2021. Amounts in NOK million 2022 2021 2022 2021 2022 2021 Akastor ASA Subsidiaries Total Audit Other assurance services Total 1 - 1 2 - 2 1 - 2 2 1 3 3 - 3 4 1 5 Annual Report 2022 | Financials and Notes | Akastor Group47 Note 11 | Finance income and costs Amounts in NOK million Note 2022 2021 Interest income on bank deposits measured at amortized cost Interest income on debt instruments at FVOCI Interest income on finance lease receivables Net foreign exchange gain Dividend income from equity instrument Net changes in fair value of financial assets at FVTPL Liquidation of foreign entity 1) Other finance income Finance income Interest expense on financial liabilities measured at amortized cost Unwind of discounting effect Interest expense on lease liabilities Impairment loss on receivables 2) Loss on foreign currency forward contracts Other financial expenses Financial expenses Net finance income 31 31 35 103 21 166 79 58 - 27 490 (140) (24) (6) (166) (58) (16) (410) 80 17 89 12 55 74 11 110 2 369 (112) (24) (9) - (17) (12) (175) 194 1) Relates to currency translation differences that were reclassified from Other Comprehensive Income to the income statement as result of liquidation. 2) Impairment related to loss allowance on debt instruments measured at FVOCI. See Note 30 Financial instruments for information of the finance income and expense generating items. Annual Report 2022 | Financials and Notes | Akastor Group48 Note 12 | Income tax Income tax expense Amounts in NOK million Current tax expense Current year Total current tax expense Deferred tax expense Origination and reversal of temporary differences Write down of tax loss and deferred tax assets Recognition of previously unrecognized deferred tax assets Total deferred tax income (expense) Total tax income (expense) 2022 2021 (3) (3) (13) (22) 37 2 (2) (1) (1) 25 (30) 26 21 20 Effective tax rate The table below reconciles the reported income tax expense to the expected income tax expense according to the corporate income tax rate in Norway. Amounts in NOK million 2022 2021 Profit (loss) before tax, continuing operations Tax income (expense) using the company's domestic tax rate Tax effects of: Difference between local tax rate and Norwegian tax rate Permanent differences 1) Prior year adjustments (deferred tax) Recognition of previously unrecognized deferred tax assets 2) Write down of tax loss or deferred tax assets 3) Total tax income (expenses) (259) 57 (1) (74) 1 37 (22) (2) 22.0% (0.4%) (28.6%) 0.5% 14.5% (8.6%) (0.7%) (235) 52 - (32) 4 26 (30) 20 22.0% - (13.5%) 1.8% 11.1% (12.7%) 8.5% 1) Relates mainly to net profit and loss after tax from equity-accounted investees and profit and loss recognized on various tax-exempted investments. 2) Relates mainly to previously not recognized tax loss carry-forward in Norway. 3) The impairment relates mainly to deferred tax assets in Akastor Corporate entities in Norway. Annual Report 2022 | Financials and Notes | Akastor Group 49 Recognized deferred tax assets and liabilities Amounts in NOK million 2022 2021 2022 2021 2022 2021 Assets Liabilities Net PPE and Intangible assets Pensions Provisions Other items Tax loss carry-forwards Total before set offs Set-off of tax Total deferred tax assets(liabilities) 5 2 2 9 36 53 (16) 37 2 2 1 6 37 48 (5) 42 (1) - - (19) - (20) 16 (4) (1) - - (9) - (10) 5 (4) 4 2 2 (10) 36 33 - 33 1 2 1 (3) 37 38 - 38 The group has made an evaluation of taxable profit for the next five years based on management’s projection. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available, against which the deductible temporary difference can be utilized. Change in net recognized deferred tax assets (liabilities) Amounts in NOK million Balance as of December 31, 2020 Disposal of subsidiaries as of January 1, 2021 Recognized in profit and loss Recognized in other comprehensive income Currency translation differences Balance as of December 31, 2021 Recognized in profit and loss Classified as held for sale Balance as of December 31, 2022 PPE and intangible assets Projects under construc- tion Pensions Provi- sions Other items Tax loss carry-for- wards 30 (29) - - - - 3 - 4 (50) 51 - - (2) - - - - 65 (57) - (6) (1) 2 - - 2 28 (26) (1) - - 1 1 - 2 204 (207) - - - (3) (10) 3 (10) 43 (27) 22 - (1) 37 7 (9) 36 Total 320 (294) 21 (6) (3) 38 2 (6) 33 Tax loss carry-forwards and deductible temporary differences for which no deferred tax assets are recognized Deferred tax assets have not been recognized in respect of tax loss carry-forwards or deductible temporary differences when the group evaluates that it is not probable that future taxable profit will be available against which the group can utilize these benefits based on forecasts and realistic expectations. Expiry date of unrecognized tax loss carry-forwards Amounts in NOK million Expiry within one year Expiry in more than one year or later Indefinite Total 2022 14 375 1 350 1 739 2021 - 350 1 772 2 121 Unrecognized other deductible temporary differences are NOK 1 169 million in 2022 (NOK 1 022 million in 2021). Annual Report 2022 | Financials and Notes | Akastor Group 50 Note 13 | Earnings per share Akastor ASA holds 1 985 164 treasury shares at year end 2022 (2 390 215 in 2021). Treasury shares are not included in the weighted average number of ordinary shares. Amounts in NOK million Profit (loss) from continuing operations Non-controlling interests Profit (loss) attributable to ordinary shares from continuing operations Profit (loss) from discontinued operations Profit (loss) attributable to ordinary shares Basic/ diluted earnings per share 2022 (261) (19) (280) 4 (276) 2021 (215) (6) (221) 1 140 919 The calculation of basic/diluted earnings per share is based on the profit (loss) attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding. Issued ordinary shares as of January 1 Weighted average number of issued ordinary shares for the year adjusted for treasury shares Basic/ diluted earnings (loss) per share (NOK) Basic/ diluted earnings (loss) per share for continuing operations (NOK) Basic/ diluted earnings (loss) per share for discontinued operations (NOK) 2022 2021 274 000 000 274 000 000 271 002 629 271 609 785 (1.01) (1.03) 0.02 3.38 (0.81) 4.20 Annual Report 2022 | Financials and Notes | Akastor GroupNote 14 | Property, plant and equipment The table below includes discontinued operations until these met the criteria to be classified as held for sale. Amounts in NOK million Historical cost Balance as of January 1, 2021 Additions Reclassifications Transfer from assets under construction Disposals and scrapping Disposal of subsidiaries Currency translation differences Balance as of December 31, 2021 Additions Disposals and scrapping Reclassification to held for sale Currency translation differences Balance as of December 31, 2022 Accumulated depreciation Balance as of January 1, 2021 Depreciation for the year 1) Disposals and scrapping Disposal of subsidiaries Currency translation differences Balance as of December 31, 2021 Depreciation for the year Impairment Reclassifications to held for sale Currency translation differences Balance as of December 31, 2022 Book value as of December 31, 2021 Book value as of December 31, 2022 Note Buildings and land Vessels Machinery, equipment, software Under construction 671 - - - - (654) (17) - - - - - - (310) (2) - 305 7 - - - - - - - - 366 65 - - (156) - 8 282 (2) - - 35 315 (7) (30) - - (1) (38) (18) (21) - (6) (83) 244 232 1 343 11 10 1 (8) (1 248) (7) 101 1 - (9) - 93 (1 051) (13) 7 957 6 (94) (3) - 9 - (88) 7 5 4 3 - (1) - (6) (1) - - - - - - - - - - - - - - - - - - - 6 6 51 Total 2 384 79 10 - (164) (1 908) (17) 384 (1) - (9) 35 408 (1 368) (46) 7 1 262 12 (133) (21) (21) 9 (6) (171) 251 237 1) Includes depreciation of NOK 12 million from discontinued operations in 2021 Depreciation Estimates for useful life, depreciation method and residual values are reviewed annually. The group has not identified material assets expected to have a significant shorter useful life due to climate-related risks. Assets are mainly depreciated on a straight-line basis over their expected economic lives as follows: Machinery, equipment and software Vessels 3–15 years 20–25 years Annual Report 2022 | Financials and Notes | Akastor Group 52 Note 15 | Intangible assets and goodwill Amounts in NOK million Historical cost Balance as of 1 January 2021 Reclassification Capitalized development Adjustment from business combina-tions prior years Disposals of subsidiaries Currency translation differences Balance as of December 31, 2021 Reclassification Capitalized development Reclassification to held for sale Currency translation differences Balance as of December 31, 2022 Accumulated amortization and impairment Balance as of 1 January 2021 Amortization for the year 1) Impairment 2) Disposal of subsidiaries Currency translation differences Balance as of December 31, 2021 Amortization for the year Reclassification to held for sale Balance as of December 31, 2022 Net book value as of 31 December 2021 Net book value as of 31 December 2022 Note Development costs Goodwill Other Total 6 583 (10) 24 - (544) (4) 50 1 9 (14) - 47 (411) (10) - 390 3 (28) (6) 13 (22) 22 25 1 392 270 2 246 - - (1) (1 263) (10) 118 - - - 1 119 (86) - (69) 146 (1) (10) - - (10) 109 109 - 1 - (244) (3) 24 - - - - 24 (154) (6) (86) 233 3 (9) (3) - (13) 15 11 (10) 24 (1) (2 051) (16) 192 1 9 (14) 1 190 (651) (16) (155) 770 5 (47) (10) 13 (44) 145 146 1) Includes amortization of NOK 6 million from discontinued operations in 2021 2) Includes impairment of NOK 149 million from discontinued operations in 2021 Research and development costs NOK 9 million has been capitalized in 2022 (NOK 24 million in 2021) related to development activities. No research and development costs were expensed during the year (NOK 1 million in 2021). Amortization Intangible assets all have finite useful lives and are amortized over the expected economic life, ranging between 5-10 years. Annual Report 2022 | Financials and Notes | Akastor Group53 Note 16 | Impairment testing of goodwill Goodwill originates from acquisitions. For the purpose of impairment testing, goodwill has been allocated to the group’s cash-generating units (portfolio companies) as shown in the table below, which represents the lowest level at which goodwill is monitored in management reporting. Amounts in NOK million AGR Total goodwill 2022 2021 109 109 109 109 Impairment testing for cash-generating units containing significant margins and other cost components based on historical experience as goodwill well as assessment of future market development and conditions. These The recoverable amounts of cash-generating units (portfolio companies) assumptions require a high degree of judgement, given the significant are determined based on value-in-use calculations. Discounted cash flow degree of uncertainty regarding oilfield service activities in the forecast models are applied to determine the value in use for the portfolio companies period. with goodwill. The management has made cash flow projections based on budget and strategic forecast for the periods 2023-2027. Beyond the Terminal value growth rate The group uses a constant growth rate not explicit forecast period of five years, the cash flows are extrapolated using exceeding 2% (including inflation) for periods beyond the management’s a constant growth rate. forecast period of five years. The growth rates used do not exceed the growth rates for the industry in which the portfolio company operates. Key assumptions used in the calculation of value in use are discussed below. The values assigned to the key assumptions represent Discount rates are estimated based on Weighted Average Cost of Capital management's assessment of future trends in the relevant industries as well (WACC) for the industry in which the portfolio company operates. The as management’s expectations regarding margin, and have been based on risk-free interest rates used in the discount rates are based on the 10 year historical data from both external and internal sources. state treasury bond rate at the time of the impairment testing. Optimal debt EBITDA used in the value-in-use calculations represents the operating further adjusted to reflect any additional short to medium term market risk earnings before depreciation and amortization and is estimated based considering current industry conditions. leverage is estimated for each portfolio company. The discount rates are on the expected future performance of the existing businesses in their main markets. Assumptions are made regarding revenue growth, gross Discount rate assumptions used in impairment testing Discount rate after tax 2022 2021 Discount rate pre tax 2022 2021 AGR 15.0% 13.0% 18.4% 16.3% Sensitivity to changes in assumptions The group has performed sensitivity calculations to identify any reasonably For the portfolio companies containing goodwill, the recoverable amounts possible change in key assumptions that could cause the carrying amount are higher than the carrying amounts based on the value in use analysis to exceed the recoverable amount. In AGR, if the average revenue growth and consequently no impairment loss of goodwill was recognized in 2022 in the forecast period were reduced by more than 10%, or if the average or 2021. EBITDA margin in the forecast period were reduced by more than 2%, the estimated recoverable amount would be lower than the carrying amount and it would result in impairment in AGR. Annual Report 2022 | Financials and Notes | Akastor Group54 Note 17 | Equity-accounted investees Equity-accounted investees include joint ventures that are accounted for using the equity method. Such investments are defined as related parties to Akastor. See Note 33 Related parties for significant agreements and transactions with joint ventures and any guarantees provided on behalf of or from such entities. Amounts in NOK million Country Ownership and voting rights Balance as of January 1, 2022 Acquisitions Share of net profit (loss) Share of other comprehensive income Currency translation differences Balance as of December 31, 2022 HMH AKOFS Offshore Netherlands 50% 2 650 - (82) (25) 321 2 863 Norway 50% 759 - (179) (51) 86 615 Total equity- accounted investees Føn Energy Services Norway 45% - 26 (2) - - 24 3 408 26 (263) (76) 407 3 502 HMH Føn Energy Services On October 1, 2021, Akastor completed the transaction to bring together In February 2022, Akastor, through its subsidiary AGR AS, completed the Akastor’s wholly owned subsidiary, MHWirth AS (MHWirth) and Baker transaction to establish a joint venture company, Føn Engergy Services, Hughes’ Subsea Drilling Systems (SDS) business to create a joint venture together with IKM Group. Following the transaction, Akastor and IKM each company HMH Holding B.V. (HMH). Following the transaction, Akastor and holds 45% of the shares in Føn Energy Services, and have joint control Baker Hughes each holds 50% of the shares in HMH, and have joint control over the company. See Note 6 for more information about the transaction. over the company. See Note 5 Discontinued operations for more information The company offers integrated Operations and Maintenance (O&M) about the transaction. HMH is a provider of drilling systems, equipment and solutions to developers, operators, suppliers and owners of offshore aftermarket services. AKOFS Offshore AKOFS Offshore is a joint venture where Akastor, MITSUI & CO., Ltd. ("Mitsui") and Mitsui O.S.K. Lines, Ltd. ("MOL") hold 50%, 25% and 25% of the shares respectively, and have joint control over the company. The company is a subsea well installation and intervention services provider. renewables infrastructure, and in particular offshore wind farms. Annual Report 2022 | Financials and Notes | Akastor Group55 Summary of financial information for significant equity-accounted investee (100 percent basis) Amounts in NOK million Current assets – Cash and cash equivalents Non-current assets Current liabilities – Current financial liabilities (excluding trade and other payables and provisions) Non-current liabilities – Non-current financial liabilities (excluding trade and other payables and provisions) Net assets (100%) Akastor's share of net assets (50%) Akastor's carrying amount of the investment Revenue Depreciation, amortization and impairment Interest income Interest expense Income tax expense Profit (loss) for the year Other comprehensive income (loss) Total comprehensive income (loss) (100%) Total comprehensive income (loss) (50%) Impairment of goodwill 2) Elimination of unrealized gain on downstream sales Akastor's share of total comprehensive income (loss) HMH 1) AKOFS 2022 2021 2022 2021 5 645 468 7 193 (3 770) (476) (3 341) (2 889) 5 726 2 863 2 863 6 477 (457) - (364) (78) (164) (50) (215) (107) - - (107) 6 265 817 6 906 (4 092) (1 384) (3 781) (3 199) 5 299 2 650 2 650 1 419 (116) - (57) (23) 12 - 12 6 - - 6 888 310 4 517 (1 844) (1 451) (2 331) (2 325) 1 230 615 615 1 425 (376) 5 (302) (6) (358) (102) (459) (230) - - (230) 951 337 4 249 (1 536) (1 149) (2 146) (2 140) 1 517 759 759 1 269 (453) - (269) (65) (516) (15) (531) (266) (124) 30 (360) 1) Income statement information for HMH in 2021 was related to the period between October 1 – December 31, 2021 after the formation of the company. 2) Goodwill in AKOFS Offshore was impaired in 2021 as a result of reassessment of valuation of the vessels in AKOFS Offshore. Annual Report 2022 | Financials and Notes | Akastor Group56 Note 18 | Other investments Amounts in NOK million NES Fircroft investment Aker Pensjonskasse Awilco Drilling investment Odfjell Drilling warrants Other equity securities Total other investments Shares in Step Oiltools B.V. Total current investments Note 2022 2021 33 30 30 636 158 10 34 31 621 158 10 807 29 869 1 625 162 162 147 147 NES Fircroft Odfjell Drilling warrants Akastor holds around 15% economic ownership interest in NES Fircroft, In November 2022, Akastor sold the preference shares in Odfjell Drilling a global technical and engineering staffing provider. The investment, for a total consideration of USD 95.2 million, of which USD 75.2 million consisting mainly of debt instruments, is measured at fair value. See was settled in cash while the remaining USD 20 million was settled through Note 30 Financial instruments for more information about the fair value a seller’s credit agreement towards Odfjell Drilling, see Note 19 for more measurement of debt instruments in NES Fircroft. information. Akastor retains warrants for 6 837 492 common shares in Odfjell Drilling, divided by six exercisable tranches until May 31, 2024. Aker Pensjonskasse Odfjell Drilling is listed on the Oslo Stock Exchange. Aker Pensjonskasse was established by Aker ASA to manage the retirement plan for employees and retirees in Akastor as well as related Shares in Step Oiltools B.V. Aker companies. Akastor holds 93.4 percent of the paid-in capital in Aker Step Oiltools was included in the transaction scope when HMH was Pensjonskasse. The ownership does not constitute control since Akastor established and thus forms part of the MHWirth business contributed from does not have the power to govern the financial and operating policies so Akastor to the joint venture HMH in 2021. However, the legal ownership in as to obtain benefits from the activities in this entity. shares in Step Oiltools B.V. remains with Akastor as of December 31, 2022. Awilco Drilling The ownership does not constitute control since Akastor is not exposed to variable returns from the legal ownership. See also Note 24 Other liabilities Akastor holds 6.8% of the common shares in Awilco Drilling, which is listed for more information about the liabilities related to Step Oiltools. on the Oslo Euronext Growth. Note 19 | Non-current interest-bearing receivables Amounts in NOK million Receivables from AKOFS Offshore Receivables from HMH Seller’s credit to Odfjell Drilling Receivables from Aker Pensjonskasse Receivable from Føn Energy Services Total non- current interest-bearing receivables Note 2022 2021 226 218 200 22 2 668 113 180 - 22 - 315 In November 2022, Akastor sold the preference shares in Odfjell Drilling for a total consideration of USD 95.2 million, of which USD 75.2 million was settled in cash while the remaining USD 20 million was settled through a seller’s credit agreement towards Odfjell Drilling. The seller’s credit agreement has maturity date on July 31, 2024, with 10% p.a. cash interest (step-up of interest to 13% p.a. from January 1, 2024). Annual Report 2022 | Financials and Notes | Akastor GroupNote 20 | Trade and other receivables Amounts in NOK million Trade receivables Less provision for impairment Trade receivables, net of provision Other receivables Trade and other receivables Advances to suppliers Contract assets Prepaid expenses Public duty and tax refund Total 57 Note 2022 2021 30 8 204 (64) 140 556 696 2 61 11 - 769 191 (57) 135 673 808 - 47 16 2 872 Other receivables relate mainly to Akastor’s economic interest in four drilling equipment contracts with Jurong Shipyard (DRU contracts). This position was carved out from MHWirth in connection with the merger with Baker Hughes’ SDS business. The contracts were terminated by Jurong and dispute over termination fees is being resolved through arbitration process with outcome expected in 2023. In 2022, the group reassessed both receivables and accrued expenses following the formal termination of the last two contracts. An impairment of NOK 174 million, with a corresponding reversal of accrued expenses, was recognized in 2022 (NOK 214 million in 2021). Net financial position related to the contracts was not impacted by the reassessment. Book value of trade and other receivables is approximately equal to fair value. Aging of trade receivables Amounts in NOK million Not overdue Past due 0-30 days Past due 31-90 days Past due more than 90 days Total trade receivables 2022 2021 145 126 3 1 8 - 56 57 204 191 The past due receivables are monitored regularly and impairment analysis is performed on an individual basis for major customers. As of December 31, 2022, trade receivables of a face value of NOK 64 million were impaired. See below for the movements in the provision for impairment of receivables. Amounts in NOK million Balance as of January 1 Unused amounts reversed Disposal of subsidiaries Currency translation differences Balance as of December 31 Note 21 | Cash and cash equivalents Amounts in NOK million Restricted cash Interest-bearing deposits Total cash and cash equivalents 2022 2021 57 - - 7 64 131 (8) (68) 2 57 2022 2021 2 117 119 - 89 89 Additional undrawn committed bank revolving credit facilities amount to NOK 304 million, that together with cash and cash equivalents gives a total liquidity reserve of NOK 423 million as of December 31, 2022. See also Note 23 Borrowings. Annual Report 2022 | Financials and Notes | Akastor Group 58 Note 22 | Capital and reserves Share capital reserve is related to share of other comprehensive income in equity Akastor ASA has one class of shares, ordinary shares, with equal rights for accounted investees. all shares. The holders of ordinary shares are entitled to receive dividends and are entitled to one vote per share at General Meetings. Total outstanding Fair value reserve shares are 274 000 000 at par value NOK 0.592 per share (NOK 0.592 in The fair value reserve comprises the cumulative net changes in the fair 2021). All issued shares are fully paid. value of financial assets classified as Fair Value through OCI (FVOCI) until these assets are impaired or derecognized. Treasury shares Sale of 405 051 treasury shares to employees was carried out in 2022 in Currency translation reserve connection with the company’s variable pay program. As of December 31, The currency translation reserve includes exchange differences arising 2022, Akastor ASA holds 1 985 164 treasury shares (2 390 215 treasury from the translation of the net investments in foreign operations, foreign shares in 2021), representing 0.72 percent of total outstanding shares. exchange gain or loss on loans defined as part of net investments in foreign operations, as well as the group’s share of currency translation differences The Board of Directors has not proposed dividend for 2022 or 2021. in equity accounted investees. Upon the disposal of investments in foreign operations during 2021, the accumulated currency translation differences related to the disposed entities were reclassified from the currency Hedging reserve translation reserve to the income statement. As of December 31, 2022, the group had no cash flow hedges. The hedging Annual Report 2022 | Financials and Notes | Akastor Group59 Note 23 | Borrowings Below are contractual terms of the group’s interest-bearing loans and borrowings which are measured at amortized cost. For more information about the group’s exposure to interest rates, foreign currency and liquidity risk, see Note 29 Financial risk management and exposures. Amounts in million 2022 Revolving credit facility (USD 66 million) Revolving credit facility (NOK 250 million) Subordinated Aker facility (NOK 250 million) 3) Term loan AGR Term loan DDW Offshore Total borrowings Current borrowings Non-current borrowings Total borrowings 2021 Revolving credit facility (USD 89 million) Revolving credit facility (NOK 250 million) Subordinated Aker facility (NOK 250 million) Term loan AGR Term loan DDW Offshore Overdraft Total borrowings Current borrowings Non-current borrowings Total borrowings Nominal currency value Carrying amount (NOK) Currency Maturity 1) Interest terms 2) USD NOK NOK NOK USD USD NOK NOK NOK USD NOK 66 200 16 180 27 83 - 3 180 53 Feb 2024 USD LIBOR + margin 5.5% Feb 2024 Mar 2024 Apr 2027 NIBOR + margin 5.5% NIBOR + margin 10% Fixed rate 4% Feb 2024 USD LIBOR + margin 4.25% 656 198 16 198 272 1 340 1 142 198 1 340 721 Feb 2023 USD LIBOR + margin 5.5% Feb 2023 Mar 2023 Apr 2027 NIBOR + margin 5.5% NIBOR + margin 10% Fixed rate 4% Oct 2023 USD LIBOR + margin 4.25% - 3 185 467 11 1 387 16 1 372 1 387 1) In February and March 2023, the maturity date of Revolving credit facilities, Aker facility and DDW Offshore term loan was extended to February/March 2024. The borrowings are classified as current reflecting the maturity date as at the reporting date. 2) Commitment fee is 40 percent of the margin for revolving credit facilities and Aker facility. 3) In March 2023, Aker facility was increased to NOK 450 million (NIBOR + margin 12%). For information about contractual maturities of borrowings including interest payments and the period in which they mature, see Note 29 Financial risk management and exposures. Bank debt The term loan of USD 27 million to DDW Offshore is provided by GIEK, DNB The revolving credit facilities are provided by a bank syndicate consisting and BNP Paribas and matures in February 2024. The Facility is guaranteed of high-quality Nordic and international banks, with DNB acting as agent. by Akastor ASA and the lenders benefit from first priority mortgages in the The terms and conditions include restrictions which are customary for vessels. This facility includes restrictions which are customary for these these kinds of facilities, including inter alia negative pledge provisions and kinds of secured financing. restrictions on acquisitions, disposals and mergers, dividend distribution and change of control provisions. For information about financial covenants, see Note 28 Capital management. The term loan facility of NOK 180 million to AGR is provided by Nordea and DNB. The lenders have no recourse to Akastor ASA. This facility includes restrictions which are customary for these kinds of facilities. Annual Report 2022 | Financials and Notes | Akastor Group 60 Reconciliation of liabilities arising from financing activities Amounts in NOK million Balance as of December 31, 2020 Proceeds from borrowings Repayment of borrowings Changes from financing cash flows Changes in capitalized borrowing costs Accrued interest (incl. commitment fees) Foreign exchange movements Balance as of December 31, 2021 Proceeds from borrowings Repayment of borrowings Changes from financing cash flows Changes in capitalized borrowing costs Accrued interest (incl. commitment fees) Foreign exchange movements Balance as of December 31, 2022 Revolving credit facilities Subordi- nated Aker facility Term loan AGR Term loan – DDW Offshore Overdraft Total borrowings 1 119 1 056 (1 472) (416) 7 5 6 721 736 (711) 25 13 (1) 96 854 - - - - - 3 - 3 20 (20) - - 13 - 16 173 455 - - - - 13 - 185 - - - - 13 - 198 - - - - - 13 467 - (254) (254) - 9 50 272 - 11 - 11 - - - 11 - (11) (11) - - - - 1 746 1 067 (1 472) (405) 7 20 18 1 387 756 (996) (240) 13 33 146 1 340 See Note 31 Leases for reconciliation of liabilities arising from leasing activities. Note 24 | Other liabilities Amounts in NOK million Deferred gain Deferred settlement obligations Liability for profit split Other liabilities Total other non-current liabilities Liability related to Step Oitools Total other current liabilities Note 2022 2021 30 30 30 30 30 326 102 1 459 162 162 51 377 200 1 628 148 148 Deferred gain Liability for profit split In May 2018, Akastor invested in preferred equity and warrants in Odfjell DDW Offshore AS has obligation to share 50 percent of the sale proceeds Drilling. On initial recognition, the investment in warrants was recognized at from disposal of two of its vessels with its lenders prior to April 2024. fair value and the difference between the fair value and the transaction price, NOK 117 million, was recognized as “Deferred gain”. The deferred gain is Liability related to Step Oiltools subsequently amortized and recognized to profit and loss at straight-line Step Oiltools was included in the transaction scope when HMH was basis over six years. See Note 18 Other investments for more information established and thus forms part of the MHWirth business contributed from about the warrant investment. Akastor to the joint venture HMH in 2021. However, the legal ownership in shares in Step Oiltools B.V. remains with Akastor as of December 31, 2022. Deferred settlement obligations Since Akastor is not exposed to variable returns from the legal ownership, Deferred settlement obligations represent contingent considerations the liability reflects the obligation to transfer Step Oiltools or its assets to resulting from disposal of subsidiaries. The obligations are mainly related HMH when the ownership structure is resolved. See also Note 18 Other to provision for indemnity liabilities for pension plans in connection with investments for more information about the Step Oiltools shares. MHWirth divestment as well as guaranteed preferred return to Mitsui and MOL in connection with AKOFS Offshore divestment. Annual Report 2022 | Financials and Notes | Akastor Group61 Note 25 | Employee benefits – pension Akastor’s pension costs represent the future pension entitlement earned by Compensation plan employees in the financial year. In a defined contribution plan the company To ensure that the employees were treated fairly on the change over to the is responsible for paying an agreed contribution to the employee’s pension contribution plan in 2008, the company introduced a compensation plan. assets. In such a plan, this annual contribution is also the cost. In a defined The basis for deciding the compensation amount is the difference between benefit plan, it is the company’s responsibility to provide a certain pension. calculated pension capital in the defined benefit plan and the value of the The measurement of the cost and the pension liability for such arrangements defined benefit plan at the age of 67 years. The compensation amount will is subject to actuarial valuations. Akastor has over a long time period be adjusted annually in accordance with the adjustment of the employees’ gradually moved from defined benefit arrangements to defined contribution pensionable income, and accrued interest according to market interest. If plans. Consequently, the impact of the remaining defined benefit plans is the employee leaves the company voluntarily before the age of 67 years, gradually reduced. the compensation amount will be reduced. Pension plans in Norway AFP – early retirement arrangement The main pension arrangement in Norway is a general pension plan organized AFP is an early retirement arrangement organized by Norwegian employers, by the Norwegian Government. This arrangement provides the main the main Labor Union organization in Norway (LO) and the Norwegian general pension entitlement of all Norwegians. All pension arrangements by Government. The AFP plan is providing additional lifelong pensions to employers consequently represent limited additional pension entitlements. employees that retire before the general retirement age, to compensate for the reduction of the ordinary pension entitlements. The employees are Norwegian employers are obliged to provide an employment pension plan, given a choice of retirement age, with lower pension at earlier retirement. which can be organized as a defined benefit plan or as a defined contribution plan. The Norwegian companies in Akastor have closed the earlier defined The Norwegian Accounting Standards Board has issued a comment benefit plans in 2008 and are now providing defined contribution plans for all concluding that the AFP plan is a multi-employer defined benefit plan. The employees. Defined benefit plan AFP plan exposes the participating entities to actuarial risk associated with employees of other entities with the result that there is no consistent and reliable basis for allocating the obligation, plan assets and costs to Employees who were 58 years or older in 2008, when the change took place, individual participating entities. Sufficient information is not available to use are still in the defined benefit plan, which is a funded plan. There are no longer defined benefit accounting and the AFP plan is accounted for as a defined any active employees in this plan. The estimated contributions expected to be contribution plan. paid to the Norwegian plan during 2023 amount to NOK 6 million. Pension plans outside Norway Pension plans outside Norway are predominately defined contribution plans. Pension cost Amounts in NOK million Defined benefit plans Defined contribution plans including AFP Total pension cost Net employee defined benefit obligations Amounts in NOK million Defined benefit plans Norway Defined benefit plans USA Total employee benefit obligations Note 2022 2021 1 11 12 1 10 11 9 2022 2021 94 2 96 94 15 108 Annual Report 2022 | Financials and Notes | Akastor Group62 Movement in net defined benefit (asset) liability Amounts in NOK million Balance as of January 1 Disposal of subsidiaries as of January 1, 2021 Included in profit or loss Service cost Interest cost (income) Total Included in OCI Remeasurements (loss) gain: Actuarial loss (gain) arising from: – demographic assumptions – financial assumptions – experience adjustments Return on plan assets excluding interest income Effect of movements in exchange rates Total Other Benefits paid by the plan Contributions paid into the plan Total Balance as of December 31 Plan assets Amounts in NOK million Plan assets at fair value Norwegian plan Government Finance Private and Government enterprise Municipalities Bonds Fund/private equity Total plan assets Norway at fair value Equity securities Debt securities Total plan assets US at fair value Total plan assets at fair value Pension obligation 2022 2021 Pension asset Net pension obligation 2022 2021 2022 2021 332 - 639 (279) 1 4 4 2 (18) 4 - 7 (5) (30) - (30) 301 1 2 3 6 (10) (5) - 3 (6) (25) - (25) 332 (224) - - (2) (2) - (3) - 25 (6) 16 24 (20) 5 (205) (251) 28 108 - 388 (251) - (1) (1) - (2) - - (3) (5) 20 (15) 5 (224) 1 2 2 2 (21) 4 25 - 11 (6) (20) (26) 96 1 2 2 5 (12) (5) - - (11) (5) (15) (20) 108 2022 2021 2 14 23 10 48 56 104 25 76 101 205 5 15 26 15 60 60 120 29 75 104 224 The equity portfolio is invested globally. The fair value of the equities is The investment in fund/private equity is mainly funds that invests in listed based on their quoted prices at the reporting date without any deduction for securities and where the fund value is based on quoted prices. estimated future selling cost. The investments in bonds are done in the Norwegian market and most of the bonds are not listed on any exchange. The market value as at year end is based on official prices provided by the Norwegian Securities Dealers Association. The Bond investments have on average a high credit rating. Most of the investments are in Norwegian municipalities with a credit rating of AA. Annual Report 2022 | Financials and Notes | Akastor Group Defined benefit obligation – actuarial assumptions The group’s significant defined benefit plans are in Norway. The followings are the principal actuarial assumptions at the reporting date for the plans in 63 Norway. Discount rate Asset return Salary progression Pension indexation Mortality table Norway 2022 3.20% 2.00% 3.75% 1.7 -3.5% K2013 2021 1.90% 1.90% 2.75% 0 -2.5% K2013 The information below relates only to Norwegian plans as these represent in the pension indexations. The total effect of fluctuations in economic the majority of the plans. assumptions is consequently unlikely to be very significant. The discount rates and other assumptions in 2022 and 2021 are based Assumptions regarding future mortality have been based on published on the Norwegian high quality corporate bond rate and recommendations statistics and mortality tables. The current life expectancy underlying the from the Norwegian Accounting Standards Board. It should be expected values of the defined benefit obligation at the reporting date is shown below. that fluctuations in the discount rates would also lead to fluctuations Years Life expectancy of male pensioners Life expectancy of female pensioners 2022 22.7 26.0 2021 22.6 25.9 As of December 31, 2022, the weighted-average duration of the defined benefit obligation was 4.1 years. Sensitivity analysis Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation as of December 31, 2022 by the amounts shown below. Amounts in NOK million Discount rate (1% movement) Future salary growth (1% movement) Future pension growth (1% movement) Increase Decrease (8) - 9 9 - (7) The change in discount rate assumptions would affect plan assets in the income statement in next period as it would change the estimated asset return but have no effect on pension assets as of year-end. Annual Report 2022 | Financials and Notes | Akastor Group64 Note 26 | Provisions Amounts in NOK million Provision, current Provision, non-current Total provisions Development of significant provisions Amounts in NOK million Balance as of December 31, 2021 Provisions utilized Provisions reversed Unwind of discount Reclassification to held for sale Balance as of December 31, 2022 Expected timing of payment Within the next twelve months After the next twelve months Total Onerous contracts 2022 2021 31 3 34 20 26 47 Warranties Onerous contracts Other Total 10 - (9) - (1) - - - - 31 (3) - 1 - 29 27 3 29 6 (2) - - - 5 4 1 5 47 (4) (9) 1 (1) 34 31 3 34 Provision for onerous contracts relates mainly to unavoidable operational costs for vacant properties where the group is committed under lease contracts. Note 27 | Trade and other payables Amounts in NOK million Trade creditors 1) Accrued expenses Liability for profit split 2) Trade and other payables Public duty and tax payables Contract liabilities Deferred settlement obligations Total trade and other payables Note 2022 2021 67 179 89 335 46 25 91 498 99 377 - 476 46 21 82 625 30 8 30 1) Trade creditors are due within one year. 2) Relates to obligation in DDW Offshore AS to share 50 percent of the sale proceeds from disposal of two of its vessels in 2023. Book value of trade creditors and other current liabilities is approximately equal to fair value. Annual Report 2022 | Financials and Notes | Akastor Group65 Note 28 | Capital management Akastor’s capital management is designed to ensure that the group has Funding cost sufficient financial flexibility to carry out its strategic targets, both short- Akastor aims to have diversified funding sources in order to reach the term and long-term. Akastor is targeting to maintain a financial structure lowest possible cost of capital. These funding sources might include: that, through solidity and cash flow, secures the group’s strong long-term creditworthiness, as well as maximize value creation for its shareholders through: Investing in projects and business areas which will increase the company’s Return On Capital Employed (ROCE) over time. Optimizing the company’s capital structure to ensure both sufficient and timely funding over time to finance its activities at the lowest cost. Investment policy The use of banks based on syndicated credit facilities. The issue of debt instruments in the Norwegian capital market. The issue of debt instruments in foreign capital markets. Ratios used in monitoring of capital/covenants Akastor monitors capital on the basis of a gearing ratio (net debt/equity) and equity ratio (equity/total assets). These ratios are similar to covenants as defined in the loan agreement entered into in 2021 for the revolving credit facilities which are shown below. See Note 23 Borrowings for details about Akastor’s capital management is based on a rigorous investment selection these loans. process which considers not only Akastor’s weighted average cost of capital and strategic orientation but also external factors such as market expectations. Funding policy Liquidity planning The company’s gearing ratio shall not exceed 0.5 times and is calculated from the consolidated total borrowings to the consolidated Equity. Equity ratio shall not be lower than 32.5%, calculated from the Akastor has a strong focus on its liquidity situation to meet its capital needs consolidated total equity to consolidated total assets. and ensure solvency for its financial obligations. Akastor had a liquidity reserve per year end 2022 of NOK 423 million, composed of an undrawn Minimum liquidity amount shall exceed NOK 150 million on committed credit facility of NOK 304 million and cash and cash equivalents consolidated level. of NOK 119 million. Funding of operations The ratios are calculated based on net debt including cash and borrowings, consolidated equity and consolidated total assets, however adjusted for Akastor’s group funding policy is that subsidiaries should finance their certain items as defined in the loan agreement. Covenants ratios are based operations with the treasury department (Akastor Treasury). This ensures on accounting principles as of December 31, 2022. optimal availability and transfer of cash within the group and better control of the company’s overall debt as well as cheaper funding for its operations. The covenants are monitored on a regular basis by the Akastor Treasury However, AGR is financed directly through a NOK 180 million Term Loan department to ensure compliance with the loan agreements which are maturing in 2027, and DDW Offshore is financed directly through a USD 27 tested and reported on a quarterly basis. Akastor was in compliance with its million Term loan maturing in 2024. covenants as of December 31, 2022. In February 2023, the group extended Funding duration the maturity of the corporate revolving credit facilities to February/March 2024. In March 2023, the subordinated Aker facility was increased with Akastor emphasizes financial flexibility and steers its capital structure NOK 200 million to NOK 450 million (NIBOR + 12% margin). accordingly to limit its liquidity and refinancing risks. In this perspective, loans and other external borrowings are to be renegotiated well in advance AGR’s external financing has one financial covenant the Liquidity shall be of their due date and generally for periods of 3 to 5 years. However, as a not less than NOK 20 million. result of MHWirth divestment in 2021 and the required refinancing carried out in connection with this, corporate facilities currently have a shorter duration as realization of assets are expected to be carried out in the short to medium term. Annual Report 2022 | Financials and Notes | Akastor Group66 Note 29 | Financial risk management and exposures The group is exposed to a variety of financial risks: currency risk, interest Currency risk rate risk, price risk, credit risk, liquidity risk and capital risk. The capital The group operates internationally and is exposed to currency risk market risk affects the value of financial instruments held. The objective of on commercial transactions, recognized assets and liabilities and net financial risk management is to manage and control financial risk exposures investments in foreign operations. Commercial transactions and recognized and thereby increase the predictability of earnings and minimize potential assets and liabilities are subject to currency risk when payments are adverse effects on the group’s financial performance. denominated in a currency other than the respective functional currency of the group company. The group’s exposure to currency risk is primarily Risk management is present in every project. It is the responsibility of the against USD. project managers, with the support of Akastor Treasury, to identify, evaluate and hedge financial risks under policies approved by the Board of Directors. Exposure to currency risk The group has well-established principles for overall risk management, as Changes in currency rates change the values of borrowings, receivables well as policies for the use of derivatives and financial investments. There and cash balances. have not been any changes in these policies during the year. Amounts in million Cash and cash equivalents Intercompany loans Loans and receivables Deferred settlement assets and obligations Balance sheet exposure Forward exchange contracts Net exposure Net exposure (NOK million) 2022 USD - 48 109 (42) 115 - 115 2021 USD (5) 43 43 (50) 31 (75) (43) 1 141 (383) Sensitivity analysis of the reporting period. The analysis assumes that all other variables, in A strengthening of USD against NOK as of December 31 would have particular interest rates, remain constant and ignores any impact of forecast affected the measurement of financial instruments denominated in a foreign sales and purchases. Figures in the table below only include the effect in currency and increased (decreased) income statement by the amounts income statement for change in currency regarding financial instruments shown below. This analysis is based on foreign currency exchange rate and do not include effect from operating cost and revenue. variances that the group considered to be reasonably possible at the end Effect of weakening of NOK against USD: Amounts in NOK million Profit (loss) after tax 2022 USD (10%) 114 USD (10%) 2021 Profit (loss) after tax (38) A strengthening of the NOK against USD as of December 31 would have interest rate risk. Borrowings and receivables issued at fixed rates expose had the equal but opposite effect on the above amounts, on the basis that the group to fair value interest rate risk. However, as these borrowings are all other variables remain constant. The sensitivity analysis does not include measured at amortized cost, interest rate variations do not affect profit and effects on the consolidated result and equity from changed exchange rates loss when held to maturity. used for consolidation of foreign subsidiaries. The primary currency-related risk is the risk of reduced competitiveness increased (decreased) profit and loss by the amounts shown on the table abroad in the case of a strengthened NOK. This risk relates to future below. This analysis assumes that all other variables, in particular foreign commercial contracts and is not included in the sensitivity analysis above. currency rates, remain constant. The analysis is performed on the same An increase of 100 basis points in interest rates during 2022 would have basis as for 2021. Interest rate risk The group’s interest rate risk arises from cash balances, interest-bearing borrowings and interest-bearing receivables. Borrowings and receivables issued at variable rates as well as cash expose the group to cash flow Annual Report 2022 | Financials and Notes | Akastor GroupEffect of increase of 100 basis points in interest rates on profit (loss) before tax Amounts in NOK million Cash and cash equivalents Interest-bearing receivables Borrowings Net 67 2022 2021 1 4 (17) (12) 2 2 (19) (16) A decrease of 100 basis points in interest rates during 2022 would have The group evaluates that significant credit risk concentrations are related had the equal but opposite effect on the above amounts, on the basis that to receivables and contract assets from major corporate customers. The all other variables remain constant. There are no effects on equity as there maximum exposure to credit risk at the reporting date equals the carrying are no interest swaps. Guarantee obligations amounts of financial assets (see Note 30 Financial instruments) and contract assets (see Note 8 Revenue and other income). The group does not hold collateral as security. The group has provided the following guarantees on behalf of subsidiaries and related parties as of December 31, 2022 (estimated remaining exposure Based on estimates of incurred losses in respect of trade receivables and as of December 31, 2022): contract assets, the group establishes a provision for impairment losses. Provisions for loss on debtors are based on individual assessments. Performance guarantees on behalf of group companies of Provisions for loss on trade receivables and contract assets were NOK 278 NOK 17 million (NOK 361 million in 2021) million in 2022 (NOK 271 million in 2021). Performance guarantees on behalf of related parties of Liquidity risk NOK 2.2 billion (NOK 2.6 million in 2021) Liquidity risk is the risk that the group will encounter difficulty in meeting the Parent company indemnity guarantees for fulfillment of lease liquidity to ensure that it will always have sufficient liquidity reserves to meet obligations associated with its financial liabilities. The group manages its obligations and finance obligations of NOK 2.6 billion its liabilities when due. (NOK 3.0 billion in 2021) Financial guarantees including counter guarantees for bank/ availability of funding from an adequate amount of committed credit facilities surety bonds and guarantees for pension obligations to and the ability to close out market positions. Due to the dynamic nature of employees of NOK 0.2 billion (NOK 0.3 billion in 2021) the underlying businesses, Akastor Treasury maintains flexibility in funding Prudent liquidity risk management includes maintaining sufficient cash, the by maintaining availability under committed credit lines. Although guarantees are financial instruments, they are considered contingent obligations and the notional amounts are not included in the Akastor is an investment company with limited upstream cash flow from financial statements. See more information about guarantees for related its portfolio companies and therefore to a large degree depends on parties in Note 33 Related parties. realization of assets to reduce debt and improve liquidity. In order to mitigate Price risk refinancing risk when the corporate financing facilities mature and secure available liquidity, the group is in accordance with its strategy focusing on The group is exposed to fluctuations in market prices in the operational realization of holdings. The outcome related to the DRU arbitration process areas related to contracts, including changes in market prices for raw is a key milestone in this regard. If realization processes planned should be materials, equipment and development in wages. These risks are to the delayed or if proceeds come in at a lower value than anticipated, refinancing extent possible managed in bid processes by locking in committed prices risk would increase and other sources of capital could be required. from vendors as a basis for offers to customer or through escalation clauses with customers. Credit risk The group policy for the purpose of optimizing availability and flexibility of cash within the group is to operate a centrally managed cash pooling arrangement. An important condition for the participants (business units) Credit risk is the risk of financial losses to the group if customer or in such cash pooling arrangements is that the group as an owner of such counterparty to financial investments/instruments fails to meet contractual pools is financially viable and is able to prove its capability to service its obligations and arise principally from investment securities and receivables. obligations concerning repayment of any net deposits made by business units. Management monitors rolling monthly forecasts of the group’s liquidity Assessment of credit risk related to customers and subcontractors is an reserve on the basis of expected cash flow. important requirement in the bid phase and throughout the contract period. Such assessments are based on credit ratings, income statement and balance sheet reviews and using credit assessment tools available (e.g. Dun & Bradstreet and Credit Watch). Sales to customers are settled in cash. Annual Report 2022 | Financials and Notes | Akastor Group68 Financial liabilities and the period in which they mature The following is the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments and exclude the impact of netting agreements. Amounts in NOK million Note Book value Total cash flow 1) 6 months and less 6–12 months 1–2 years 2–5 years More than 5 years 2022 Borrowings 2) Lease liabilities Other non-current liabilities Other current liabilities Deferred settlement obligations Trade and other payables Total financial liabilities Financial guarantees 3) 2021 Borrowings 2) Lease liabilities Other non-current liabilities Deferred settlement obligations Trade and other payables Total financial liabilities Financial guarantees 3) 23 31 24 24 24, 27 27 23 31 24 24, 27 27 1 340 1 403 85 103 162 417 335 2 442 89 110 162 429 335 2 528 5 058 1 387 1 522 155 201 459 476 2 678 168 221 481 476 2 868 6 247 59 27 - - 103 272 461 198 48 42 - 8 240 338 581 334 22 - 162 8 63 589 1 32 41 - 60 236 369 4 852 34 110 - 91 - 1 087 555 1 237 46 221 82 - 1 586 497 157 6 - - 102 - 265 3 640 111 39 - 163 - 313 3 315 - 1 - - 126 - 127 665 94 1 - 168 - 263 1 851 1) Nominal currency value including interest. 2) The interest costs are calculated using the last fixing rate known by year end (plus applicable margin). 3) Financial guarantees are not recognized on the consolidated balance sheet. The undiscounted cash flows potentially payable under financial guarantees are classified on the basis of expiry date. Annual Report 2022 | Financials and Notes | Akastor Group 69 Note 30 | Financial instruments Accounting classifications and fair values Level 2 - fair values are based on inputs other than quoted prices included The following table shows the carrying amounts and fair values of financial in Level 1 that are observable for the asset or liability, either directly or assets and financial liabilities, including their levels in the fair value indirectly. hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a Level 3 - fair values are based on unobservable inputs, mainly based on reasonable approximation of fair value. For financial instruments measured internal assumptions used in the absence of quoted prices from an active at fair value, the levels in the fair value hierarchy are as shown below. market or other observable price inputs. Level 1 - fair values are based on prices quoted in an active market for identical assets or liabilities. Amounts in NOK million 2022 Financial assets measured at fair value Fair value through P&L (mandatorily at FVTPL) Equity securities Equity securities 1) Warrants Fair value through Other comprehensive income Debt instruments 1) Financial assets not measured at fair value Financial assets at amortized cost Cash and cash equivalents Non-current interest-bearing receivables Trade and other receivables Financial assets Financial liabilities not measured at fair value Financial liabilities at amortized cost Borrowings 2) Other financial liabilities Other non-current liabilities Trade and other payables Financial liabilities measured at fair value Fair value through profit & loss Other current liabilities Deferred settlement obligations Financial liabilities Note Carrying amount Financial instruments measured at fair value Level in fair value hierarchy 18 18 18 18 21 19 20 23 24 27 24 24, 27 40 321 34 40 321 34 Level 1 Level 3 Level 3 636 636 Level 3 119 668 696 2 514 (1 340) (1 342) Level 2 (103) (335) (162) (417) (2 357) (162) (417) Level 3 Level 3 1) Investments in level 3 in the hierarchy relate to equity securities and debt securities with no active market. These investments are measured at the best estimate of fair value. 2) For credit facilities and other loans with floating interest, notional amounts are used as approximation of fair values. Annual Report 2022 | Financials and Notes | Akastor Group70 Amounts in NOK million 2021 Financial assets measured at fair value Fair value – hedging instruments Derivative financial instruments Fair value through P&L (mandatorily at FVTPL) Equity securities Equity securities 1) Warrants Contingent considerations Fair value through Other comprehensive income Debt instruments 1) Financial assets not measured at fair value Financial assets at amortized cost Cash and cash equivalents Non-current interest-bearing receivables Trade and other receivables Financial assets Financial liabilities not measured at fair value Financial liabilities at amortized cost Borrowings 2) Other financial liabilities Other non-current liabilities Other current liabilities Trade and other payables Financial liabilities measured at fair value Fair value through profit & loss Deferred settlement obligations Financial liabilities Note Carrying amount Financial instruments measured at fair value Level in fair value hierarchy 18 18 18 17 18 21 19 20 23 24 24 27 24, 27 10 10 Level 2 10 1 125 18 20 10 1 125 18 20 Level 1 Level 3 Level 3 Level 3 619 619 Level 3 89 315 808 3 013 (1 387) (1 402) Level 2 (201) (148) (476) (459) (2 671) (459) Level 3 1) Investments in level 3 in the hierarchy relate to equity securities and debt securities with no active market. These investments are measured at the best estimate of fair value. 2) For credit facilities and other loans with floating interest, notional amounts are used as approximation of fair values. Annual Report 2022 | Financials and Notes | Akastor GroupReconciliation of Level 3 financial assets and financial liabilities Amounts in NOK million Balance as of December 31, 2020 Addition Settlements Net gain (loss) in the income statement Fair value through OCI Disposal of subsidiaries Balance as of December 31, 2021 Settlements Net gain (loss) in the income statement Reclassifications Balance as of December 31, 2022 71 Assets Liabilities 1 480 189 (37) 196 (20) (26) 1 782 (982) 220 (29) 991 (274) (220) 27 4 - 3 (459) 59 (16) (162) (579) Measurement of fair values at level 3 Debt instruments at FVOCI Deferred settlement obligations These liabilities relate to contingent considerations and obligations from Financial assets measured at FVOCI are related to debt instruments business disposals. Final amounts to be paid depend on future earnings in NES Fircroft. The valuation model considers the present value of the in the disposed companies or outcome of indemnity claims and price expected cash flows from the ultimate disposal of the investments weighted adjustment mechanisms. with different probabilities. The expected disposal value is determined by forecast EBITDA at the time of disposal and market multiples, adjusted by Liabilities depending on future earnings: The recognized amounts forecast net debt of the investee. The estimated fair value would increase are determined based on recent forecasts and strategy figures for The forecast EBITDA were higher (lower); (decrease) if: The market multiples applied were higher (lower); or adjustment mechanisms: Provisions are made based on all available evidence as at the reporting date. The net debt of the investees at the date of disposal were lower (higher). The credit exposure on the Level 3 asset is limited to the amount recognized and the credit risk is not considered to be significant due to the nature of the entity, thus the final realized values are sensitive to the above inputs as driven by market conditions. Liabilities depending on outcome of indemnity claims and price Warrants measured at FVTPL the arrangement. The financial asset relates to warrant investment in Odfjell Drilling. The valuation is obtained from external valuation experts, using a Monte Carlo simulation model where the simulated stock prices are based on a lognormal stock price model assumed to follow a Geometric Brownian Motion. The key inputs to the valuation model consist of the stock price of Odfjell Drilling (listed on the Oslo Stock Exchange under ticker ODL) at the valuation date, as well as assumption of future volatility based on the share’s historical prices. The estimated fair value is mostly sensitive to the ODL share price and would increase (decrease) if the ODL share price were higher (lower). Annual Report 2022 | Financials and Notes | Akastor Group72 Note 31 | Leases Group as lessee IT equipment and office equipment are considered as leases of low-value The group leases office buildings on a number of locations. The leases assets. The right-of-use assets and lease liabilities are not recognized for typically run for a period of 3-10 years and some of the leases have short-term leases or leases of low-value assets. extension options. The group applies the short-term lease recognition exemptions for leases of property or machinery with lease term of 12 months or less. Leases of The lease agreements do not impose any covenants or restrictions. Right-of-use assets Amounts in NOK million Balance as of January 1 Additions Depreciation 1) Reversal of impairment Disposal of subsidiaries Remeasurement Currency translation differences Balance as of December 31 1) Includes depreciation related to discontinued operations of NOK 11 million in 2021 The right-of-use assets are related to leases of office buildings. Lease liabilities Amounts in NOK million Balance as of January 1 Cash payments Additions Remeasurement Disposal of subsidiaries Currency translation differences Balance as of December 31 Current lease liabilities Non-current lease liabilities Amounts recognized in the income statement and cash flow statement Amounts in NOK million Expenses related to leases of low-value items Interest on lease liabilities Total amounts recognized in the income statement Payments for leases expensed Interest paid for lease liabilities Principal payments of lease liabilities Total cash outflow for leases 2022 2021 41 4 (15) 1 - (4) - 27 468 9 (43) - (416) 25 (2) 41 2022 155 2021 592 (78) (112) 4 9 5 64 - - 85 48 37 (397) (1) 155 82 72 2022 2021 (3) (6) (9) (3) (6) (78) (87) (2) (9) (11) (2) (26) (112) (139) Annual Report 2022 | Financials and Notes | Akastor Group 73 Some property leases contain extension or termination options exercisable Group as lessor before the end of the non-cancellable period. They are used to maximize The group subleases out some of the property leases which are presented operational flexibility in terms of managing the assets used in the group’s as part of the right-of-use assets. DDW Offshore leases out some of its operations. The extension and termination options held are exercisable vessels. only by the group and not by the respective lessor. The group assesses at lease commencement date whether it is reasonably certain to exercise the Finance leases extension or termination options. Some of the subleases of right-of-use assets are classified as finance lease, with reference to the right-of-use assets arising from the head leases. In Most extension options in offices leases have not been included in the lease 2021, DDW Offshore entered into bareboat charter agreements and forward liability, because the group expects to be able to replace the assets without sale of two vessels, which are classified as finance lease. The group significant cost or business disruption. Most of the early termination options recognized a gain of NOK 51 million from the transaction as “gain from are not considered in the lease term either as the group assesses it as disposal of assets”, see Note 8 Revenue and other income. reasonably certain that the leases will not be terminated early. If the group had exercised the extension options in significant property leases as of The following table sets out a maturity analysis of finance lease receivables, December 31, 2022, the group estimates potential future lease payments showing the undiscounted lease payments to be received after the reporting (undiscounted) of approximately NOK 37 million, which are not included in date. the lease liabilities. Amounts in NOK million Due within one year Due in one to two years Due in two to three years Total undiscounted lease receivable Unearned interest income Total finance lease receivables Current finance lease receivables Non-current finance lease receivables Operating leases 2022 2021 213 18 - 232 13 218 208 10 64 189 18 271 31 241 64 176 Most of the leases are classified as operating leases except for the finance leases identified above. The lease income from subleasing right-of-use assets in 2022 was NOK 10 million (NOK 28 million in 2021). The following table sets out future undiscounted sublease income under the non-cancellable lease periods. Amounts in NOK million Due within one year Due in one to two years Total 2022 2021 104 2 106 23 - 23 Annual Report 2022 | Financials and Notes | Akastor Group74 Note 32 | Group companies This note gives an overview of subsidiaries of Akastor ASA. For information about other investments in the group, refer to Note 17 Equity-accounted investees and Note 18 Other investments. If not stated otherwise, ownership equals share of voting rights. Group companies as of December 31 Company Akastor ASA AGR1) AGR (Australia) Pty Ltd AGR AS AGR Energy Services AS AGR Software AS AGR Consultancy Services AS AGR Mexico Well Management S. de R. L. de C. V AGR Consultancy Solutions Ltd SpotOn Well Management Ltd AGR Group Americas, Inc AGR Energy Services Inc AGR Wind Services AS 2) Other companies Cool Sorption A/S Well Systems Servicing Ltd AKA SPH AS DDW Offshore AS Akastor AS Mercury HoldCo AS Akastor Real Estate AS KOP Surface Products Singapore Pte Ltd Aker Cool Sorption Siam Ltd Frontica Business Solutions Ltd 3) AK Willfab Inc Mercury HoldCo Inc 1) Akastor holds 100 percent of the shares and 64 percent of the economic interests 2) Disposed in 2022 3) Liquidated in 2022 Country Norway Australia Norway Norway Norway Norway Mexico UK UK USA USA Norway Denmark Nigeria Norway Norway Norway Norway Norway Singapore Thailand UK USA USA Ownership (%) 2022 2021 64 64 64 58 64 64 64 64 64 64 - 100 100 100 100 100 100 100 100 100 - 100 100 64 64 64 58 64 64 64 - 64 64 52 100 100 100 100 100 100 100 100 100 100 100 100 Annual Report 2022 | Financials and Notes | Akastor Group75 Note 33 | Related parties Related party relationships are those involving control (either direct or settled firstly by ordinary dividend from AKOFS Offshore, with any shortfall indirect), joint control or significant influence. Related parties are in a being guaranteed by Akastor. Akastor ASA has issued a bank guarantee for position to enter into transactions with the company that would not be payment of preferred return for a total amount of NOK 131 million relating undertaken between unrelated parties. to the remaining period. Akastor ASA is a parent company with control of around 20 companies Akastor has issued a financial guarantee of NOK 152 million in favour of around the world. These subsidiaries are listed in Note 32 Group finance institutions for fulfilment of lease obligations related to Avium Subsea companies. Any transactions between the parent company and the AS. Akastor has issued a financial parent company indemnity guarantee of subsidiaries are shown line by line in the separate financial statements NOK 1.4 billion in favour of OCY Wayfarer Limited for fulfilment of lease of the parent company, and are eliminated in the consolidated financial obligations related to AKOFS 3 AS. In addition, Akastor is guaranteeing statements. the performance of AKOFS Norway Operations AS (operating AKOFS Seafarer) under the 5 years charter agreement with Equinor. The remaining Joint ventures are accounted for using the equity method, see Note 17 contract value of this charter agreement is NOK 2.1 billion. Avium Subsea Equity-accounted investees. AS, AKOFS 3 AS and AKOFS Seafarer AS are wholly owned subsidiaries The largest shareholder of Akastor, Aker Holding AS, is wholly-owned by Aker ASA, which in turn is controlled by Kjell Inge Røkke through TRG HMH of AKOFS Offshore. Holding AS and The Resource Group TRG AS. Akastor is an associated In October 2021, Akastor completed the transaction to bring together company to Aker ASA as per year end 2022 and 2021. Akastor’s wholly owned subsidiary, MHWirth AS (MHWirth) and Baker Below are descriptions of significant related party agreements. company HMH. Following the transaction, Akastor and Baker Hughes each Significant agreements with related parties to Aker ASA See Note 5 Discontinued operations and Note 17 Equity-accounted holds 50% of the shares in HMH, and have joint control over the company. Hughes’ Subsea Drilling Systems (SDS) business to create a joint venture Aker Holding AS investees for more information. In connection with the refinancing of its corporate credit facilities, Akastor entered into a subordinated loan agreement with Aker Holding AS, a As of December 31, 2022, Akastor has interest-bearing receivables of wholly owned subsidiary to Aker ASA. The agreement provides credit NOK 218 million against HMH (fixed interest rate 8.0 percent), see also facility of NOK 250 million (NIBOR + margin 10.0 percent) available to Note 19 Non-current interest-bearing receivables. Further, Akastor has a Akastor. In February/March 2023, the facility was extended to March 2024 liability of NOK 162 million towards HMH related to Step Oiltools, see also and increased to NOK 450 million (NIBOR + margin 12.0 percent). The Note 24 Other liabilities for more information. Akastor has issued financial carrying amount of the loan from Aker Holding AS was NOK 16 million as of guarantees of NOK 539 million for MHWirth AS, a wholly owned subsidiary December 31, 2022, see Note 23 Borrowings for more information. of HMH, for fulfilment of lease obligations and performance under certain operational support frame agreements. The Resource Group TRG AS AK Wilfab Inc, a wholly owned subsidiary of Akastor, is together with Aker Other related parties Solutions Inc and The Resource Group TRG AS sponsoring the US pension Aker Pensjonskasse plan named the Kvaerner Consolidated Retirement Plan. Akastor holds one Aker Pensjonskasse was established by Aker ASA to manage the retirement third of the liability of the sponsors for the underfunded element of the plan plan for employees and retirees in Akastor as well as related Aker companies. and The Resource Group TRG AS holds two thirds of the ultimate liability. Akastor holds 93.4 percent of the paid-in capital in Aker Pensjonskasse and Aker ASA guarantees for The Resource Group TRG AS’ liability and covers Akastor’s share of paid-in equity was NOK 158 million at the end of 2022 for all its expenses related to the pension plan. (NOK 158 million in 2021). Akastor’s premium paid to Aker Pensjonskasse amounts to NOK 6 million in 2022 (NOK 8 million in 2021). Akastor also Related party transactions with joint ventures has an interest-bearing receivable against Aker Pensjonskasse of NOK 22 AKOFS Offshore million and an additional financing commitment NOK 10 million (3% interest As of December 31, 2022, Akastor has interest-bearing receivables of NOK of drawn amount and 1% interest of committed amount). 226 million against AKOFS Offshore, including term loan of NOK 173 million (LIBOR + margin 2.5/5.5 percent) and drawn working capital facility of NOK Even though Akastor owns 93.4 percent in Aker Pensjonskasse, the 53 million (NIBOR + margin 5.5 percent). Akastor has made available a ownership does not constitute control since Akastor does not have the NOK 100 million working capital revolving facility to AKOFS Seafarer AS power to govern the financial and operating policies so as to obtain benefits from contract commencement with Equinor. from the activities in this entity. As part of the joint venture shareholders agreement, the other two investors, Grants to employee representative’s collective fund Mitsui and MOL, are entitled to a guaranteed preferred equity return, in Aker ASA has signed an agreement with employee representatives that respect of the operations of AKOFS Seafarer, amounting to a total of USD regulate use of grants from Akastor ASA for activities related to professional 46 million for the period 2020-2025. The payment of preferred return will be development. The grant in 2022 was NOK 510 000 (NOK 510 000 in 2021). Annual Report 2022 | Financials and Notes | Akastor Group76 Compensation to key management The key management personnel of Akastor includes the Board of Directors and the executive management team. The figures below represent remuneration expenses recognized in the year. Detailed remuneration disclosures are provided in Remuneration Report 2022. Amounts in NOK million Base salary Variable pay and other benefits Post-employment benefits (pension expenses to company) Remuneration to Board of Directors Total 2022 2021 7 8 1 3 19 7 15 - 3 26 The balance of accrued expenses related to key management remuneration amounted to NOK 16 million as of December 31, 2022, of which NOK 5 million is contingent on continuous employment after a three-year period. Note 34 | Events after reporting date In February 2023, the maturity of Akastor’s corporate credit facilities was extended to February/March 2024. In March 2023, the subordinated Aker facility was increased with NOK 200 million to NOK 450 million. In March 2023, Akastor entered into a share purchase agreement with ABL Group ASA (“ABL Group”) for the sale of all shares in AGR against a combination of shares in ABL Group and cash. Certain defined assets are excluded from the transaction and will be retained by Akastor. This includes AGR’s ownership in Føn Energy Services AS. The transaction is expected to generate an accounting gain upon completion in 2023. Annual Report 2022 | Financials and Notes | Akastor Group 04.b. FINANCIALS AND NOTES AKASTOR ASA Akastor ASA | Income statement Akastor ASA | Statement of financial position Akastor ASA | Statement of cash flow Note 1 | Accounting principles Note 2 | Operating revenue and expenses Note 3 | Net financial items Note 4 | Tax Note 5 | Investments in group companies Note 6 | Shareholders’ equity Note 7 | Receivables and borrowings from group companies and related parties Note 8 | Borrowings Note 9 | Guarantees Note 10 | Financial risk management Note 11 | Related parties Note 12 | Shareholders Note 13 | Subsequent events 77 78 79 80 81 82 82 83 83 84 84 85 86 87 87 88 88 Annual Report 2022 | Financials and Notes | Akastor ASAFinancials and Notes | Akastor ASA78 Akastor ASA | Income statement For the year ended December 31 Amounts in NOK million Operating revenue Operating expenses Operating profit (loss) Net financial items Profit (loss) before tax Income tax benefit (expense) Profit (loss) for the period Profit (loss) for the period distributed as follows Other equity Profit (loss) for the period Note 2022 2021 2 2 3 4 1 2 (40) (40) (429) (468) 12 (457) (457) (457) (53) (51) (613) (664) - (664) (664) (664) Annual Report 2022 | Financials and Notes | Akastor ASA Akastor ASA | Statement of financial position As of December 31 Amounts in NOK million Assets Deferred tax assets Investments in group companies Non-current interest-bearing receivables on group companies Other non-current interest-bearing receivables Total non-current assets Current interest-bearing receivables on group companies Other receivables on group companies Other receivables Cash in cash pool system Total current assets Total assets Equity and liabilities Issued capital Treasury shares Share premium Other paid in capital Other equity Total equity Non-current borrowings, external Total non-current liabilities Current borrowings, external Other liabilities to group companies Other current liabilities Total current liabilities Total liabilities Total equity and liabilities 79 Note 2022 2021 4 5 7 7 7 7 6 8 8 7 12 4 194 500 2 4 708 126 - 4 11 141 4 849 162 (1) 2 000 2 005 (227) 3 939 - - 870 40 1 910 910 4 849 - 4 515 500 2 5 018 173 1 3 - 177 5 195 162 (1) 2 000 2 003 229 4 393 719 719 16 52 15 83 802 5 195 Fornebu, March 22, 2023 I Board of Directors of Akastor ASA Frank O. Reite | Chairperson Lone Fønss Schrøder | Deputy Chairperson Svein Oskar Stoknes | Director Kathryn M. Baker | Director Luis Antonio G. Araujo | Director Henning Jensen | Director Asle Christian Halvorsen | Director Stian Sjølund | Director Karl Erik Kjelstad | CEO Annual Report 2022 | Financials and Notes | Akastor ASA 80 Akastor ASA | Statement of cash flow For the year ended December 31 Amounts in NOK million Profit (loss) before tax Adjustments: Group contribution and dividend Non-cash impairment Net interest cost and unrealized currency (income) loss Profit (loss), net of adjustments Changes in net operating assets Net external interest paid Net cash from operating activities Capital contribution in group companies Net cash from investing activities Proceeds from borrowings Repayment of borrowings Changes in borrowings from group companies Changes in borrowings to group companies Change in overdraft cash pool Net cash from financing activities Effect of exchange rate changes on cash and cash deposits Net increase (decrease) in cash and bank deposits Cash in cash pool system at the beginning of the period Cash in cash pool system at the end of the period1) 1) Unused committed credit facilities amounted to NOK 304 million as of December 31, 2022 (NOK 553 million in 2021). Note 3 3 7 2022 (468) - 355 111 (3) (28) (41) (71) (34) (34) 756 (731) - - 40 65 50 11 - 11 2021 (664) (7 000) 7 593 46 (25) 18 (38) (45) - - 1 067 (1 483) 844 (171) (225) 32 14 - - - Annual Report 2022 | Financials and Notes | Akastor ASA 81 Note 1 | Accounting principles Akastor ASA (the parent company) is a company domiciled in Norway. The Share capital financial statements are presented in conformity with Norwegian Accounting Costs for purchase of own shares including transaction costs are accounted Act and Norwegian generally accepted accounting principles (NGAAP). for directly against equity. Sales of own shares are performed according to stock-exchange quotations at the time of award and accounted for as Revenue recognition increase in equity. Operating revenue mainly comprise parent company guarantees (PCG) recharged to entities within the group. The revenue is recognized over the Cash flow statement guarantee period. The statement of cash flow is prepared according to the indirect method. Cash and cash equivalents include cash, bank deposits and other short- Investments in subsidiaries term liquid investments. Investments in subsidiaries are measured at cost in the parent company accounts, less any impairment losses. The investments are impaired to Functional currency and presentation currency fair value if the impairment is not considered temporary. Impairment losses The parent company’s financial statements are presented in NOK, which are reversed if the basis for the impairment loss is no longer present. is Akastor ASA’s functional currency. All financial information presented in Investments in subsidiaries and associates are reviewed for impairment NOK has been rounded to the nearest million (NOK million), except when whenever events or changes in circumstances indicate that the carrying otherwise stated. The subtotals and totals in some of the tables in these amount may exceed the fair value of the investment. financial statements may not equal the sum of the amounts shown due to Dividends, group contributions and other distributions from subsidiaries are recognized as income the same year as they are recognized in the financial Foreign currency rounding. statement of the provider. If the dividends or group contributions exceed Transactions in foreign currencies are translated at the exchange rate withheld profits after the acquisition date, the excess amount represents applicable at the date of the transaction. Monetary items in a foreign repayment of invested capital, and is recognized as a reduction of carrying currency are translated to NOK using the exchange rate applicable on the value of the investment. balance sheet date. Foreign exchange differences arising on translation are recognized in the income statement as they occur. Classification Current assets and current liabilities include items due within one year or Tax items that are part of the operating cycle. Other balance sheet items are Tax income (expense) in the income statement comprises changes classified as non-current assets/debts. in deferred tax. Deferred tax is calculated as 22 percent of temporary differences between accounting and tax values as well as any tax losses Non-current borrowings are presented as current if a loan covenant breach carry-forward at the year end. Net deferred tax assets are recognized only exists at balance date. If a covenant waiver is approved subsequent to to the extent it is probable that they will be utilized against future taxable year-end and before the approval of the financial statements, the liability profits. is presented as non-current debt to the extent maturity date is beyond one year. Measurement of borrowings and receivables Financial assets and liabilities consist of investments in other companies, trade and other receivables, interest-bearing receivables, cash and cash equivalents, trade and other payables and interest-bearing borrowing. Trade receivables and other receivables are recognized in the balance sheet at nominal value less provision for expected losses. Interest-bearing borrowings are initially recorded at transaction value less transaction costs. Subsequent to initial recognition, these borrowings are measured at amortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings on an effective interest basis. Cash in cash pool system Akastor ASA has a cash pool that includes the parent company’s cash as well as net deposits from subsidiaries in the group cash pooling system owned by the parent company. Correspondingly, Akastor ASA’s current debt to group companies will include their net deposit in the group’s cash pool system. Annual Report 2022 | Financials and Notes | Akastor ASA82 Note 2 | Operating revenue and expenses Operating revenue comprises NOK 1 million in income from parent company NOK 3.2 million has been allocated to payable fees to the Board of Directors guarantees (NOK 2 million in 2021). for 2022 (2021: NOK 3.0 million). Remuneration to and shareholding of the Board of directors and CEO is described in Remuneration Report 2022. There are no employees in Akastor ASA and hence no salary or pension related costs and also no loan or guarantees related to the executive Fees to the auditors management team. Group management and corporate staff are employed Fees to the auditors for statutory audit amounted to NOK 1.1 million by other Akastor companies and costs for their services as well as other exclusive VAT (2021: NOK 2.0 million). parent company costs are recharged to Akastor ASA. Note 3 | Net financial items Amounts in NOK million Interest income from group companies Interest income, external Interest expense, external Other financial income Dividends from group companies Impairment on receivables to group companies Impairment of shares Other financial expenses Net foreign exchange gain (loss) Net financial items Note 2022 2021 7 41 52 (108) - - - (355) (9) (50) (429) 29 31 (82) 1 7 000 (56) (7 537) (3) 4 (613) Annual Report 2022 | Financials and Notes | Akastor ASANote 4 | Tax Amounts in NOK million Calculation of taxable income Profit (loss) before tax Dividend income from group companies Impairment of shares and receivables to group companies Changes in timing differences Generated (utilized) tax loss Taxable income Taxable (deductible) temporary differences Provisions Interest deduction carry-forward Tax loss carry-forward 1) Net temporary differences Tax rate Tax effects of temporary differences Not recognized deferred tax assets 2) Deferred tax assets (liability) Tax expense Taxes payable Change in deferred tax Income tax benefit (expense) 83 2022 2021 (468) - 355 9 104 - 2 (21) (180) (199) 22% 44 (32) 12 - 12 12 (664) (7 000) 7 593 (7) 79 - (2) (5) (79) (86) 22% 19 (19) - - - - 1) In addition, Akastor ASA has unrecognized tax loss carry forwards of NOK 440 million as of 2022 which is currently being subject to inquiries from Norwegian Tax Authorities 2) Deferred tax assets are not recognized when the management assesses that it is not probable that future taxable profit will be available, against which the deductible temporary difference can be utilized. Note 5 | Investments in group companies Amounts in NOK million Akastor AS Mercury Holdco AS Total Registered office Share capital Number of shares held Percentage owner- / vot- ing share Fornebu, Norway Fornebu, Norway 1 004 - 1 1 000 100% 100% Financial information in group companies 2022 (unaudited) Amounts in NOK million Profit (loss) for the period Equity as of December 31 2022 2 882 1 312 4 194 2021 3 237 1 279 4 515 Akastor AS Mercury Holdco AS (343) 2 859 75 1 400 Annual Report 2022 | Financials and Notes | Akastor ASA 84 Note 6 | Shareholders’ equity Amounts in NOK million Share capital Treasury shares Share premium Other paid in capital Retained earnings Equity as of January 1, 2021 Profit (loss) for the period 162 (1) 2 000 2 003 - - - - Equity as of December 31, 2021 162 (1) 2 000 2 003 Treasury shares transaction Profit (loss) for the period - - - - - - 2 - Equity as of December 31, 2022 162 (1) 2 000 2 005 894 (664) 229 - (457) (227) Total 5 057 (664) 4 393 2 (457) 3 939 The share capital of Akastor ASA is divided into 274 000 000 shares with a treasury shares held by the end of 2022 was 1 985 164 and the shares nominal value of NOK 0.592. The shares can be freely traded. See Note 12 are held for the purpose of being used for future awards under any share Shareholders for an overview of the company's largest shareholders. purchase program for employees, as settlement in future corporate acquisitions or for other purpose as decided by the board of directors. Sale of 405 051 treasury shares to employees was carried out in 2022 in connection with the company’s variable pay program. The number of Note 7 | Receivables and borrowings from group companies and related parties Amounts in NOK million 2022 2021 Group companies (borrowings) deposits in the cash pool system Akastor ASA's net deposit (borrowings) in the cash pool system Cash in cash pool system Non-current interest-bearing receivables on group companies Current interest-bearing receivables on group companies 1) Net interest-bearing receivables on group companies Other receivables on group companies Other liabilities to group companies Total other receivables on group companies 1) Includes group companies’ borrowings in the cash pool system. (121) 131 11 500 126 626 - (40) (40) (171) 171 - 500 173 673 1 (52) (52) Interest-bearing receivables on and borrowings from group assure good control and access to the group’s cash. Participation in the companies cash pool is vested in the group’s policy and decided by each company’s Akastor ASA is the group’s central treasury function (Akastor Treasury) board of directors and confirmed by a statement of participation. The and enters into borrowings and deposit agreements with group companies. participants in the cash pool system are jointly and severally liable and it Deposits and borrowings are done at market terms and are dependent of is therefore important that Akastor as a group is financially viable and can the group companies’ credit rating and the duration of the borrowings. repay deposits and carry out transactions. Any debit balance on a sub account can be set-off against any credit balance. Hence, a debit balance In 2021, an impairment of NOK 56 million was recognized related to interest- represents a claim on Akastor ASA and a credit balance a borrowing from bearing receivables on Step Oiltools BV prior to recapitalization of the entity. Akastor ASA. Cash pool arrangement The cash pool system has a net cash of NOK 11 million as of December 31, Akastor ASA is the owner of the cash pool system arrangements with DNB. 2022 (net overdraft of NOK 11 million in 2021). The cash pool systems cover a majority of the group geographically and Annual Report 2022 | Financials and Notes | Akastor ASA 85 Note 8 | Borrowings Amounts in million Currency Nominal currency value Carrying amount (NOK) Maturity 1) Interest terms 2) 2022 Revolving credit facility (USD 66 million) Revolving credit facility (NOK 250 million) Subordinated Aker facility (NOK 250 million) 3) Total borrowings USD NOK NOK 66 200 16 Current borrowings Total 2021 Revolving credit facility (USD 89 million) Revolving credit facility (NOK 250 million) Subordinated Aker facility (NOK 250 million) Overdraft facility Total borrowings Current borrowings Non-current borrowings Total USD NOK NOK NOK 83 - 3 - Feb 2024 USD LIBOR + margin 5.5% Feb 2024 Mar 2024 NIBOR + margin 5.5% NIBOR + margin 10% 656 198 16 870 870 870 721 Feb 2023 USD LIBOR + margin 5.5% Feb 2023 Mar 2023 NIBOR + margin 5.5% NIBOR + margin 10% - 3 11 735 16 719 735 1) In February 2023, the maturity date was extended to February/March 2024. The borrowings are classified as current reflecting the maturity date as at the balance sheet date. 2) Commitment fee is 40 percent of the margin. 3) In March 2023, Aker facility was increased to NOK 450 million (NIBOR + margin 12%). All facilities are provided by a bank syndicate consisting of high-quality The company’s gearing ratio shall not exceed 0.5 times, calculated Nordic and international banks and DNB is acting as the agent. The terms from the consolidated total borrowings to the consolidated Equity. and conditions include restrictions which are customary for these kinds of facilities, including inter alia negative pledge provisions and restrictions on Equity ratio shall not be lower than 32.5%, calculated from the acquisitions, disposals and mergers, dividend distribution and change of consolidated total equity to consolidated total assets. control provisions. Minimum liquidity amount shall exceed NOK 150 million on In 2021, Akastor ASA carried out refinancing of its credit facilities as a consolidated level. result of MHWirth divestment. In February 2023, the maturity date of the revolving credit facilities was extended to February/March 2024. Under the The covenants are monitored on a regular basis by the Akastor Treasury loan agreements, the financial covenants are a gearing ratio based on net department to ensure compliance with the loan agreements which are debt/equity, an equity ratio based on equity/total assets and a minimum tested and reported on a quarterly basis. Akastor was in compliance with liquidity amount. its covenants as of December 31, 2022. On the basis of the covenant levels and its financial forecasts, management believes that the risk of covenant being breached is low and that the group will continue as a going concern for the foreseeable future. See more information in Board of Directors’ report. Annual Report 2022 | Financials and Notes | Akastor ASA 86 Financial liabilities and the period in which they mature Amounts in NOK million 2022 Revolving credit facility (USD 66 million) Revolving credit facility (NOK 250 million) Subordinated Aker facility (NOK 250 million) Total borrowings 2021 Revolving credit facility (USD 89 million) Subordinated Aker facility (NOK 250 million) Overdraft facility Total borrowings Carrying amount Total undiscounted cash flow 1) 6 months and less 6–12 months 1–2 years 2) 656 198 16 870 721 3 11 735 668 217 16 901 787 3 11 800 35 9 - 43 27 - 11 37 32 9 - 40 602 200 16 818 22 738 - - 22 3 - 740 1) The interest costs are calculated using the last fixing rate known by year end (plus applicable margin). 2) Repayment of the loan in the table is according to maturity date of the facility in the loan agreement. Note 9 | Guarantees Akastor has provided the following guarantees on behalf of wholly owned subsidiaries and related parties as of December 31 (all obligations are per date of issue): Amounts in NOK million Parent Company Guarantees to group companies 1) Parent Company Guarantees to related parties 2) Counter guarantees for bank/surety bonds, group companies 3) Counter guarantees for bank/surety bonds, related parties 3) Total guarantee liabilities Maturity of guarantee liabilities: 6 months and less 6-12 months 1-2 years 2-5 years 5 years and more 2022 639 4 017 232 1 4 889 45 1 555 3 623 665 2021 1 025 4 416 305 8 5 754 104 4 497 3 315 1 835 1) Parent Company Guarantees to support subsidiaries in contractual obligations towards clients. 2) Parent Company Guarantees to support related parties in contractual obligations towards clients, mainly AKOFS 1 AS, AKOFS 3 AS, AKOFS Norway Operations AS and MHWirth AS. 3) Bank guarantees and surety bonds are issued on behalf of Akastor subsidiaries and related parties, and counter indemnified by Akastor ASA. Although guarantees are financial instruments, they are considered contingent obligations and the notional amounts are not included in the financial statements. US pension plan AK Wilfab Inc, a wholly owned subsidiary of Akastor, is together The Resource Group TRG AS and Akastor ASA sponsoring the US pension plan named the Kvaerner Consolidated Retirement Plan. Akastor Group holds one third of the liability of the sponsors for the underfunded element of the plan and The Resource Group TRG AS holds two thirds of the ultimate liability. Aker ASA guarantees for The Resource Group TRG AS’ liability and covers for all its expenses related to the pension plan. Annual Report 2022 | Financials and Notes | Akastor ASA87 Note 10 | Financial risk management Currency risk loans to subsidiaries and related parties, guarantees to subsidiaries and The company’s exposure to currency risk is primarily against USD as the related parties and deposits with external banks. External deposits are done company has external borrowings denominated in USD. As of 31 December according to a list of approved banks and primarily with banks where the 2022 or 2021, Akastor ASA had not entered into any forward exchange company also have a borrowing relationship. contracts. Interest rate risk Loss provisions for interest-bearing receivables are made in situations of negative equity if the company is not expected to be able to fulfill its loan The company is exposed to changes in interest rates because of floating obligations from future earnings. No impairment related to receivables interest rate on loan receivables and loan payables. The company does from group companies was recognized in 2022 (NOK 56 million in 2021). not hedge transactions exposure in financial markets and does not have See Note 7 Receivables and borrowings from group companies for more any fixed interest rate loan receivables nor loan payables. The company is information about receivables. therefore not exposed to fair value risk on its outstanding loan receivables or loan payables. Interest bearing loan receivables and loan payables Liquidity risk expose the company to income statement and cash flow interest risk. Liquidity risk relates to the risk that the company will not be able to meet its debt and guarantee obligations and is managed through maintaining Interest-bearing borrowings to group companies reflect the cost of external sufficient cash and available credit facilities. Due to the dynamic nature of borrowing, reducing the interest risk exposure for Akastor ASA. the underlying businesses, Akastor Treasury maintains flexibility in funding Credit risk by maintaining availability under committed credit lines. Development in the group’s and thereby Akastor ASA’s available liquidity is continuously Credit risk is the risk of financial losses to the company if a customer or monitored through monthly cash flow forecasts, annual budgets and long counterparty fails to meet contractual obligations. Credit risk relates to term planning. Note 11 | Related parties Transactions and balances with subsidiaries and related parties are described in the following notes: Transactions Other services Financial items Investments Cash pool, receivables and borrowings Guarantees Note Note 2 Note 3 Note 5 Note 7 Note 9 All transactions with related parties are carried out at market terms and in accordance with the arm’s lengths principle. Annual Report 2022 | Financials and Notes | Akastor ASA88 Note 12 | Shareholders Shareholders with more than 1 percent shareholding as per December 31 Company 2022 Aker Holding AS Goldman Sachs & Co Ministry of Trade, Industry and Fisheries, Norway Morgan Stanley & Co. LLC Apollo Asset Limited Mh Capital AS F2 Funds AS Tigerstaden AS Company 2021 Aker Holding AS Goldman Sachs & Co Morgan Stanley & Co. LLC Ministry of Trade, Industry and Fisheries, Norway Verdipapirfond Odin Norge F2 Funds AS Note 13 | Subsequent events Nominee Nominee Number of shares held Ownership 100 565 292 38 731 705 33 100 085 30 438 269 6 049 000 4 000 000 3 270 000 3 000 000 36.70% 14.14% 12.08% 11.11% 2.21% 1.46% 1.19% 1.09% Number of shares held Ownership Nominee Nominee 100 565 292 39 245 843 33 139 698 33 100 085 10 575 925 3 239 187 36.70% 14.32% 12.09% 12.08% 3.86% 1.18% In February 2023, the maturity of Akastor’s corporate credit facilities was extended to February/March 2024. In March 2023, the subordinated Aker facility was increased with NOK 200 million to NOK 450 million. Annual Report 2022 | Financials and Notes | Akastor ASA 05. AUDITOR'S REPORT 89 To the General Meeting of Akastor ASA Independent Auditor’s Report Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Akastor ASA, which comprise: • • the financial statements of the parent company Akastor ASA (the Company), which comprise the statement of financial position as at 31 December 2022, the income statement and statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the consolidated financial statements of Akastor ASA and its subsidiaries (the Group), which comprise the statement of financial position as at 31 December 2022, the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion • • • the financial statements comply with applicable statutory requirements, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Our opinion is consistent with our additional report to the Audit Committee. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. PricewaterhouseCoopers AS, Dronning Eufemias gate 71, Postboks 748 Sentrum, NO-0106 Oslo T: 02316, org. no.: 987 009 713 MVA, www.pwc.no Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap Annual Report 2022 | Auditor's ReportAuditor's Report 90 We have been the auditor of the Company for one year from the election by the general meeting of the shareholders on 20 April 2022 for the accounting year 2022. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matters How our audit addressed the Key Audit Matter Accuracy of Equity-accounted investees Investments in the Joint Ventures (JV) HMH Holding B.V (HMH) and AKOFS Offshore AS (AKOFS) amounts to approximately 51% of the Group’s total assets, and any year-on-year fluctuations in Akastor’s share of the JV’s booked results may amount to a significant part of the Group’s total results. As such, accuracy in reporting Group management receives from JVs is of significance to the Group’s financial statements. See note 3 “Significant accounting policies”, section “Basis of consolidation” for significant accounting policies applied for investments in joint ventures. Information on the recognition and measurement of the JVs are disclosed in note 17 “Equity-accounted investees”. We completed the Group audit plan based on our understanding of HMH and AKOFS, discussions with Akastor’s management and collaboration with the component audit teams. We were involved in the component audit team's risk assessment, including the susceptibility of material misstatement due to fraud or error, and we reviewed their audit plan with regards to identified significant risks. We agreed with the component auditors on the materiality levels for their audit. Our involvement and communication, both written and otherwise, was extensive. We obtained a sufficient understanding of the component audit firm and the engagement teams through meetings with them, prior experience with the component team, and frequent communication. They confirmed to us that they were independent. To evaluate the sufficiency and appropriateness of audit evidence obtained by the component audit teams, we reviewed the received audit reporting, held meetings with the component audit teams and reviewed their audit documentation. Our procedures were focused on the audit of significant risks and the audit of the consolidation process and -journals. Through our involvement with the component auditors, we were able to obtain sufficient appropriate audit evidence regarding the financial information of the components and the consolidation process to express an opinion on the Group’s financial statements. Finally, we considered the adequacy of disclosures in notes related to equity-accounted investees and found them to be appropriate. 2 / 6 Annual Report 2022 | Auditor's Report 91 Valuation of Other Investments and Trade and Other Receivables Other Investments and Trade and Other Receivables amount to approximately 24% of the Group’s total assets. Management uses valuation techniques to estimate the fair value of Other Investments and the recoverability of Trade and Other Receivables. These two line items are significant to the financial statements, and the carrying value is sensitive to management’s use of judgment. The substantial part of Other Investments is measured at fair value through other comprehensive income and is classified as level 3 in the fair value hierarchy. Trade and Other Receivables are measured at amortized cost less any impairment, if present. See note 4 “Significant accounting estimates and judgements” for disclosures on Management’s fair value measurement and Impairment of financial assets. The carrying value of Other Investments is specified in note 18 “Other Investments”. See note 20 “Trade and Other Receivables” for disclosure on trade and other receivables. For Other Investments, we obtained the valuation model from management, evaluated the valuation method applied and tested the mathematical accuracy of the model. We agreed with management that the valuation model used was appropriate. We challenged the key assumptions applied by management in the valuation model. Specifically, we discussed with management to challenge their view on EBITDA, peer groups, EV/EBITDA valuation multiples, assumed exit date and discount rate. We compared applied assumptions to budgets approved by management and to obtainable market information such as relevant benchmarks for enterprise value multiples and discount rates. We also tested data used in the model against relevant agreements. We found management's key assumptions to be reasonable. For the substantial part of Trade and Other Receivables, composed of Other Receivables, we obtained management’s valuation and held discussions with management to challenge their assessment of the impact on Other receivables of the dispute related to four terminated construction contracts with Jurong Shipyard. To corroborate the valuation assessment, we obtained supporting documentation on key assumptions. We found that supporting documentation corroborated with the information presented. Finally, we considered the adequacy of disclosures in notes for Other Investments and Trade and Other Receivables and found them to be appropriate. Other Information The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors’ report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors’ report nor the other information accompanying the financial statements. In connection with our audit of the financial statements, our responsibility is to read the Board of Directors’ report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsistency between the Board of Directors’ report and the other information accompanying the financial statements and the financial statements or our knowledge 3 / 6 Annual Report 2022 | Auditor's Report 92 obtained in the audit, or whether the Board of Directors’ report and the other information accompanying the financial statements otherwise appear to be materially misstated. We are required to report if there is a material misstatement in the Board of Directors’ report or the other information accompanying the financial statements. We have nothing to report in this regard. Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report • • is consistent with the financial statements and contains the information required by applicable statutory requirements. Our opinion on the Board of Director’s report applies correspondingly to the statements on Corporate Governance and Corporate Social Responsibility. Responsibilities of Management for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for the preparation and true and fair view of the consolidated financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern. The financial statements of the Company use the going concern basis of accounting insofar as it is not likely that the enterprise will cease operations. The consolidated financial statements of the Group use the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an 4 / 6 Annual Report 2022 | Auditor's Report 93 opinion on the effectiveness of the Company's and the Group's internal control. • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Report on Compliance with Requirement on European Single Electronic Format (ESEF) Opinion As part of the audit of the financial statements of Akastor ASA, we have performed an assurance engagement to obtain reasonable assurance about whether the financial statements included in the annual report, with the file name AKASTORASA_ESEF_2022-12-31, have been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 5 / 6 Annual Report 2022 | Auditor's Report 94 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format, and iXBRL tagging of the consolidated financial statements. In our opinion, the financial statements, included in the annual report, have been prepared, in all material respects, in compliance with the ESEF regulation. Management’s Responsibilities Management is responsible for the preparation of the annual report in compliance with the ESEF regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary. Auditor’s Responsibilities For a description of the auditor’s responsibilities when performing an assurance engagement of the ESEF reporting, see: https://revisorforeningen.no/revisjonsberetninger Oslo, 22 March 2023 PricewaterhouseCoopers AS Anders Ellefsen State Authorised Public Accountant (Norway) 6 / 6 Annual Report 2022 | Auditor's Report95 06. ALTERNATIVE PERFORMANCE MEASURES Akastor discloses alternative performance measures as a supplement to the consolidated financial statements prepared in accordance with IFRS. Such performance measures are used to provide an enhanced insight into the operating performance, financing abilities and future prospects of the group. These measures are calculated in a consistent and transparent manner and are intended to provide enhanced comparability of the performance from period to period. It is Akastor's experience that these measures are frequently used by securities analysts, investors and other interested parties. The definitions of these measures are as follows: EBITDA - earnings before interest, tax, depreciation and amortization, corresponding to "Operating profit before depreciation, amortization and impairment" in the consolidated income statement. EBIT - earnings before interest and tax, corresponding to "Operating profit (loss)" in the consolidated income statement. Capex and R&D capitalization - a measure of expenditure on PPE or intangible assets that qualify for capitalization. Net current operating assets (NCOA) - a measure of working capital. It is calculated by current operating assets minus current operating liabilities, excluding financial assets or financial liabilities related to hedging activities. Net capital employed - a measure of all assets employed in the operation of a business. It is calculated by non-current assets and finance lease receivables (excluding non-current interest-bearing receivables) added by net current operating assets minus non-current operating liabilities (deferred tax liabilities, employee benefit obligations, other non-current liabilities and lease liabilities). Gross debt - sum of current and non-current borrowings, excluding lease liabilities. Net debt - gross debt minus cash and cash equivalents. Net interest-bearing debt (NIBD) - net debt minus non-current and current interest-bearing receivables. Equity ratio - a measure of investment leverage, calculated as total equity divided by total assets at the reporting date. Liquidity reserve - comprises cash and cash equivalents and undrawn committed credit facilities. Order intake - represents the estimated contract value from the contracts or orders that are entered into or committed in the reporting period. Order backlog - represents the remaining unearned contract value from the contracts or orders that are entered into or committed at the reporting date. The backlog does not include options on existing contracts, or contract value from short-cycled service orders. The tables below show reconciliation of alternative performance measures to the line items in the financial statements according to IFRS. Net current operating assets (NCOA) Amounts in NOK million Inventories Trade and other receivables Current operating assets Current tax liabilities Provisions, current Trade and other payables Current operating liabilities Net current operating assets (NCOA) 2022 2021 5 5 769 872 774 877 (2) (1) (31) (20) (498) (625) (531) (647) 243 231 Annual Report 2022 | Alternative Performance MeasuresAlternative Performance Measures 96 Net capital employed (NCE) Amounts in NOK million Total non-current assets Net current operating assets (NCOA) Current investment Current finance lease receivables Non-current interest-bearing receivables Deferred tax liabilities Employee benefit obligations Other non-current liabilities Other current liabilities Non-current provisions Total lease liabilities Net assets held for sale Net capital employed (NCE) Gross debt/Net debt/NIBD Amounts in NOK million Non-current borrowings Current borrowings Gross debt Cash and cash equivalents Net debt Non-current interest-bearing receivables Net interest-bearing debt (NIBD) Equity ratio Amounts in NOK million Total equity Divided by Total assets Equity ratio Liquidity reserve Amounts in NOK million Cash and cash equivalents Undrawn committed credit facilities Liquidity reserve 2022 2021 5 497 6 025 243 231 162 148 208 64 (668) (315) (4) (4) (96) (108) (459) (628) (162) (148) (3) (26) (85) (155) 11 - 4 645 5 084 2022 198 1 142 1 340 2021 1 372 16 1 387 (119) (89) 1 220 1 299 (668) (315) 553 984 2022 4 092 6 804 60% 2022 119 304 2021 4 109 7 212 57% 2021 89 553 423 642 Annual Report 2022 | Alternative Performance Measures07. BOARD OF DIRECTORS 97 Frank O. Reite | Chairperson of the Board Frank O. Reite is a Norwegian citizen, born in 1970. He first joined Aker in 1995 and held the position as CFO in Aker ASA from August 2015 until August 2019. Mr. Reite has previously held the position as President & CEO of Akastor (up until 2015) and also held a variety of executive positions in the Aker group, including overseeing and developing Aker’s investments in Converto Capital Fund AS, Havfisk ASA, Norway Seafoods AS and Aker Yards ASA. Mr. Reite also has experience from banking and served as Operating Director at Paine & Partners, a New York-based private equity firm. Reite’s current board positions include being chair of Converto AS, deputy chair of the board and chair of the audit committee in Aker ASA, chair of Norron AB, and director of Solstad Offshore ASA. He holds a B.A. in business administration from Norwegian Business School BI in Oslo. As of March 22, 2023, Mr. Reite holds, through a privately owned company, 200,000 shares in Akastor ASA and has no stock options. He is a Norwegian citizen and has been elected for the period 2022-2024. Lone Fønss Schrøder | Deputy Chair Lone Fønss Schrøder is CEO of Concordium AG, a global provider of blockchain technologies. She is vice-chair of Volvo Cars AB and chair of the audit committee, and director of Geely Sweden Holdings AB and Ingka Holding B.V. (Ikea Group). She has held several senior management and CEO positions in the A.P. Møller-Maersk group and became CEO and president of Wallenius Lines AB in 2005. Fønss Schrøder has board experience from Kværner ASA, Eukor Inc, Vattenfall AB, Yara ASA, Valmet OY and others. Fønss Schrøder holds an MSc in law from the University of Copenhagen and in economics from Copenhagen Business School in Denmark. Ms. Fønns Schrøder serves as an independent director. As of March 22, 2023, she holds 4,400 shares in the company and has no stock options. She is a Danish citizen and has been elected for the period 2022-2024. Svein Oskar Stoknes | Director Svein Oskar Stoknes has been CFO at Aker ASA since August 2019. Prior to this, he served as CFO at Aker Solutions, where he joined in 2007 and was named CFO in 2014. Previously, Mr. Stoknes held a range of senior positions within finance and advisory for organizations like Tandberg, Citigroup and ABB. He graduated from the Norwegian School of Management and has an MBA from Columbia Business School in New York. As of March 22, 2023, Mr. Stoknes owns 1,297 shares and no stock options in the company. He is a Norwegian citizen and has been elected for the period 2022-2024. Annual Report 2022 | Board of DirectorsBoard of Directors98 Kathryn M. Baker | Director Kathryn M. Baker has over 35 years of business experience in a broad range of industries and roles. She currently serves as Chairwoman of Terra Mater Renewable Investments, and board member of MPC Energy Solutions and Gaming Innovation Group ASA and member of the Investment Committee of Norfund. Ms. Baker previously served on the Executive Board of the Central Bank of Norway (Norges Bank), the European Advisory Board of the Tuck School of Business and the Ethics Committee of the Norwegian Private Equity and Venture Capital Association (NVCA), where she also previously served as Chairwoman. Ms. Baker was a partner at the Norwegian private equity firm Reiten & Co for 15 years. Prior to that, she was a management consultant at McKinsey & Company in Oslo and a financial analyst at Morgan Stanley in New York. Ms. Baker holds a bachelor’s degree in economics from Wellesley College and an MBA from the Amos Tuck School of Business at Dartmouth College. As of March 22, 2023, she holds 45,683 shares in the company. Ms. Baker is an American citizen and has been elected for the period 2021-2023. Luis Antonio G. Araujo | Director Luis Antonio G. Araujo has over 38 years of experience in the energy and oil & gas industries. He was CEO of Aker Solutions from July 2014 to August 2020. Prior to his appointment as CEO, Mr. Araujo held the position as Regional President and Executive Vice-President for Aker Solutions in Brazil since November 2011 where he led a major turn-around of the local operations. Prior to his period with Aker Solutions, he was CEO of Wellstream in Brazil (currently part of Baker Hughes GE), and held several senior positions within ABB, FMC Technologies, Vetco Gray and Technip Coflexip. Mr. Araujo is currently an independent director and member of the board of Magseis Fairfield ASA listed on the Oslo Stock Exchange, and Chairperson of the board of OceanPact, a Brazilian company. Mr. Araujo holds a bachelor degree in Mechanical Engineering from Gama Filho University and an MBA from Edinburgh University. Mr. Araujo serves as an independent director. As of March 22, 2023, Mr. Araujo holds no shares and no stock options in the company. He has triple citizenship; Brazilian, British and Portuguese and has been elected for the period 2021-2023. Henning Jensen | Director, Elected by the employees Henning Jensen currently works as a Service Account Manager in DLS department at HMH. Mr. Jensen joined MHWirth in 2005. He has since then held various positions in the company. Mr. Jensen holds a bachelor degree in Marine Technology and a Master in Industrial Economy and Technology from Agder University College in Grimstad. As of March 22, 2023, Mr. Jensen holds no shares or stock options in the company. Mr. Jensen is a Norwegian citizen and has been elected for the period 2021-2023. Annual Report 2022 | Board of Directors99 Asle Christian Halvorsen | Director, Elected by the employees Asle Christian Halvorsen currently works as Sales Manager in the Global Sales dept at HMH. He began his career with the Aker group in 2011 when he joined STEP Offshore. Mr. Halvorsen holds an Executive Master of Management from BI Norwegian Business School. As of March 22, 2023, he holds 10,000 shares in the company. Mr. Halvorsen is a Norwegian citizen. He has been elected for the period 2021-2023. Stian Sjølund | Director, Elected by the employees Stian Sjølund currently works as Performance Optimization Engineer at HMH. Mr. Sjølund joined the Company in 1998 as an Engineer in Drilling Lifecycle Services department. He has since then held various positions in the company in Norway and abroad. Mr. Sjølund holds a technical college degree in electrical engineering from Grimstad Technical College. As of March 22, 2023, he holds 10,000 shares in the company. Mr. Sjølund is a Norwegian citizen and has been elected for the period 2021-2023. Annual Report 2022 | Board of Directors100 08. MANAGEMENT Karl Erik Kjelstad | CEO Karl Erik joined Akastor in 2014, he has been part of the Aker group since 1998 and has numerous key positions including various CEO positions. Karl Erik has held several board positions in different industries, including oil service, offshore drilling, offshore and merchant shipping, shipbuilding, IT services, real estate and construction industry. Karl Erik holds an MSc in Marine Engineering from the Norwegian University of Science and Technology (NTNU) and an AMP from Harvard Business School. As of March 22, 2023, Kjelstad holds 700,000 shares in Akastor ASA through his company Byesvollen AS. Øyvind Paaske | CFO Øyvind joined the investment team in Akastor as Investment Manager in 2014 and has held the position as CFO of Akastor from March 2020. Prior to this he was Investment Manager at Converto (Aker ASA). Øyvind holds an MSc in Financial Economics from the Norwegian School of Economics and Business Administration (NHH) and UNC Kenan-Flagler Business School. As of March 22, 2023, Paaske holds 135,083 shares in Akastor ASA. Annual Report 2022 | ManagementManagement101 09. COMPANY INFORMATION Reports on the Internet Copyright and Legal Notice The quarterly and annual reports of Akastor are available on the internet. Akastor encourages its shareholders to subscribe to the company’s annual reports via the electronic delivery system of the Norwegian Central securities Depository (VPS). Please note that VPS services (VPS Investortjenester) are designed primarily for Norwegian shareholders. Subscribers to this service receive annual reports in PDF format by email. VPS distribution takes place at the same time as distribution of the printed version of Akastor’s annual report to shareholders who have requested it. Quarterly reports, which are generally only distributed electronically, are available on the company’s website and other sources. Shareholders who are unable to receive the electronic version of interim reports may subscribe to the printed version by contacting Akastor’s investor relations staff. Copyright in all published material including photographs, drawings and images in this publication remains vested in Akastor and third party contributors to this publication as appropriate. Accordingly, neither the whole nor any part of this publication can be reproduced in any form without express prior permission. Articles and opinions appearing in this publication do not necessarily represent the views of Akastor. While all steps have been taken to ensure the accuracy of the published contents, Akastor does not accept any responsibility for any errors or resulting loss or damage whatsoever caused and readers have the responsibility to thoroughly check these aspects for themselves. Enquiries about reproduction of content from this publication should be directed to Akastor ASA. Contact details Akastor ASA Oksenøyveien 10, 1366 Lysaker, Norway PO Box 124, 1325 Lysaker, Norway +47 21 52 58 00 akastor.com HMH Norway Butangen 20, 4639 Kristiansand, Norway PO Box 413 Lundsiden, 4604 Kristiansand, Norway +47 38 05 70 00 Houston 3300 North Sam Houston Parkway East 77032 Houston, Texas, United States +1 281 449 2000 hmhw.com AKOFS Offshore Karenslyst Allé 57, 0277 Oslo, Norway PO Box 244, 0213 Oslo, Norway +47 23 08 44 00 akofsoffshore.com AGR Karenslyst allé 4, 0278 Oslo, Norway +47 24 06 10 00 agr.com Annual Report 2022 | Company InformationCompany Informationl e d n e H . C a j l I : o t o h P • s a . T L O B • 3 4 0 1 3 2 2

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