Staatsolie Annual Report 2017

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Confidence in Our Own Abilities 86 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 Hydrocarbon reserve and resource estimates Hydrocarbon AFS financial reserves investments are estimates include equity of the and amount debt securities. of hydrocarbons Equity that investments can be economically classified as and availablefor-sale are from those the neither Group’s classified oil properties. as held-for-trading The Group estimates nor designated its commercial at fair value reserves through and profit resources or loss. legally extracted based After initial on information measurement, compiled AFS by financial appropriately investments qualified are persons subsequently relating to measured the geological at fair and value technical with data unrealized on the gains size, or depth, losses shape recognized and grade as OCI of the until hydrocarbon the investment body is and derecognized, suitable production at which techniques time, the and cumulative recovery gain rates. or Commercial loss is recognized reserves in are other determined operating using income estimates or expense, of oil in place, or the recovery investment factors is and determined future commodity to be impaired, prices, at the which latter time, having the cumulative an impact loss on the is reclassified total amount to of the recoverable consolidated reserves statement and the of profit proportion or loss of in the finance gross costs reserves and removed that are from attributable the OCI. to The the Group host government evaluates its under AFS the financial terms assets of the production-sharing to determine whether agreements the ability (PSAs). and intention Future to development sell them in the costs near are term estimated is still appropriate. using assumptions as to the number of wells required to produce the commercial reserves, the cost of such wells and associated production (ii) Financial facilities, liabilities and other capital costs. The Recognition economic and tests measurement for the December 31, 2017 reserve volumes were based on a future projection of crude Financial oil prices liabilities using are crude classified, oil prices at initial forecasted recognition, by PIRA as Energy financial group liabilities as the at reference fair value price. through profit or loss, loans and borrowings, payables, as appropriate. All financial liabilities are recognized initially at fair Average price of actual crude sales and the PIRA price premise for 2017 are the same requiring no value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. adjustment for price differential. The same oil price premise was applied for all reserve categories less a The Group’s financial liabilities include trade and other payables, loans and borrowings including bank transfer premium. A shrinkage factor of 1% was also applied to capture losses in delivery of crude to the overdrafts. refinery. Loans and borrowings This is the category most relevant to the Group. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the consolidated statement of profit or loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance costs in the consolidated statement of profit or loss. This category generally applies to interest-bearing loans and borrowings. m. Inventories Petroleum products are valued at the lower of cost and net realizable value. Raw materials: • Purchase cost is valued on weighted average method Finished goods and work in progress: • Cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs Page 62 Page 86
Annual Report 2017 87 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 Average price differential between the PIRA crude price forecast and actual crude price realized by the selling price in the ordinary course of business, less estimated costs of completion and the estimated Group in 2016 was US$ 0.24/Bbl. The current long-term PIRA crude oil prices used in the estimation of costs to sell. the commercial reserves are listed in the table below. The cost of crude oil and refined products is the purchase cost, the cost of refining, including the appropriate Year proportion US$/Bbl of depreciation, depletion and amortization and overheads based on normal operating 2018 capacity, 48.74 determined on a weighted average basis. 2019 44.62 The net realizable value of crude oil and refined products is based on the estimated selling price in the 2020 36.42 ordinary course of business, less the estimated costs of completion and the estimated costs necessary to 2021 41.00 make 2022 the sale. 44.26 2023 47.19 Materials and supplies are valued using the weighted average cost method. 2024 50.21 2025 52.88 Pipeline 2026fill 55.28 Crude 2027 oil, which 57.30 is necessary to bring a pipeline into working order, is treated as a part of the related pipeline. 2028 This is 59.05 on the basis that it is not held for sale or consumed in a production process, but is 2029 60.94 necessary to the operation of a facility during more than one operating cycle, and its cost cannot be 2030 62.65 recouped through sale (or is significantly impaired). This applies even if the part of inventory that is 2031 64.29 deemed 2032to be an 65.87 item of property, plant and equipment cannot be separated physically from the rest of inventory. 2033 It is valued 67.57 at cost and is depreciated over the useful life of the related asset. 2034 69.21 2035n. Impairment 70.88 of non-financial assets The The carrying Group assesses amount of at oil each properties reporting at date December whether 31, there 2017 is and an indication 2016 is shown that an in asset Note 4.1. may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating units (CGU) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In 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 specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. 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 87
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Contact Information Head Office Dr.
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Staatsolie Annual Report 2017

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