192 Annual Report 2025 NOTES TO THE FINANCIAL STATEMENTS 2 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) 2.12 Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance expense. (i) Decommissioning provision The Group records a provision for decommissioning costs to rehabilitate and decommission oil field assets and infrastructure such as wells, pipelines and processing facilities in Oman, Norway, Benin and Germany, which are expected to be incurred when the operations are ceased. Decommissioning costs are provided for at the present value of expected costs to settle the obligation using estimated cash flows and are recognised as part of the cost of O&G assets. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the decommissioning liability. The unwinding of the discount is expensed as incurred and recognised in the statement of profit or loss as a finance expense. The impact of climate-related matters, such as changes in environmental regulations and other relevant legislation, is considered by the Group in estimating the decommissioning liability on the O&G assets. Changes in the estimated future costs, or in the discount rate applied, are added to or deducted from the cost of the asset. (ii) Onerous contract An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The cost of fulfilling a contract comprises the costs that relate directly to the contract (i.e., both incremental costs and an allocation of costs directly related to contract activities). If the Group has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision. However, before a separate provision for an onerous contract is established, the Group recognises any impairment loss that has occurred on assets dedicated to that contract. 2.13 Revenue Revenue from sale of crude oil and gas in the ordinary course of business is recognised when the Group satisfies a performance obligation (“PO”) by transferring control of a promised good or service to the customer. The amount of revenue recognised is the amount of the transaction price allocated to the satisfied PO. The lifting schedule and allocation of lifts to the Group will vary with the production profiles and commercial arrangements for the various petroleum products and assets. Transaction price is the amount of consideration in the contract to which the Group expects to be entitled in exchange for transferring the promised goods or services. If the value of the goods transferred by the Group exceeds the payments, a contract asset is recognised. If the payments exceed the value of the goods transferred, a contract liability is recognised. The pricing of the sales of petroleum products is determined based on market pricing for each product or preestablished contracts. Revenue is recognised at the point of delivery when the title passes to the customer. This is normally at the time of loading oil or natural gas liquids on vessels used for transport, or at agreed point of delivery for dry gas.
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