Staatsolie Annual Report 2017

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Confidence in Our Own Abilities 112 Staatsolie Maatschappij Suriname N.V. Staatsolie Maatschappij Suriname N.V. Notes to the Consolidated financial statements for the years ended December 31, 2017 and 2016 Notes (continued) to the Consolidated financial statements for the years ended December 31, 2017 and 2016 (continued) Available-for-sale (AFS) financial investments Decommissioning AFS financial investments provision include equity and debt securities. Equity investments classified as availablefor-sale Group are makes those neither full provision classified for the as held-for-trading future cost of decommissioning nor designated at oil fair wells value and through production profit facilities, or loss. The on After a discounted initial measurement, basis on the AFS installation financial of investments those wells are and subsequently facilities. The measured decommissioning at fair value provision with represents unrealized gains the present or losses value recognized of decommissioning as OCI until costs the investment relating to is oil derecognized, and gas properties, at which which time, are the expected cumulative to gain be incurred or loss up is to recognized 2055, when in the other producing operating oil properties income or are expense, expected or to the cease investment operations. is These determined provisions to be have impaired, been at created which time, based the on cumulative the Group’s loss internal is reclassified estimates. to the consolidated statement In of profit addition, or loss the in Group finance makes costs full and provision removed for from the the future OCI. The cost Group of decommissioning evaluates its AFS the financial refinery, assets on a discounted to determine basis whether on the the installation ability and of intention the refinery. to sell The them decommissioning in the near term provision is still appropriate. represents the present value of decommissioning costs relating to the refinery, which are expected to be incurred up to 2040, when (ii) Financial the refinery liabilities expected to cease operations. This provision has been created based on the Group’s internal Recognition estimates and measurement utilizing a third party estimating the dismantlement cost. Lastly, Financial the liabilities Group makes are classified, full provision at initial for recognition, the future as cost financial of decommissioning liabilities at fair the value power through plant, profit on or a discounted loss, loans and basis borrowings, on the installation payables, of as the appropriate. power plant. All The financial decommissioning liabilities are recognized provision represents initially at the fair present value and, value in the of decommissioning case of loans and costs borrowings relating and to the payables, power plant, net of which directly are attributable expected transaction to be incurred costs. up to The 2055, Group’s when financial the power liabilities plant expected include trade to cease and operations. other payables, This provision loans and has borrowings been created including based bank on the overdrafts. Group’s internal estimates utilizing a third party estimating the dismantlement cost. Assumptions based on the current economic environment have been made, which management believes Loans and borrowings form a reasonable basis upon which to estimate the future liability. These estimates are reviewed This is the category most relevant to the Group. After initial recognition, interest bearing loans and regularly to take into account any material changes to the assumptions. However, actual borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning recognized in the works consolidated required statement that will reflect of profit market or loss conditions when the at liabilities the relevant are derecognized time. Furthermore, as well the as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or timing of decommissioning is likely to depend on when the fields cease to produce at economically viable premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is rates. This, in turn, will depend upon future oil and gas prices, which are inherently uncertain. included in finance costs in the consolidated statement of profit or loss. This category generally applies to The discount rate used in the calculation of the provision as at December 31, 2017 is 8.38% (2016: 10.28%). interest-bearing loans and borrowings. Other provisions m. Inventories A provision at fair value of US$ 1,758 as at December 31, 2017 (US$ 1,600 as of December 31, 2016 Petroleum products are valued at the lower of cost and net realizable value. and January 1, 2016) mainly comprise provisions for litigation or contractual claims. The claims are subject Raw materials: to legal arbitration and are not expected to finalize during 2018. This amount remained unchanged • Purchase at the cost reporting is valued date. on weighted average method Environmental Finished goods risk and provision work in progress: GOw2 • Cost purchased of direct Chevron materials in and 2011 labor which and included a proportion their of marketing manufacturing activities overheads in Suriname based of on 22 normal petrol stations operating and 3 capacity oil terminals. but excluding These sites borrowing will be remediated costs in a nine year timeframe. The present value of the estimated costs as at December 31, 2017 is US$ 2,781 (December 31, 2016 is US$ 2,588 and Page 62
Annual Report 2017 113 Staatsolie Maatschappij Suriname N.V. Staatsolie Maatschappij Suriname N.V. Notes to the Consolidated financial statements for the years ended December 31, 2017 and 2016 (continued) Notes to the Consolidated financial statements for the years ended December 31, 2017 and 2016 (continued) Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated January 1, 2016 is US$ 2,475). The amount recognized is the best estimate calculated by management selling price in the ordinary course of business, less estimated costs of completion and the estimated of the expenditure required. costs to sell. The 4.8 cost Employee of crude oil defined and refined benefit products liabilities is the purchase cost, the cost of refining, including the appropriate proportion of depreciation, depletion and amortization and overheads based on normal operating The Group capacity, has three determined types of employee on a weighted benefit average plans, basis. namely pensions, post-employment benefits and other long-term employee benefit plans. A summary of the net employee benefit liabilities for the different The net realizable value of crude oil and refined products is based on the estimated selling price in the benefits are shown in the table below. ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. As at December 31, As at December 31, As at January 1, x US$ 1,000 Materials and supplies are valued using the weighted 2017average cost method. 2016 2016 Pension Plans Employee pension plan 13,487 34,121 29,231 Pipeline Executive fill pension plan 646 1,197 628 GOw2 retiree pension plan 96 112 129 Crude Post-employment oil, which is benefit necessary plans to bring a pipeline into working - order, is treated as a part of the related - pipeline. Retiree This Medical is on Plan the Staatsolie basis that it is not held for sale 13,506 or consumed in 15,441 a production process, 10,116 but is Retiree Medical plan GOw2 492 424 783 necessary Retiree Medical to the Plan operation SPCSof a facility during more than 240 one operating cycle, 222and its cost cannot 143 be recouped Pension through gratuity Staatsolie sale (or is significantly impaired). This 2,965applies even if 2,734 the part of inventory 2,522 that is Pension gratuity SPCS 18 15 12 deemed Funeral to grant be an plan item Staatsolie of property, plant and equipment cannot 894 be separated 833 physically from the 763 rest of inventory. Funeral grant It is valued plan SPCS at cost and is depreciated over the useful 8 life of the related 7asset. 5 Supplementary Provision Board 733 646 589 members Other long-term employee benefit plans - - n. Impairment of non-financial assets Jubilee gratuity Staatsolie 6,602 6,430 6,072 The Jubilee Group gratuity assesses SPCS at each reporting date whether there 103 is an indication that an 87asset may be impaired. 71 Jubilee gratuity GOw2 93 89 111 If any indication exists, or when annual impairment testing for an asset is required, the Group estimates Additional holiday allowance Staatsolie 2,839 2,681 2,485 the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating Additional units holiday (CGU) allowance fair value SPCSless costs of disposal 30 and its value in use. 30It is determined for 55 an individual asset, unless the asset does Total not generate cash 42,752 inflows that are 65,069 largely independent 53,715 of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its Pensions and other post-employment benefit plans recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In The Group has two defined benefit pension plans (funded), one for the employees and one for the assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks directors. The employee pension plan is a final salary plan and requires contributions to be made to a separately administered fund. The directors’ pension plan is an insured plan. In addition, the Group specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken provides certain post-employment benefits to employees (unfunded) such as healthcare, excedent into account. If no such transactions can be identified, an appropriate valuation model is used. gratuity, funeral grants, pension gratuity, jubilee and additional holiday allowances. Impairment losses of continuing operations are recognized in the consolidated statement of profit or loss in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to OCI. In this case, the impairment is also recognized in OCI up to the amount of any previous revaluation. Page 63 Page 113
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Staatsolie Annual Report 2017

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