Norwegian Energy : Noreco 2021 Remuneration Report

Executive Remuneration Report 2021

Content

Page
3	Introduction
Board of Directors' Remuneration
5
8	Executive Management Remuneration
13	Equity based payment and shareholdings
16	Management statement

Introduction

2021 Highlights

Strong Operational Performance. Average production from the Halfdan, Dan and Gorm hubs was 26.9 mboepd in 2021, at the top end of Noreco's guidance for the year of 25.5 - 27.5 mboepd. This outcome was primarily driven by the success of the well intervention work programme carried out by Noble Sam Turner. The annual revision of the Company's reserves, confirmed by independent auditor RISC, resulted in total 2P reserves at year end 2021 of 200 mmboe and reflects a c. 100 percent reserves replacement ratio.

Significant Tyra Redevelopment Progress. The ongoing project achieved several important milestones during 2021, and will continue to deliver during 2022 and 2023 as it progresses towards first gas in Q2 2023. Redeveloped Tyra will decrease operating expenditure significantly and lower emissions at the field by 30 percent. In addition, the completed project will extend field life by 25 years and produce enough gas to power what equals to 1.5 million homes in Denmark. The project will provide a strong foundation for future reserves growth, unlocking gross reserves in excess of 200 mmboe.

Focused Operational Methodology. Re-established focus during the second half of 2021 on how the Company can best bring its significant expertise to bear in its role as a non-operated partner in the DUC. Set of principles defined and communicated around concentrating approach on activities where most impactful and we can constructively and persuasively support the operator. While non-operated, we are independent and control our own destiny. Finally, we will continue to be disciplined and accountable.

Demonstrated Environmental Commitment. Noreco takes seriously its Energy Transition responsibilities, and the Company is actively contributing through involvement and investments in projects and studies for Carbon Capture Storage within and outside the DUC partnership. The focus Noreco has on achieving these objectives is demonstrated by the establishment of a link between performance and the margin payable under the Company's USD 1.1 billion RBL Facility. Strengthened Financial Position. During 2021, Noreco amended, extended and increased its RBL Facility to USD 1.1 billion in order to reinforce the Company's financial position prior to the operational restart of the Tyra Hub. The Company also reached an agreement with its NOR14 bondholders in July 2021 to add additional headroom to certain financial covenants in order to reduce exposure to future market volatility. As a result, Noreco continues to have a robust capital structure and be fully funded to deliver the Tyra project.

($mm)

175

Revenue

150

105

($/boe)

30,5

Opex1)

($mm)

EBITDA2)

29

Q1

($mm)

CFFO 3)

34

Q1

• 1) Opex: Operational Expenditure

  135

  32,7

  30,8

  Q4 2021

  58

  65

  84

  18

  Q2

  Q3

• 2) EBITDA: Earnings before Interest, Taxes, Depreciation, and Amortization

• 3) CFFO: Cash Flow From Operations. Q1 adjusted for 2020 Danish VAT liability

565

2021

27,0

30,2

2021

97 250

200

64

Q4

2021

Remuneration Committee - meetings and focus 2021

Committee member

Committee meetings attended

Marianne Lie (Chair of Committee)

Lars Purlund 1 (Former Chair)

Jan Lernout (Member)

David B. Cook 2

Hege Hayden 2

• 1 Resigned from office 14 April 21

• 2 Not members of the Committee, attended meetings in capacity as CEO and EVP People &Capability regarding the Company's Compensation policy

The Board's Remuneration Committee's main activities 2021

Disclosures

• ▪ Noreco has applied the Executive Remuneration guidelines throughout 2021 as approved by the General meeting.

• ▪ No deviations from the Executive Remuneration policy have been made by the Board of Directors in 2021.

• ▪ Noreco has not claimed back any paid remuneration to executives during 2021.

• ▪ No Executive has received remuneration from other Group undertakings than their employment entity.

Previous performance periodCurrent performance periodGovernance activitiesFuture performance periods

• ▪ Reviewing the 2020 results and recommending the achievement of the Annual Performance Bonus program (STI)

  • ▪ No bonus pay out for Executive Management

• ▪ Reviewing and recommending the proposed annual salary increase

  • ▪ Maintained the salary freeze for Executive Management set in 2019 in the context of Covid 19 and business performance

• ▪ Reviewing the proposals for Noreco's Total Compensation Policy proposed by the Administration 2H 2021 and aligning Executive programs accordingly

  • ▪ Evaluating the appropriateness of the proposed Short Term Incentive ("STI") and Long Term Incentive ("LTI") programs, relevance of metrics in the current context of the

    Noreco being a non-operated oil and gas company, and suitability of reward levels, including reviewing market practise and trends

  • ▪ Delayed endorsement of amended Annual Performance Bonus Program and its 2021 Key Performance Indicators for Board's approval due to change in strategic priorities

    (approved 2022)

  • ▪ Delayed endorsement of LTI program for Board's approval until 2022

• ▪ Endorsing the terms for employment of new Executives

• ▪ Endorsing and recommending terms upon Executives' resignations

• ▪ Reviewing and updating the 2021 Guideline on Executive Remuneration, later approved by AGM May

• ▪ Preparing for adjustment of the Guideline on Executive Remuneration on basis of the Total Compensation Policy proposed

• ▪ Preparing this Annual Executive Remuneration Report 2021 in the context of the latest guidelines on Company Law requirements for listed companies (EU directive implemented) and general best practise trends in executive remuneration disclosure

• ▪ Approving Minutes of Meetings and following up actions set from the Remuneration Committee's meetings

• ▪ Reviewing Key Performance Indicators for the Annual Performance Bonus Program 2022 (STI)

Board of Directors' Remuneration

Noreco Board of Directors 2021

All Board members hold their office for two years and all are shareholder elected. There is no employee elected representatives in the Board of Directors. Currently, the Board counts seven members.

• ▪ Riulf Karsten Rustad is Executive Chair of the Board.

• ▪ Tone Kristin Omsted, Marianne Lie and Robert J. McGuire were not for election in 2021 and hold office until AGM 2022.

• ▪ Lars Purlund resigned from the Board 14 April 2021 and was not replaced as it was preferred to reduce number of Board members.

Three Board members were for election in 2021.

• ▪ Colette Cohen was re-elected for a period of two years. To strengthen the shareholder representation in the Board

• ▪ Jan Lernout (Kite Lake Capital Management (UK) LLP) and Peter Coleman (Taconic) were elected as members by AGM 19 May 2021 and replaced Chris Bruijnzeels and Yves-Louis Darricarrere.

All Noreco Board meetings in 2021 were done by video conference, except for one joint 2-days meeting with the Board and the Noreco Executive Management.

Board of Directors

Board meetings

Riulf Rustad (Executive Chair)

Marianne Lie

Tone Kristin Omsted

Colette Cohen

Robert J. McGuire

Jan Lernout

Peter Coleman

Lars Purlund

Chris Bruijnzeels

Yves-Louis Darricarrere

Audit Committee

Marianne Lie

Tone Kristin Omsted

Peter Coleman

ESG Committee

Colette Cohen

Robert J. McGuire1)

1) Joined the ESG committee in July 2021

Nomination Committee

Richard Sjøquist

Annette Malm Justad

Kristian Utkilen

2021 Fee Structure	Board of	Audit	Remuneration
In USD	Directors	Committee	Committee
Chair	500 000	n/a	n/a	1500/meeting
Member	60 000	n/a	n/a	1500/meeting

ESG Committee n/a n/a

Nomination Committee

Committee meetingsCommittee meetingsCommittee meetings

5