Electromagnetic Geoservices : EMGS Annual Report 2023

EMGS

ANNUAL REPORT 2023.

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EMGS technology

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Board of Directors

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Board of Directors' Report

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Responsibility Statement

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Report on Corporate Governance

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Report on Sustainability and CSR

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2023 Transparency Act Statement

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Determination of Salary Statement

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Financial Statements EMGS Group

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Financial Statements EMGS ASA

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Auditor's Report for 2023

EMGS technology.

We deploy two methods of electromagnetic (EM) technology when conducting offshore surveys: controlled-source electromagnetic (CSEM) surveying and magnetotelluric (MT) surveying. Both methods use electromagnetic signals to map the subsurface. EMGS then receives the signals with acquisition hardware, and further processes and interprets this information with proprietary software. We seek to continually improve our signalling, acquisition, processing and interpretation hardware and software in order to further enhance the value of our technology to our clients.

Our clients see significant benefits in using electromagnetic surveys in addition to seismic surveys, which are based on acoustic wave technology. By combining these datasets, the accuracy and efficiency of oil and gas exploration can be significantly improved.

CSEM (Controlled-Source Electromagnetic)

When performing a CSEM survey, a powerful horizontal electric dipole source is towed above the seafloor while a series of receivers are placed on the seabed.

The dipole source transmits a low-frequency electromagnetic signal into the subsurface underneath the seafloor. The resistivity of the formations under the seafloor define the way in which the electromagnetic energy transmitted by the dipole propagates through the subsurface. High resistivity is an indicator of a possible hydrocarbon-filled reservoir.

Multi-component receivers that have been placed on the seabed for the survey measure the electromagnetic energy that has propagated through the subsurface and the sea. The information from these receivers is processed and inverted to produce a 3D resistivity image of the survey area. EMGS typically deploys grids of receivers in order to acquire full-azimuth surveys. This type of survey provides optimal imaging of the subsurface.

CSEM data is a valuable supplement to information on structure and deposition of sediments provided by seismic (acoustic wave) surveys.

In addition, CSEM data can provide information on shallow subsurface resistivity which is important in marine mineral exploration and could also prove to be valuable in offshore wind turbine and cable placement and a range of other geotechnical applications.

EMGS has developed a workflow that allows companies to easily integrate CSEM information with seismic data and embed the integrated interpretation into their prospect evaluation work. This workflow, the EMGS' Exploration Solution, includes a wide range of analyses including; resistivity attribute analysis (similar to working with seismic attributes), anomaly identification and delineation, anomaly significance tests, sensitivity assessment for depth intervals of interest, correlation of anomalies to seismic observations such as conformance to structure, seismic DHI and seismic indicators of lithological resistors. The resulting integrated interpretation is used to establish the likelihood of a prospect being hydrocarbon charged and the size/area of a possible hydrocarbon accumulation.

Extensions to the workflow are available that address subsurface questions specific to field appraisal, such as estimating pay distribution and interpreting the hydrocarbon-water contact, both of which can further refine a company's assessment of the prospect(s) and therefore improve the understanding of the survey area prior to taking further steps in the exploration process.

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The EMGS' Exploration Solution workflow transforms CSEM data into information for improved exploration decision-making

MT (Magnetotelluric)

Similar to CSEM surveying, the MT technique generates insight into the subsurface by imaging subsurface resistivity.

Marine MT surveys map subsurface resistivity variations by measuring naturally occurring electromagnetic signals on the seabed. These signals are generated by the interactions of solar wind with the Earth's magnetic field, which, when strong, are known as geomagnetic storms. The MT signals are of very low frequency, which offers excellent depth penetration. The unique design and sensitivity of the EMGS seabed receivers enable EMGS to efficiently acquire high- quality MT data as part of a CSEM survey when the controlled-source is inactive.

The low-frequency,deep-sensing nature of MT surveying makes the technique valuable for imaging and interpreting regional geology. MT surveys have been found most useful in salt and basalt settings where the flanks and/or the base are poorly defined. MT measurements, therefore, form a useful complement to seismic techniques, particularly in settings where high-impedance volcanic rocks or salt make the imaging and interpretation of seismic challenging.

Application of EM technology

The services offered by EMGS are used in all stages of the offshore exploration and development cycle. Applications of EMGS' technology include evaluating regional prospectivity, ranking identified prospects and appraisal of discoveries.

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Figure 1: CSEM acquisition equipment

EM source

towed

above seabed

EM receivers dropped on the seabed in a grid

Integrated interpretation of seismic and EM improves exploration performance by reducing uncertainties

Regional Prospectivity

At the early stages of the exploration and production process, oil and gas companies use EM services to evaluate whether an offshore acreage is viable for commercial production of hydrocarbons. EM surveys may be conducted before licensing decisions are made in order to better understand the acreage value, as well as prioritization of potential leads and prospects that may have been mapped with seismic. EM may also be used to de-risk new and unproven plays and generate new leads and prospects. Adopting EM early in the exploration cycle can help oil and gas companies focus their investments on the most valuable acreage.

Prospect Ranking and Portfolio Polarisation

When a prospect is identified from seismic information, EM surveys can help operators reduce uncertainties in the probability of success and expected hydrocarbon volume, resulting in a more reliable economic evaluation of the prospect. Using EM to rank prospects reduces the risk of drilling dry wells, thereby increasing the economic success of exploration projects. Used on a portfolio of existing prospects EM can polarise the prospect portfolio and highlight the prospects with the largest volume potential and the highest chance of success. Through better targeting of exploration drilling activity, the use of EM surveys can also help to diminish the overall environmental impact of an exploration project.

Field Appraisal

Once a discovery is made, EM surveys can be used to ascertain a field's commercial viability and aid in development planning by improving reservoir delineation (i.e. the size and shape of the reservoir). EM can also assist in the optimal placement of subsequent development wells and reduce the number of appraisal wells that would typically be required for field delineation and reservoir characterisation, can result in a positive impact on a project's financial outcome and reducing its environmental footprint.

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Potential New Application Areas

EMGS' core technology, originally developed for the oil and gas industry, can be adapted to new application areas such as marine mineral exploration, gas hydrate mapping, geotechnical and shallow hazard investigations, and the location of subsea cables. It is the company's goal to develop these new business fields building on its world-renowned expertise in marine EM technology.

Marine minerals

The electrification of society is an important part of the energy transition. In its "net zero 2050" scenario, Net Zero by 2050 A Roadmap for the Global Energy Sector (2021), the International Energy Association (IEA) forecasts a significant increase in the demand for minerals that are key components in the electrification supply chain, such as lithium, copper, and cobalt. Currently, these minerals are mined onshore, but it is expected that mineral deposits on or beneath the seafloor, called "marine minerals," are likely to play an important role in meeting this demand in the coming years and decades.

The marine mineral industry is in its infancy. The International Seabed Authority (ISA) has granted several concessions in international waters, and Norway is planning a concession round as early as 2024. There are already several Norwegian and international companies evaluating a possible participation in the upcoming concession round in Norway.

There are three main categories of marine minerals: nodules, crusts, and Seafloor Massive Sulfides (SMS). Most of the marine mineral deposits discovered to date are at the seabed in ultra-deep waters. Within the Norwegian Exclusive Economic Zone (EEZ) both crusts and SMSs have been discovered in the area of the mid-Atlantic spreading ridge.

SMS deposits are created by volcanic activity. Marine life thrives while the system is volcanically active. Only SMS deposits that have ceased to be volcanically active (i.e., extinct) are considered for commercial exploitation. The mineral content of these extinct SMS deposits vary in both mineral content and volume, and only a few of the many extinct SMS deposits are expected to have valuable metallic minerals in large enough quantities to be of commercial interest for offshore mineral excavation. Therefore, geophysical techniques are important in order to cost-effectively search for and identify potential SMS prospects for sampling, drilling and eventual excavation.

Electromagnetic systems are expected to play a significant role in the exploration and appraisal of marine minerals, and can be an important part of the geophysical toolbox. Towards this end, but also for other applications, EMGS has developed a deep-towed EM streamer solution for efficient mapping of seabed geology at, and near, the seabed. A prototype of the system was used in ATLAB survey in 2022. It will be possible to use the towed system on a stand-alone basis or together with EM seabed nodes, Autonomous Underwater Vehicles (AUV), as well as with acoustic surveying methods such as high resolution seismic and multi-beam echosounder bathymetry.

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Development of EM technology

Development of marine EM equipment

EMGS is soon to launch a new source system, which will be its sixth-generation source system. The new source technology has been developed inhouse, based on years of experience with the marine controlled source electromagnetic (CSEM) method and deep-towed CSEM source systems. A key element of the new source system is its scalable and modular design enabling EMGS to quickly produce bespoke source systems for specific applications. The modular design of the new source allows for simple replacement of entire modules offshore, improving reliability and decreasing the likelihood of extended periods of technical downtime during operations.

The first new 6th generation source system, Tx-D 5006, will replace the Conventional Source as a backup for the Deep Blue (Tx-D 10005) and will be capable of transmitting up to 5000 ampere.

Figure: IGBT A Module

The Tx-D 5006 source system is expected to be ready for sea trials during Q3 2024.

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Board of Directors.

Frederik W. Mohn, Chairman of the Board

Frederik W. Mohn is the sole owner and managing director of the Company's second largest shareholder Perestroika, a Norwegian investment company with investments in oil and gas, shipping, infrastructure, real estate development and financial services. Frederik was previously Chairman of the Board of Songa Offshore SE and currently is a member of the Board of Directors of Transocean Ltd.

Beatriz Malo de Molina, Board member

Beatriz Malo de Molina is a Managing Director at Alvarez & Marsal, a global professional services firm. Beatriz has served as Senior Vice President and Head of M&A at Orkla ASA and has previously held positions at Kistefos Private Equity and McKinsey & Co in Oslo, after a ten year career in the Investment Banking Division of Goldman, Sachs & Co. in London, Frankfurt, New York City and Mexico City. Beatriz began her career in 1994 within Ernst & Young's financial advisory department in New York City.

Ms. Malo de Molina has board experience from publicly listed and privately held companies both in Norway and internationally, including chair positions.

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Mimi Berdal, Board member

Mimi Berdal runs an independent corporate counseling and investment business. She holds a Cand. Jur. (law) degree from the University of Oslo.

Mimi Berdal is also a member of the Board of Directors of the listed companies Goodtech ASA (Chairman), Norsk Titanium AS and Thor Medical ASA, in addition to Freyr Battery SA (listed NYSE).

Jørgen Westad, Board member

Jørgen Westad is an Executive Director and Secretary of Siem Industries S.A. He is also a Director of Deusa GmbH. Prior to joining the Siem Group in 2015, he was CFO for a privately held shipping company as well as working as a commercial and investment banker at Hambros Bank Ltd and Bankers Trust Company. He holds a B.Eng in Naval Architecture and Shipbuilding and an MSc in Management Studies. Jørgen is a Norwegian citizen, resident in Luxembourg.

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Board of Directors' Report.

2023 proved to be a difficult year for EMGS, with little activity. The Atlantic Guardian remained warm-stacked for the entire year. As a result of the low activity level the Company's focus was on developing backlog and keeping other cash outlays to a minimum, with the exception of required capital expenditures.

During the year, EMGS secured its first contract within the renewable energy infrastructure industry. EMGS will acquire Magneto Telluric (MT) data to be used in the design phase of an infrastructure project in Southeast Asia.

EMGS also developed new modular source technology which will be used in a new generation (6th generation) of deep towed electromagnetic sources. The first system, which is currently in production, will be deployed on the Atlantic Guardian and used as a backup for the Deep Blue source system.

About EMGS

Vision, Values and Strategy

Electromagnetic Geoservices ASA ("EMGS" or the "Company"), with its subsidiaries (together, the "Group"), is the global leader in electromagnetic ("EM") surveying technology in the offshore oil and gas exploration industry.

EMGS' vision is to make EM an integral part of the E&P workflow and make EM as fully adopted as seismic. By providing EM data integrated with other subsurface measurement, we enable our customers to reduce uncertainty and therefore increase success in their exploration and development programmes.

EMGS' core values are: Integrity, Commitment, Innovation and Quality. These values form an integral part of our organisation and operations and are included as a topic in the Company's annual employee appraisal process. EMGS is constantly working to deliver the best quality product to its customers. The Company's technology is developed on an ongoing basis to improve quality and efficiency, as well as to broaden the scope of application and addressable markets. EMGS also places a high priority on interacting with its customers, to assist in ensuring that the full value of the Company's service is captured by our customers.

The integration of EM methods into exploration workflows provides oil and gas companies with an improved de-risking and appraisal tool when compared to using seismic exploration techniques alone. The use of EM data is complementary to the use of seismic data, as it provides oil companies with more information about the subsurface. Integrating the use of EM data into the exploration workflow reduces exploration risk through a better understanding of a reservoir's charge, seal and volume estimates. This data can also serve to decrease the environmental impact of a particular project, since better targeting of drilling activities can serve to reduce the total number of wells drilled into the seabed. EMGS remains a global leader in the planning, acquisition, processing, modelling, interpretation and integration of EM data. The Company has extensive experience, well-established proprietary routines and leading-edge processing, modelling and inversion software.

Over the past two decades EMGS has conducted over 900 surveys across most major mature and frontier basins in the world in water depths ranging from 20 to 3,600 metres for more than 150 customers.

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